New Car Buyers Bible: Everything You Need to Know About How NOT to get Scammed at the Dealership
It’s nerve wrecking… buying a new car, for some people. You may trust in the manufacturing and reliability of a certain auto maker but can you trust the salesmen who are handing you the keys. While there are some good car salesman out there who may do the right thing, the fact of the matter is, they not only work on commission, there is a large number of ways they can increase their profit margin from sale to sale and it comes directly out of your pocket. You can’t blame a salesman for trying and trust me they try. Not only that, there are other various ways that car dealerships can make money off of car owners that may not always be in the owner’s best interests. You really need to be careful so that you are not pressured into purchasing something you don’t actually need. We’ve collected a pretty large list of the most common ways that car dealerships can wheel and deal to take advantage of ignorant customers and how you can avoid being “taken for a ride.”
Trick 1 - The Pressure Cooker of White Lies:
These are the small things that car salesmen will lie about to pressure you into an impulse purchase. Statements such as: “This is the last one available; I have someone else very interested in the car who may come back today; I can only give you this price for today only; This is the only one in this style/color available”. They are set into play to make you feel like you will miss out on something if you don’t get the ball rolling now. The salesmen want you to believe that this very car in front of you is the last of it’s kind, or a one of a kind, or the opportunity of a lifetime. They want you to believe that making a decision on any other day will only cost you more money or lose you the car all together. Unfortunately this tactic works very well when you are an unexperienced or over-excited car buyer drooling over what you think could possibly be your dream car. Truth is, they want you to rush in and make the sale as soon as possible for fear of losing the deal of a lifetime. Not only that, some dealerships reward salesmen who can close “same-day” deals.
How to avoid this? Take everything the salesman says with a grain of salt. This is not the last model, or color… and if the sale price is good today, trust me, it will be good tomorrow and next week. They don’t just disappear. Be kind and cordial to your salesman but do not panic when they use this tactic to make the car you have your eye on look like the last unicorn. Dealerships can locate cars from other dealerships and even trade cars… and if it can’t be found at one dealership, chances are you can find exactly what you are looking at, at another… with an even better price. So relax, put your game face on, nod your head and smile when they try to turn the heat up and know that you are in control. Walk in to the dealership NOT expecting to drive out the same day with a car. As long as you put a deposit on the car (which is 100% refundable if you choose not to buy) the car is not going anywhere until you make your decision. Bottom line.
How to get one step ahead: Give them a taste of their own medicine. Use white lies to your own advantage to turn the tables. Tell them you have a deposit already on the same car with the same options and colors from another dealership out of state, or that you were promised a certain deal. Tell them if the deal is only available “today only” then you will most likely do business with the other dealership. Don’t let them bully or pressure you. Give it back and pressure them to be honest.
Trick 2 - The Bait and Switch:
This is when a car dealership advertises a “too-good-to-be-true” offer for a vehicle but when you get to the place, they tell you it’s already been sold. BUT… while you are here, why don’t you check out one of our more expensive, newer vehicles instead! The whole point of this is to get you to come out to the dealership so that you start drooling over the gloriously shiny beasts of burden in the show room. Once they see your tongue half way out of your mouth as you pine and perish over the newest sports model that is a little out of your price range, they come in for the kill. You’re already semi-paralyzed having seen the new cars first hand, especially when you open the door and sit behind the wheel. You’ve already imagined what your life would be like and how many chicks you could pick up once you get the keys to the fully loaded hard top rotating and glistening under strategically placed showroom lighting. That good deal fades away as you quickly start convincing yourself that you will cut back on spending, drop your premium cable channels and pick up an extra shift on the weekends to afford the latest model. You’ll also see this a lot in car commercials. They will promise you unbelievably low rates and the shoppers will come running, because they’ve missed the fine print in the commercial where it says these rates only apply to those with perfect credit scores, with large down payments and on select models or vehicles. They will use words such as “As Low As”, or “Starting At” to entice you with low and affordable rates. What you don’t realize is that these cars may still have manual door handles… pricing “starts at” your lowest level bare bones base model. Its all about getting you in the door.
How to avoid this? Call the dealership and make sure the car is still available before you leave to head down, and that its not in any prior negotiations. You can also call to learn more specific details on a deal you’ve seen in a magazine or commercial to make sure that the deal applies to you. Once you step foot on that showroom floor, you are at the mercy of very pushy, experienced, and well trained car salesmen.
How to get one step ahead: You can ask the dealership to email you a confirmation that the vehicle is still in stock and available for sale. Some will even take a deposit over the phone to hold it for you until you get there to look. Ask specific questions about sales or deals that you’ve seen to make sure they are still running or that they apply to you and the specific car you are looking to buy.
Trick 3 & 4 - Low Balling Your Trade-In: One way to get you in the door is If you the dealership to ask for a price on your trade-in, they give you a great offer. When you bring it in, they start deducting from the value of the car for frivolous reasons, pretending they didn’t anticipate wear and tear and the price they gave you was for a car in mint condition. This is to get you in the door.
The second thing they will do is quote you a low price on your trade-in. For three reasons. One, because they’d like to get it for as low as possible, two because they want to see if you even know the value of your trade in and will be willing to sell it at a low value, and three, if they do increase the value they are willing to offer for your trade in, then you may feel as if you’ve won, or now have an advantage. But trust us, there is no advantage here - they will not buy the car for more then a set value and in some occasions you have to be very careful that if they do offer you a higher than expected rate for your trade-in that they are not compensating their loss in the price of your vehicle or deal negotiations that go under the radar.
How to avoid them: Avoid Kelly Blue Book. This is the low ball value of your trade-in and a way that dealerships will try to undercut you when giving you an offer. In fact, dealers hope you come in asking for Kelly Blue Book value and they will gladly give it to you because the system they use prices your car much higher. Dealers use the NADA (National Automobile Dealers Association) for used car values to figure out what they can get for your trade in. Price and print out the NADA value for your car based on its make, model, year and condition so the dealer knows that you know the value. It gives you your starting point for negotiations. KBB tends to undervalue cars by thousands of dollars. When pricing your car be honest with yourself. You know how many miles and what condition your car is really in so do yourself a favor, be realistic and price it accurately. With a fender dent, a shopping car scratch, chipped paint, and a coffee stain and dog claw rips on your cloth upholstery, you’re not getting an “excellent” condition value on your car.
How to stay one step ahead: Get your trade-in appraised at multiple dealers. Bargain up your trade-in price by letting them know what other dealerships have offered you for it. Always negotiate the trade-in value for your car completely separate from any other negotiations or paperwork you will do when making a deal for the new car. Another way to stay ahead is to sell your old car privately. This is the way you will be guaranteed to get the most money for it. Dealerships won’t give you full NADA value because they are looking to make money on a resell.
Trick 5 - Overpriced Gap Insurance:
Gap insurance is a necessary evil for auto financing. If you wreck your car in an auto accident, your regular insurance will only cover the value of the car, which depreciates every time you drive it. Gap insurance pays the difference from what the car is worth to what you owe on the car. This way you don’t have to continue paying for a car that you do not even have anymore.
A dealership will try to sell you gap insurance for $500 or more. What most people don’t realize is that you can purchase this on your own for a much lower price.
How to avoid this and stay one step ahead? Buy gap insurance from an outside credit union or location and save a few hundred dollars. However, do not drive the car off the lot without it. Gap insurance is required on all finances.
Trick 6 - Charging You for Customer Service:
On your paperwork, you’ll notice something called a “customer service fee.” This is what the dealership charges you to handle your loan paperwork, issue your tags, process your title, and pay your taxes. How much do they charge for something that not only takes 30 minutes to an hour and not only makes them hundreds, to thousands of dollars in revenue and commission? Anywhere from $300 to $1000 and beyond. Its a bogus, nonsense charge to dig into your pocket.
How to avoid this? Get it reduced. The majority of the costs on your purchase or lease agreement are negotiable in some way, shape for form, except for things such as taxes, tags, ect.
How to stay one step ahead? Refuse to pay it. You have some leverage on this if you have obtained your auto financing elsewhere - it is less work for them. Chances are they are not going to turn down a huge deal on a car where they make thousands of dollars over a $300 charge.
Trick 7 - Rolling Your Financed Trade-In
Everyone loves a new car, and car salesmen will do anything to get you behind the wheel and off the lot. Sometimes people walk into the dealership with a car that is still currently being leased or financed. You tell the salesman you are just browsing because you don’t yet have the title to your current vehicle, but the salesman insists it is no problem at all! They will buy out your current vehicle, financing and all as a trade in, to get you behind the wheel of a new car. Really? Wow… sounds too good to be true, and it is. There is no free parking at the car dealership. If you owe more on the car then the value that the dealership is willing to pay for it, they will still buy it out, but guess what, they will tack the difference in cost onto the price of your new car’s financing, sometimes without you even realizing. The difference owed gets calculated and hidden into your monthly payments on the new finance as they work their dealer magic and juggle numbers til you’re dizzy and cannot see. This may be ok in some situations, especially if the difference in what you owe and the value is relatively small, however, this can be extremely disastrous if you are looking to lease a car, with a possible by out on the lease. The reason being is that once the terms of your lease are finished you have to go back into the dealership and decide if you are going to buy out the car or not, which ends up in an entirely new finance negotiation. Where the problem lies is that if the buyout price on your vehicle is a lot higher than the vehicle’s current value after the lease, including the mileage and wear and tear you put on the car, the bank will not issue you a loan to buy out your vehicle. Simply put because they are not going to lend you more money than your vehicle is actually worth to buy it. This can leave you in a very bad position. The car salesmen don’t care because once you sign the paperwork and drive off the lot, you are not their problem anymore.
How to avoid this? Know the NADA value of your car, and know how much money you still owe on the financing before you enter a dealership. When you negotiate the buy out value of the car, keep the additional roll-over cost in mind with what the car will be worth and your expected buy out.
How to stay one step ahead? Make sure you negotiate the price of your car separately and before you negotiate the value of your trade in so you know exactly what you are paying for the vehicle and numbers cannot be manipulated or hidden causing you issues later down the line. Bargain the buy out value in your favor as well.
Trick 8 - Pushy Salesmen
Car salesmen are just that. Salesmen. They are fully armed with a set of tried and true tactics to “sell” cars, to make the customer feel confused or pressured into making an impulse decision, or to manipulate them into feeling secure and in good hands or that they are getting the better end of the deal, even though they are being taken to the cleaners. If you have limited experience car buying can be extremely intimidating.
How to avoid this? Know what you are getting into. Educate yourself in how car buying works. Know where you can push and pull, know where you have to pay close attention and know what to look for. The best way is to talk to someone before going in and never ever purchase a car same day unless you know exactly what you are getting and how the numbers work.
How to stay one step ahead? Bring a buddy with you. You will stay two steps ahead if you bring someone with you that has automotive car buying or sales experience themselves. Someone aggressive, confrontational and not afraid to ask the questions that you may be intimidated to ask, or bargain for the deals you may feel too uncomfortable or polite to bargain for because you’re just not sure of what you are entitled to or how things work. A partner in crime will also help you from making any impulse decisions and help protect you from being taken advantage of. They can also be a second set of ears for promises made by the dealerships, as well as an excellent tactic to make car salesmen believe that you are onto them, or that there is a better deal down the road.
Trick 9 - Stall Tactics
Buying a car can be emotionally draining and stressful. Especially if you have been drooling over it since you’ve seen it’s concept released at the Detroit Auto Show two years prior, and have been saving every penny you own to purchase one. Your car salesman will begin to play a game with you to wear you down so that you become more and more anxious to agree to a deal and get the hell out of there. They will sit down with you. Then they will have to go talk to their manager. Then they will sit back down, and then go into the other office where you can see them talking to two more individuals pretending to stare at your finance sheet and crunch numbers. What are they really doing? They could be doing the math, or they could be talking about the hot chick test driving the new coupe, or about their plans for saturday night. Unless you can read lips, you hope they are negotiating in your best interests but here’s the deal. Your car salesman already knows the rock bottom line and final set of digits… the lowest price that he can give you to allow you free into the streets with your new dream car. He already knows what is possible and he knows what is impossible. He knows what you have to pay for, and he knows what is negotiable, and to what degree. He doesn’t need his manager. The salesman will try to make it look like he’s got your back and that you are the one who is really taking advantage of them. He knows how to present information to you in a specific way so it looks like he’s your best friend and he just had a conversation with his manager, and he went to bat for you and got you the best possible deal anyone ever could on this car. Do not get suckered by this. You have just sat there for an additional 45 minutes just for your salesman to come back to you with a deal that is $6 a month cheaper than it was 45 minutes ago. Don’t be fooled. It is just a way to wear you down to the point of delirium that you will agree to any price just to leave.
How to avoid this? Car buying should not take more than a few hours. Anything longer and they are simply wasting your time and wearing you down. If they can not get their act together and give you the bottom line (which they already know) then you need to get up and walk out. There are other dealerships.
How to stay one step ahead? Do your research. Shop multiple dealers for the same car. Price out your options. Bring someone who has experience in buying/selling cars to cut all of the hassle and smoke and mirrors out of the price and final offer dance the salesman will attempt to do, and give you the bottom price as quickly as possible.
Trick 10 - The Disappearing Offer:
Car dealerships like to pretend that some deals have a shelf life, but the reality is that most of the time this is an exaggeration to evoke a response within you to impulse purchase. Truth is they do not want you to leave the dealership and price out other cars, or leave the dealership without buying in general. If the car is one price today, there is no reason it cannot be the same price tomorrow. When you go back into the dealership to talk about the same car, they know that you are more than interested in buying it and they will attempt to pretend that the deal is gone and force you to buy the car at a higher price.
How to avoid this: Don’t be pressured to make same day decisions. Car prices do not change overnight and any salesman that says so is pressuring you into a quick sale. Never make any same day purchases and always get the deal in writing. This way you can refer to it when you come back, just in case they try to pretend the offer is not on the table anymore.
How to stay one step ahead? Use the written offer the dealership sends to you as a bargaining and negotiating tool when you go to other dealerships. That way they already know what you’ve been offered, that the offer is legitimate, and they will work hard to give you an even better deal to make the sale themselves.
Trick 11 - Mistakes in the Numbers:
Mistakes in negotiation paperwork are pretty common. Naturally, these mistakes never go in the consumer favor. Errors can be made anywhere on the document such as purchase price, loan terms, additions and options, down payment, or anything else. Their excuse, “oh I thought that is what you wanted…” So if you don’t catch it, you are paying for it.
How to avoid this: Make sure you review all numbers and items in paperwork very closely. Its up to you to make sure everything is right before you sign.
How to stay one step ahead: Write down all negotiations and promises as they are said to make sure that there are no discrepancies once the paperwork is drawn up.
Trick 12 - Over-charge on MSRP for Buy-out Options:
Most car shoppers don’t realize that you can negotiate the purchase price of the car when leasing, so they don’t bother to. They are too busy looking at their lease terms and payments that they never consider it. Plus a higher buyout can mean lower lease terms. If left up to the car dealer, you’ll be paying the full MSRP for the vehicle.
How to avoid this and get ahead: When leasing a car, the purchase price of the car is labeled “capitalized cost”. Make sure you negotiate this number just as aggressively as you would be if you were buying the vehicle.
Trick 13 - The Ever Extending Agreement Length:
You’ve seen it before… you tell your car salesman where you want to be with pricing, and suddenly they run to the office and magically come back a half hour later with an offer that matches your budget! How wonderful of them to drop the price of the car down and finagle the numbers to meet a price you can afford. Sorry to burst your bubble, but this is not likely what happened. One thing that car salesman do to meet your monthly payment is to secretly extend the months or years of your payment plan. Sure you can pay $300 a month for this car instead of $500, but you will be paying over 5 years instead of 3. They won’t always tell you how they got the number, but instead, that it came through by some divine intervention and magically became lower. The problem with this is that you tend to pay more interest, as well as higher interest, and not only that, by the time you are done paying for the car over the course of 5 years, you’ve put so many miles on it that its come time for a new one. You’ll end up paying off one car only to have to purchase another and you’ll never be free from car payments. Lease agreements that run for long terms tend to be recipes for disaster. The longer you finance your lease, the more opportunity you have to go over the mileage that not only depreciates the value making it harder to finance your buyout, it ends up costing you a small fortune in overages.
How to avoid this: Pay very close attention to the details of your lease including the length of the contract and ask the dealer specifically what he did to your agreement to decrease the price. Don’t let him bury numbers.
How to stay one step ahead: Get your vehicle financing on your own, ahead of time with length and cost already laid out for the price range you want to spend. What is it you actually do when you finance a car through a dealership? They call up the bank and try to get you approved. The worst part is that one, they can submit you to several banks, putting a ton of inquiries on your credit causing your score to drop, and two, they don’t even have to offer you the best rate, and sometimes when their is an incentive not to, they wont. Additionally, this prevents you from purchasing a car you can’t afford by stretching out your payments over more time.
Trick 14 - The Extended Warranty:
One of the biggest scams and fine printers in the auto selling and buying industry is this ever specific “extended warranty” option. This is a way that the car dealerships can make a ton of extra money. In an extended warranty the auto service contracts promise to do or pay for repairs or services not included in the initial warranty or extended past the initial warranty. The problems lie in several areas. Sometimes these warranties have fine print. They sometimes are very specific and cover the parts of the car you may least likely have any problems with, or they require extremely strict maintenance and car to your car that must be documented, or else there is potential to void the warranty. The warranty may be a great deal for someone who does not drive that often if it is based on miles only… but thats why they always include the catch… such as 100k miles or 5 years (whichever comes first). Fact of the matter is, unless you drive 150,000+ miles in your car and never bother to change the oil or take care of any other standard maintenance, you should not encounter any issues with your vehicle within the first 100,000 miles or 5 years. When the offer extends beyond that, the “extended warranty” sometimes does not cover or specifically excludes the parts of your car that may actually need replacing at that point. Other times the warranties will actually make the dealership even more money by making sure that you get the car serviced frequently and at their service stations, when you could actually get it serviced less often or for much cheaper elsewhere.
How to avoid this: Before you sign or buy any extended warranty know exactly what it covers and weigh the pros and cons. Don’t let the salesman pressure you by escalating costs of repairs. A good car should be built to last and the dealers know exactly how reliable these vehicles really are. Keep all service receipts and records just in case so you can prove what services have been performed on your car and when.
How to stay one step ahead: Negotiate the terms and cost of your extended warranty. Not many people know that you can do this at some dealerships. Have them throw in free oil changes and tire rotations, or reduce the overall cost of the warranty itself. They can do this, all you have to do is haggle.
Trick 15 - Supply and Demand:
Newer models tend to be more expensive and the dealers are less likely to budge on price due to the fact that when a new car model comes out the demand for it is high enough that they don’t need to give you a discount. Someone will purchase it at full price and the demand is high so this makes haggling over prices more difficult.
How to avoid this: Make your purchase at the end of the month, or the end of the year. These are prime times when salesmen and dealerships are more motivated to reduce prices because they are looking to fill quotas and move inventory.
How to stay one step ahead: Purchase a current year model instead of the newest model. The new models tend to be released toward the summer and end of the summer so the 2015’s will start to go on sale as soon as the 2016’s hit the lot at full price. You’ll get a better deal on last year’s model which, in all honesty sometimes tends to be extremely similar to the newest one released. They will give you a decent bargain to clear out the old models before they get shipped off to make room for the latest ones.
Trick 16 - Numbers Juggle:
The “4 Square Method” is the most common sales tactic a dealer can use to try to gain an advantage over the customer. It is a technique designed to confuse you by mixing the price of the car, the down payment, the trade-in value and the monthly payment into one big transaction. They will continue to juggle numbers until you are so confused that by the end of the transaction the only one you are really paying attention to is your monthly payment which has magically been adjusted to suit your budget.
How to avoid this: Make sure to negotiate each part of your deal separately. That way numbers cannot be adjusted or juggled.
How to stay one step ahead: If you negotiate over phone or email, (which most car buyers don’t even know that you can do) they will have to handle each part of your negotiation as a separate transaction. The 4 Square Method is utilized in in-person transactions at the dealership.
Trick 17 - Dealer Stickers:
Sometimes car dealerships will add additional stickers or “dealer stickers” next to the official MSRP. You may think this is the real cost, but it really is put into place to fool you into paying a lot more for your vehicle. The dealer sticker includes random or sometimes worthless dealer installed options that add additional nonsense and overpriced charges.
How to avoid this: Unless the “dealer sticker” has really added something substantial or valuable to the vehicle worth the markup, do not pay these charges. Redirect the dealer attention to the lower price and original MRSP.
How to get ahead: Tell the dealer that you do not want these added options and to find you a car that has what you want at the original MSRP. If they are nonsense additions, they will remove the cost and negotiate the final price of the car to make the sale. They don’t want to find you cars, they want to sell what they have in the lot first.
Trick 18 - Lying about Money Factor:
Money factor is another number juggle and misdirection that dealers use to confuse car buyers looking to lease a car. The Money Factor is basically the interest rate shown as a fraction. To convert it into an interest rate you are familiar with, you have to multiply it by 2,400 - but a lot of people don’t realize so it is an easy way for dealers to accidentally make a mistake in the numbers. Still confused? For example if the money factor is .0025 that would mean the interest rate is (.0025 x 2400). A dealer may mislead you by telling you that the interest rate is 2.5 percent hoping you get confused by the 2.5 percent and the .0025. A true 2.5 percent interest rate would equal a money factor of .00104. This is complete fraud, but if you question the about it they will tell you that they told you the money factor was 2.5 not the interest rate. And you’d have to prove it.
How to avoid this: Make sure to get your interest rate in writing before signing any deals and make sure to have the salesman clarify both the money factor number and the interest rate value.
How to stay one step ahead: Multiply the money factor by 2,400 to get the equivalent interest rate. Make sure it is written up in the contract accurately.
Trick 19 - Finance Markup Scam:
When you apply for financing through a dealer, they shop you around at several lenders to see what rates you qualify for (additionally putting several inquiries on your credit). They call this the “buy rate”. Lets say you get a 5% interest rate. The dealership will come back to you and present you with a marked up interest rate (and this is totally legal to mark up the rates, sometimes as high as 4% but other states are limited to 2.5%). So the dealer comes back and says you got approved for 7% financing. 8 or 9% if they are really greedy. What happens is the dealer will keep the additional markup as a profit. (They split a portion of it with the finance company they are working with.) They call this profit the “finance reserve” or “dealer reserve”. This markup can cost you an additional $1000-6000 or more depending on the price of the car and the length of the terms as well as the interest rate markup. When you consider that the average dealer is making several hundred to a thousand dollars per car, the additional markup can more than double their profit - which makes it very important to them to try and mark up your financing. Its almost as if they sold you two cars on the same day instead of one after they collect their paycheck.
How to avoid this: Get your own financing before going for a dealer. This way you know what you are working with and don’t have to be scammed by dealer finance markups.
How to stay one step ahead: Find out the financing rates you can get on your own before hitting the dealership and force your dealer to beat the rate that you got, giving you a better deal then you could have gotten on your own.
Trick 20 - Packing Payments and Numbers Games:
Dealers will attempt to hide add-ons, extras, extended warranties, gap insurance, etching, or other useless items into the monthly price of a car. Especially if they already have a bullseye on your head for the magic number you are looking to pay each month. Just because you will spend $500 a month doesn’t mean the car actually costs that much. The dealer will shove many additional costs into the car. They will always assume you want the additional features such as extended warranty, or fabric protection, unless you specifically tell them you don’t want it. Most car buyers are so concerned with what they are paying month to month, they never negotiate the actual price of the vehicle itself. And dealers count on this. They raise the price to make more money, and lower your payments by extending the payment plan, among other juggling techniques and tactics. They even have tactics they use to get you to focus on the monthly payment itself such as asking you questions like “If I can get your payment down to $240 a month, would you take this car home today?” Its a scam to get you to focus only one one number.
How to avoid this: Pay close attention to what you are paying for and the extras, features and additional costs that are crammed in and hidden into your agreement.
How to stay one step ahead: Always negotiate the final price of your car first before you play around with monthly payment options. Know exactly what is included and what you are paying for. Once that number is solid, and unchanging, then you can make the adjustments to find your happy place with an affordable monthly payment.
Trick 21 - Good Cop, Bad Cop Car Dealer:
Your basic good cop, bad cop routine between your car dealer and his manager. The manager typically gets to play the bad cop, being hard to negotiate with and unbending when it comes to the price of the car. Your dealer, pretends to be on your team and working for you. They may give you a false sense of security or belief that they are being completely honest and presenting you the best possible deal. Which is true, because they are… but its the best possible deal for them and their manager, not the best possible deal for you. This tactic is to simply wear you down and make you feel like the dealer is working for you so that you believe you are getting a great deal on the car.
How to avoid this: Know what you are dealing with when you walk in the door. Know what numbers to look at, and don’t become emotionally invested or swayed when making negotiations. Assume that everything said to you during negotiations is a tactic to lower your guard and pay close attention to all negotiations and fine print.
How to stay one step ahead: Negotiating the price of the car over the phone or online can eliminate the three ring circus your car salesman and his manager will put on for you during the bargaining process.
Trick 22 - Service Scams:
The service center makes a lot of money on replacement and worn parts such as brake pads and air filters and oil changes. Even erroneous “transmission” or “oil” flush services that will rejuvenate your engine if they feel they can scare an unknowing car owner into preventing damage because, god forbid, they missed an oil change. These special packages or services are made up by dealerships to convince you to believe that your car needs more care then its traditional oil changes and tire rotations. Most people will accept the dealer suggestions with no questions asked, thinking they are looking out for their car’s best interest. Other times the dealership will sell you service packages that are not cost effective or that you will never need. Especially if you only intend on leasing a vehicle. If you are giving the car back, there are many things such as an extended warranty or service packages that you don’t have to bother with because the warranty of the car covers you for the length of the lease. They may even offer services for extremely inflated prices that you can do yourself for 300% cheaper, such as AC recharging.
How to avoid this: Know what you are looking for and what services your car really needs and when. Don’t be pressured to get services you don’t need or don’t want. Especially on a leased vehicle. Know the suggested mileage for specific services. Car dealerships may pressure you to get an oil change every 3,000 miles, but truth is most cars today with high quality synthetic oil, don’t need them until every 7,500 miles.
How to stay one step ahead: Get a second opinion from a professional mechanic that you know or trust.
Trick 23 - Bad Credit Score Scam:
Some dealers take advantage of the fact that many people have no clue what their credit score is or what interest rate they would qualify for. So the dealer goes it the back, runs your credit and comes back out. He doesn’t tell you your score, he just pretends that your credit isn’t good enough for competitive or low pricing. He then pretends he’s going to try a few more things to see what he can do to get you approved. When he comes back out and presents you an offer, you are now more willing to take it in fear that it may be the only financing you can get, especially when they scare you by telling you that every time your credit is run, your score gets lowered. Meanwhile, he’s just scammed you into giving him thousands of extra dollars in interest payments.
How to avoid this: Know your credit score before you go into the dealership so that you know what level of finance rate you are likely to qualify for.
How to stay one step ahead: Get financing outside of the dealership on your own. This way you will know exactly what your qualify for financing and won’t get scammed by the dealer.
Trick 24 - Spot Delivery Scam:
There are times when a dealer will arrange financing for you, and let you take the car home. Now after you’ve been enjoying your car for a few days, posting photos on your Facebook and Instagram and showing it off to all of your friends, he calls you up and tells you your financing fell through and you need to break the car back. Now you are back at the dealership and they pressure you into signing for a loan with a higher interest rate, a larger downpayment or both. You end up paying way more than expected or promised, just to keep a car you already trusted you owned for less, and the dealership makes more money. There are times when financing does actually fall through, but the fact of the matter is, no dealer should ever let you take a car home (nor should you ever take a car home) until you are 100% sure you have been approved. Be most suspicious if you know you have bad credit, and are offered a good rate.
How to avoid this: Make sure you are approved before you take the car home at a price you can afford.
How to stay one step ahead: Get pre-approved for your own financing. Do not rely on the dealership. They are not looking out for your best interests.
Trick 25 - Targeting Your Numbers:
When you go into a car dealership the salesman will generally ask you what you are looking to pay monthly or what you are looking to spend. Once they get a target on these numbers, they know what you are willing to pay and will juggle numbers in their favor, even if it means overpricing and charging you for extras. As long as you are within your price range of monthly payments, who cares if you are overpaying for features and options you did not want, or inflated interest rates. Just because you will pay up to $400-500 a month for your car doesn’t mean you have to, or that it even costs nearly that much. The problem is that it can cost that much if you let a dealer take advantage of you.
How to avoid this: Keep your numbers a secret. Don’t even let them run your credit before negotiation starts. Let them tell you what the car costs and then know that they can always give you a much better deal. Make sure you are looking at all numbers presented and not just the monthly payment.
How to stay one step ahead: Know their numbers. Price out your car and your interest rate for the total cost and monthly payments way before stepping into a dealership. If you know what the numbers should be, you’ll have an easier time arguing them in your favor. Shop several dealerships for the same car. Make them compete to give you the best price, because they definitely will.
Trick 26 - Take The Car Home Today:
Car salesman will do anything to get you to take the car home the same day. In fact, some get bonuses for selling cars the same day. They will make up tons of excuses to validate the urgency of purchasing immediately, such as the car being the last in stock, or that it has another interested buyer, or even that the sale price will expire tomorrow and he cannot guarantee the best deal, but the bottom line is not only do they want to make the sale, they do not want you shopping around for better deals. They will even offer you the opportunity to take the car home on a trial after they approve you for financing and you sign the contracts, promising you can return it if you don’t like it. Truth is, they count on you not wanting to go through the hassle and just settling for the car because you are so excited to be behind the wheel and driving it. Not only that, they know once you take the car off the lot and drive it home, it is not as easy to return as a pair of pants you just decided you don’t like. High pressure sales tactics and tricks will stress the inexperienced car buyer, or the over-excited car buyer to buy same day. Truth is, if you really want the best deal, you should not fall for this.
How to avoid this: Educate yourself on automobile financing and purchasing and never buy a car same day. If you put a deposit on the car, (which is completely refundable) this will allow you to go home, sleep on it, and make your decision away from the stress of a high pressure salesman.
How to stay one step ahead: Shop around. Not only that, use previous offers and negotiations as bargaining tools for other dealerships to give you a better deal.
Trick 27 - Finance to Lease:
You walk into a dealership looking to buy a car and you sit down with the dealer and start working numbers. You get a good interest rate but what you did not realize was that your monthly payment for the car you want is just much higher than you anticipated, even if you are given a legitimate fair deal. At this point you tell the dealer that the cost is just too high and go to look at a less expensive car when right before your eyes, the dealer produces this magical concept called car leasing that allows you to drive the same car, at a much lower monthly cost. Now all of a sudden, your dream car becomes affordable and your eyes glaze over as he tells you all the mystical advantages of leasing a car. What is car leasing? Its renting. Renting a car, with strict limitations and an option to purchase at the end. The catch-22 is that if you don’t buy out the car at the end, you’ve invested a lot of money into a vehicle and have nothing when the lease is over. The other problem with leasing is that they regulate the mileage you can put on the car each year. So even though the price is low right now, you are limited to the amount of wear and tear and mileage you can put on the vehicle because they need to keep the value up for resale if you decide to return it. This means you will owe money for every single mile over the lease, and every ding, dent, scratch or coffee stain on or within the vehicle. The dealer will tell you its only “5 cents or 10 cents” per mile over… but that means you are paying $100 per 1000 miles over, just to give the car back and have nothing. If you drive more than ten to fifteen minutes to get to work, it is extremely easy to go over your miles. Some people say, “well it doesn’t matter if I damage the car or drive so many miles because I’m buying the car when the lease is up, but the problem that most first time leasers don’t realize, especially if they are leasing in order to reduce monthly payments, is that if you go far over the mileage, you will depreciate the value of the car. The reason this is not good is because when you go to buy the car out and attempt to finance the buy-out price of the vehicle, if the value of the car does not equal the buy-out price, the bank will not give you a loan for the vehicle. They will not let you buy a vehicle that isn’t worth the price you are paying for it because if you default on the loan, the value of the car will not equal what is owed if they need to repossess the car and sell it to get their money back.
How to avoid this: Take into careful consideration and learn all the terms of the lease agreement before you decide to lease a car over financing. Carefully estimate the mileage you will be putting on your car each month and make sure that your driving habits are well within the range of lease agreement miles allowed. Leasing is really an option for people who don’t drive much, don’t mind a car payment, and like to drive a new car every few years, not for people looking to save money on car buying because in the long run, you will pay much more over a longer period of time. Realize that by leasing and then financing, you are paying way more than the car is worth, and quite possibly finding yourself in a 7-9 year finance between leasing and buying that by the time the car is actually yours, you will need to purchase another. In some cases where you put on too many miles, the car will break down before you are done paying for it due to high mileage.
How to stay one step ahead: Finance wherever possible. If you must lease, make sure that you negotiate not only your lease agreement terms, but the buy-out price of the car at the end of the lease agreement. This price can be negotiated as aggressively as you would when buying a new car. Most people do not realize this can be done and simply end up paying the full remainder of the MSRP for the depreciated vehicle.
Trick 28 - The Unexperienced Car Shopper:
This is pretty much a round up of the fact that car salesmen are in the business to make money and will use any tactics they can to mislead or confuse a new or inexperienced car buyer into making a sale that profits them in anyway possible. Understand that car salesmen, while not bad people are not only aggressive due to the competitive nature of the job and its demands to both meet quotas and allow them to earn a living, are very well trained in the art of selling cars and confusing buyers.
How to avoid this: Educate yourself. Learn about what to look for when buying a car or negotiating prices, where the biggest scams are made, and know exactly what you are buying and what you are paying for it. Read contracts carefully before signing, don’t be pressured or fooled by pushy salesmen and do not be afraid to ask questions and question things in your agreement. Do your research beforehand, always shop around and get multiple prices from different dealers, as well as looking into your own financing outside of the car dealership to allow for the best rates or to at least know what a fair rate should be. Take everything he car dealers say with a grain of salt, never feel pressured and don’t be fooled by the three ring circus happening in the showroom with salesmen, managers, and finance coordinators. It is simply there to confuse and distract you in any way possible. Also, don’t be afraid to bring an experienced person with you to help you get the best price for the car you want. A second set of eyes will help prevent you from being taken advantage of or making impulse decisions.
How to stay one step ahead: You have finished reading our guide and now know most of the in’s and out’s of new auto shopping and car buying so you are already one step ahead! Use this list as a guide when car shopping to help you avoid the most common scams or tricks they may pull during the car buying process. We hope it helps you to get a fair and reasonable price as well as make new car shopping a more enjoyable and less stressful experience that doesn’t end in you getting taken advantage of.
Bonus Tip 1: Another tip for you new car buyers out there, when you go into the dealership, look for the youngest, greenest, car salesman you can find. He's going be more eager to sell a car, then he will be to make as much money as he can off of it. Veteran salesman will have little interest in doing anything for you if they know they won't make money off of the deal. It is a waste of their time they could be spending with other potenital buyers.
Bonus Tip 2: Be polite to your salesman. If you act like a know-it-all, or come across arrogant or rude they are not going to want to help you or will do their best to not give you a good deal. Car salesman are just trying to earn a living and deserve respect.
Bonus Tip 3: As much as you may want car buying to be as quick and painless as possible, it is in your best interest to make sure that they spend a lot of time with you. Their time is as valuable as yours is and the longer you spend iwth them the lower the price of your car will continue to go in hopes that they can finally make a sale and thier time wont have been wasted.
If we've missed anything, or you have any additional tips or tricks to getting the best deal at an auto dealership, please let us know! Post in the comment section below and we'd be happy to add them!
*A special thanks and credit to Jamie Galiastro for his input and expertise in the auto sales industry!