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6 min read Published October 06, 2022

Writer: Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in helping readers with the ways and pitfalls of borrowing money to purchase cars. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers feel confident to control their finances by providing concise, well-studied information that break down complicated topics into bite-sized pieces. The Bankrate guarantee

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This compensation could influence the manner, place and when products are listed in the event that they are not permitted by law. We also offer loan products, such as mortgages and home equity, and other home lending products. Other factors, such as our own rules for our website and whether the product is available in the area you reside in or is within your self-selected credit score range can also impact how and where products appear on this website. We strive to offer the most diverse selection of products, Bankrate does not include details about each financial or credit item or service. In essence, dealers don’t want to scam you. But as an informed consumer it is important to be ready for situations in which you come across a salesperson with a bag of tricks aiming to maximize profits. Tips for a successful car dealer to look out for . Here are a few ploys some dealers, even the most reputablemight try to use over you when it’s time to purchase. 1. The credit cozen A dealer may tell you that you aren’t eligible for rates that are competitive. While this could be the case in certain instances however, the salesperson may suggest that your credit score is less than it actually is, and you believe you’ll need to pay more for a better interest rate. What to do: Go in with cash before you sit down with the dealer so they won’t swindle you. It’s better to get an auto loan to avoid having to depend on dealership financing. 2. The single-transaction method People often think of purchasing a vehicle as a one-time transaction. The reality is that it’s not. Dealers know this. It’s actually three transactions rolled into one: the new car price, its value, and financing. All three are ways for the dealer to make profits, which means all three are places you could save. What to do treat each transaction the same way the dealer would: independently. In reality, you could look around at different dealers to obtain the best price. Also, bringing in typical prices for the vehicle you’re interested in can help ensure that the salesperson is truthful. 3. The payment ploy The sales or finance department might hand you a fantastic monthly installment — one that you could possibly be eligible for. However, there’s usually a catch. In some instances the dealer might have included a substantial down payment or extended the duration of the auto loan up to 72 months or . How to avoid: Focus on the cost of the car rather than the monthly payments. Don’t answer the question “How much will you have to pay monthly?” Stick to saying, “I can afford to pay an amount of X dollars for the vehicle.” It is also important to make sure that any price that you negotiate is the total prior to the trade-in or utilized. 4. The sticker shenanigan . The car price on the vehicle’s window is is known as the manufacturer’s suggested retail value, or MSRP. However, that’s not what’s most important. It is important to know the price of the invoice — what the dealer was paid. Starting with the invoice is much more straightforward than cutting from the MSRP. How to avoid: What vehicles are being sold for after taking into account any consumer or dealer incentives. Certain hot cars are sold at the sticker price or more. The price will drop when demand decreases. 5. Holdbacks are a common practice. Manufacturers typically offer cash rewards which are sometimes referred to as holdbacks to dealers to motivate them to sell slower-selling models. This typically isn’t mentioned in advertising. How to avoid Find holdbacks or other factory-to-dealer incentives available for the car you are contemplating. While it’s not certain that the dealer will offer any of these funds to the car you’re interested in It’s not a bad idea to inquire. 6. Spot delivery financing A few Dealers have reported to phone customers several days, up to weeks or months following the time having have signed a purchase agreement, to inform them that their financing didn’t go through. It’s a fraud. Spot delivery, sometimes referred to as spot finance, was designed to induce you to sign a loan contract at a greater interest rate. The lender will know if you qualify for financing in a matter of minutes. The goal of the later call is to convince you to sign the loan that has an interest rate that is higher due to the fact that, according to them they’ve just discovered you weren’t eligible for the rate that they offered at a lower percentage. Avoid this: Don’t walk out the door without signing contracts that spell out each and every line left in. Check to confirm that you’ve been approved for the loan your dealer is offering. If that’s the case you are approved, they cannot withdraw the loan. 7. The insurance scam Some dealers may try hard to convince you to buy an insurance policy when you’re purchasing your vehicle. One type, , covers the difference between what the car is worth and amount you owe it. It’s generally an additional expense, but if you are interested typically, gap insurance is cheaper when bought from the same source as your regular . Another popular option is credit life insurance, will pay off the portion of your loan in the event that you die before you’ve been able to repay it. If you are interested in these policies then you should be aware of what you’re buying, and that you can choose to decline the policy and look for better prices. The cost of these policies at the dealer can be enormous due to the fact that the insurance companies who sell the policies to dealers offer huge discounts that range from cash to first-class travel in order to promote the policies. Avoid this: Don’t automatically agree to the insurance plan offered. Certain insurance companies include the benefits of gap insurance in their comprehensive insurance coverage for cars So make sure to check first. As for the credit-based life insurance you’ll more than likely want to stay clear of it. In the majority of cases it’s not a good idea for you. 8. The price sounds tempting — to finance a new automobile. However, this option might not be the most suitable to save money. In the beginning, many financing incentives are for shorter terms, and you require a high credit score. And with short-term loans that are 36 or 24 months for the cheapest car can be astronomical. In addition, you may be better off finding your own financing and then accepting the rebate offered by the dealer when one is available. Let’s say you’re interested in an automobile worth $20,000 and get $4,000 for your trade-in. You can choose between zero percent financing or financing at 3.49 percent, with a $2,000 rebate. The length that you can avail of this loan runs for 36 months. Through the loan you’ll end up ahead by more than $1,200 If you choose to take the rebate and 3.49 percent financing. 3.49 percentage financing. How to avoid Calculate the exact amount over the course for the loan to figure out what is the best deal for you. 9. The rollover ruse It can be tempting to sell your car for a higher-priced car before you have finished paying off the car you’re currently driving. One way that some car buyers do this is to roll the balance of their current car to the new vehicle loan or lease. This is a risky move. You will end up owing more for the second vehicle than what it’s worth. In the jargon of the automotive world it’s a ” ” on the car. If it’s damaged in an accident or if you decide to sell it, you’ll have to write out a large check to cover the remainder sum of your loan. What to do: You don’t want to carry over an old vehicle loan into a new one. Instead, you should try to negotiate an affordable price either through a trade-in, or private sales. And if you can’t, stick with it. If you don’t absolutely require a new car There’s no reason to buy a vehicle before you have paid off your old one. 10. The long-term scam It is not illegal or deceitful concerning dealers who offer loan periods extending out up to seven or six years. For one thing, the majority of cars last longer than they did previously which means that your monthly payments are lower. Still, it’s not ideal. It’s likely that you will have to pay more for your vehicle than its worth since your vehicle is depreciating faster than you’re paying off. Tips to avoid this: If you are considering an extended loan period, you probably ought to consider an affordable vehicle that’s better in line with your budget. 11. The balloon scam is similar to the one that occurs when certain dealers may encourage the purchase of a vehicle with extremely low monthly payments now but with a much more substantial balloon payment towards the end of the loan period. In a few cases, this can be a legitimate method to finance an automobile. For instance, you could have recently graduated and realistically assume that your income will increase by the time the balloon payment comes due. But for most people the balloon payment simply means rolling over the remaining balance into the form of a new loan. How to avoid: Be wary of such offers, and be aware the fact that your situation could alter by the time the balloon payment due, and you might have a difficult time paying it. 12. Bait and switch The bait and switch occurs when you’re in the market for a specific car, but the dealer manages to get you behind the wheel of a different one. Dealers might use deceitful tactics to lure you onto the lot only to inform you the car you want isn’t on the market and then try to convince you to buy another vehicle, usually at a higher cost. Avoid this by sticking to what you want. If you’ve taken the time to know what you are searching for, then you don’t need to doubt yourself. You can wait it out or look for another dealer that does have the car you want. 13. Contract cons Keep an eye out for clauses that are hidden within the small print that you may be able to miss. They might come in the form of changes to the loan duration, additions to the loan that you never agreed to or other services which could lead to substantial cost. A legit lender won’t try to dupe you with this kind of thing however it is important to be careful. If you spot any discrepancies, point them out. And if the dealer doesn’t want to make the necessary changes, walk away. What to do: Go carefully over the contract. Make sure you know all the charges and ensure the terms are clearly understood by both you and the dealer. Keep an original copy of the contract to be prepared in the event of any issues later down the line. The bottom line isn’t supposed to be a situation where you are tricked, and you leave feeling as if you paid too much for your car. Knowledge is power, so consider these common dealer maneuvers to ensure you aren’t getting scammed. Find out more


This article is written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers with the ways and pitfalls of borrowing money to purchase a car. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain confidence to control their finances through providing concise, well-researched and well-documented details that cut complex subjects into bite-sized pieces.

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