Identifying Other Types of Car Buyer Scams.
When you’re dealing in the world that is highly dependent upon sales and commissions, salespeople will make buyer scams a standard practice. Many look to prey on those who don’t have so many options due to poor credit.
To protect yourself you should know
Exactly what you are looking for in the “dealer make” and “model” of a vehicle
Exactly what your trade in is worth
and what is the least amount of money you will take for it
Your budgeted spending amount, what the monthly payments of your auto loan will be and stick to your limit!
Decide beforehand that you will not let the excitement and glamour of the new cars side track you from your main objective of being on guard against dealer tricks.
Negotiate Your Trade-In Price
When you first walk into a dealership and meet a car salesperson for the first time, many times they will start off by asking you “are you trading a car in?” This is the first signal that “you are about to be worked by the sales person.”
If the salesperson knows what car model you are trading in and how much it is worth they will manipulate the deal they offers you for your new car so the dealer makes more money off the trade-in and you lose money.
Many people do not worry about what the dealer offers for their trade in. They are just happy to get rid of their old car but let me explain why this is wrong thinking.
- Your old car was expensive even though it is time to get rid of it. The money you paid for your old car was probably associated with interest as well so you may have spent $1350.00 for every $1000.00 or more depending on your overall loan amount paid.
- The money you get for your trade in goes directly to pay down the principal of the new car and this, in turn, will directly lower you new car loan payments.
So you see why your old trade in is so valuable, and it is important that the dealer not cheat you out of your hard-earned equity.
Another scenario could look like this. They claim you will get an incredible APR, but at the same time, they charge you a jacked up MSRP cost, add extras and fees and give you a horrible price for your old car. Their profit remains just as high. This is why it is important to negotiate your trade-in price after the car price is settled on.
You can also see the importance of knowing what your old car is worth before you go to the dealership. Don’t take their word for it.
Push, Pull or Drag It In Scam
Dealers will advertise that they will take your trade-in any condition. This is known as the “push, pull or tow it in” scam. The dealer will offer a minimum amount of money for your car regardless of its condition. This money is usually taken from rebates and buyer incentives you could have gotten even if you did not have a trade-in. So you just gave your trade-in to the dealer for no money at all.
It all looks good on paper, but the reality is that whatever your car was worth, the dealer just took it from you and now he is going to sell your old car for a bigger profit. If you know your vehicle’s resale value, you will know what the dealer can make off of your car when he sells it, and that will help you settle on a fair price for your old car.
Pay Off Your Old Car Loan Scam
Some car dealers will offer to pay off your existing car loan on your trade “no matter how much you still owe.” If the amount that you owe on the payoff is more than the car is worth than you are in a negative equity situation.
Being upside down on a car loan is a bad situation that should be avoided at all cost. Many times this happens from trading in a loan for another car loan and rolling the due payments into the next loan.
Dealers do this to make a sale on a car; buyers do this to try and gain lost depreciation on the car they are now driving.
The problem is that the car will continue to depreciate faster than the payments can catch up. If the car is totaled or badly damaged, you could have car payments without a car.
Car dealers are not going to pay more for a car than it is worth and most of the time will not give you what the cars resale value is because they know they will not be able to make a profit when it resells.
Avoid the Temptation to Buy Without Comparing Other Dealerships
When negotiating in person, don’t let the salesperson push you into doing paperwork and taking a deposit before you shop around at other car dealers. This advice cannot be stressed enough, because once you sign, it is considered a contract which is written in stone.
Find your lowest deal before you sign, to avoid the frustration of trying to find a way to get out of a deal.
Searching cars online can also help you see what a particular car is selling for in your area.
It is easy for a salesperson to say that no other dealership will match their price. It is up to YOU to find out if that is TRUE! Start looking at the websites that sell those cars in your area; many sites will compare cars and prices.
Have your paperwork ready to show them comparative quotes. If they see you have done your homework on available deals from competitors, they have to negotiate car prices on your terms. This is one of the best ways to avoid car buying scams, fast-talkers, or payments that are higher than they should be.
Don’t Hand Over Your Driver’s License or Social Security Number
There is no real reason a car dealer would need to photocopy your license before a test drive, even if they mention that insurance requires it “in case you pull a fast one on the salesman.”
Other dealers copy your license to run unauthorized credit checks during your test drive. To avoid giving out your original document, hand them the copy of your license instead and make sure to get it back before you leave. Legibly write that the dealer may not run a credit check on you without your permission.
Don’t give personal info such as a driver’s license or social security number until you have signed the buyer’s order and are financing via the dealer. You can double-check whether the dealership ran a credit check on you by getting your report online free on the Valley Auto Loans site as often as you like.
Remember the best way to get financing is to get a pre-approved loan before you shop
Low Monthly Payment Scam
If you let the dealer know what Payments you are looking for on your car financing, the dealer can sell you a car with an inflated price tag. Then they spread out or extend your loan term monthly payments to obtain the small payments you are looking for.
Stay focused on the selling price of the car and not the payments. If you have done your homework and used a car payment calculator to determine what your payments will be with your trade in and down payment, then you will know approximately what your payments will be for your budgeted price. You will also know if the dealer is trying to rip you off.
Test Drive, Questions Only Please
The things you say during a test drive can be used against you so try to keep it limited to just your questions without replying to theirs. Car salespeople want to glean as much information from you as possible to see if you can afford your car’s monthly payment or if you will go higher.
They want to see what you liked about the car or if they want your trade-in so they can play off of that information for the sale.
They want to know what payment you are happy with, instead of outright offering you the selling price. Tell them you only negotiate based on price, not monthly payments.
Certified Used Car Scam
Many used car dealers offer certified used cars, stating they have been inspected and certified to be in factory fresh working order. However, the only truly certified used cars are found at franchised factory dealerships.
This certification process is not cheap, and most truly certified cars will sell for about $1,000 over the same model of car that is not certified. This gives used car dealers who cannot certify cars a huge price advantage over the certified car package. It’s easy for a used car dealer to advertise a car and say it is certified when it is not.
Salvage Title Scam
If a wrecked car is damaged as a result of a natural disaster such as a flooding, hail or hurricane, it is assigned a salvage title by the insurance company. Many of these cars look new and in good condition on the surface but could have severely damaged electrical or mechanical systems preventing it from being sold as a car of the same value as others cars of the same make and model.
Even though regulations exist to prevent a title from being altered from its salvage status, these regulations vary from state to state and shrewd dealers have found ways to wash a title.
Used cars are almost always sold “as is” and this means that the unsuspecting buyer gets stuck with a car that could have complicated mechanical problems after the sale. This can be prevented by a simple vehicle history report from a leading vehicle reporting agency such as CarFax or AutoCheck. You can get a free report online for most cars.
If you experience a totaled vehicle, there are steps you can take to speed up the settlement process.
Mysterious Price Change Scam
This can happen when a salesperson quotes you a price during price negotiations but then when the finance manager does the paperwork you notice a different price on the contract. Then the finance manager explains fees and other prices you did not know that he included in the car price.
This is a scam, and the car selling price should be listed as a line item without other fees added to the cash price on that line. At this point have them redo the contract correctly or walk out but do not sign until it is correct.
Dealer Options Scam
If you are trying to qualify for financing with poor credit, the dealer may try to tell you that you will need to purchase certain options to qualify for a lower auto financing rate or a better selling price.
Be assured that this is incorrect and a scam. They may try to adjust their story after you question it but this is probably a good time to walk out to prevent other bad business practices from that dealer.
Credit Card Trap
One more pitfall to avoid is the credit card trap. While there are times that emergencies happen, and it is necessary to make use of a credit card to use for the down payment on a car, it is important to keep in mind that you are still paying interest on that charge.
However, if you have a decent credit card, the APR is sometimes lower than what the dealership is going to offer you for a no down payment car loan.
Your Deposits and Down Payment
I most cases, a deposit is not needed and is another dealer scam to get your money. If a salesperson tells you that you will need to leave a deposit to hold a car for you at that price they are probably trying to get you to commit to that car and prevent you from comparing that price with other dealers.
If you give them a deposit, you will probably lose that money or fight to get it back. If you truly have an honest salesperson, they will still acknowledge that price when you return.
It is not a good idea to pay cash for a deposit since you will never get your money back if a deal turns sour, but you can dispute a credit card charge. When handling such a large transaction, it may be wiser to get a separate credit card to pay for your car deposit.
One exception would be if you asked a dealer to do a dealer to dealer trade to bring in the car model you are looking for. Then the dealer will need a down payment to know you are committed to the deal before he puts up the expense to swap cars.
Dealer Window Sticker Scam
Many dealers will display a sticker on the window next to the MSRP window sticker that looks official and has a list of added features with a larger price. These features are added by the dealership and are put there to increase the price of the vehicle.
These options may not even be installed on the car yet, but the dealer is trying to make a larger profit from that vehicle. One example would be fabric protection. You can request this same car without the added options or tell the sales person you will no pay for any extra options.
Dealer Addendum Label Car Scams
As you are checking, the car dealers inventory you may notice a list of dealer installed items with extra costs listed. This is known as the dealers addendum list and usually include things like paint sealant, rustproofing, fabric protection and more.
This is also a frequently used dealer scam to drive up the selling price of the car. One would almost think that profit padding is a required step in the auto industries sales process.
As you negotiate the price of this car you need to ignore the prices on this list and if the sales person refuses to remove this cost it is time to move to the next car. Also, note that if a dealer is using this type of sticker, they will be using a lot of other dealer tricks to increase the price as well.
Arbitration or Conflict Resolution Agreement Scam
During the paperwork, the finance manager may ask you to sign a “Conflict Resolution or a Dispute Resolution” agreement. Be cautious because he is asking you to waive your ability to take the dealership to court if a problem occurs.
Don’t Pay for Extra Dealer Fees
When buying a new car, there are always some extras that may be included in the car you selected, such as floor mats, a full tank of gas and other little things. Some the dealer offers for free but be sure it is in writing, or you could get charged on the paperwork.
The biggest abused extra is the extended warranty. Be cautious about buying expensive warranty coverage, since this can offset a great car deal. You will have no chance to go over the terms of warranty service contract for what you are buying so many people find out later that it was a big mistake.
A new car will come with a three to five-year-manufacture warranty as standard equipment. Someone in the dealership, and it will not be your salesperson, will want to sell you an extended warranty. Some extended warranties can be good if the vehicle is used and not completely covered, but you do not have to buy it from the dealership nor do you need a warranty for a car that already has one.
Many dealers will fill your new car with a full tank of gas. You thought the dealer was just generous, but it is paid for by the manufacturer along with a dealer prep credit. The manufacturer pays the dealer credit to prep the car for display by removing the shipping covers, cleaning and inspecting the car before you see it. If you see this charge on the invoice, tell the dealer “no thanks I am sure you would not want to get money twice for the same service.”
Ask about the car buyer rebates before you negotiate the car price.
Rebates and purchasing incentives are offered by most car manufactures and are for the buying customer. Many dealers will use your rebate in the price negotiating without telling you and then have you sign the rebate over to them during the paperwork process.
You can avoid this by asking several local dealers about the rebates before you talk about car prices on any car. Also, note that the rebate price does not have to be used with the MSRP price. It is sent to you from the factory or added to the car deal, regardless of the selling price the dealer gives you.
It is extremely important to ask for a list of fees associated with buying a car and if any rebates are offered form the factory. The car dealer will use your rebate to adjust the car price without telling you and make you think he is offering you a discounted price. Rebates should be used after you have settled on a price. They are yours to use the way you want and not for the sales person to negotiate with.