Many new car dealers advertise low prices, low interest rates, and other special promotions. Advertisements promising high trade-in allowances and free or low-cost options may help you shop, but finding the best deal requires careful comparisons.

Many factors determine whether a special offer provides true savings. The interest rate, for example, is only part of the car dealer's financing package. Terms like the size of the down payment also affect the total financing cost.

Low Interest Loan Offers

A call or visit to a dealer should help clarify details about low interest loans. Consider asking these questions:

• Will you be charged a higher price for the car to qualify for the low-rate financing?
• Would the price change if you paid cash, or supplied your own financing from your bank or credit union?
• Does the financing require a larger down payment? 
• Are there limits on the length of the loan? Are you required to repay the loan in a condensed period of time, say 24 or 36 months?  Having a shorter loan term will increase the monthly payment amount.
• Do you have to buy special or extra merchandise, options, or services such as rust proofing, an extended warranty, or a service contract to qualify for a low-interest loan?
• Is the financing available for a limited time only? Some merchants limit special deals to a few days or require that you take delivery by a certain date.
• Does the low rate apply to all cars in stock, only to specific models, or only to specific vehicles?
• Are you required to surrender the manufacturer's rebate to the dealer to qualify for financing?

Other Promotions

Other promotions include high trade-in allowances and free or low-cost options. Some dealers promise to sell the car for a stated amount over the dealer's invoice. Other dealers will guarantee a minimum trade-in allowance.  Asking questions like those listed below can help you determine the true value of the special promotions.

• Does the advertised trade-in allowance apply to all cars, regardless of their condition? Are there any deductions for high mileage, dents, or rust?
• Does the larger trade-in allowance make the cost of the new car higher than it would be without the trade-in?  The dealer might be making up for the higher trade-in allowance by increasing the price of the car.
• Is the dealer who offers a high trade-in allowance and free or low-cost options giving you a better price on the car than another dealer who doesn't offer such promotions?
• Does the "dealer's invoice" reflect the actual amount that the dealer pays the manufacturer? You can consult consumer publications for information about what the dealer actually pays as well as rebate and incentive information.
• Does the "dealer's invoice" include the cost of options, such as undercoating, that already have been added to the car? Is one dealer charging more for these options than others?
• Does the dealer have cars in stock that have no expensive options? If not, will the dealer order one for you?
  Are the special offers available if you order a car instead of buying one off the lot?
• Can you combine special offers?

Once you decide which dealer offers the car, price, and financing you want, read the invoice and the installment contract carefully. Check to see that all the terms of the contract reflect the agreement you made with the dealer. If they don't, get a written explanation before you sign.