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Big Car Bargains: Deal or No Deal?

Dana Dratch, Bankrate.com

It's a buyer's market on car lots these days. As with almost everything, if you have the money, it's a great time to shop.

"There's never been a better time to get a car if you need one and if you're going to be very cautious," says Remar Sutton, author of "Don't Get Taken Every Time" and co-founder of FoolProofMe.com, a financial education Web site aimed at younger consumers.

Customer at an auto dealership.

Dealers are also rolling out some eye-catching offers. Some will dovetail perfectly with your own plans.

Others, however, could tempt you into a buy that's not in your best interest.

Here's a closer look at some of the offers you might see and some you may want to avoid.

Buy one, get one free
The pitch: You pay for one vehicle and get a second one free.

Why it might not work for you:

  • Often you don't get to choose the car you get free. It might be a specific model or even a specific car, new or used. Often, these deals will pair two very large vehicles, like heavy-duty trucks, or a very large truck or SUV with a very small car.
  • You likely won't get as good a deal on the first car as you would have in a normal transaction, says Sutton. "In the real world, a free car is just not possible. It's a distraction. It takes you away from what you should be doing: finding the one specific car that makes the most sense for you, at the best price." Frequently with a twofer, you pay the manufacturer's suggested retail price, or MSRP, which is often $3,000 to $4,000 more for a car and $4,000 to $8,000 more for a truck or sport utility vehicle, says Jeff Ostroff, president and CEO of CarBuyingTips.com, an online car buying guide.

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  • You probably won't get manufacturer or dealer incentives, or rebates. You can find the latest rebate and incentive information at Edmunds.com and at the manufacturers' own Web sites.
  • The primary vehicle could also include a host of dealer add-ons that will make it pricier, says Tim Jackson, president of the Colorado Automobile Dealers Association, or CADA.
  • If you use dealer financing, you'll likely pay a higher interest rate or have payments spread over a longer period, Ostroff says.

Your best bet: Compare prices and buy the vehicle, or vehicles, you actually need. What if you're looking for the exact two vehicles included in a two-for-one promotion? Consider the offer, but shop around. It's likely you can do as well or better if you purchase them separately, says Jack Gillis, director of public affairs for the Consumer Federation of America and author of "The Car Book."

Low-interest loans
The pitch: If you buy the car, the dealer or manufacturer will give you a low-interest loan.

Why it might not work for you:

  • It could be a great deal if you can lock in zero percent to 2.9 percent for the model you want. "But the highly publicized low interest rates are available to very few of us," says Gillis. Credit scores often need to be in the 750 range, and frequently only select models are included in the offer, he says.
  • Sometimes these low-interest offers require a minimum down payment or a shorter loan term, says Bill Gerhard, director of bank products for AAA Financial Services.

Your best bet: Get financing from a bank or credit union before you hit the showroom. If the dealer can best that offer with a lower rate, take it. Hammer out the best possible deal on the car before you start talking financing. Until you have your price locked in, consider yourself a cash buyer. Another caution: Don't apply for dealer financing accidentally. There have been reports that some dealers ask buyers to complete credit applications even if they don't want dealer financing -- under the pretense that the information is required by the Patriot Act, says Ostroff. It's not, he says. Unless you are actually applying for credit at a car dealership, do not supply your Social Security number and other personal or financial information.

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