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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 financial calculators and interactive tools, publishing original and objective content. This allows users to conduct research and examine information for no cost and help you make informed financial decisions. Bankrate has partnerships with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this website are provided by companies that pay us. This compensation could affect how and where products are displayed on this site, including, for example, the order in which they be displayed within the categories listed and other categories, unless prohibited by law. Our loans, mortgages, and other home lending products. But this compensation does affect the content we publish or the reviews that you see on this site. We do not cover the vast array of companies or financial deals that might be available to you. Maskot/Getty Images

6 minutes read. Published October 06, 2022

Written by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers to navigate the ins and outs of securely borrowing money to purchase cars. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers feel confident to control their finances by providing clear, well-researched information that breaks down otherwise complex topics into manageable bites. The Bankrate promises

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This compensation could impact how, where and when products appear within listing categories and categories, unless it is prohibited by law. We also offer loan products, such as mortgages and home equity and other home lending products. Other factors, like our own rules for our website and whether the product is available in your area or at your self-selected credit score range could also affect the way and place products are listed on this site. While we strive to provide an array of offers, Bankrate does not include information about every financial or credit product or service. In essence, dealers aren’t trying to rip you off. However, as a knowledgeable consumer it is important to be ready for the possibility of having to encounter a salesperson with an arsenal of tricks aiming to maximize profits. Car dealer tricks to watch for. These are some tricks dealers, even the ones that are legitimate- may try to run on you when it comes time to purchase. 1. The credit counselor may tell you that you don’t qualify for competitive rates. While this could be the case in certain instances however, the salesperson may suggest that your credit is worse than it actually is, and you believe you’ll need to pay more for a better interest rate. How to avoid: Come in with cash before meeting with the dealer so they won’t swindle you. You can also apply for an auto loan so you don’t have to rely on dealership financing. 2. The single-transaction approach Many people view purchasing a vehicle as a one-time transaction. The reality is that it’s not. Dealers recognize this. It’s actually three transactions all in three: the new car price, the cost and financing. Each of them is a way the dealer can earn profits, which means that all three are ways you could save money. How to avoid: Treat every transaction in the same way the dealer would: independently. In reality, you could shop your trade-in at multiple dealers to find the most competitive price. In addition, having typical prices for the car you’re interested in will help you keep the salesperson truthful. 3. The payment ploy or finance department might hand out a great monthly payment — one that you could possibly qualify for. But there’s often a catch. In certain cases dealers may have factored in a large down payment, or extended the term for the loan to 72 or . Avoid this by focusing on the cost of the vehicle, not the monthly installment. Don’t answer the question « How much do you need to pay monthly? » Stick to saying, « I can afford to pay X dollars to purchase the car. » Also, ensure that the price you negotiate is in full prior to the trade-in or utilized. 4. The sticker trick The vehicle 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. You need to know the value of the invoice — the amount the dealer was paid. Working from the invoice up is much simpler than cutting from the MSRP. What to stay clear of: what cars are selling for after considering any consumer and incentives offered by dealers. Some hot cars go for sticker price and above. The prices will fall when demand decreases. 5. Holdbacks are a common practice. Manufacturers typically give cash incentives (sometimes referred to as holdbacks — to dealers to encourage them to move slow-selling models. The issue is rarely mentioned in advertising. Tips to avoid it search for holdbacks and other factory-to-dealer incentive options for the car you are considering. Although it’s not guaranteed to expect that the dealership will offer one of these incentives to the car you’re interested in, it doesn’t hurt to ask. 6. Spot delivery financing A few dealers have been known to contact customers for days up to weeks or months following the time having signed a purchase agreement to tell them that the financing fell through. It’s a scam. Spot delivery, also known as spot financing, is a scheme to convince you to sign a loan contract at a higher rate of interest. The lender can tell whether you are eligible for financing quickly. The purpose of the subsequent phone call is to persuade you to sign a loan that has an interest rate that is higher since, as per their claims they have just discovered that you didn’t qualify for the quoted lower rate. Avoid this: Don’t leave the showroom without signing contracts that spell out each and every blank filled in. Check to confirm that you’ve been approved for the loan your dealer offers. If that’s the case the financing, they aren’t able to withdraw the financing. 7. The insurance illusion A few dealers might attempt to get you to purchase an insurance policy while purchasing your car. One kind of insurance, called gap insurance , covers the difference between what the car is worth and the amount you still owe on it. It’s typically an added cost, but if are interested typically, gap insurance is less expensive when purchased through your regular . Another popular option is credit life insurance will pay the balance of your loan in the event of your death before you’ve been able repay it. If these policies appeal to you it is important to know what you’re purchasing and if you have the option to opt out and shop to find better rates. The markup on these policies when you purchase them from a dealership could be huge due to the fact that the insurance companies who sell the policies to dealerships offer them huge incentives including everything from cash to first-class trips 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 as part of their regular comprehensive automobile coverage So make sure to check first. As for Credit life insurance, it’s likely want to steer clear of it. In most cases it’s not the best choice for you. 8. The price looks tempting to finance a brand new car. However, this deal may not be the ideal one to save money. In the beginning, many finance incentives are offered for shorter durations, and you’ll must have a great credit score. For short-term loans like 24 or 36 months and even on the cheapest car can be sky high. Furthermore, you might be better off finding your own financing , and using the dealer rebate when one is available. Say you’re looking at a car worth $20,000. You will receive $4,000 as a trade-in. You can choose between the financing at 0 percent or at 3.49 percent, with a $2,000 rebate. The term for the loan is 36 months. Through the loan, you’ll come out better than $1,200 when you use the rebate along with the 3.49 percent financing. What to do Calculate the exact amount over the duration of your loan to determine what deal suits you best. 9. The rollover ruse It can be tempting to trade to a car that is more expensive before you have finished paying off the car you’re currently driving. One method by which some buyers take advantage of this is to roll over the balance of their current car to a new car loan or lease. This is an extremely risky decision. You will end up owing more on the second car than it’s worth. In the language of the automobile world it’s a  »  » with the car. If it’s damaged in an accident, or you decide down the road to sell it, you’ll have to write out a big check to cover the remaining sum of your loan. Avoid this the situation: Don’t roll over an old car loan into a brand new one. Instead, try to get a good price for it either through a trade-in, or private sales. And if you can’t keep it, then stick to the car. Unless you desperately need a new car, there is no reason to purchase a car after you’ve completed the payment on your previous car. 10. The long term trick There is nothing illegal or deceitful concerning dealers who offer loan durations that last for six or seven years. For one thing, the majority of cars are more durable than they did previously and this means your monthly payments are less. However, this isn’t ideal. You’re likely to have to pay more for your car than it’s worth because your car is declining faster than you’re paying off. Tips to avoid this If you’re thinking about the possibility of a lengthy loan duration, you should scale back to the cheapest vehicle that’s more 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 a low-cost monthly payment now but with a much greater balloon payment at the end of the loan period. In some cases, this can be a valid way to finance an automobile. For instance, you could have recently graduated and be confident that your income will grow when the balloon payment comes due. But for most people the balloon payment simply involves rolling over the balance to an additional loan. What to do Beware of these offers and know you’re financial position may alter by the time the balloon payment due, and you may struggle to pay it. 12. Bait and switch The bait and switch is when you go in looking for one car and the dealer is able to get you behind the wheel of a different one. Dealers may use deceptive strategies to convince you to go to the lot, only to tell that the car you’re looking for isn’t on the market and then try to sell you on something else, often at a greater cost. What to do: Stick to what you’re looking for. If you’ve taken the time to are aware of what you are searching for, then there’s no reason to doubt yourself. Wait it out or try another dealer that does have the vehicle you’re looking for. 13. Contract cons Keep an eye for clauses hidden in the fine print that you could otherwise miss. They might come in the form of modifications to the loan duration, additions to the loan which you didn’t agree to or other services that could result in significant cost. A legit lender will not attempt to scam you in this way, but it pays to be cautious. If you spot any discrepancies, be sure to point them out. And if the dealer isn’t willing to fix it take it off the table. How to avoid: Read carefully through the contract. Be sure to inquire about all fees and ensure the terms are clear for both you and the dealer. Make sure you keep a copy of the contract in case anything comes up in the future. 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. The more you know, the better. take note of these typical dealer tricks to make sure you’re not fooled. Learn more


Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers in navigating the ins and outs of securely taking out loans to purchase a car. The article was 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 by providing clear, well-researched information that breaks down complicated topics into digestible pieces.

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