The Top 10 Dealership Scams To Watch Out For
Everyone has heard about dealership scams, but unfortunately, few
people know about any scam specific details and therefore are
unsure what to watch out for.
In this article I'll cover the ten most common dealership scams
so that you can be better armed to protect yourself the next time
you are out new or used car shopping from a dealership.
1. The VIN window etching scam
Basically a dealer will charge you $300-$900 for window etching
and they will tell you that you have to pay the money to get the
loan because the banks insists on it.
Some dealers might tell you that the etching is free but will add
on the etch money to your monthly payments to make up for it.
The best way to avoid this scam is to force the dealer to put it
in writing if they say that the etching is free or simply etch
the car yourself.
You can get an etch-it-yourself kit from http://www.CarEtch.com
for $30 or just don't buy the car. Remember a lender doesn't
require that you purchase any extras on a car. All the lender
cares about is that you can make your payments on time regularly.
Don't buy into it.
2. The Financing Scam
I have mentioned this before already, but here it is in more
detail.
Basically you trade in your old car and the finance manager tells
you that your interest rate is good and then gives you the car.
After a week or two passes you get the call from him that you
didn't qualify for the interest rates that they gave you upon
making the deal.
Every new purchase has a clause in the contract that usually
states that the deal is "subject to loan approval."
This gives the finance manager a loop hole in getting more money
out of you. All that this means in the contract is that the deal
is not finished yet even you already have possession of the car
and have signed the contract.
The dealer can then charge you $1000 more in finance fees and up
your monthly payments by $50.
This scam is generally pulled on people with bad credit because
it is more plausible.
If you are wondering why they would sell you the car at 6% APR if
they knew you had bad credit (remember they ran the credit search
already) the answer is simple; to sell the car.
You can avoid this scam by not financing the car with the dealer
if you know that you have bad credit.
You are better off going to a credit union and financing the car
yourself. When you buy a new car the deal should be made on the
price of the car, not on the monthly payments.
3. The Credit Score Scam
This scam is ridiculous at best. This is when the finance manager
tells you that your credit score is lower than it really is so
that they can get you for higher interest rates.
This scam is pulled on everyone; good or bad credit.
This scam is easy to avoid. Just get your own copy of your credit
report from Equifax.com, and bring it with you.
It is really difficult to lie to you about your credit score if
you have your own copy of it. If your paper and theirs doesn't
say the same thing, go somewhere else because that dealership is
lying to you.
Don't forget to let them know it too because it'll be nice to
watch them squirm.
4. The Forced Warranty Scam
This is when the finance manager tells you that you are not
eligible for the loan by the bank unless you pay an extra $2000
for a 2-3 year extended warranty.
This scam just doesn't make sense. Basically the finance manager
is telling you that the bank won't trust you to pay the $20,000
loan for the car, but they will trust you if you pay even more
money. That's just stupid.
You can avoid this scam if you can force them to put it in
writing that you "have" to pay the extended warranty in order to
get the loan.
That way you can bring a copy of the contract to your local
State's Attorney's office to verify that the deal is valid. I can
bet that the finance manager will change his tune pretty quickly.
5. The Dealer Prep Scam
Let me first let you know that cost is not only legal but very
much common practice. I still refer to it as a scam because it is
just another way for you to end up paying more money for the car.
Basically the dealer will tell you have to pay an extra $500 to
cover the labor costs of the dealership's 5-point inspection. You
are paying for the time it took for the dealership to make sure
that the car wouldn't explode on you in the first week of owning
it!
This check up that you are paying so much money for is for the
dealership to remove plastic from the seats etc, vacuum the car
out, and making sure that all of the fuses and fluids are ready
to go.
When factories deliver the new cars to the dealerships the cost
of delivery and prep is already covered, so basically you are
paying the dealership for work that they haven't really done.
I swear they would take a car in perfectly ready to drive
condition, take everything out and put everything right back in
it just so that they can make you pay the fee again.
You can avoid this scam by simply asking the dealership to add an
extra $500 credit to the deal to make sure you do not have to pay
the money.
If they refuse, you can then decide if the car is worth the
money. If it is fine; buy the car, if not; go to another dealer
that will remove the dealer prep costs.
6. The Dealer Mark up Scam
This is an unnecessary fee that the dealer charges for no reason
other than greed. This fee can be seen on the orange sticker
marked on the manufacturer's suggested retail price (MSRP).
The additional dealer markup is nothing more than requiring more
money for no real reason. They can include all kinds of extra
fees in the additional dealer markup.
When you see an extra dealer mark up fee, ask the dealer to get
rid of it. If they refuse, it is pretty much up to you, but
remember that if you do pay the extra dealer markup, you are
overpaying for no real reason.
7. The Payoff Your Loan Scam
This is when the dealer offers to pay off the balance of your
current car loan no matter how much money you still owe. It is a
common sales strategy and one I hear on a regular basis on the
local radio stations. When the average buyer hears it, they think
that by purchasing a new car with a new dealership, they will
automatically owe no more money on their current car.
That couldn't be further from the truth.
What really happens is that the dealership does help you get out
of your current contract; however, they normally are forgetting
to tell you how high your fees are going to be for breaking the
lease agreement with your old dealership.
You will now be responsible to pay fees that are in the thousands
to make up for it.
You also will not be able to refinance for a new car until those
fees are paid. Of course the dealership can add the cost on to
your contract with them at a substantially higher rate.
The dealership only agrees to this deal because they want to get
more money off of your current car. They aren't really doing
anything for you at all. The dealership will also give you far
less then the car is worth on the trade off. Basically this scam
works because they will up your monthly fees, and then sell your
trade in for a more money than its worth.
The dealership then extends your monthly payments so that they
can make it appear that you are paying a small amount monthly
when you don't even realize that you have committed to an extra
year of payments.
To avoid this scam, you have to bite the bullet and ride out your
current lease till the end. If you are really determined to get a
new car, then you should try selling your current car on your
own.
Just sell it so that the buyer just takes over the lease
payments.
8. The Used Car Sold "As Is" Scam
This is when a dealership will sell you a car that has been in a
car wreck, but they will tell you that the car has been
completely refurbished.
When you see the car it has a sticker on it that says "as is" on
it and no warranty is included with your purchase.
This is the dealer's way of telling you that you can't bring the
car back, you are assuming all risks for the car, and that it is
not under any kind of warranty.
To avoid this scam, don't buy a car without a warranty or one
that says "as is" on it. By doing this, you might as well buy a
car from a stranger on the street with the same deal.
9. The Bounced Check Scam
This is when you walk into a dealership with a bank draft and the
dealership charges that they can't accept your draft because your
bank bounces checks often so they now refuse checks from that
bank.
Of course, this leaves the table open for them to get the extra
money they want by offering to sell you a car at a higher
interest rate.
You can avoid this scam first by getting your drafts from Capital
One Auto Finance.
Then let the finance manager know that you are aware of the scam
that they are pulling and that Capital One Auto Finance is in the
business of giving loans so the checks don't bounce.
10. The Forced Credit Application
If you are hoping to pay for a car outright or in cash with a
bank draft or check that is what you should do. Some dealerships
will not let you.
You will hear one of these lines so that they can try and get you
into paying monthly terms for more money.
"State laws require that you must fill out a credit application
before I can sell you this car."
"Everyone that buys a car from us fills out a credit application
first."
"It's the company's policy".
If you hear any of these lies, then you know what's going on.
When you are paying cash or financing with another company, why
would you think that you need to fill out a credit application
with the dealership?
It doesn't make sense. No state will force you to apply for
credit when paying cash.
Would you have to fill out a credit report if you want to buy a
sofa or groceries while paying cash? See how silly this is. To
avoid this scam, just laugh in their faces.
Well, there you have it, the top ten most common dealership
scams. So, now you are better armed to detect when a sales agent
is trying to pull one over on you.
George Dodge is the webmaster for 1st Choice Auto Parts that has
been expanding to include all things related to automobiles,
including, parts, accessories, apparel, books, posters,
insurance, loans, and articles to name but a few.
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