13 car dealer tricks to avoid Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial decisions by offering you interactive financial calculators and tools as well as publishing objective and unique content. This allows you to conduct research and compare information for free to help you make informed financial decisions. Bankrate has partnerships with issuers, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are displayed on this site are from companies who pay us. This compensation may impact how and where products are displayed on this site, including for instance, the order in which they may be displayed within the categories listed and other categories, unless prohibited by law. Our loans, mortgages,, and other home loan products. This compensation, however, does have no impact on the content we publish or the reviews that you read on this site. We do not contain the vast array of companies or financial offers that may be accessible to you. Maskot/Getty Images
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 is a specialist in helping readers with the ways and pitfalls of taking out loans to purchase a car. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are passionate about helping readers feel confident to manage their finances through providing precise, well-researched and well-researched data that breaks down otherwise complicated subjects into digestible pieces. The Bankrate guarantee
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This compensation could affect the way, location and when products appear in listing categories and categories, unless it is prohibited by law for our loan products, such as mortgages and home equity, and other home loan products. Other factors, such as our own proprietary website rules and whether the product is offered in the area you reside in or is within your self-selected credit score range can also impact the manner in which products appear on this website. While we strive to provide a wide range offers, Bankrate does not include information about each financial or credit item or service. At the core, dealers don’t want to rip you off. As a savvy consumer, it is important to be ready for the possibility of having to come across a salesperson with a bag of tricks that are designed to increase profits. Tips for a successful car dealer to look out for . Here are a few tricks car dealers — even the most legit — may try to run on you when it comes time to purchase. 1. The credit cozen A dealer might inform you that you aren’t eligible for rates that are competitive. Although this might be the case in certain instances but the salesperson might suggest your credit is worse than it is, so you believe you’ll need to pay a higher interest rate. Avoid this by coming to the store with your cash prior to meeting with the salesperson so they don’t try to trick you. It’s better to get an auto loan so you don’t have to rely on dealer financing. 2. The single-transaction approach A lot of people think of buying a car as a single transaction. It’s not, and dealers know this. There are actually three transactions that can be rolled into one: the car’s price, its value, and financing. All three are ways for the dealer to make profits, which means that all three of them are places you can save. Avoid this treating every transaction in the same manner the dealer would: independently. In reality, you could compare your trade-in with multiple dealers to find the most competitive price. And coming in with common sale prices for the vehicle you’re interested in will help you ensure that the salesperson is up-to-date. 3. The payment ploy The sales or finance department might hand you a fantastic monthly installment — one that you reasonably could qualify for. However, there’s always a caveat. In certain cases the dealer might have included a substantial down payment or extended the term that the car loan up to 72 months or . What to do: Concentrate on the cost of the vehicle, not the monthly payments. Do not answer the question “How much can you pay monthly?” Stick to saying, “I can afford to pay an amount of X dollars for the vehicle.” You should also ensure that the price you negotiate is in full before your trade-in or is used. 4. The sticker trick The vehicle price listed on the window is is known in the industry as the suggested retail value, or MSRP. However, it’s not the most important. It is important to know the value of the invoice — the amount the dealer was paid. From the invoice upwards is much simpler than cutting from the MSRP. How to avoid: What is the value of cars after considering any consumer and dealer incentives. Certain hot cars are sold at the sticker price or more. Prices will decrease as the demand declines. 5. The holdback scam Manufacturers frequently provide cash-based incentives — sometimes called holdbacks — to dealers to encourage them to move slower-selling models. This typically isn’t mentioned in advertising. Tips to avoid it Find holdbacks or other incentives offered by dealers to the factory for the car you are considering. While it’s not certain to expect that the dealership will apply any of these funds to the car you’re interested in but it’s a good idea to inquire. 6. Spot delivery financing Some dealers have been known to phone customers several days, or even weeks after having have signed a purchase agreement, to tell them that financing did not go through. This is a scam. Spot delivery, sometimes referred to by the name of spot financing is a scheme to induce you to sign an loan contract at a greater interest rate. The dealer can know whether you’re eligible for financing quickly. The purpose of the subsequent call is to get you to sign the loan that has higher interest rates due to the fact that, according to them they’ve just discovered you didn’t qualify for the lower rate they quoted. Avoid this: Don’t leave the showroom without signing contracts that spell out every detail and with every line completed. Verify that you’ve been approved for the loan your dealer offers. If they have you are approved, they cannot withdraw the loan. 7. The insurance scam A few dealers might attempt to convince you to purchase an insurance plan when buying your car. One kind of insurance, called gap insurance , will cover the difference between what the car is worth and the amount that you owe on it. It’s typically an added expense, but if you would like it the gap insurance will generally be less expensive when purchased through your regular . Another favorite, credit life insurance, can cover the remaining portion of your loan if you die before you’ve been able pay it back. If you are interested in these policies it is important to be aware of what you’re buying, and that you can decline it and shop around for cheaper rates. The markup on these policies when you purchase them from a dealership is often huge, in part because the insurance companies who sell the policies to the dealerships offer them huge incentives — everything from cash to first-class travel in order to promote the policies. Avoid this Avoid a bind: Do not simply accept the insurance plan offered. Some insurers include the benefits of gap insurance in their comprehensive insurance coverage for cars Therefore, you should first check it out. For the credit-based life insurance you’ll more than likely want to steer clear of it. In most cases it’s not the best choice for you. 8. The rate razzle-dazzle It certainly seems appealing to finance a brand new vehicle. However, this deal may not be the most suitable for your budget. First of all, the majority of financing incentives are for shorter time frames, and you’ll need a stellar credit score. With short-term loans that are 36 or 24 months for an affordable car could be extremely high. Additionally, you might be better off locating the financing yourself and accepting the rebate offered by the dealer in the event that one is offered. Let’s say you’re interested in an automobile worth $20,000 and receive $4,000 in exchange for your trade-in. You can choose between the financing at 0 percent or at 3.49 percent with the option of a rebate of $2,000. The term that you can avail of this loan is 36 months. Over the course of the loan, you’ll come out ahead by more than $1,200 when you use the rebate and you take advantage of the 3.49 percent financing. Tips to avoid it using an application to calculate the amount of money you’ll earn over the term of the loan to determine which deal suits you best. 9. The trick to rollover can be tempting to sell your car for a more expensive car before you have finished paying off the car you’re currently driving. One method that some buyers make this happen is to roll the remaining balance on their current car into an entirely new car loan or lease. This is a risky option. You will end up owing more on the second car than what it’s worth. In the language of the automobile world it’s a ” ” with the vehicle. If it is totaled in an accident or if you decide down the road to sell it, you will end up writing out a large check to cover the remainder portion of the loan. Avoid this the situation: Don’t carry over an old vehicle loan into a brand new one. Instead, try to get an affordable price as a trade-in or through an auction. If not stay with it, do the car. If you don’t absolutely need a new car, there is no reason to purchase a car prior to having completed the payment on your previous car. 10. The long-term scam There is nothing illegal or deceitful concerning dealers who offer loan durations that last for 6 or 7 years. In the end, many vehicles are more durable than they used to, and mean your monthly payments are lower. However, this isn’t ideal. It’s likely that you will owe more on your vehicle than it’s worth because your car is depreciating faster than you’re paying for it. Tips to avoid this: If you are considering an extended loan time, you should scale back to a less expensive car that is better suited to your budget. 11. The balloon scam is similar to the one that occurs when certain dealers may encourage buyers to buy a car with a low-cost monthly payment in the present, but with a more substantial balloon payment towards the close of the loan time. In certain instances this could be a legitimate way to finance an automobile. For instance, you could have recently graduated and reasonably assume that your earnings will increase when the balloon payment comes due. For the majority of people, a balloon payment just involves rolling over the amount into the form of a new loan. Tips to avoid them Beware of these deals and remember the fact that your situation could be altered by the time that the balloon payment due, and you might have a difficult time paying it. 12. Bait and switch Bait and switch occurs when you’re looking for a specific car, but the dealer is able to get you behind the wheel of a different one. Dealers might use deceitful tactics to get you on the lot, only to tell you the car you want isn’t on the market and then try to get you to purchase another vehicle, usually at a higher price. What to do: Stick to the things you want. If you’ve done your research and know what you are looking for, then there’s no reason to doubt yourself. Try another dealership that has the car you want. 13. Contract cons Watch out for clauses tucked into the small print that you may be able to miss. They might come in the form of changes to the loan term, add-ons which you didn’t agree to, or other terms that could result in significant cost. A legitimate lender won’t try to dupe you like this, but it pays to be vigilant. If you notice any discrepancies, point them out. If the dealer refuses to fix it, walk away. What to do: Go carefully through the contract. Make sure you know all the charges and ensure the terms are clear for both the dealer and you. Be sure to keep an original copy of the contract in case something arises in the future. It’s not supposed to be an experience where you are tricked, and you walk away feeling like you overpaid for your vehicle. It’s all in the knowledge, so be aware of these dealer tricks to make sure you’re not tricked. Find out more
Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers to navigate the details of borrowing money to purchase cars. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are dedicated to helping readers gain the confidence to take control of their finances through providing clear, well-researched information that breaks down complex subjects into bite-sized pieces.
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