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Most auto dealers aren’t out to give you an unfair deal. But as an informed consumer, you’ll want to be prepared for situations where a salesperson uses aggressive tactics to maximize profits. If you know what to watch out for, you can swiftly and firmly avoid maneuvers that could drain your time and money.
Car dealer tricks to watch out 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 don’t qualify for competitive rates. And while this may be true in some cases, the salesperson will imply your credit is worse than it is, so you think you’ll have to pay a higher interest rate.
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. All three are ways for the dealer to make money — meaning all three are places you can save.
3. The payment ploy
The sales or finance team might throw out a great monthly payment — one that you reasonably could qualify for. But there’s often a catch. In some cases, the dealer may have factored in a large down payment or stretched the term of the auto loan to 72 or 84 months.
4. The sticker shenanigan
The vehicle price listed on the window is what is known as the manufacturer’s suggested retail price, or MSRP. But that isn’t what is most important. You want to know the invoice price — the amount the dealer paid for it. Ultimately you will pay an Out the Door (“OTD”) price, which includes taxes and various fees. Knowing what the dealer paid can help you to stay clear on your line-item expenses when buying the vehicle.
5. The yo-yo financing yank
Spot delivery, also known as spot financing, allows you to sign a contract and drive your car home before the financing is finalized. While it is often legitimate, it can sometimes used to back you into a loan with higher rates than what you might otherwise qualify for.
Yo-yo loan scams operate by “qualifying” you to borrow at a specific appealing rate. Then, the dealer will notify you at a later (and often inconvenient) date that you’ve not qualified to borrow under those terms. Then, surprise! The only way to stay in your new vehicle is to agree to a far more expensive loan.
6. The insurance illusion
Some dealers may try hard to get you to purchase insurance coverage 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. It’s usually just an extra expense, but if you do want it, gap insurance is generally cheaper when purchased from your regular car insurance company.
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, understand what you are purchasing and know that you can decline it in favor of shopping around for a better price. The markup on insurance coverage offered directly through the dealership can be substantial, and you may be able to score better terms with your auto insurance company.
7. 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. Most financing incentives are for shorter terms, and you need a stellar credit score. And with short-term loans, such as 24 or 36 months, payments on even a moderately priced car can be hefty.
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 3.49 percent with a $2,000 rebate. The term of the loan is 36 months. At the loan’s end, you’ll come out ahead by more than $1,200 if you take the rebate and the 3.49 percent financing.
However, in today’s rate environment, even those with excellent credit typically see rates of 5 percent or higher.
8. The rollover ruse
It can be tempting to trade for a more expensive car before you have finished paying off the car you’re currently driving. Some car buyers do this by rolling over the remaining payments on their current car into a new car loan or lease.
This is a risky move. You could owe more on your new loan than the vehicle is worth. In the lingo of automobile loans, you’ll be “upside down” on the vehicle. Then, if it is totaled in an accident or you decide to trade it in, you will write a big check to cover the remaining loan amount.
9. The long term trick
There is nothing illegal or even deceptive about dealers offering loan periods extending out six or seven years. In fact, nearly one-third of auto loans in 2023 have a term of six years or longer. That said, many cars last longer than they used to, and longer loan terms mean your monthly payments are lower. Still, it’s not ideal. You are likely to continually owe more on your car than it’s worth because it depreciates faster than you’re paying it off.
10. 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 term. Though payments early on can be manageable, many borrowers struggle to come up with a lump sum payment at the end of their loan period.
A balloon loan 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. But for most people, a balloon payment just means rolling over the remaining balance into a new loan.
11. The 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.
12. Fine-print finessing
Keep an eye out for clauses tucked into the fine print that you might otherwise miss. They might be changes to the loan term, add-ons that you never agreed to or other services that can lead to significant costs.
A legit lender won’t try to dupe you like this, but it pays to be careful. If you notice any discrepancies, point them out. And if the dealer isn’t willing to fix it, walk away.
The bottom line
Buying a car can be stressful, but don’t let the fine print of a contract make you sweat. Take your time to read everything over and ensure you understand. Knowing what to watch out for and understanding what kind of rate you’ll qualify for can help you to remain in control of the situation.
If you feel pressured or uncomfortable at any point during the transaction, remember you hold the power as a consumer. Walking away from a sketchy contract is likely to save you from a headache down the road.