Write down or print out these tips when you are planning on buying a new or used car or truck. This will save your THOUSANDS OF DOLLARS! Before making what is the 2nd most expensive purchase for most people, other than a home, which is the 1st most expensive, you should visit AT LEAST 5 different dealers to compare prices, mileage, and condition for the type of car you are considering buying. When you are spending $10,000 or more, you should spend more time to make your decision than if you were buying a sandwich or a meal. Buying a meal for $10, if you don’t like it, you have only lost $10 at most. With buying a car, you could be ripped off and overcharged by $1000’s of dollars. To reduce your risk of being overcharged, don’t make the decision the same day. Shop around at several dealers. Do not buy from dishonest dealers who try to charge more than the listed price or from lazy dealers who do not post their prices and mileage. Instead, try to find a dealer who is hard-working and honest, who lists prices and mileage honestly, and provides good service by responding to emails.
8 tricks up your auto dealer’s sleeve
Auto dealers have lots of ways to make the most off of every sale.
Everything from interest rate markups and dealer add-ons to longer and longer loans can drive up the cost of buying a new car or truck.
If you’re not careful, you can wind up paying more to buy and finance a new car or truck than you really need to.
That’s a total waste of money for anyone trying to build financial security for themselves and their families. Look out for these 8 well-known tricks when you visit the showroom.
Dealer trick 1. Preying on your lack of information.
There’s nothing a salesperson loves more than a clueless car shopper.
You can’t negotiate a fair price for a vehicle when you don’t know what that price should be.
Or add the Edmunds or Kelley app to your smartphone and punch in the model, trim level, equipment packages and other options listed on the window sticker for any car on the lot.
Either way, you’ll know what car buyers are actually paying for the ride you’re considering, and it’s usually hundreds, and often thousands, of dollars less than the suggested retail value posted on the window.
You want to be the smart shopper who pays a little less than the average transaction price.
Dealer trick 2. Making it all about the monthly payment.
Salespeople often ask potential buyers what’s the biggest monthly payment they can afford.
With that number in hand, they’ll calculate the most you can possibly spend and still hit that monthly payment by dragging out the loan for as long as possible.
He or she will then show you cars and trucks in that price range, which is often higher than what you wanted to spend, while reassuring you that a better ride is well within your budget.
Let’s say you came in to buy a compact sedan that cost about $20,000 but let slip that you could afford a payment of $450 a month.
The salesperson immediately recognizes that a 60- or 72-month loan would allow you to buy a $25,000 midsize sedan while keeping your payment at about $450 a month — and that is what he or she will try to sell you.
The bigger sticker price, and longer loan, both mean more money for the dealership.
Use the 20/4/10 rule to see what you can really afford.
It says you should put down at least 20% on a vehicle, finance it for no more than four years and not spend more than 10% of your monthly income on your auto expenses, including your note, maintenance and insurance.
Here’s how to put that rule to use before you go car shopping and come up with a purchase price that won’t drain your checking account every month — and then stick to it.
Dealer trick 3. Imposing finance charge markups.
You’ve picked the car you want to buy, and now the finance manager is searching his computer for the best deal on a loan.
But the dealership is not required to tell you the cheapest loan you’ve qualified for and can legally pad the interest rate with a couple percentage points for themselves.
Let’s say the bank or finance company says you’re eligible for a 5% loan, but the finance manager tells you 7%.
On a $22,000 five-year loan, that extra 2% will add an extra $1,277 to your payments.
The lender is in cahoots with the dealer. It collects the extra money, keeps half for itself and sends the other half back to the dealer.
While this is quite legal, the U.S. Justice Department and the Consumer Financial Protection Bureau have been investigating whether dealers and lenders are prone to discriminate against women and minorities by adding markups to their loans more often.
Dealer trick 4. Making deceptive payoff promises.
Let’s say you’re looking to buy a new car but still have a balance on your current car loan.
To close the deal, a salesperson will often promise: “We’ll pay off your loan no matter how much you owe.”
Most dealers will make up for that loss by charging more for your new ride, offering less on your trade-in and imposing a finance charge markup.
But unscrupulous showrooms pay off your old loan, just as they promised, then secretly add that amount to your new loan.
To get away with that, they’re counting on you to focus on the monthly payment and ignore the total amount you’re financing.
Initially you might have been told that your monthly payment would be around $400, which is what it would be if you financed $20,000 over 60 months at 6%.
When you sit down to sign the papers, the finance manager points to the monthly payment line and, sure enough, it’s $397.
What you don’t see is that the dealer added that $4,000 payoff to the balance on your loan and financed that $24,000 over 72 months, committing you to pay on that car for an additional year.
Dealer trick 5. Pushing you to lease.
Some salespeople may steer you to leasing because it may get you a new vehicle at less than half the monthly payment it would cost to buy.
The problem is, you’ll still be making years of monthly payments at the end of which you will own nothing.
If you need to lease a car to “afford” it, you probably can’t afford it in the first place.
Read our story about why leasing is a bad deal.
Dealer trick 6. Saying the deal is only good now.
Salespeople love to pressure buyers for quick sales with things like “the deal is only good today.”
It’s a common tactic to prevent you from checking other dealerships or having second thoughts. They’re worried if you leave the lot, you won’t come back.
Chances are you’ll get the same deal if you return.
The one exception would be around the end of the month when incentives provided by the car companies — rebates and discount loans — often expire.
Click here to find all of the current automaker incentives and exactly how long they last.
You don’t want to make impulse decisions or be pressured on such a big purchase anyway.
Don’t be scared to sleep on it.
Dealer trick 7. Trotting out the old bait-and-switch.
You see an ad for a great price on a car you’ve been considering.
Then you get to the showroom and find that’s only for a stripped-down model, or trim level in auto lingo, which no one ever buys.
The salesperson is sympathetic. When was the last time you saw a car with crank windows and no air-conditioning?
Over the next hour, he or she shows you better-equipped versions. By the time you finally see the car you thought the ad was touting, you’re paying $4,000 more.
So ignore the prices you see in ads.
Most dealers now have their inventories on their websites, allowing you to find the fully equipped model you’re really interested in buying before leaving home.
Take those VINs (vehicle identification numbers) or stock numbers with you to the showroom.
Not only will you have a more realistic idea of how much the car you want really costs, it shows the salesperson you did some homework.
Dealer trick 8. Selling worthless or overpriced dealer add-ons.
Dealers boost their profits by selling all sorts of accessories, from roof racks to premium sound systems.
Take a careful look at the cost. You can usually get the same thing for half price or less at electronics or auto parts stores.
Be especially alert for surprise add-ons salespeople try to slip in as you’re wrapping up the deal.
VIN-etching is the latest add-on to avoid. Also, be on the lookout for paint protection, fabric protection, rust-proofing and car alarms.
We know. Not all car dealerships are unscrupulous and not all are going to take you to the cleaners. Among all the Honest Bobs and Barbs out there walking the lots, many really are trustworthy. But there is a simple reason so many people dread buying a new car: The potential for rip-off is astronomical, and common practices over the years have often justified consumers’ fears. If you catch a whiff of any of the scams below, be on the alert.
Juggling the Foursquare
This isn’t really a trick, but awareness here is important for a buyer. When you sit down to negotiate, the salesperson will pull out a “foursquare” worksheet on which to figure out the terms of the deal. In the four quadrants of the sheet, the salesman (or -woman, but enough of being PC!) will record purchase price, down payment, monthly payments, and trade-in value. He will fill in the sheet as you talk, working the deal like a shell game. If he thinks you are preoccupied with getting a fair deal on your trade-in, he might give you a good price for that and then nudge your new-car purchase price north. Take it slow, focus on one item at a time, and be sure you are comfortable with each individual aspect of your purchase.
Profiting from Rebates
Rebates bring a lot of customers into a showroom, but the discounts can hide several tricks dealerships employ to suck a few bucks from a buyer. First, don’t let a salesman tell you that you are getting a good deal because of a rebate; rebates come from the manufacturer and usually apply regardless of the price you negotiate with the individual dealership. Negotiate as if there were no rebates. Second, make sure the rebates are deducted from the purchase price. If you allow the dealership to mail you a check after the sale, you end up paying taxes and interest on the rebate. And never let an incentive like a low APR or a rebate rush you into a purchase you aren’t ready to make. If there’s an incentive on a car today, odds are there will be incentives on it again. Salesmen often tell you there are strings attached to incentives, such as that you have to buy a certain trim, engine, or option package to qualify. This is not always true. Do your homework.
Talking monthly payments at the car dealership can be as dangerous as saying “bomb” at the airport. A salesman asks how much you are willing to pay each month, and you throw out a number—say, $450. He asks how much more you could afford—just getting a feel for you. You tack on another 50 bucks. In your mind, you were theorizing, but to the salesman, you just committed to a $500 minimum monthly payment. Instead, when a salesman asks how much you can pay each month, tell him you will not discuss monthly payments and only want to talk purchase price; you’ll decide on monthly payments after you’ve settled on a fair price.
Fees and Extras
Delivery charges, titling fees, and other closing costs are inevitable extras associated with buying a new car. But aside from a few essential add-ons, most fees or extra-cost items are inflated or altogether unnecessary. Negotiate fees down, or outright refuse to pay them. And deny any extras offered by the finance and insurance manager. Basically, if it’s anything he offers you after you’ve negotiated your sales price, you don’t need it and you shouldn’t pay for it. Particularly egregious are paint and fabric protection— essentially wax and Scotchgard that dealerships often charge hundreds of dollars for.
You should always shop for your own financing before you head to the dealership. Maybe you’ll get a better rate; maybe you’ll just get a better idea of what rate you qualify for so you can police the finance manager. It is not uncommon for the dealership to secure financing for you at one APR but offer you a rate one percentage point higher—and then pocket the difference.
Altering the Bill of Sale
Never sign a bill of sale with blanks or terms that are “subject to bank approval” or have similar wording. Some dealerships will let a customer sign such a document and release the new car to its happy owner, only to call the buyer back a few days later to say that the loan fell through and you need to come back to sign some new paperwork, which just happens to cost the buyer more than the negotiated price. Never drive your car off the lot until all the paperwork is filled out completely.
The following four are the most underhanded and childish dealer tricks. Fortunately, they don’t happen very often anymore. But if a dealership pulls any of these stunts on you, it doesn’t deserve your business. Walk away.
Ransoming Your Check
The sales manager gets cast as the villain in a good-cop, bad-cop routine some salesmen play with buyers. You’ll negotiate a price, and the salesman will leave to get approval from the sales manager, painting himself as your ally and the manager as a common enemy. Be wary if the salesman asks for a check to prove to the manager you are serious. Sometimes your offer will be rejected, but your check won’t be returned right away—it’s been “misplaced” or some similar nonsense. Now they have your money, and you feel pressured to concede to their terms. Remember that you can always walk away and cancel the check later.
Although it’s a good idea to bring a friend or family member shopping with you—someone else to watch the deal, question the terms, and help keep your emotions in check—this opens additional avenues for nefarious dealerships to use the wingman against the buyer. When the salesman leaves the cube, customers drop their guard and feel comfortable discussing aspects of the deal they wouldn’t mention in front of the salesman. With just a couple subtle pokes at their phones, salespeople can leave the intercom open to the sales manager’s office, where they will go not to seek approval on your terms but to eavesdrop on your conversation, harvesting information to use against you. There are even stories of salespeople hiding baby monitors in their offices. When the salesman leaves to talk to the sales manager, that’s your cue to leave and get a cup of coffee.
Lying about Your Credit Score
In addition to shopping around for financing, you should take a look at your credit report and strongly consider spending the few bucks to learn your credit score before you go to a dealership. Many of the best offers to be had on new cars are contingent on the buyer having qualifying credit, and dealerships have been occasionally known to lie to customers about their credit scores and the financing for which they qualify.
Misplacing Trade-In Keys
If you are thinking of trading in your old car when you buy a new one, someone might borrow your keys to evaluate your ride. If negotiations stall and you try to leave, you might find that your keys have been “misplaced” in order to prevent you from leaving and entice you to make a deal you aren’t comfortable with. If you bring two sets of keys with you, this won’t be a problem.
Not every dealership is guilty of these tricks. Which is all the more reason to stick with a good one when you find it.