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13 car dealer tricks to avoid Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial choices by offering you financial calculators and interactive tools as well as publishing objective and unique content. This allows users to conduct research and compare data for free and help you make financial decisions with confidence. Bankrate has partnerships with issuers, including but not limited 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 that pay us. This compensation could affect how and where products are displayed on the site, such as such things as the order in which they be listed within the categories of listing and other categories, unless prohibited by law for our mortgage, home equity, and other home lending products. However, this compensation will affect the information we provide, or the reviews that you read on this site. We do not cover the universe of companies or financial deals that might be accessible to you. Maskot/Getty Images

6 minutes read. published on October 06, 2022.

Authored by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in helping readers in navigating the details of borrowing money to purchase an automobile. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are dedicated to helping their readers feel confident to control 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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We receive compensation for placement of sponsored products and, services, or when you click on specific links on our site. Therefore, this compensation may affect the way, location and in what order products appear within listing categories and categories, unless it is prohibited by law. We also offer mortgage, home equity and other home loan products. Other factors, like our own rules for our website and whether or not a product is available within your area or at your personal credit score can also impact the manner in which products appear on this website. Although we try to provide the most diverse selection of products, Bankrate does not include details about every credit or financial product or service. In essence, dealers don’t want to rip you off. But as an informed consumer it’s important to be prepared for potential situations where you encounter a salesperson who has a bag full of tricks aiming to maximize profits. Car dealer tricks to watch out for These are a few tricks dealerships — even the ones that are legitimate- may try to run over you when it’s time to buy. 1. The credit counselor may tell you that you aren’t eligible for rates that are competitive. And while this may be true in some instances however, the salesperson may suggest that your credit score is lower than it is, so you believe you’ll need to pay a higher interest rate. Avoid this by coming in with your on hand before you sit down with the dealer to ensure they can’t trick you. You can also apply for an auto loan to ensure that you don’t need to depend on dealership financing. 2. The single-transaction strategy Many people view the purchase of a car to be a single transaction. However, dealers recognize this. It’s actually three transactions that are rolled into one: the new car price, its value, and the financing. Each of them is a way the dealer can earn money — and that means that all three are ways that you can save. What to do: Treat every transaction in the same manner the dealer treats each transaction: individually. In fact, you can shop your trade-in at multiple dealers to obtain the best price. Also, bringing in average prices of the vehicle you’re interested in can help ensure that the salesperson is honest. 3. The payment ploy The sales or finance team might throw you a fantastic monthly installment — one you could possibly be eligible for. However, there’s usually a catch. In some cases the dealer might have included a substantial down payment or stretched the terms that the car loan to 72 or . How to avoid: Focus on the cost of the car , rather than the monthly installment. Don’t answer the question “How much will you have to pay each month?” Stick to saying, “I can afford to pay X dollars to purchase the car.” It is also important to be sure that the price that you negotiate is the total prior to your trade-in or used. 4. The sticker shenanigan . The car price listed on the window is referred to in the industry as the suggested retail price, or MSRP. However, that’s not what’s most important. You want to know the value of the invoice — the amount that the dealer paid for it. Working from the invoice up is much simpler than trying to subtract off the MSRP. What to stay clear of: what vehicles are being sold for when you take into consideration 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 called holdbacks to dealers in order to get them to shift slow-selling models. The issue is rarely mentioned in advertisements. What to do Find holdbacks or other factory-to-dealer incentive options for the vehicle you’re considering. While it’s not a given that the dealer will apply any of these funds to the car you’re interested in, it doesn’t hurt to ask. 6. Spot delivery financing A few dealers have been known to call customers for days and even months after they signed a purchase contract to tell them that their financing didn’t go through. It’s a scam. Spot delivery, sometimes referred to by the name of spot financing is a scheme to induce you to sign an loan contract with a higher rate of interest. The dealer can know whether you are eligible for financing almost instantly. The goal of the later call is to convince you to sign the loan with a higher interest rate due to the fact that, according to them they have just discovered that you weren’t eligible for the quoted lower rate. How to avoid: Never walk out the door without signed contracts that detail every single detail, and have every empty space filled in. Check to confirm that you’ve been approved for the financing the dealer provides. If that’s the case you are approved, they cannot withdraw the loan. 7. The illusion of insurance Some dealers may try hard to get you to purchase an insurance policy when you’re buying your car. One kind of insurance, called gap insurance , is a way to cover the difference between the amount the vehicle is worth and the amount you owe it. It’s generally an additional expense, but if you are interested typically, gap insurance is cheaper when bought from your regular . Another favorite, credit life insurance, can pay the balance of your loan if you die before you’ve been able to pay it back. If you are interested in these policies it is important to be aware of what you’re buying and if you have the option to choose to decline the policy and look for cheaper rates. The price of these policies at the dealer could be huge partly because the insurance companies selling the policies to dealerships offer them huge incentives — everything from cash to luxury trips — to push the policies. Avoid this Do not automatically accept the insurance plan offered. Certain insurance companies include the benefits of gap insurance in their regular comprehensive automobile coverage, so check there first. In the case of Credit life insurance, it’s more than likely want to simply avoid it. Most of the time it’s not the best choice for you. 8. The rate razzle-dazzle It certainly seems appealing to finance a brand new automobile. But, this offer might not be the ideal one 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 like 36 or 24 months, payments on even an affordable car could be astronomical. Additionally, you might prefer to find the financing yourself and taking the dealer rebate when one is available. If you’re considering a car worth $20,000. You will get $4,000 for your trade-in. You have the option of choosing zero percent financing or financing at 3.49 percent, with an additional $2,000 in rebate. The length of the loan will be 36-months. Over the course of the loan you’ll end up in front by more than $1200 If you choose to take the rebate as well as the 3.49 percent financing. Tips to avoid it Calculate the amount of money you’ll earn over the course of the loan to figure out what deal suits you best. 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 make this happen is by rolling over the remaining balance on their current car into a new car loan or lease. This is a risky option. You’ll end up paying more for the second vehicle than the value of the car. In the language of the auto industry it’s a ” ” in the car. If it is totaled in an accident or you decide to sell it, you will end up writing out a big check to cover the remainder amount of the loan. How to avoid: You don’t want to roll over an old car loan to a new one. Instead, you should try to negotiate the best price as a trade-in or through a private sale. If not, stick with it. If you do not require a new car There’s no reason to purchase a car before you have paid off your old one. 10. The long term trick 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 in the past and this means your monthly payments are lower. But it’s not the best option. It’s likely that you will have to pay more for your vehicle than its worth since your vehicle is declining faster than you’re paying it off. How to avoid: If you are considering an extended loan period, you probably need to reduce your borrowing limit to an affordable car that is better for your budget. 11. The balloon bamboozle Similarly, some dealers will encourage the purchase of a vehicle with extremely low monthly payments now but with a much more substantial balloon payment towards the close of the loan period. In some cases, this can be a legitimate way to finance a car. For instance, you may have recently graduated and realistically assume that your income will grow by the time the balloon payment comes due. But for most people it simply involves rolling over the balance to an additional loan. What to do: Be wary of these offers and know you’re financial position might alter by the time the balloon payment due, and you may be unable to make it. 12. Bait and switch The bait and switch happens when you’re looking for a specific car, but the dealer is able to put you at the steering wheel of another one. Dealers may use deceptive strategies to lure you onto the lot only to inform you that the car you’d like isn’t in stock and then attempt to convince you to buy something else, often at a higher price. What to do: Stick to what you’re looking for. If you’ve taken the time to are aware of what you are looking for, then there’s no need to second-guess your own thoughts. Try another dealership that has the vehicle you’re looking for. 13. Contract cons Look out for clauses tucked into the fine print that you might be able to miss. They could come in the form of changes to the loan period, additional terms which you didn’t agree to, or other terms that could result in significant cost. A legitimate lender will not try to trick you like this However, it’s important to be careful. If you find any differences, make sure you make sure you point them out. If the dealer isn’t willing to fix it take it off the table. Tips to avoid this: Read over the contract carefully. Be sure to inquire about all fees and ensure that the terms are clearly understood by both you and the dealer. Keep the contract in a safe place to be prepared in the event of any issues later down the line. The bottom line isn’t supposed to be an experience in which you feel tricked and walk away feeling like you’ve paid more for your car. Knowledge is power, so consider these common dealer maneuvers to ensure you aren’t getting tricked. Find out more

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Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers to navigate the ways and pitfalls of taking out loans to purchase an automobile. 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 gain confidence to control their finances with concise, well-researched and well-documented details that cut otherwise complex topics into manageable bites.

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