Debunking Common Automobile Dealership Scams to Protect Your Wallet
A journey through searching for a new vehicle can be a stressful experience for many consumers. One of the biggest challenges comes in the form of hidden fees and dealer tricks designed to hike up the final price of your purchase. Understanding these common scams and how to counteract them can save you thousands of dollars. Here are some of the most common scams and tips to avoid falling prey to them.
Common Dealer Scams to Watch Out For
One of the most common tricks is the claim that “this car is way better than others from the same year,” or that “you'll never find a better condition car.” I remember hearing this a lot during my search for a new vehicle last year. Dealers often try to push additional services and products, like an allegedly new tire set that only requires swapping out. You might be relieved to hear it's 'like new,’ but be prepared for that extra cost as it often isn’t necessary.
The Cult of Interest Rates
Another common trap is the manipulation of interest rates. Dealers often push up interest rates, making it cost you thousands more. One way to combat this is to get pre-approved for a loan from a bank or credit union before visiting the dealership. Be aware that different financial institutions offer different rates, but typically, the dealer’s offers are higher. Dealers have the capacity to offer competitive rates but usually choose not to provide them.
Consumers need to be wary of this and ensure they are getting the best deal. Dealers know that a higher interest rate is easier to hide and manipulate, so it’s crucial to keep a close eye on this aspect of the deal.
Dealership Negotiation Tactics Revealed
Many dealers are trained to control the negotiation process, often starting with the friendly yet manipulative approach of establishing a relationship. Once they have you in the comfort zone, they’ll try to understand your hot buttons. If price is your main concern, they might offer a lower price but a lower trade value. Conversely, if trade is a priority, they might offer a higher price offset by a higher trade value.
These dealers often lie about the validity of lower quotes or claim urgency. For example, they might say a deal is only good for that day or that another buyer is waiting to make a purchase. Always verify everything, and be polite but firm. Keep in mind that dealers hope you won't know what you should pay and might get worn down by a lengthy negotiation process.
Widening the Gap Between Your Totals
Understand that when negotiating, you should focus on the net price. For instance, if you want to pay $26,000 and value your trade at $13,000, your net is $13,000. Revealing this net value forces the dealer to work within these numbers. Additionally, it often gets the sales manager involved, as they are in control of the final decision.
Confronting the Finance Office
The finance and insurance (FI) office is notoriously lucrative for dealers. They use it to bump up the interest rate or sell overpriced, often unnecessary products. Be proactive and demand disclosure of the true buy rate and resist any excessive product sales. Remember, the fees and products you see are just ways to split the price.
Finally, never let the sales staff know you are paying cash. Dealers can earn significant profit from the finance office, and it’s in their interest to keep you interested in financing. Be smart and only reveal you're paying cash after negotiating the price and trade deal.
By being aware of these common dealership scams and taking the time to do your research, you can navigate the car-buying process more confidently and preserve your financial health. Stay informed and stay vigilant!