The thought of heading to the car dealership can fill some people with dread. Not because you don’t want the new car, but because you’re worried that you’ll be bamboozled by a salesperson and a finance department working in tandem to get as much money as they can from you. 

Obviously, not all dealerships are like that and there can be very honest company cultures and salespeople out there, but the key to making sure that doesn’t happen is to come prepared. 

The biggest favor you can do for yourself is not depending on dealer financing. Savvy car shoppers go to the bank or credit union first and you’ll see why. 

11 Car Dealer Tricks to Avoid

When you know exactly what you want, how much you want to pay for it, and what rate your limits are on the specifics, your trip to the auto dealer will be much easier. Keeping an eye out for the tactics we’re diving into will be quick to spot and defend against. 

Keep in mind that there are other psychological strategies in play too: 

• Making you wait or delaying the process
• Playing the good guy, bad guy act between the car salesman and sales manager
• Pressing the urgency of buying now

All of these can wear you down throughout the process and make it easier for the dealer to make their money. 

Lying About the Rate That Your Credit Score Qualifies You For

If you don’t know your credit score, then you might not be familiar with the average rate you qualify for with your credit history. Dealers sometimes capitalize on this by raising the interest rate on your new vehicle. 

In some cases, a salesman will imply that your credit score is worse than it is so they can justify charging a higher interest rate.

Prep for your trip to the dealership by pulling your credit score the day before and researching the interest rates for people with similar scores to yours so you aren’t giving away your hard-earned money.

If you don’t know what is a good credit score to buy a car, you can do some research. 

You can also check out the myFICO Loan Savings Calculator for an estimate of what you should be paying in interest based on your credit score. 

The best way to avoid this is by starting your car shopping process by pre-qualifying with multiple lenders to find the best auto loan rates. Then you can get an auto financing pre-approval and show up at the dealership as a cash buyer. 

Rushed Signing Process

When you speed through anything in life, you’re likely to miss a few things. The same is true with the car buying process. 

After being kept in the dealership for hours, it can be tempting to want to sign the papers as quickly as possible so you can do something else with your day, but rushing it might cost you later. 

You should be asking questions about the costs associated with your vehicle loan and what the additional terms and agreements are. If they’re not willing to answer your questions, get someone who can and don’t sign until they’re answered. 

By rushing the signing process, you could miss out on important information like your money factor, added fees, and other dealer tricks. 

And you should never sign off on forms that are incomplete or incorrect. Once you’ve signed it, it’s official and you’ll likely be stuck with the arrangement you signed off on even if it’s not the one you thought you were getting. 

Bait and Switch Offer

There are two common bait and switch tactics when you get to the dealership. The first happens before you even step onto the lot.

You may have seen the advertisements online, in the newspaper, or passing a dealership on your way to work. They’ll usually offer a car for an amazing price to get people to sit down with them. And of course, as you come to inquire about it, they’ve already sold the car you wanted.

From there, they attempt to convince you to buy a more expensive, newer model car. If this isn’t what you want, just stand by your decision. Other car lots are still an option and may be willing to negotiate a better deal with you. 

The second bait and switch is with your loan offer. Once you’ve decided on the car you want with an advertised $0 downpayment. The loan offer might come back for a completely different car with a higher interest rate than what you came prepared for. 

Extended Loan Terms

Most car loan terms range from about 24 months to 60 months or two to five years of repayment. However, it’s not uncommon these days to see offers from the dealership finance office with loan terms as high as 84 months. 

While extending how long you’re repaying your car loan might lower the monthly payment, it usually results in you being upside down on your vehicle loan. 

The issue comes with depreciation. If you’re extending your loan term out to six or seven years, you’re repaying the car loan much slower than your car is losing value. And as we all know, your car starts depreciating as soon as you drive it off the lot. 

If you truly can’t afford the monthly payments on the car you want without extending the loan term, then it might be smart to look for a less expensive car that you can pay off in 60 months. 

No Credit Needed Loans

No credit loans can be much more difficult to be approved for and might be expensive to use. If you need a car but don’t have any credit history yet, it could be worth it to build your credit over time before you apply for the loan so you can qualify for better car financing options. 

Often, the no credit loans have higher added fees and other stipulations to meet. This increases how much you’re paying in financing costs which also affects your monthly car payment. 

You can also make moves to build your credit. Look into options like:

• Getting a Credit Builder loan
• Applying for a secured credit card 
• Opening other accounts that build credit

Some no credit loans, such as student and recent graduate programs, might be useful but you should still be wary about these loans and find a reputable lender. 

For additional information about how your credit score affects buying or leasing a car, you can check out: Lease A Car With Bad Credit. It’s still best to improve your credit first since being a car buyer with good credit will save you money in the long run. 

The Three-In-One Transaction

Buying a car is just one transaction right? Not really.

In reality, it’s three transactions rolled into one.

1. Pricing out the sale of a new car
2. Trading in your current car
3. Financing the new car

Sure, bundling your car purchase into one big transaction might seem convenient, but it allows the dealership to make an extra profit at your expense. It’s more effective to negotiate each transaction separately. 

When you bundle everything into one, it allows each of those to be manipulated by the dealership’s lender so it works for them. Want more for your trade-in? They might increase the price of the new car. Want better financing? They might lower the offer for your trade-in. 

Instead, do your research to see who will give you a good deal on each transaction. You can shop around and find the lowest price on your new car at one dealership and trade in your vehicle at another for top dollar. 

• Shop around for the lowest interest rate and get a car loan pre-approval from your bank. 
• Research the most competitive price for your trade-in. And have it inspected and valued at multiple dealerships. 
• Look for dealers with pricing that’s affordable with reasonable financing terms. Explore their prices online and confirm prices and availability by phone.   

Taking back your leverage by separating the transactions allows you to maintain your buying power and keep from being outsmarted by the salesman and finance manager. 

Yo-Yo Financing

So you bought your car, signed all the paperwork, and drove it home. Days later the dealership is calling you with unfortunate news. The lender reviewed your credit score and your financing deal fell through. What?!

They want you to sign off on a higher interest rate loan with the excuse that their finance department found out you don’t qualify for the lower interest rate. 

In many cases, they’ll have you sign a “Borrowed Car Agreement” which means the financing hasn’t been approved yet. And of course, when you get the call, your trade-in has already been sold so it gives the impression that you don’t have many options. 

Don’t leave the dealership with a new car if the sale isn’t finalized. Make sure you’re completely approved before you leave the lot and stick to the interest rate you signed off on in your documents. 

This is more common with consumers who have bad credit. According to Business Insider, many of the people who fall for this end up paying an interest rate five percent higher than people with similar credit scores. 

After you’ve signed the documents with all of the details about the loan and the car sale, there’s no backing out on the financing agreement. So don’t let this trick of the trade fool you. 

To avoid this, you can utilize a pre-approval through a bank or credit union to solidify your financing before you get to the dealership so there’s no question regarding your interest rate. 

The Insurance Illusion

By this point, you know that some dealers will tack on extra things just to make more money. One of those things is gap insurance. If you were to go through your current insurance company and get a quote for adding gap insurance to your new car, it’s pretty affordable. 

It can even save you some money if your car gets totaled and you still have an outstanding loan amount left to pay compared to the value of your car. 

But somehow when you get insurance from the dealership, it’s got an insane mark-up on the price. In many cases, the car salesperson is handsomely incentivized to get you to sign up. 

You don’t have to sign up for it just because it’s being offered. 

Before you head to the dealership, check with your insurance company to see how much it would be to add gap insurance to your policy for the new vehicle. They can usually send you a quote in a few minutes if it isn’t already included in their comprehensive auto coverage. 

The Rate Razzle-Dazzle

It’s easy to get caught up in flashy car commercials and dealer advertisements that offer 0% interest to finance a new car but there are a few catches to this…

• The loan term is usually much shorter (around 24-36 months).
• You have to have excellent credit to qualify for it. 
• The payments are much higher than a longer-term auto loan. 

All of these factors can add to the difficulty of repaying the loan even though a shorter loan term gets you to pay off quicker. And if you break out your calculator, a good rebate from the manufacturer paired with a low interest rate can be just as affordable as a 0% interest financing.  

Negotiating Your Monthly Payments

By focusing on what you want your monthly payment to be you’re negating the overall cost of the car. The dealer can adjust factors like your loan term, or even the trade-in value to bring the monthly payment down to what you want.

Sure it fits in your budget, but how much are you actually paying? 

The trick is they’re just getting the money you think you’re saving from another part of the deal.

They’ll lower the trade-in value for your old car so they make more profit from reselling it.

They’ll also increase the interest rate so you’re paying them more on the back end. 

Or they’ve made the car’s overall purchase price higher which makes you think you’re getting a good car deal when you’re only focused on the monthly payment. In fact, you end up paying more for the vehicle loan than if you’d chosen to pay a little extra money each month. 

You should hone in on the overall price of the car with the finance charges included. This will tell you how much interest you’re going to be paying for the loan and how much you’re paying for the car so you know whether you’re getting a fair price. 

It’s worth mentioning again to focus on how long the loan term is. Typically you want something between 36-60 months to outpace depreciation as long as you can afford the payments. 

Always negotiate the price of the car and not the monthly payments.  

The Trade-In Trick

As mentioned earlier, dealers take advantage of being able to adjust the trade-in price of the vehicle. It’s part of the negotiation strategy of lumping everything into one transaction.

A smart buyer like you does their research on sites like Kelley Blue Book or Edmunds.com to find the top and bottom values for their trade-in vehicle as well as what others paid for the same car purchase or leased vehicle.

By arming yourself with knowledge of what you should be getting, you won’t be fooled into taking a lower than acceptable value for your trade-in. Even if they’re giving you a discount on the car price.

When you prepare yourself ahead of going in to buy a new car, you can avoid a lot of the tricks pretty easily and still drive away feeling like you got to treat yourself without breaking the bank. 

As you get good at negotiating the financing terms and figures you want, it can almost start to feel like a game to see how well you can do. As with any game, you can’t be afraid to get up from the table when what you came in for isn’t being offered. 

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