13 car dealer tricks to avoid Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare data for free – 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 website are provided by companies who pay us. This compensation can affect the way and when products are featured on this website, for example, for example, the order in which they may appear within the listing categories in the event that they are not permitted by law. Our loan products, such as mortgages and home equity, and other home loan products. However, this compensation will affect the information we provide, or the reviews you read on this site. We do not cover the entire universe of businesses or financial offerings that could be open to you. Maskot/Getty Images
6 minutes 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 in navigating the ways and pitfalls of borrowing money to buy a car. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are passionate about helping readers to take control of their finances through providing precise, well-researched and well-researched data that breaks down otherwise complicated topics into bite-sized pieces. The Bankrate promises
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We are compensated in exchange for the promotion of sponsored goods and services, or when you click on specific links on our website. Therefore, this compensation may impact how, where and when products are listed and categories, unless it is prohibited by law. We also offer loan products, such as mortgages and home equity, and other home lending products. Other factors, such as our own rules for our website and whether a product is available in your area or at your own personal credit score can also impact the manner in which products appear on this website. Although we try to provide a wide range offers, Bankrate does not include details about every financial or credit product or service. At the core, dealers aren’t trying to take advantage of you. But as an informed consumer it’s essential to prepare for potential situations where you meet a more aggressive salesperson who has a bag full of tricks aiming to maximize profits. Tips for a successful car dealer to look for. These are a few ploys some car dealers — even the most legit — may try to run on you when it comes time to buy. 1. The credit cozen A dealer may tell you that you aren’t eligible for rates that are competitive. While this could be true in some cases however, the salesperson may suggest that your credit score is less than it is, so you’re convinced that you’ll be required to pay a higher rate of interest. How to avoid: Come in with your on hand before you sit down 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 strategy People often think of purchasing a vehicle as a one-time transaction. It’s not, and dealers recognize this. It’s actually three transactions rolled into one: the new car price, the value and the financing. Each of them is a way for dealers to earn profits, which means that all three of them are places you can save money. How to avoid treat every transaction in the same manner the dealer would: independently. You can compare your trade-in with multiple dealers to get the best price. Also, bringing in average prices of the vehicle you’re considering can help keep the salesperson up-to-date. 3. The payment ploy The sales or finance department might hand you a fantastic monthly installment — one that you could possibly qualify for. However, there’s always a caveat. In some instances, the dealer may have included a substantial down payment or stretched the term that the car loan until 72 hours or . What to do: Concentrate on the cost of the car rather than the monthly payments. Don’t 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.” Also, make sure that any price negotiated is the full before your trade-in or is applied. 4. The sticker trick The vehicle price on the vehicle’s window is referred to in the industry as the suggested retail price, or MSRP. However, that’s not what’s most important. It is important to know the price of the invoice — the amount that the dealer paid for it. From the invoice upwards is much simpler than trying to cut from the MSRP. What to stay clear of: what vehicles are being sold for after considering any consumer and dealer incentives. Certain hot cars are sold for sticker price and above. The prices will fall when demand decreases. 5. The holdback hustle Manufacturers often give cash incentives — sometimes called holdbacks — to dealers to encourage them to move slow-selling models. This typically isn’t mentioned in advertisements. What to do: Search for holdbacks or other factory-to-dealer incentives available for the vehicle you’re considering. While it’s not certain that the dealer will offer any of these funds to the car you’re considering It’s not a bad idea to inquire. 6. Spot delivery financing A few dealers have been known to contact customers for days up to weeks or months following the time having have signed a purchase agreement, to tell them that their financing didn’t go through. It’s a fraud. Spot delivery, also referred to by the name of spot financing is a scheme to get you to sign an loan contract with a higher rate of interest. The dealer can know if you qualify for financing quickly. The goal of the later call is to get you to accept a loan with an interest rate that is higher because, according to them they have just discovered that you didn’t qualify for the quoted lower rate. How to avoid: Never go out of the store without signed contracts that detail every single detail, and have every line filled in. Verify that you’ve been approved for the financing your dealer is offering. If you have that, they can’t retreat on the loan. 7. The insurance illusion Some dealers may try hard to get you to purchase an insurance policy while purchasing your car. The type that will cover the difference between what the vehicle is worth and the amount that you owe on it. It’s generally an additional expense, but if you are interested the gap insurance will generally be cheaper when bought from your regular . Another option, credit life insurance, can pay off the portion of your loan in the event that you die before you’ve been able to repay it. If you are interested in these policies it is important to know what you’re purchasing and that you are able to decline it and shop around to find better rates. The price of these policies when you purchase them from a dealership can be enormous due to the fact that the insurance companies that sell the policies to dealerships provide them with huge rewards — everything from cash to first-class travel to encourage the policies. What to do: Don’t automatically agree to the insurance plan offered. Certain insurance companies include the benefits of gap insurance as part of their regular comprehensive automobile coverage, so check there first. For credit life insurance, you’ll more than likely want to simply avoid it. In the majority of cases, it won’t make sense for you. 8. The price sounds tempting — to finance the purchase of a brand-new vehicle. However, this deal may not be the most suitable for your pocketbook. For starters, most finance incentives are offered for shorter time frames, and you’ll need a stellar credit score. For short-term loans, such as 24 – or 36-month loans, payments on even the cheapest car can be sky high. Furthermore, you might be better off finding your own financing and then taking the dealer rebate if one is offered. Say you’re looking at a car worth $20,000. You will get $4,000 for your trade-in. You have the option of choosing the financing at 0 percent or at 3.49 percent, with the option of a rebate of $2,000. The term of the loan is 36 months. In the course of the loan you’ll end up ahead by more than $1,200 when you use the rebate as well as you take advantage of the 3.49 per cent financing. What to do Calculate the actual dollars over the duration of the loan to determine what is the best deal for you. 9. The rollover scam It could be tempting to sell your car for a more expensive car after you’ve paid off the car you’re currently driving. One method by which some buyers take advantage of this is to roll the remaining payments on their current car into an entirely new car loan or lease. This is an extremely risky decision. You will end up owing more on the second car than what it’s worth. In the parlance of the auto industry, you’ll be ” ” in the vehicle. If the car is damaged in an accident, or you decide to sell it, you’ll have to write out a large check to pay the remaining sum of your loan. Avoid this: You don’t want to carry over an old vehicle loan into a brand new one. Instead, try to find the best price by trading it in or via a private sale. If you aren’t able to, stick with it. Unless you desperately need a new vehicle There’s no reason to purchase a car prior to having completed the payment on your previous car. 10. The long term trick There is nothing illegal or deceitful concerning dealers who offer loan periods extending out up to seven or six years. For one thing, the majority of cars are more durable than they did previously and this means your monthly payments are lower. Still, it’s not ideal. You’re likely to owe more on your vehicle than its worth because your car is declining faster than you’re paying for it. What to do: If you are considering an extended loan duration, you should scale back to the cheapest vehicle that’s better for your budget. 11. The balloon scam is similar to the one that occurs when certain dealers will try to convince the purchase of a vehicle with extremely low monthly payments at the moment, only to have a larger balloon payment at the time of the loan time. In some cases, this can be a legitimate way to finance the purchase of a vehicle. For example, you might have just graduated and can realistically assume that your income will increase at the point when the balloon payment due. But for most people it simply is a way of rolling over the balance into an additional loan. How to avoid Beware of these offers and know that your financial situation could change by the time the balloon payment is due, and you might struggle to pay it. 12. Bait and switch The bait and switch is when you go in looking for one car and the dealer is able to put you at the wheel of a different one. Dealers can use deceitful strategies to get you on the lot, only to inform that the car you’re looking for isn’t in stock and then attempt to get you to purchase another vehicle, usually at a higher cost. What to do: Stick to what you’re looking for. If you’ve taken the time to are aware of what you are seeking, there’s no reason to doubt your own thoughts. Wait it out or try another dealer that does have the car you’re looking for. 13. Contract cons Keep an eye out for clauses that are hidden within the small print that you may otherwise miss. They could come in the form of modifications to the loan duration, additions to the loan which you didn’t agree to, or any other service that could result in significant cost. A legitimate lender will not attempt to scam you in this way however it is important to be careful. If you spot any discrepancies, be sure to point them out. And if the dealer isn’t willing to fix it then walk away. Tips to avoid this: Read carefully over the contract. Be sure to inquire about all fees and make sure the terms are clear to both the dealer and you. Keep a copy of the contract in case something arises in the future. The bottom line isn’t supposed to be an experience where you feel tricked and feel like you’ve paid more for your car. The more you know, the better. consider these common dealer maneuvers to make sure you’re not tricked. Learn more
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This article is written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the details of borrowing money to buy cars. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to control their finances with precise, well-studied details that cut complex topics into manageable bites.
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