7 Scams Car Dealerships Don't Want You To Know About

May 1, 2014 - PRLog -- Most dealerships today hold their salespeople and staff to high ethical standards. However, some dealers will scam or trick you if given the opportunity.  These are some of the most common scams used by dishonest dealerships.

Misleading Advertising

Don’t be fooled by advertisements that offer vehicles for extremely low, too-good-to-be-true prices.  Once you get there, dishonest dealers will claim that those vehicles are “already sold,” then try to sell you other vehicles at higher prices.  The whole point of these bait-and-switch ads is to get you to the showroom.

If you plan to respond to an ad like this, read the fine print and call the dealer ahead of time to verify the availability and price of the vehicle.  You can even ask them to e-mail you a signed statement indicating that the vehicle is still in stock and available for sale.

The Payment Packing Scam

Let’s say you’ve found your ideal vehicle and negotiated a purchase price of $20,000 with a down payment of $4,000 and an interest rate of 4% over a 48-month loan term.  Your monthly loan payment is $361.  Instead of telling you the true monthly payment, dishonest salespeople will inflate the payment to $400 and try to close you on the higher payment.  Once you agree on the inflated monthly payment, the finance manager is going to try and sell you back-end products, such as an extended warranty, GAP, credit and disability insurance that typically equals an additional $50 a month.  If the salesperson had presented you with the true car loan payment of $361, the finance manager would have a difficult time selling you on the $50 monthly increase for the add-on products.  But, when it’s only an $11 monthly increase for “all these add-ons” it sounds like you’re getting a great deal.

Always review the numbers and ask the salesperson if the monthly payment they’re presenting to you is only for the vehicle that you want to buy and nothing else is added to the payment.

Changing the Figures in the Agreement

There’s a ton of paperwork involved in buying a new vehicle.  Getting through all that paperwork can be unnerving when a salesperson or finance manager is waiting impatiently for you to sign on the dotted line.  “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.  Refuse to pay for phony charges that may suddenly appear in the paperwork such as delivery, promotion, handling charges, sales charges or floor charges.  These are made-up charges that the dealer uses to pad the deal.

Take the time to read the contract carefully, make sure the figures are congruent with what’s been agreed upon and use a calculator to check the numbers prior to signing on the dotted line.

Trade-In Fraud

You can usually get the most amount of money when selling your vehicle to a private buyer.  However, this is a time consuming process fraught with its own elements of peril.  That’s why most people choose the convenience of trading in their vehicle at the dealership and using the proceeds as part of the down payment.  Many dealerships utilize this transaction as an opportunity to rip off unsuspecting customers.

If you call over the phone, the dealer may quote you an inflated price for your vehicle and tell you to bring it in.  Then, once you arrive they look over the vehicle and point out minor or non-existent flaws that bring that value down.  The goal from the beginning was just to get you into the showroom.

Once you’re at the dealership, they will quote you a very low price on your trade-in.  First, they want to see if you’re naïve enough to accept such a low offer.  If not, they’re hoping it will cause you to question the value of your vehicle.  As they increase the offer, it seems like a “victory” to you, but since they started out so low, you still get ripped off.


The Rebate Trick

Car salesmen will tell you you’re getting a great deal because of a rebate.  Don’t believe it.  Rebates come from the manufacturer and typically apply regardless of the price you negotiate with the dealership.  Negotiate as if there were no rebates and then deduct the rebates from the negotiated price.  If you’re not informed about the current rebates, dealers may hide some of these rebates from you and pad their pockets in the process.  Dealers can get away with this because the manufacturer doesn’t audit every single sale.  Manufacturers often give cash incentives – called holdbacks – to their dealers to encourage them to move slow-selling models.  These typically aren’t mentioned in advertisements or on manufacturer websites.

The Credit Score Trick

A scam used by dishonest dealers is to trick customers into believing that they have bad credit.  Many of the best offers to be had on new cars are contingent on the buyer having good credit.  Some dealers will imply your credit is worse than it is so you think you’ll have to pay a higher interest rate.  This will allow the dealer to inflate your interest rate and earn a bigger commission for themselves.  Get an idea of your credit score prior to visiting the dealership.  Manufacturer websites typically disclose the credit scores required to qualify for the current financing offers.

Financing Falls Through

It’s common practice for dishonest car dealers to alter financing rates.  Just a ½ a percentage point can significantly improve the dealership’s profit.  You may leave the dealer with your new vehicle only to get a phone call a few days later with news that your financing fell through.  Once you’re back at the dealer, they say that you have to finance through a different lender at a higher interest rate.  If you had a trade-in, the dealer might tell you that it’s been sold, so you’re pressured to keep the new car.

You should always shop for your own financing before you head to the dealership.  Maybe you’ll get a better rate.  Maybe you’ll just get a better idea of what rate you qualify for so you can police the finance manager.  Never take possession of a vehicle unless the car loan is finalized – make sure to see that the financing has been approved first-hand.  If they ask you to sign a “borrowed car agreement,” that’s a sure sign the financing has not been approved yet.

Remember, the best way to counter any suspected scams or tricks is to simply head for the door.

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