What Your Car Dealer Doesn't Want You To Know

Additional Coverage:

14 Ways You’re Getting Scammed at the Car Dealership (cheapism.com)

Navigating the Dealership: How to Avoid Common Car Buying Traps

Buying a new vehicle is a significant investment, and while many dealerships operate with integrity, consumers must remain vigilant. Car salespeople are seasoned negotiators who engage in transactions daily, giving them a distinct advantage over most buyers. However, with preparation and awareness, you can confidently navigate the purchasing process and avoid common pitfalls.

Here are 14 common tactics to watch out for at the car dealership:

1. The Disappearing Financing Act

Imagine driving your new car home, only to receive a call days later stating your financing fell through, requiring you to reapply at a higher interest rate. This “yo-yo financing” scam leaves buyers vulnerable.

Your Defense: Secure your financing from a bank or credit union before you even step onto the dealership lot. This gives you solid ground to negotiate.

2. High-Pressure Sales Tactics

Dealers might try to rush your decision by claiming a special deal expires today or that another buyer is eyeing the same car. This aims to push you into an emotional purchase.

Your Defense: Never feel pressured. If you’re unsure, walk away and take time to consider.

There are always other vehicles and other dealerships.

3. Misrepresenting Your Credit Score

A good credit score is key to favorable loan terms. Some unscrupulous dealers might falsely claim your credit score is lower than it is, leading you to accept a higher interest rate.

Your Defense: Obtain your credit report and score from all three major bureaus before you shop. Knowing your true credit standing empowers your negotiations.

4. Charging for “Dealer Prep”

This seemingly innocuous fee, often hundreds of dollars, is supposedly for preparing your car. In reality, it’s often an inflated or unnecessary charge for tasks like cleaning, which should be included in the vehicle’s price.

Your Defense: Scrutinize every line item on the purchase agreement. Question and negotiate to reduce or remove any “dealer prep” or similar vague fees.

5. Failing to Pay Off Your Trade-In Loan

If you trade in a car with an outstanding loan, the dealer is responsible for paying it off. Some dealers, however, may delay or fail to do so, leaving you responsible for two car payments.

Your Defense: Ideally, pay off your old loan before trading in. If not, ensure the payoff is clearly documented in the contract and follow up to confirm the payment has been made to your previous lender.

Remember, the loan is ultimately your responsibility.

6. Focusing on Monthly Payments, Not Total Price

Dealers often initiate negotiations by asking about your desired monthly payment. Agreeing to a monthly figure can lead to extended loan terms and significantly higher total costs, even if the monthly payment seems affordable.

Your Defense: Always negotiate the total purchase price of the vehicle first, before discussing financing terms or monthly payments.

7. Bait-and-Switch Advertisements

Those eye-catching advertisements for 0% financing or incredibly low lease payments often come with fine print that most buyers don’t qualify for, such as requiring excellent credit or a substantial down payment.

Your Defense: Be skeptical of deals that seem too good to be true.

Read all disclosures carefully and understand that advertised specials may not apply to your situation.

8. Handling Rebates Incorrectly

Manufacturer rebates are incentives that reduce the vehicle’s price, regardless of your negotiation. Some dealers might try to include them in your negotiated price or send you a check later, which could make the rebate taxable or accrue interest.

Your Defense: Negotiate the vehicle’s price before factoring in any rebates. Once the price is agreed upon, insist that rebates be applied directly to the purchase price to avoid extra taxes or interest.

9. Pushing Useless Add-Ons

Dealers often try to sell expensive, unnecessary extras like rustproofing, fabric protection, paint sealants, or VIN etching. These have high markups and questionable value.

Your Defense: Politely but firmly decline these add-ons. Most are overpriced, and many are already covered by the manufacturer’s warranty or are simply not needed.

10. Non-Refundable “Hold” Deposits

A dealer might ask for a deposit to “hold” a car while you consider your options or await loan approval. If you decide not to buy, some unscrupulous dealers will refuse to refund your deposit.

Your Defense: Never leave a deposit unless it’s explicitly stated in writing that it is fully refundable. Ideally, avoid leaving any deposit until you are ready to finalize the purchase.

11. Tricking Buyers Into a Lease Agreement

When a buyer hesitates on loan terms, a dealer might offer lower monthly payments with no down payment, seemingly as a purchase. However, they may secretly switch the contract to a lease agreement without the buyer’s full understanding.

Your Defense: Read all documents thoroughly before signing. Ensure you understand whether you are purchasing or leasing the vehicle.

Look for terms like “lessee” or “lessor” and carefully review mileage limits and end-of-lease options.

12. Negotiating from MSRP

The Manufacturer’s Suggested Retail Price (MSRP) is often inflated. Dealers might “wow” you with a discount off the MSRP, but you’re still paying too much.

Your Defense: Research the dealer invoice price – what the dealer paid for the car. Use this as your starting point for negotiations, aiming to pay as close to that figure as possible.

13. The Co-Signer Scam

If you can’t qualify for financing alone, a salesperson might encourage you to get a co-signer, telling that person they are merely a “reference.” This is false.

Your Defense: Understand that a co-signer takes on full legal and financial responsibility for the loan if the primary borrower defaults. Never co-sign unless you are fully prepared to pay off the entire debt yourself.

14. Undervaluing Your Trade-In

Dealers may significantly undervalue your trade-in, offering a low price while suggesting it’s the best they can do.

Your Defense: Research your car’s market value independently using online tools and by getting offers from multiple dealerships or even private buyers before you visit the dealership you intend to buy from.

This ensures you know your vehicle’s true worth.

By being informed and prepared, car buyers can protect themselves from these common dealership scams and secure a fair deal on their next vehicle.

What Your Car Dealer Doesn’t Want You To Know