Updated: 11/2/2011 2:19 PM ET|
Auto dealership tricks and scams
Shopping for a new car can be a daunting proposition -- but it need not be if you know what to expect (and are willing to walk away).
Buying a new car is one of the most stressful financial situations you're likely to encounter. There are many reasons for this. After all, this is one of the biggest purchases (aside from a house) that you'll make, and you want to get a good deal.
One big obstacle for many is dealing with salespeople who try any number of tricks to get you to spend more than you planned.
Understand the process
While there are honest car dealers out there, dealing with a crooked dealership can leave a very bad taste in your mouth. If you know the tricks of the trade, though, you can go in prepared to get a fair deal for your next car.
Here are some of the most common tricks you'll encounter when buying a car or trading one in:
Trading in your old car can help offset a portion of the purchase price on your new car, but it's rarely the best deal. In most cases, you'd be better off selling your old vehicle yourself and then putting the proceeds toward the new car. It's more legwork, but if you're patient, you can get a much better deal.
Inflated trade-in values. If you do decide to trade in your car, the salesperson might come back with a fantastic offer -- perhaps much more than any other dealer would offer. Seeing as this price is much better than what you can get elsewhere, you may go ahead and start making a deal for your next car.
The problem with this situation is that, all too often, the sales guy will eventually claim that the trade-in price was rejected by his manager. He'd like to keep the deal with the new car but will offer a smaller amount for the trade-in. At that point you may be so emotionally invested in the process that you're likely to accept his offer.
Don't fall for this trick. Stand up, start moving toward the door, and ask the salesperson to lower the new car's price correspondingly. If they won't budge, just walk away.
Holding your keys. Another possible gotcha occurs after you hand the dealer the key for your trade-in. There have been stories of dealers keeping potential customers in the showroom by "misplacing" their keys. Our friends had it happen to them. Upset with that old trick, they wound up leaving without purchasing anything.
Scams when buying a car
The biggest advantage you can have when buying a car is knowledge. Don't go into a dealership without knowing what kind of car you're looking for and how much it should cost. If you're prepared, you'll be able to spot outrageous offers and comfortably walk away.
Foursquare -- bad math. If a salesperson asks how much you're willing to pay per month for your car, watch out! Some dealerships coach their salespeople to pull out a foursquare chart to maximize their profit by focusing only on your monthly payments.
Payments can be reduced by extending the length of your loan, or by including a balloon payment. Know what you're looking for and tell them what -- and how -- you want to buy. Use Kelley Blue Book values or Cars.com price data to see what your dream car is worth and how much people are paying for in your area.
Instead of getting into the tricky math at the dealership, focus on the bottom line -- the total price you're willing to pay for the car. If you need financing, you should consider lining it up on your own rather than including that in your negotiations.
Lowball first offer. Similar to the overly generous trade-in offer, a too-good-to-be-true price on the car you want to buy isn't that uncommon. As you rush to close the deal, however, the manager inevitably steps in and says that the price is too low. The dealership can't sell it to you at that price because it would "lose money." Don't fall for it.
If a salesperson has been at the dealership for any reasonable amount of time, he'll know what sort of deal will pass muster and what will get rejected. Simply tell him you understand, but that you'll need to find a deal that is better suited to your situation. Then get up and head for the door. If he capitulates, great. If not, keep walking.
Push you to pay more. Finally, be on the lookout for attempts to add extras to your purchase. Maybe salespeople will claim that the bank requires you buy a warranty before they'll approve the loan. Another tactic is to use your credit score as an excuse to get you into a ridiculously high-rate car loan. They may be right that your score won't get you the best interest rate, but it doesn't mean you have to take the worst.
Prepare for this tactic by knowing your credit score. You should also check with your local bank or credit union to see what sort of interest rate you can qualify for. Knowing these things in advance can help you evaluate any deal you come across.
Note from Nickel: My preference is to avoid the showroom entirely, and to negotiate the deal via email and/or fax. That way you can play dealerships against each other and find the bottom of the market without racing all over town. It also keeps you out of the sales office, so you avoid any shenanigans.
VIDEO ON MSN MONEY
Let me give you the math how many cars do you need to sell at a $100.00 per car yes that right to put your children thru college...have no weekends with your family and have people question your integrity on a daily basis.....I have been in this business over 40 years and am a hard working family man and yes we are the ones who take the blunt of misinformed public who think that we are still in the 70"S making or have $4000 profit in vehicles shame on you for not taking the time to understand the process and then throw stones at hard working ethical salespeople who have made this their career. Next time you want to purchase a vehicle know what you want know a fair price pick a dealer in your neighbor hood and support it thats how you establish a good relationship and would glady support you in your efforts!!!
The majority oif dealers & salespeople are honest. The problem with articles like this is the continued focus ona few old tactics that have all but died off a decade ago. People have a vast amount of info at their finger tips today. There is no other product on the market where a consumer can easily look up what the dealer paid for it. Can you imagine if people knew what everything costs the retailers today?
Salespeople work long hours & put up with alot of crap from people. No 2 trade ins are the same. Reconditioning on a prospective trade can be in the thousands. Not to mention how many people try & hide mechanical problems on their trades by putting black tape on warning lights, etc.
The easiest way to buy a car is do some research on your trade & the car you want. Support a local family owned dealer w/ has a good BBB rating & make sure your salesperson is dedicated to your interests as well as the dealers. When you need your salesperson for a loner car or a favor down the road, they are happy to accomodate you because they appreiciate your business & relationship.
Bottom line is it isn't 20 yrs ago. Some people don't want to let go of the "stone-age" dealer tactics (which many other buisinesses had) because they need to justify their own shady behavior when they try and dump their trade on the dealer. "Dealer bad...Customer Good"
Finally, every dealer on the planet would welcome a 1-price no haggle sales policy direct from the factory. Let the dealer make $1500.00 per car and the only gray area would be the trade-in. However, when we have tried that policy, customers still wanted to haggle even on deals w/o a trade. I have personally seen factory employees want to haggle on their own "factory employee price" because they know "we make money on service, etc." & therefore can afford to take less for the car. It is very frustrating for a salesperson.
It seems dealers will never win. When we fully disclose our prices we're told we are still too high or they don't believe us.
I have been in the business nearly 30 yrs & I have realized my biggest fear...I no longer enjoy working with people. The majority of our customers are nasty, bitter, mean, dishonest & outright rude to deal with.
My first question is what is your background that says you know what your talking about. The worst thing with these articles is they don't take into account the saleperson's need to make a living. As far as using KBB and Edmunds you might as well go to joeblowcars.com since none of those websites have a buy button. Only autotrader.com stands behind there bids. Lastly why don't you do your job for free since your asking salespeople who are trying to provide for there familes to do the same.
This is the second article I've read today on MSN's home page that's blasting car dealerships. I'm starting to wonder what the real motivation is? I often wonder why there isn't more articles about "paying to much at the grocery store" or "paying to much for your appliance's"? Should car dealerships sell and service cars for no profit? No other retail business can you negotiate price. The margins on new cars are so small, I don't know how dealers stay in business. Or is it that Laura Martinez made a poor buying decision herself and is now blaming the dealerships? Or is MSN getting money from car buying services to smash dealers? Why don't you do some research on how much money the average car dealer spend per year giving back to there communities and write a story on that. But you get more satisfaction out of running honest people through the mud. VERY SAD MSN
Good job MoscowMike! I would like to take this debate of rip-offs even a little further: Could there be an article about bad advice from poorly researched online sources too?
Most dealers don't hide a ton of money in the deal, a lot are up and up and very honest. The biggest sign of a bad dealer? THE SECOND STICKER! I was at a local Dodge dealership the other day and a Challenger R/T was sitting on the lot with ten thousand dollar mark-up added on top of the retail tag. WHAT?!! The car has demand, don't get me wrong, but it is not the latest nor the greatest offering. Taking on excessive gross is exactly that: GROSS.
Another no-buy scenario: "The THIS WEEKEND ONLY TENT SALE!" Run, don't walk! The insane carnival like atmosphere of being away from the dealership makes people do some majorly poor buying decisions. If you want to have that potential lemon you want to buy checked out, are you going to be able to do it at the Fairgrounds on a Sunday afternoon? Most vehicles are marked up over what they were on the lot, then marked down a touch to make you think it is a bigger deal than they really are. Grease paint pens and balloons coupled with a free hot dog are pressure items folks. Walk away.
The last. Is the worst. The turn. Do people need to be brow-beaten into purchasing a car? No is no. If the dealership you are at won't let you go without talking to the closing manager BOLT. Free floor mats, a years worth of oil changes (only losing about $200 off the gross of the deal btw) are not worth the humiliation of buying something I don't really want under pressure.
There is a simple answer to this... if you think you are gonna get ripped off, don't buy a new or used vehicle from any dealership! Take your chances with all those "HONEST"
people who are selling theirs out right!
lol,,,,, for all the tricks of dealers there are tricks of buyers.... how about just sell trade in on your own,,, and buy at sticker minus rebates? keeps it simple. or tip the sales person $200 to be on your side? what is a good deal? a win-win,, the dealership need to make some money. they contribute to the local economy,,,,, and used to be one of our biggest donators until articles like this cut their profit ... which doesn't hurt the owner but the employees that work for them.. just like every other business when things get tuff the big guys cut employees or benifits and still make their money... so remember it is the sales person who hurts, or the min. wage office staff or detaler that is actually hurting and the charity or school that no longer gets donations.
Wow..... Another article that makes all car dealers "scum" and the general public "wise" to how the car business works. (Yes there are some dealers that are bad...... Are there bad bankers, lawyers, insurance agents, real estate agents, politicians, etc???)
Do you know how many hard working men and women work at these places? (Yes... they work 6 - 7 days a week... 10-13 hour days). And oh.. By the way... They despise every "occupy wall street" freeloader that thinks the government should give them a lifestyle for free. (True hard working Americans).
The next time you pay $1000 for a pair of Prada shoe's.... Remember somebody... is making more than what a dealer makes (in most cases) on a economy car. I am sure the person writing this article... Doesn't even think twice about that one. (And that poor salesperson.. That you ran around for 4 hours on a Saturday... Probably called and emailed 3-4 times the week before you came in... They may make a $100).
Here are some real documented facts. (I'll use the high numbers).
An average salesman sells 8 - 10 cars a month.
The average commission per sale is $250.
That makes a monthly income on a high side of $2500. (Before taxes, insurance, etc..).
And you wonder why.. Things become unethical?
If you want some good advice.... Throw out KBB, NADA, Consumer Reports, and every other "guide" that tells you what they think your car is worth or what the dealers car is worth....
These companies have no accuracy responsibilities.... AND THEY USE THE CAR BUSINESS FOR PROFIT. They only care about the advertising dollars they can generate!!!! There is never a button to push on their website... That prints you out a check and somebody magically comes and picks up your car. Here is the real deal...... Dealers offer you real money for your car... Either take it or leave it.
By the way... Have a great week!
Useless article containing nothing new, I could actually write a more useful article. I haven't seen a dealer use the old foursquare since the 90s or so. The key to a successful vehicle purchase is knowledge, including the knowledge the dealer needs you more than you need the dealer.
Oh and trading in a vehicle may not be the worst bet. One must consider the tax savings gained via the trade in. In most states, sales tax is not applicable to the value of the trade.
To you, yerfullofit: Such an apropos screen name, as you are quite that...FULL-OF-IT. First of all, it is against the law to resell a vehicle without disclosure that it was previously sold. When it is first sold, the paperwork (RD108 here in Michigan) shows it was sold and to whom and is sent within a day or two to the Secretary of State. It is tied to that vehicle by the VIN (Vehicle Identification Number), which cannot be changed without it being noticed. The story you told about your money being applied to the payoff of the trade-in is also quite NORMAL and proper as well as MANDATED by the bank who holds the lien. They will not let you trade or sell it until it is paid off. They want their money too. Learn the processes.
But instead of seeing this as normal, you instead spew lies and innuendo to perpetuate these lies that you think tell a story of brilliance on your part. Quite the opposite. You are among the unknowing and undereducated that is the American today. You want the answers to follow your plan instead of following where the path leads. No two people are in the same boat when it comes to buying a vehicle, don't plop them all into the same group. If you go to a dealer doing these scams and you buy there, it is your fault. But don't disparage the entire industry because you're uneducated and ignorant in the facts.
The most dangerous person to buy a used car from is a private owner. They only need to sell one car & they will not spend an extra dime to make sure the brakes, tires, A/C, etc are all in correct working order.
Buy from a quality dealer who has top notch facilities & a good reputation in their community. Consumers all have the power of "no". If a dealer is dishonest, walk away. The problem is those types of dealers appeal to the customers greed & offer them a few hundred more for their trade, etc in order to take the sale away from the quality dealer down the street.
Always remember you get what you pay for. Quality dealers spend a fortune to continuosly train their technitions. The also spend a fortune to stock the right parts so their customers don't have to wait too long for service, etc. It costs alot of money to run a reputable dealership. Meanwhile the whore dealer down the street has a revolving door for his sales staff because they get burned out from complaints & low pay & long hours. But hey, he gave you $300.00 more for your trade so give him your business...right? He was able to spend the extra on the trade because he doesn't spend anything on employee retention, parts stock, or customer and community goodwill.
The more info customers have regarding our internal costs, the less they are willing to pay. They openly don't care if we lose money but will immediately complain when they receive poor service after the sale.
Thoese types reap what they have sown.
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