A car dealer makes 10% to 20% profit when they sell a new car. Some unscrupulous dealers employ sneaky tricks to rip you off and make a bigger profit. However, you can avoid these tricks if you have the right information about buying a car. How do you identify and avoid dealer tricks to get a good deal? Apply what you learn. Here are the most common dealer tricks to avoid when buying a new car.
The Bait-and-Switch Trick
The bait-and-switch trick is one of the longest-running tactics dealers use to lure clients into their showrooms. It’s not exclusive to car-selling, electronics retailers, apparel sellers, and other business people use it.
Here’s how the trick works: the seller advertises a product in a way that looks like you’ll get a bargain. Once you go to buy the product, the seller claims the advertised item is sold out, but they can offer you a similar model/product. The substitute is usually of lower quality or more expensive than the advertised product. If you suspect the dealer is playing this trick on you, the best option is to walk away.
Stretching the Loan Term
Salespeople are aware of buyers’ obsession with monthly payments and will trick you into thinking you got a great deal by offering lower monthly installments. But they will quote a ridiculous downpayment and stretch your loan repayment period to seven or eight years.
By doing this, the salesperson makes a profit on the downpayment and the extended loan term —unbeknown to you. To avoid this trick, do your research to understand the financing options available.
Faking an Urgency
A good salesperson is also a great marketer, and one of the tricks they use to win over customers is by playing with their psychology. Car dealers may fake an urgency to motivate you to buy a particular model fast. For instance, the dealer might tell you the specific model you are eyeing is the best-selling vehicle in America, and there is an inventory shortage.
If you really want the car and fall for this trick, you might make bad financial decisions or fail to bargain, thinking the car is going out of stock. Avoid this trick and take your time to decide whether you want a particular vehicle.
Jacking Up the Interest Rate
Dishonest car dealers will do anything to increase their profit margin, including marking up the interest rate. This trick is not new in car financing and here’s how it works. A dealer partners with lenders to offer auto loans to consumers. If the lender agrees to a 10% interest rate, the dealer tells car buyers the interest rate is 12%, pocketing the 2% every month. To avoid this trick, get pre-approved for an auto loan by your bank before walking into a car dealership.
Dealer Accessories and Add-Ons
The car dealer may add accessories and other things you don’t need. Examples of these add-ons are sunroofs, window etching, and key protection. Some add-ons may be necessary, but you can get them from an independent dealer at a lower price. Don’t fall for this trick. Instead, tell the dealer you are only interested in the vehicle and will upgrade the features in the future.
If you avoid the above tricks, you will walk away with a good deal and save money.
