Car dealers are finding new ways to Jam you every day! Here is a list of their latest tricks!
Have you been burned by a trick that we haven’t listed? Post it in the comment section below!
Outrageous New-Car Scams To Avoid from forbes.com
10. “Back End” Add-Ons
. According to the National Automobile Dealers Association, an average dealership loses $180 for every new model sold. While doesn’t seem like a sound business model, there are far more ways for a dealership to make money and there’s no more profitable way that the so-called “back end” of the deal. In addition to financing, you’ll be offered – perhaps pressured is a better word – to purchase assorted add-ons that can suck the value out of what would otherwise be a good deal. These range from credit life insurance (conventional term-life or disability insurance is usually a better buy) to fabric protection (a can of Scotchguard can suffice), rustproofing (largely unnecessary with today’s cars) and paint sealant (little more than a good coat of wax). Simply refuse to pay for any of these high-profit items and threaten to walk out on the deal if they’re insisted upon.
9. The Spot Delivery Scam.
Perhaps among the most onerous of car-deal cons, this swindle involves sending a buyer – often one with sub-prime credit – home in a new vehicle before the final financing arrangements have been completed. The dealer calls back in a day or two to tell the customer there’s a problem with the loan terms, subsequently subjecting him or her to a higher interest rate than expected and perhaps even requiring a larger down payment in order to qualify. The idea is that since the buyer has emotionally “bonded” with the vehicle by already taking possession, he or she will pay whatever it takes to keep it.
8. Negative Equity Scams.
Never trust dealers who promise to pay off your existing car loan – no matter how much you owe on it. Motorists who’ve bought their current vehicles with low down payments and long loan terms often have “negative equity” in them, meaning they owe more than the car is worth in trade. Sure, the dealer will pay off the loan, but will simply wrap the amount of negative equity into the new-car deal, resulting in a higher balance, a costlier monthly payment and even a longer loan term.
7. Finessed Financing.
Automakers regularly offer cut-rate financing on select models through their affiliated finance companies that can be real money savers. Unfortunately, as the ads state they’re reserved “for qualified buyers only.” While lenders have been easing up on their credit qualifications in recent months, only those with top FICO scores (usually 690 or better out of a maximum 850) will even come close to qualifying for the most favorable financing terms. Everyone else will be asked to pay higher rates and sometimes even a higher down payment; if your credit is particularly tarnished, you’ll pay dearly.
6. Fun With Numbers.
There’s a lot of paperwork involved in buying a new vehicle, and wading through it all can become unnerving when a salesperson or finance manager is waiting impatiently for you to sign at the bottom of each page. Those with an aversion to numbers and/or lacking math skills can find themselves at a distinct disadvantage. “Mistakes” in paperwork are common, and to no one’s surprise they usually favor the dealer. The price of the car or trade-in value may not exactly be what’s been agreed upon or the interest rate quoted may be inflated. Sometimes the discrepancies can be flagrant, such as when a buyer is asked to sign a leasing agreement thinking it was actually a sales contract, or when the value of a trade-in is “inadvertently” left out.
5. Trade-In Tribulations.
While a new-car buyer can usually get the most for his or her current ride by selling it outright to a private party, this is a time consuming process that’s fraught with its own elements of peril. That’s why most consumers choose the convenience of trading-in their cars at a dealership and using the proceeds as part (or all) of the down payment on a new model. Unfortunately a dealer may artificially inflate the value of your trade-in to help seal a deal and ultimately exact that cost – often more – by manipulating other aspects of the transaction.
4. The 4-Square Method.
This isn’t so much of an outright swindle as it is a car dealer’s equivalent of Three Card Monty. Only instead of trying to keep your eye on a particular card as its being shuffled around face down on a table, you have to keep your eye on the bottom line as a salesperson manipulates various aspects of a new-car deal. It’s called the 4-square method because the salesperson often illustrates the various components of the transaction on paper sectioned into four squares. The idea is if a buyer focuses firmly in on one facet, usually the monthly payment, he or she can be easily fleeced by manipulating the other parts of the deal to the house’s advantage.
3. Good For One Day Only.
Some auto dealers loathe to let buyers cross-shop at multiple dealerships – or for that matter take the time to think a deal through before signing the paperwork – so they’ll often do whatever they can to ensure one only walks out through the front door if it’s with the keys to a new car. Typically, you’ll be told that a given deal on a particular model will stand for that day only and will cost more if you decide to come back tomorrow. That’s pure butcher shop-grade baloney.
2. Multiple Window Stickers.
In addition to the standard window sticker that verifies a vehicle’s retail price, you may also find another price tag that details charges levied for overpriced dealer-installed equipment and other add-ons that are typically of little value. Some dealerships use a second sticker to tack on additional charges to recover advertising expenses or for something that may be called “ADM,” which is a clever way of collecting “additional dealer markup.”
1. Bait And Switch.
This is the classic sleight of hand in which the promise of something – whether it’s a dollars-off coupon, a low advertised price or interest rate, promised trade-in value or what seems to be a bona fide price quote from a web site – is used to lure a shopper into a dealer’s showroom. After inhaling that new-car smell and getting in a buying state of mind he or she is told that the offer is expired, the price has gone up, the advertised car has already been sold or any other number of excuses why that particular offer is no longer in effect.