Bad Credit? Great, You’ll Pay Less For a Car

Car Salesmen rank somewhere just below Personal Injury Attorneys and right above Dog Fight Promoters on the Loveability Index. They’d shake their own mother down to squeeze out a few extra dollars on a sale. But you came in armed with excellent credit and a good payment history, so you’re gonna get a better deal than some deadbeat, right? Wrong.

Mark Marine is a long-time car dealer. But unlike many of his car-selling peers, he grew a conscience and decided maybe it was time consumers understood what really goes on when they buy a car. So he wrote a book titled, “Kick the Dealer… Not the Tires!”. In it, he discusses the role your credit plays when you buy a car. And, even though it sounds counter-intuitive, having good credit may not get you the best deal.

“You may not want to hear this but the people getting the best price on a car are people with bad credit,” says Marine. “The car-buying experience is designed to allow dealers to make up profits lost on bad-credit sales by making bigger profits on good-credit sales.” So, just like with insurance, the rest of us end up paying higher rates because of the idiots out there.

So how can you arm yourself against the dealers when they check your credit and find out you actually pay your bills on time? Marine gives five key points you should know before buying a new car:

1. Check your Credit Report.
Most credit reports contain inaccurate information. It’s up to you to correct it — there’s no government agency that requires the credit report companies to amend mistakes to your report. And Marine warns against using the “credit repair” companies if you find problems on your credit report. “There is no such thing as credit repair,” he says. “These companies claim they can hide or remove negative information from your credit report, even if that information is true. But they can’t. What’s even worse is that after they’ve ‘repaired’ your credit, your score drops even lower than before you went to them.”

2. Bad Credit Means the Bank Protects Its Money.
When you have bad credit, the bank places more restrictions on the loan. That gives dealers less wiggle room to add on extras and options, lowering the amount of stuff they try to squeeze into the deal. (On the flip side, bad credit still means you have fewer options when borrowing money.)

3. Good Credit Means You’re Ripe for Abuse.
When you have good credit, banks place fewer restrictions on your loan and that allows dealers to charge you more, throw in “necessary” add-ons, offer you more options, etc. So it’s crucial ammunition to know your lender’s conditions on your loan up-front.

4. Get Pre-approved Before You Visit Any Car Dealer.
That way you’ll know up front any conditions placed on your loan. And all the terms. Then the dealer is forced to make a deal that fits the conditions outlined by your bank – eliminating his profit wiggle room.

5. Have an Exit Strategy.
Don’t let the lust for leather seats and a premium sound system melt your brain. When buying a car, keep in mind at some point you’ll sell that car. So you have to be smart. You’ll pay much more for options than you’ll recoup when selling, or trading in, your car down the road.

“A car purchase will affect your economic life for roughly three to seven years,” says Marine. “That’s a long time to be stuck in a bad deal.”