We are an independent, advertising-supported comparison service. Our goal 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 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 site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict
, this post may contain references to products from our partners. Here’s an explanation for
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information.
How We Make Money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey.
Bankrate follows a strict editorial policy, so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.
We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money.
Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service.
At the core, most dealers aren’t out to rip you off. But they employ experienced and aggressive salespeople who have a bag of tricks designed to maximize the salesperson’s cut and the dealer’s profit.
Here are ploys that some car dealers — even the most scrupulous — may try to run on you when it comes time to buy.
13 car dealer tricks to avoid
1. The credit cozen
A dealer may say something like, “With your credit score, you won’t qualify for competitive financing rates.” This may be true. However, some dealers will imply your credit is worse than it is so you think you’ll have to pay a higher interest rate.
How to avoid: Come armed with your credit score before you sit down with the dealer so they can’t pull a fast one on you.
2. The single-transaction strategy
Many people view buying a car as one transaction. It’s not, and dealers know this. It’s really three transactions rolled into one: the new-car price, the trade-in value and the financing. The dealer sees all three as ways to make money.
How to avoid: Treat each transaction the same way the dealer does, as a separate transaction. That means you should negotiate each one. If you get a new car for $200 over invoice but receive only $1,000 for a trade-in car that’s worth $2,500, you haven’t done as well as you could.
3. The payment ploy
A dealer might say, “We can get you into this car for only $389 a month.” Probably true, but how? In some cases, the dealer may have factored in a large down payment or stretched the term of the auto loan to 60 or 72 months.
How to avoid: Focus on the price of the car rather than the monthly payment. Never answer the question, “How much can you pay each month?” Stick to saying, “I can afford to pay X dollars for the car.”
4. The sticker shenanigan
The vehicle price listed on the window is what’s known as the manufacturer’s suggested retail price, or MSRP. Who cares? You want to know the invoice price — the amount the dealer paid for it. Working from the invoice up is much easier than trying to cut from the MSRP.
How to avoid: Find out what cars actually are selling for after taking into account any consumer and dealer incentives. Some really hot cars go for sticker price and even above. Be patient and wait: The prices will fall as demand slackens.
5. The holdback hustle
Manufacturers often give cash incentives — sometimes called holdbacks — to their dealers to encourage them to move slow-selling models. This typically isn’t mentioned in advertisements.
How to avoid: Search for holdbacks or other factory-to-dealer incentives available for the car you’re considering. While it’s not a given that the dealer will apply any of these funds to the car you like, it doesn’t hurt to ask.
6. The financing four-flush
Some dealers have been known to call customers days or even weeks after they signed a purchase agreement to tell them that the financing fell through. It’s a crock. The dealer can know if you qualify for financing almost instantly. The goal of the later call? To sign you up for a loan with a higher interest rate because, according to them, they just found out you didn’t qualify for the lower rate.
How to avoid: Never leave the showroom without signed contracts that spell out every detail and with every blank filled in. If you’ve got that, they can’t retreat on the financing.
7. The insurance illusion
Some dealers may try hard to get you to purchase an insurance policy when you’re buying your car. One type, gap insurance, covers the difference between what the car is worth and the amount you still owe on it. Say the car is worth $10,000 but you still owe $12,000. If your car is a total loss, a gap insurance policy will cover that $2,000 difference. Gap insurance is generally quite inexpensive when purchased from your regular car insurance company rather than a dealer.
Another favorite, credit life insurance, will pay the balance of your loan if you die before you’ve been able to repay it. If these policies interest you, you’ll want to understand what you’re purchasing and have the opportunity to decline it and shop around for better prices. The mark-up on these policies at the dealership can be enormous, in part because the insurance companies that sell the policies to the dealerships offer them huge incentives — everything from cash to first-class trips — to push the policies.
How to avoid: Don’t automatically agree to the insurance policy offered. Some insurers include the benefits of gap insurance in their regular comprehensive automobile coverage, so check there first. As for the credit life insurance, you’ll more than likely want to simply avoid it. In most cases, it won’t make sense for you.
8. The rate razzle-dazzle
It certainly sounds tempting — 0 percent interest to finance a new car. However, this deal may not be the best one for your pocketbook. For starters, most financing incentives are for shorter terms, and you need a stellar credit record. With very short-term loans, such as 24 or 36 months, payments on even a moderately priced car can be sky-high.
In addition, you may be better off finding your own financing and then taking the dealer rebate, if one is offered. Say you’re looking at a $20,000 car and will get $4,000 for your trade-in. You can choose between 0 percent financing or financing at 3.49 percent with a $2,000 rebate. The term of the loan is 36 months. Over the course of the loan, you’ll come out ahead by more than $1,200 if you take the rebate and the 3.49 percent financing.
How to avoid: Use our calculator to compute the actual dollars over the term of the loan to figure out what deal suits you best.
9. The rollover ruse
Often, it’s tempting to trade up to a more expensive car even before you’ve finished paying off the car you’re currently driving. One way that some car buyers do this is by rolling over the remaining payments on their current car into a new car loan or lease. While this isn’t illegal, it is risky. Why? You’ll end up owing more on the second car than it’s worth. In the parlance of the automobile world, you’ll be “upside down” on the vehicle. If it’s totaled in an accident or if you decide down the road to trade it in, you’ll end up writing out a big check to cover the remaining amount of the loan.
How to avoid: A good rule of thumb to keep in mind is that you don’t want to roll over an old car loan into a new one.
1o. The long-term trick
There’s nothing illegal or even deceptive about dealers offering loan periods extending out six or seven years. After all, many cars last longer than they used to, and longer loan terms mean your monthly payments are lower. Still, it’s not optimal. You’re likely to continually owe more on your car than it’s worth because your car is depreciating faster than you’re paying it off.
How to avoid: If you’re considering a long loan period, you probably should scale back to a less expensive car that’s better suited to your budget.
11. The balloon bamboozle
Similarly, some dealers will encourage you to purchase a car for unrealistically low monthly payments now but with a much larger balloon payment at the end of the loan period. In a few cases, this can be a legitimate way to finance a car. For instance, you may have just graduated and can realistically assume that your income will rise by the time the balloon payment comes due.
How to avoid: Be wary of these offers and know that your financial situation may change by the time the balloon payment comes due, and you may struggle to pay it.
12. Bait and switch
The bait and switch happens when you go in looking for one car and the dealer manages to get you behind the wheel of a different one. Dealers may use deceptive strategies to get you on the lot, only to tell you the car you want isn’t available and then try to sell you on something else, often at a higher price.
How to avoid: Stick to what you want. If you did your research and know what you’re looking for, then there’s no need to second-guess yourself. Wait it out or try another dealer that does have the car you want.
13. Contract cons
Contract cons are clauses tucked into the fine print that you might miss and likely wouldn’t even be looking for. They might come in the form of changes to the loan term, add-ons that you never agreed to or other services that can lead to significant costs.
How to avoid: Read over the contract carefully. Ask about all charges and make sure the terms are clear to both you and the dealer. Make sure you keep a copy of the contract.