The Pros & Cons of Internet Financing Web Sites

Before you go speeding off to research financing options or apply for a loan online, you need to consider a few dangerous realities about financing on the Internet.

Unless you are dealing with a very few noncommercial sites or dealing with the Web site of your bank or your credit union, financing ripoffs are generally worse on the Web than at dealership. At times, even the good online sources can hurt you. Why? Online, you are not a human being. You are an inconsequential response nodule. Don't believe me? Do this experiment: go to some Web-based finance sites. Go to both a pure finance site and to the finance Web page of a dealership and/or manufacturer. Send an e-mail to those sites using an impossibly stupid name and an impossibly stupid question, and watch what comes back.

For instance, enter your name as I. M. Asucker on one of their friendly forms. Ask if they finance cars if you live on the moon or Mars. Under "special comments," say you're only twelve years old. You will get an answer that takes you seriously. That's because these sites, except for smaller independent dealerships (about as rare as heavy water) are computer-driven, not human-driven. At least with dealership finance salespersons you can look them in the eye, threaten to leave on the spot and finance directly at your bank. You can duel. You can't do that with the Internet companies.

Consider the following issues before you go surfing even the best Internet sources for automotive loans.

Some finance sites promise to "shop" your loan for the best rate--or "guarantee" the lowest rate. Can they do that?

None of them will meaningfully guarantee that you're getting the cheapest financing and cheapest total loan cost. Please read that again.

Some sites offer you a $100 guarantee that they'll beat any rates. But for that guarantee to be meaningful, you usually must do a lot of legwork-you have to apply for loans at other sites, submit their approvals, and so forth. The guarantee is meaningless.

The Web "comparison" sites generally add a layer of cost to a loan you could make directly.

For instance, your local bank may be part of a "comparison" Web site. That costs money. Go to the local branch of your bank, instead. Banks love direct loans because they make the loan without paying commissions. Take advantage of that.

"Convenience" isn't worth thousands of dollars.

How much time do you really save by borrowing on-line? Six hours? Did you make two thousand bucks during the last six hours? Convenience is a Trojan horse in the finance business.

Rate comparison sites obviously only quote rates from their cooperating sources.

A site might have a thousand sources, but it might not have the one remaining independent bank in your community that just happens to be having a rate sale this week.

None of the commercial finance Web sites tell you that a credit union may beat their rates.

Credit unions don't exist, as far as commercial Web sites are concerned. Why? The sites don't make any money with credit unions. But a credit union loan may save you thousands of dollars and endless hassle.

An exception and a caution: Some on-line dealerships list credit unions as potential sources for loans. Although they may quote you a loan rate based on a credit union's lending policies, the dealership will generally try to switch you from that rate to a more profitable rate. Be careful.

'Testimonials' on Web sites are worthless.

Generally anyone, including an employee, can submit a testimonial and specifically testimonials are worthless because they are not statistically based-one tree does not make a forest.

So Should You Forget The Web When It Comes To Financing?

No. Some really great loans are available on the Web, and at the very least, the Web provides opportunities to compare rates before you actually pick your financing source. But the Web is dangerous because it encourages you to move too fast and too trustingly. And the Web is not the only place to find cheap, smart money. Don't fall for the "infallibility" of high tech! Your goal is to look at all potential sources, and then decide the best source.