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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 better financial choices by offering you interactive financial calculators and tools, publishing original and objective content. We also allow you to conduct research and examine information for no cost — so that you can make financial decisions with confidence. Bankrate has agreements with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that are advertised on this site are from companies that pay us. This compensation may impact how and when products are featured on the site, such as for instance, the sequence in which they appear within the listing categories in the event that they are not permitted by law for our mortgage, home equity, and other products for home loans. But this compensation does affect the content we publish or the reviews that you read on this site. We do not cover the universe of companies or financial offerings that could be open to you. Maskot/Getty Images
6 min read Published October 06, 2022
Authored by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in helping readers to navigate the ins and outs of securely taking out loans to purchase cars. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers gain the confidence to control their finances by providing clear, well-researched information that breaks down otherwise complicated subjects into digestible pieces. The Bankrate guarantee
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This compensation could influence the manner, place and in what order products appear within listing categories in the event that they are not permitted by law. This is the case for our loan products, such as mortgages and home equity, and other home loan products. Other factors, like our own rules for our website and whether the product is offered in your region or within your personal credit score could also affect how and where products appear on this website. Although we try to provide an array of offers, Bankrate does not include details about every financial or credit product or service. At the core, dealers aren’t out to scam you. However, as a knowledgeable consumer it is important to be ready for situations in which you encounter a salesperson who has a bag full of tricks aiming to maximize profits. Tricks of the dealer to keep an eye out for . Here are a few ploys some dealers, even the ones that are legitimatecould try to sneak up on you when it comes time to buy. 1. The credit broker might inform you that you aren’t eligible for rates that are competitive. Although this might be true in some instances however, the salesperson may suggest that your credit is worse than it actually is, and you’re convinced that you’ll be required to pay a higher rate of interest. What to do: Go in with cash before you sit down with the dealer so they don’t try to trick you. Better yet, for an auto loan so you don’t have to depend on dealership financing. 2. The single-transaction strategy Many people view buying a car as a one-time transaction. It’s not, and dealers recognize this. It’s really three transactions that are rolled into three: the new car price, the cost and the financing. Each of them is a way the dealer can earn profits, which means that all three are ways that you can save money. What to do treating every transaction in the same way the dealer treats each transaction: individually. In reality, you could shop your trade-in at multiple dealers to find the most competitive price. And coming in with average prices of the vehicle you’re interested in will ensure that the salesperson is up-to-date. 3. The payment ploy The sales or finance department might hand out a great monthly payment — one that you could possibly be eligible for. However, there’s usually a catch. In certain cases, the dealer may have incorporated a significant down payment or extended the terms that the car loan up to 72 months or . Avoid this by focusing on the cost of the car rather than the monthly payment. Never answer the question «How much will you have to spend each month?» Stick to saying, «I can afford to pay X dollars to purchase the car.» It is also important to ensure that the price you negotiate is in full prior to the trade-in or utilized. 4. The sticker shenanigan The vehicle price displayed on the window is what is known in the industry as the suggested retail price or MSRP. However, it’s not the most important. You need to know the value of the invoice — the amount that the dealer paid for it. Starting with the invoice is much simpler than cutting off the MSRP. How to avoid: What vehicles are being sold for when you take into consideration any consumer and dealer incentives. Certain hot cars are sold at the sticker price or more. The price will drop when demand decreases. 5. Holdbacks are a common practice. Manufacturers typically give cash incentives (sometimes referred to as holdbacks — to dealers in order to get them to shift models that aren’t selling well. This typically isn’t advertised in ads. What to do search for holdbacks and other factory-to-dealer incentives available for the car you are contemplating. Although it’s not guaranteed to expect that the dealership will use the funds for the car you’re interested in but it’s a good idea to ask. 6. Spot delivery financing Some sellers have claimed to phone customers days up to weeks or months following the time having have signed a purchase agreement, to tell them that financing did not go through. It’s a scam. Spot delivery, also referred to by the name of spot financing is a scheme to induce you to sign an loan contract with a higher interest rate. The lender will know whether you are eligible for financing in a matter of minutes. The aim of the phone call is to persuade you to accept a loan that has higher interest rates due to the fact that, according to them, they just found out you weren’t eligible for the quoted lower rate. Avoid this: Don’t leave the showroom without signing contracts that detail every single detail, and have every empty space left in. Confirm that you have been granted the financing your dealer is offering. If that’s the case the financing, they aren’t able to withdraw the financing. 7. The insurance scam Some dealers may try hard to convince you to buy an insurance policy while purchasing your vehicle. The type that will cover the difference between what the car is worth and the amount that you owe on it. It’s usually just an extra cost, however if you would like it the gap insurance will generally be less expensive when purchased through your usual . Another popular option is credit life insurance, can pay off the amount of your loan in the event that you die before you’ve been able to pay it back. If you are interested in these policies it is important to know what you’re purchasing and if you have the option to choose to decline the policy and look for better prices. The markup on these policies at the dealership is often huge partly because the insurance companies selling the policies to dealers offer huge discounts that range from cash to luxury trips to encourage the policies. What to do Avoid a bind: Do not simply accept the insurance plan offered. Certain insurance companies include the benefits of gap insurance as part of their standard comprehensive auto insurance, so check there first. In the case of Credit life insurance, it’s more than likely want to simply avoid it. Most of the time it’s not a good idea for you. 8. The rate razzle-dazzle It certainly looks tempting to finance a brand new car. However, this deal may not be the ideal one for your budget. In the beginning, many financing incentives are for shorter terms, and you require a high credit score. And with short-term loans that are 24 — or 36-month loans and even on a moderately priced car can be extremely high. In addition, you may be better off locating the financing yourself and taking the dealer rebate if one is offered. If you’re considering a $20,000 car and will receive $4,000 in exchange for your trade-in. You have the option of zero percent financing or financing at 3.49 percent with the option of a rebate of $2,000. The duration that you can avail of this loan will be 36-months. In the course of the loan you’ll end up in front by more than $1200 If you choose to take the rebate and 3.49 percent financing. 3.49 percent financing. Tips to avoid it using an application to calculate the exact amount over the course for the loan to determine what deal suits you best. 9. The rollover ruse It can be tempting to trade for a higher-priced car prior to paying off the car you’re currently driving. One method that some buyers make this happen is by rolling over the remaining payments on their current car to an entirely new car loan or lease. This is an extremely risky decision. You’ll end up paying more for the second vehicle than the value of the car. In the language of the auto industry there’s a » » in the car. If the car is damaged in an accident or you decide later to sell it, you’ll have to write an enormous check to cover the remainder portion of the loan. What to do the situation: Don’t transfer an old car loan to a new one. Instead, try to find an affordable price as a trade-in or through an auction. And if you can’t stay with it, do the car. Unless you desperately need a new vehicle, there is no reason to purchase a car before you have paid off the old one. 10. The long-term trick There is nothing illegal or even deceptive regarding dealers offering loan durations that last for 6 or 7 years. After all, many cars are more durable than they used to and this means your monthly payments are less. But it’s not the best option. You are likely to continually have to pay more for your car than it’s worth since your vehicle is depreciating more quickly than you are paying for it. How to avoid If you’re thinking about an extended loan period, you probably should scale back to an affordable vehicle that’s more suited to your budget. 11. The balloon trick is also used by some dealers will encourage you to purchase a car for unrealistically low monthly payments now but with a much more substantial balloon payment towards the end of the loan time. In a few cases it can be a valid way to finance a car. For example, you might have just graduated and can reasonably assume that your earnings will rise by the time the balloon payment is due. However, for the majority of people, a balloon payment just involves rolling over the balance to an additional loan. How to avoid Beware of these offers and know the fact that your situation may be altered by the time that the balloon payment is due, and you might be unable to make it. 12. Bait and switch The bait and switch happens when you’re in the market for a specific car, but the dealer manages to put you at the wheel of a different one. Dealers can use deceitful strategies to convince you to go to the lot only to inform you the car you want isn’t available and then try to convince you to buy another vehicle, usually at a greater cost. How to avoid: Stick to what you’re looking for. If you’ve done your research and are aware of what you are looking for, then there’s no need to second-guess your own thoughts. You can wait it out or look for an alternative dealer who has the vehicle you’re looking for. 13. Contract cons Watch for clauses hidden in the small print that you may overlook. They could come in the form of changes to the loan term, add-ons that you never agreed to, or other terms that could result in significant expenses. A legit lender will not try to trick you like this, but it pays to be careful. If you spot any differences, make sure you make sure you point them out. If the dealer isn’t willing to fix it, walk away. Tips to avoid this: Read carefully through the contract. Make sure you know all the charges and make sure the terms are clearly understood by both you and the dealer. Make sure you keep an original copy of the contract to be prepared in the event of any issues later down the line. It’s not supposed to be an experience where you are tricked, and you walk away feeling like you’ve paid more for your car. The more you know, the better. take note of these typical dealer tricks to make sure you’re not scammed. Find out more
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Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers to navigate the ins and outs of securely borrowing money to purchase cars. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain confidence to control their finances through providing concise, well-researched and well-documented details that cut otherwise complicated topics into digestible pieces.
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