13 car dealer tricks to avoid Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make smarter financial decisions by offering you interactive tools and financial calculators, publishing original and objective content. This allows users to conduct research and compare information for free - so that you can make financial decisions with confidence. Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this website are provided by companies that compensate us. This compensation could affect how and where products appear on this website, for example such things as the sequence in which they be displayed within the categories listed in the event that they are not permitted by law. This applies to our mortgage, home equity and other home lending products. But this compensation does not influence the information we publish, or the reviews appear on this website. We do not include the entire universe of businesses or financial offerings that could be accessible to you. Maskot/Getty Images
6 minutes read. Published October 06, 2022
Writer: Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers with the ins and outs of securely borrowing money to buy cars. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to manage their finances by providing concise, well-studied information that breaks down otherwise complicated topics into bite-sized pieces. The Bankrate guarantee
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So, this compensation can impact how, where and when products appear within listing categories in the event that they are not permitted by law for our credit, mortgage, and other home loan products. Other elements, such as our own rules for our website and whether the product is available in your area or at your own personal credit score can also impact the way and place products are listed on this site. We strive to offer a wide range offers, Bankrate does not include details about every financial or credit product or service. The truth is that dealers aren't out to scam you. But as an informed consumer it's important to be prepared for the possibility of having to encounter a salesperson with a bag of tricks looking to maximize profits. Tips for a successful car dealer to look out for These are some tricks dealers, even the most reputable- may try to run on you when it comes time to purchase. 1. The credit counselor might inform you that you aren't eligible for rates that are competitive. And while this may be true in some cases however, the salesperson may suggest that your credit score is lower than it actually is, and you think you'll have to pay a higher rate of interest. What to do: Go in with your on hand before meeting with the dealer to ensure they don't try to trick you. You can also apply for an auto loan to avoid having to rely on dealer financing. 2. The single-transaction approach A lot of people think of buying a car as a single transaction. However, dealers are aware of this. There are actually three transactions that can be all in one: the new car price, the value and financing. Each of them is a way for the dealer to make money -- and that means that all three are ways that you can save money. How to avoid: Treat every transaction in the same manner the dealer would: independently. In reality, you could look around at different dealers to get the best price. And coming in with average prices of the vehicle you're considering will keep the salesperson truthful. 3. The payment ploy The sales or finance team might throw out a great monthly payment -- one you could possibly qualify for. But there's often a catch. In certain cases, the dealer may have included a substantial down payment, or extended the term for the loan up to 72 months or . What to do: Concentrate on the cost of the car , rather than the monthly installment. Don't answer the question "How much can you pay each month?" Stick to saying, "I can afford to pay an amount of X dollars for the vehicle." It is also important to make sure that any price negotiated is the full prior to the trade-in or applied. 4. The sticker shenanigan The vehicle price listed on the window is what is known as the manufacturer's suggested retail value, or MSRP. However, that's not what's most important. You need to know the price of the invoice -- the amount the dealer paid for it. From the invoice upwards is much simpler than trying to cut from the MSRP. How to avoid: What is the value of cars when you take into consideration any consumer and dealer incentives. Certain cars that are hot sell at sticker prices and even more. The prices will fall when demand decreases. 5. Holdbacks are a common practice. Manufacturers typically provide cash-based incentives which are sometimes referred to as holdbacks -- to dealers in order to get them to shift models that aren't selling well. The issue is rarely mentioned in advertising. Tips to avoid it Find holdbacks or other factory-to-dealer incentives available for the car you are considering. Although it's not guaranteed that the dealer will use one of these incentives to the car you like but it's a good idea to inquire. 6. Spot delivery financing A few dealers have been known to phone customers several days, or even weeks after they have signed a purchase agreement, to inform them that their financing didn't go through. It's a scam. Spot delivery, sometimes referred to by the name of spot financing is a scheme to get you to sign an loan contract at a greater interest rate. The lender will know if you qualify for financing quickly. The purpose of the subsequent call is to get you to sign an loan that has an interest rate that is higher since, as per their claims they've just discovered you didn't qualify for the quoted lower rate. What to do: Never leave the showroom without signed contracts that detail each and every line completed. Verify that you've been approved for the loan your dealer is offering. If you have that, they can't retreat on the financing. 7. The illusion of insurance A few dealers might attempt to convince you to buy an insurance policy while purchasing your vehicle. One kind of insurance, called gap insurance , is a way to cover the difference between the amount the vehicle is worth and the amount you owe it. It's typically an added cost, but if do want it, gap insurance is generally cheaper when purchased from your usual . Another popular option is credit life insurance, will pay the balance of your loan in the event that you die before you've had the chance to repay it. If these policies interest you it is important to understand what you are purchasing and if you have the option to decline it and shop around for cheaper rates. The cost of these policies at the dealership is often huge due to the fact that the insurance companies that sell the policies to dealerships offer them huge incentives including everything from cash to luxury trips to encourage the policies. What to do: Don't automatically agree to the insurance policy that is offered. Some insurers include the advantages of gap insurance within their comprehensive insurance coverage for cars, so check there first. In the case of the credit-based life insurance you'll more than likely want to steer clear of it. In the majority of cases it's not the best choice for you. 8. The price looks tempting to finance the purchase of a brand-new car. However, this option might not be the best one for your budget. For starters, most financing incentives are for shorter time frames, and you'll must have a great credit score. With short-term loans that are 24 or 36 months for the cheapest car can be astronomical. In addition, you may prefer to find your own financing , and using the dealer rebate when one is available. Let's say you're interested in a $20,000 car and will receive $4,000 as a trade-in. You can choose between zero percent financing or financing at 3.49 percent with the option of a rebate of $2,000. The length of the loan will be 36-months. Through the loan you'll end up in front by more than $1200 if you take the rebate along with you take advantage of the 3.49 percent financing. Tips to avoid it: Use an to compute the actual dollars over the term for the loan to determine which is the best deal for you. 9. The rollover ruse It can be tempting to sell your car to a car that is more expensive after you've paid off the vehicle you're driving. One way that some car buyers take advantage of this is to roll over the remaining payments on their current car into the new vehicle loan or lease. This is a risky move. You will end up owing more for the second vehicle than the value of the car. In the jargon of the auto industry, you'll be " " on the vehicle. If it's damaged in an accident or if you decide later to sell it you'll have to write out a large check to pay the remaining portion of the loan. How to avoid the situation: Don't carry over an old vehicle loan to a new one. Instead, try to get a good price for it as a trade-in or through a private sale. If not, stick with it. Unless you desperately need a new car then there's no need to purchase a car before you have paid off the old one. 10. The long-term trick There is nothing illegal or even deceptive about dealers offering loan durations that last for up to seven or six years. In the end, many vehicles last longer than they used to, and mean your monthly payments are less. But it's not the best option. You are likely to continually have to pay more for your vehicle than it's worth due to the fact that your vehicle is depreciating more quickly than you are paying for it. How to avoid: If you are considering a long loan period, you probably ought to consider a less expensive vehicle that's more in line with your budget. 11. The balloon scam is similar to the one that occurs when certain dealers will try to convince buyers to buy a car for unrealistically low monthly payments at the moment, only to have a greater balloon payment at the end of the loan period. In a few cases this could be a legitimate way to finance an automobile. For example, you might have just finished your degree and reasonably assume that your earnings will grow at the point when the balloon payment comes due. For the majority of people the balloon payment simply is a way of rolling over the balance into a new loan. Tips to avoid them: Be wary of such offers, and be aware you're financial position may be altered by the time that the balloon payment is due and you could struggle to pay it. 12. Bait and switch The bait and switch happens when you're in the market for one car and the dealer manages to put you at the steering wheel of another one. Dealers may use deceptive strategies to get you on the lot, only to tell you the car you want isn't on the market and then try to convince you to buy something else, often at a higher cost. Avoid this by sticking to what you want. If you did your and know what you are seeking, there's no reason to doubt your own thoughts. Try another dealer that does have the vehicle you're looking for. 13. Contract cons Look out for clauses that are hidden within the small print that you may overlook. These could take the form of changes to the loan duration, additions to the loan that you never agreed to, or other terms which could lead to substantial expenses. A legitimate lender will not attempt to scam you like this however it is important to be cautious. If you notice any irregularities, be sure to point them out. And if the dealer doesn't want to make the necessary changes, walk away. What to do: Go over the contract carefully. Ask about all charges and ensure the terms are clear for both you and the dealer. Be sure to keep an original copy of the contract in case something arises in the future. It's not supposed to be an experience in which you feel tricked and feel like you've paid more for your car. It's all in the knowledge, so take note of these typical dealer tricks to make sure you're not scammed. 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The article was written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers in navigating the ins and outs of securely taking out loans to purchase cars. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are dedicated to helping readers gain confidence to take control of their finances through providing precise, well-studied details that cut otherwise complex topics into manageable bites.
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