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How To Read Between The Lines In Car Ads

By Aaron Crowe

Car ads are meant to grab your attention, with or without exclamation points: “Lease for only $99 a month!” “One at this price!” “Starting at only $15,999.”

But whether the phrases offer genuine savings requires some comparison shopping, reading the fine print, and asking the dealer a lot of questions.

Print, television, Internet and radio ads can have wording to be aware of when buying a car:

“Lease for only $99 a month.” The price is right, but a large payment of $3,000 to $5,000 is needed to start the lease. That caveat should be in the fine print of the ad. If you total the car after signing a lease, insurance will cover the car but not the $5,000 spent to start the lease.

The lease contract can also allow no more than 10,000 miles per year be driven, and 20 cents per mile thereafter, which doesn’t help people who drive the average of 15,000 miles per year, says Jarrod Holland, 38, who owns a public relations firm in North Carolina and has leased most of the 29 cars he has owned over his lifetime. Stellar credit may also be required to get the low lease price, Holland says.

If no money down is needed, a lease can be a worthwhile deal, he says.  Holland once heard a radio ad for a Ford truck lease at $299 a month with no money down, and he made a U-turn to the dealership and immediately leased the truck.

“One at this price.” This phrase is often found in the small print at the bottom of an ad for what dealers call an “ad car,” and while it can be technically true, it could also be a bait and switch tactic to get shoppers in the door. The car may be an ugly color with no extras, or the dealer may say it has already been sold or is out being test driven.

The ads make clear that only one vehicle is offered at the low price, and a vehicle identification number, or VIN, will be provided.

The one “loss leader” car is used to get people in the door, Holland says. Some of the best deals are offered in August as dealers try to clear inventory for new cars in September, he says.

To get the car, Holland suggests getting to the dealership before it opens and finding the car so you can be the first in line to buy it. “I’ve tried but they’re usually gone by the time I got there,” he says.

“Starting at only $15,999.” This is the base price that will usually have an asterisk next to it, slyly alerting readers that it’s for a base model that doesn’t have all of the extras that the pictured car does It could be a car with a manual transmission, for example, or not have air conditioning or certain safety features. The pictured model can cost a few thousand dollars more, though neither price doesn’t include taxes and other fees.

“Low monthly payments.” A dealer can accomplish this by offering a low interest loan. But be aware of the “dealer markup” that the Consumer Financial Protection Bureau has warned of that can discriminate against minorities by charging them higher interest rates than the rate the lender gave the dealer.

The Federal Trade Commission warns consumers to ask dealers to clarify details about low interest loans. Among them: Will a higher price be charged for the car to quality for the low-rate financing? Is a larger down payment required to get the low rate? Is the loan for condensed period such as 24 months? Is a balloon payment due at the end of the loan? Do extra services such as rustproofing have to be bought to get the low rate?

Have you ever heard a car salesman say, “How low do your monthly payments need to be for you to feel comfortable?” It’s a way to get the monthly payments low, but the overall cost can increase dramatically.

“People don’t necessarily care because the dealer got their payments where they wanted them,” Holland says.

Paying $350 a month for 36 months may look good, but stretch that payment to 60 months and that extra two years of payments adds up.

“We’ll pay off your trade.” If your car has “negative equity,” meaning you owe more on it than it’s worth, a car dealer will pay off the balance of the loan when you trade it in for a new car. The FTC warns that trade-in offers can be misleading and the negative equity can be included in the loan for the new car.

The FTC gives an example of a car with a loan payoff of $18,000, but worth only $15,000. The dealer promises to pay off the negative equity of $3,000, but it shouldn’t be included in the new loan. If it is, then you’re paying off part of the trade-in instead of the dealer.

The FTC recommends several options, including postponing the purchase until you have positive equity, and making sure that the negative equity is paid for by the dealer and that the terms are in the contract.

The best way to read a contract is to read it backwards, says Dave Phillipson of CEO Space.

“The biggest sticking points are at the end of a contract,” Phillipson says. “They put the simple ones first to create a ‘yes’ momentum so by the end, you’re just signing and agreeing because the first few were so obvious.”

Aaron Crowe is a journalist who covers auto news for CheapCarInsurance.net.