The “Sneaky 13” Car Dealer Scams and Strategies that can cost you money
There are many advertising scams and strategies that car dealers use to bring consumers into their showrooms. While not all of these are necessarily dishonest, they could end up costing you more in the long run. Or have you paying more than you should upfront. Below are the “Sneaky 13” Car Dealer Scams and Strategies that could cost you money:
- The “Zero Down, Zero Interest, Zero Payment for One Year” deal: This program may sound great but in the long run it could cost you a lot of money. These programs can come with higher interest rates than you would want and/or expect after the first year is over. Like any deal, you need to know what the payment will be (and your interest rate) after the first year is up. If you’re paying far more than you should, the deal isn’t a deal after all.
- The “Zero Percent Financing offer”: This program is typically offered by the automaker as a benefit to the consumer. It is often used on slower moving models or as part of a broad manufacturer promotion. The consumer is typically offered, for example, either “Zero percent financing for three years or $2,500 cash back.” This means that the price of the car has been inflated to cover either the financing or the cash back. In addition, you need to take out a shorter-term loan to qualify for the zero percent financing deal. If you want a longer loan term, you’ll have to pay a higher financing rate. And remember… it’s NEVER about the payment. It’s about the price you’re paying. Don’t make this mistake. It will cost you.
- The “Bring in Your Clunker” program: This marketing program tells you to bring in any car in any condition and you’ll get “thousands” in trade for it. Anticipate that whatever “bonus” trade-in value you are getting is probably built into the price of the car you are considering buying. Knowing this can help you negotiate a better deal for yourself.
- The “Inventory Liquidation” program: This could also be called the “Tax Sale” or other similar names. Basically, the dealer advertises that “all cars must go” for tax or other reasons. Language like “no reasonable offer refused” is used and the feel is that the dealer is in earnest to sell most or all of his inventory before a certain date. The truth is that there probably isn’t any real problem for the dealer other than he hasn’t sold enough vehicles. Again, check pricing and be prepared to negotiate. That way you won’t get taken advantage of.
- The “Loss Leader” deal: This is one of the oldest marketing programs in automobile selling history. The dealer puts a few models in ads that are really well priced. The problem is that, often, these “super deals” are not always such desirable cars. They may not have air conditioning, automatic transmission, all-wheel drive (in colder climates), power windows, and/or other options that consumers really want. After the consumer expresses his or her disappointment, he or she is shown another, more expensive vehicle that has the desired features.
- The “Buy A Car, Get A TV” program: Many dealerships use this technique to bring in customers. In most cases, the cost of the giveaway is built into the price of the vehicle. That said, some dealers are able to negotiate lower pricing for that big-screen plasma so if you negotiate well, you may get a good deal on both the TV and the car. Note that this program can apply to any giveaway imaginable.
- The “We Pay Off Your Trade No Matter What You Owe” strategy: The truth is that a dealer, unless he’s off his rocker, can’t pay off your trade if he doesn’t make enough money on the car deal to do so. That means if you owe $5,000 on your existing car, it’s going to get rolled into the deal in one way or another. Again, doing your homework on what your trade-in is worth and knowing true pricing on the car you buy are your biggest defenses against paying too much.
- The “Lost Our Lease/Going Out Of Business” sale: Sometimes these can be very good opportunities for making a good deal. But in other cases, this is simply another tactic. Just because a company has lost its lease or is going out of business doesn’t mean that they don’t want to still make a profit on the things they sell. Do your research and know what you’re buying and you’ll make a good deal.
- The “We’ll Beat Any Price Or We’ll Give You The Car” strategy: This is used by new car dealers because the market is very close in terms of price from dealership to dealership. The truth is that no dealer is going to lose money on a car so even though you can use this promise in your negotiations, it probably sounds a lot better than it really is.
- The “$99 Down/$99 Per Month” strategy: This program is designed to get you into the showroom. There are a number of ways that dealers use this tactic to get you to pay them a visit. The first is to use the loss-leader strategy (see above) for the car that “qualifies” for this program. When you get to the dealership, the car is not desirable, and so you look at another more expensive one. Others use “$99 down OR $99 per month.” Since most listeners to the ad hear “$99 AND $99” per month they come to the dealership and find out that they heard wrong. But, now the dealer has a chance to sell a car.
- The “Great Car $199 Monthly Payment” program: This is typically offered on a nicer, more expensive car, truck, or SUV. The payment is far too low for the quality of vehicle being mentioned in the advertisement. What happens here is that the program is either a long lease with a large down payment required, or is a purchase with a very long loan term (as long as eight or nine years) coupled with a large down payment. Often it is used to get a buyer to switch to a used car from the new one that was advertised. Again, if a deal seems too good to be true, it probably is.
- The “Internet Price Voucher” program: The dealer ad comes on and tells you to go to their website right now to get a $1,000 voucher that you can take off your purchase at their dealership. The problem is that, typically, you need to disclose the existence of the voucher before you begin negotiating the deal. In most cases, what this means is that the voucher will be figured into your final price as part of the negotiation.
- The “Buy A Car, Get The Second Car For A Penny” sale: This is a very popular advertising strategy used by many dealers. In virtually all cases, this is one of those “too good to be true” deals. In this situation, you are probably paying more for your first vehicle, and getting a not-so-good second vehicle as part of the deal. Typically you’ll pay the full sticker price (including options and extras) for the first vehicle giving the dealer thousands in profit (on an average vehicle it can be as much as $10,000 to $12,000 or more). Then, the dealership lets you select your second car from a set group of vehicles that the dealer purchased at very low prices at auction or in trades from other customers. This becomes the “one cent” car.
The bottom line is this: Think about it. How long would a dealer be in business if he or she lost money on most, or all, of their car deals? Not very long is the answer. Dealers are like any other business. They are trying to make a profit and keep their business running. Most dealerships are good companies that want to do well for their customers. Unfortunately, the bad ones tarnish the image of the good ones.