These are the 5 biggest rip-offs to watch for at the car dealer. We share 5 sales tactics that some car dealers use that can cost you thousands of dollars. How do car dealers rip you off and price gouge you? If you are planning to buy a car in 2024 Then remember these points
Top 5 Car Dealer Scams
Tied-Selling
let’s start with the first dealer tactic that I see happen way too often, which is when the dealership forces you to pay for unnecessary add-ons, otherwise known as Tide selling.
It has become way too common for dealers to automatically charge a variety of add-ons and unnecessary fees to make extra profit.
A nonprofit organization recently did a survey on 1500 consumers who purchased a new vehicle in the past two years and in incredibly, nearly half of them said that they were forced to pay for add-ons that they didn’t want.
Some of the most common add-ons on dealer contracts include anti-theft etching or security protection, nitrogen key fob or wheel and tire protection, and a variety of insurance and warranty products. Top 5 Car Dealer Scams
And oftentimes these add-ons can inflate the price of the vehicle from several hundred to even a few thousand dollars.
Here is just one example of a typical dealer contract that I see all the time. We can see that this vehicle, a 2024 Hyundai Elantra has a price of just over $28,000, but unfortunately the dealership has added nearly $4,500 in fees and add-ons to the price.
These include an admin fee of 599, a value package for 699, pre-delivery expenses of 798 wheel locks for 149 and paint and fabric protection for nearly $2,000, all of which are completely unnecessary.
And to me, the worst part of it is that many dealerships automatically put all these add-ons onto the contract without even telling you about it, hoping that you’re not going to catch it. Top 5 Car Dealer Scams
And when they get away with that, I actually consider that to be a form of theft because the dealership is making you pay for things that you’re not even aware of.
So when you negotiate a deal, make sure that you carefully look over the price breakdown and identify and question any add-ons and insist that they be removed if you don’t want them.
Unfortunately, it still isn’t technically illegal for dealerships to use Tide selling in Canada, but it is illegal under the Federal Trade Commission in the us. So
If you, you do catch a dealership that’s attempting to use Tide selling, I would threaten to report that dealership if they refuse to cooperate with you.
Forced Financing
Now, the next dealer tactic that you really need to watch for is if the dealership forces you to finance when you want to pay cash or if they just charge a huge price premium on a cash purchase.
Just as with add-ons financing is a huge profit maker for dealers. They often receive a substantial kickback on financing deals and in the US dealers are even allowed to mark up the interest rate by up to 2% over their buy rate.
Again, adding a lot of profit to the deal. This is why some dealerships charge a huge price premium if you want to pay cash and some don’t even allow you to pay cash at all. Top 5 Car Dealer Scams
I’ve seen plenty of dealers that tell the consumer that they only do financing deals and cash buyers have to go elsewhere, which is absolutely absurd.
Now, many wonder whether you should just not tell the dealership that you’re planning to pay cash and save that for later on.
Well, you can always just tell the dealership that you haven’t decided yet whether you’re going to finance or pay cash, and that way you can just negotiate the total price first.
And you should also check the dealer website. Are they being clear that they don’t accept cash buyers? And is the price on the advertisement clearly say whether it’s a cash price or a financing price?
Well, if this information is not being properly disclosed in the advertising, I think you can make a pretty big fuss and threaten to report that dealership.
Bait & Switch
Speaking of disclosing the proper information in advertisements, that brings us to the third dealer tactic to watch for, which is the old bait and switch. I’ve seen this one many times before.Top 5 Car Dealer Scams
A consumer will come across a dealer ad that looks very desirable. Perhaps it’s a model that’s very hard to find that’s in high demand, or one that has a very attractive looking price or payments that makes it look like the deal of the century.
But when you contact the dealership, it turns out that that vehicle doesn’t exist or it’s not available, or the real price ends up being way higher than the price that you saw in the advertisement, which is totally wrong.
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This is called bait and switch because the dealer is trying to bait you or lure you in with a deceptive but enticing looking ad, which ultimately ends up being too good to be true.
Remember when things look too good to be true? They often are at least when it comes to car deals.Top 5 Car Dealer Scams
Hiding Incentives
there are some tactics that you still need to watch out for and one of those tactics is if the dealership is attempting to hide or withhold any incentives that you might be eligible for.
I’ve seen this happen when a particular vehicle is eligible for certain incentives like a cash rebate or credits, which should show on the contract in the form of a discount, but the dealer doesn’t include them, possibly an attempt to pocket that money for themselves.
So it’s very important that you do a bit of research on the manufacturer’s website to not only learn what the price of the vehicle should be, but also what the incentives you may be eligible for.
You can find this information on the website under the shopping tool section, sometimes called special offers or offers and promotions.
And if you are eligible for any incentives, make sure that the dealership includes them on the contract.Top 5 Car Dealer Scams
Trade-in Value
The next tactic that you need to watch out for, which is getting low balled on your trade-in vehicle.
If you manage to negotiate an amazing deal on your new vehicle, the dealer may try to make some of that money back by low balling you on your trade-in on the back end of the deal.
So don’t let this happen to you and make sure that you take advantage of instant cash offer tools that are available online so that you can get a really good price for your trade-in.
You can get an instant cash offer from websites like CarMax, Carvana, Autotrader, and Clutch. Top 5 Car Dealer Scams
These are real world offers from dealers that’ll give you an accurate idea of what your vehicle is worth.
Take the best one and see whether the dealership will match it or even beat it. It is really unfortunate that just getting a fair deal can sometimes be really challenging.
But the good news is that the authorities are starting to catch on and the
Federal Trade Commission in the United States is even introducing new rules that are going to crack down on these tactics and the bad unprofessional dealers.
The new rules are going to prohibit Misrepresentation require dealers to advertise the real all in price, and dealers must tell the consumer that all add-ons are optional and not required, and they’re not allowed to charge any kind of bogus fees.
The ridiculous part is that major dealer associations in the United States are already attempting to stop these new rules. Top 5 Car Dealer Scams
They’re petitioning them and attempt to block them, which is absolutely absurd because these rules are not going to do anything to harm the good honest dealerships because they’re already following them.
The only dealerships that are going to be negatively impacted by these new rules are the dishonest, unprofessional ones that are price gouging consumers.
So I think what the dealer associations really need to ask themselves is, which dealerships do you want to protect, the good ones or the bad ones? Consumer protection is extremely important.