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Expert Advice
To determine which car-sales tactics can be the
most harmful, we culled advice from the experts at
Better Business Bureau, J.D. Power and
Associates, and AAA to come up with the best
strategy to avoid getting ripped off. One important
note: These scams aren't huge conspiracies that
trick prospective drivers out of thousands of
dollars. Instead, they're small corners cut,
intimidation applied or minor untruths told that add
up to one toxic car-buying experience.
Hidden fees, for instance, could mean
a difference of a couple hundred
bucks, at most. But a couple hundred dollars is a
lot for many consumers. The scam is easy to avoid:
Just read carefully over any invoice or contract
before you sign it (alarms, extra cleaning,
"prepping," rust-proofing, fabric protection and
paint sealant are all common but unnecessary
add-ons that sometimes appear on the invoice
unknown to the buyer). And consider doing the VIN
(Vehicle Information Number) etching yourself.
Dealers charge hundreds of dollars to do it, but a
home-etching kit costs as little as $20.
The same attention to detail goes for
less-than-honest negotiation tactics. "Finance
managers" will often start the process by talking
about monthly payments rather than the total cost
of a vehicle. But by stretching the payments over a
long period of time, long-term loans coax people
into buying cars they can't afford--and the car will
have almost fully depreciated by the time it's paid
for. Instead, choose the shortest-term car loan
available.
"Consumers should do some
research on the vehicle or vehicles they are
interested in purchasing or leasing," J.D. Power's
Tews says. "They should talk to the loan officer at
their bank or credit union before going to the
dealership so they know how much they can spend
and understand their financing options and can
compare them to the options provided by the
captive provider."
A general rule of thumb is that a car
payment should cost no more than 12% to 15%
of your after-tax monthly income. Don't mention
any price at all until you've selected a vehicle to
buy, and then ask the salesperson for his or her
very best offer. Don't discuss add-ons like
warranties or trade-in prices until you've agreed on
the price for the car itself--that will only muddle
how much you're actually paying for it.
The good news is that these days,
buyers have substantial negotiation
power at their fingertips--which will help with
fending off a bait-and-switch or a lemon sale.
Online sources like Autotrader.com, Kelley Blue
Book and the National Automobile Dealers
Association can significantly narrow down the list
of what type of car might work best and provide a
reasonable price range. And the Better Business
Bureau Web site lists accredited car dealers by
region as well.
If all else fails, use common sense, Gerhard says. If
something seems amiss, walk away. There will
always be another car, another day.
To determine which car-sales tactics can be the
most harmful, we culled advice from the experts at
Better Business Bureau, J.D. Power and
Associates, and AAA to come up with the best
strategy to avoid getting ripped off. One important
note: These scams aren't huge conspiracies that
trick prospective drivers out of thousands of
dollars. Instead, they're small corners cut,
intimidation applied or minor untruths told that add
up to one toxic car-buying experience.
Hidden fees, for instance, could mean
a difference of a couple hundred
bucks, at most. But a couple hundred dollars is a
lot for many consumers. The scam is easy to avoid:
Just read carefully over any invoice or contract
before you sign it (alarms, extra cleaning,
"prepping," rust-proofing, fabric protection and
paint sealant are all common but unnecessary
add-ons that sometimes appear on the invoice
unknown to the buyer). And consider doing the VIN
(Vehicle Information Number) etching yourself.
Dealers charge hundreds of dollars to do it, but a
home-etching kit costs as little as $20.
The same attention to detail goes for
less-than-honest negotiation tactics. "Finance
managers" will often start the process by talking
about monthly payments rather than the total cost
of a vehicle. But by stretching the payments over a
long period of time, long-term loans coax people
into buying cars they can't afford--and the car will
have almost fully depreciated by the time it's paid
for. Instead, choose the shortest-term car loan
available.
"Consumers should do some
research on the vehicle or vehicles they are
interested in purchasing or leasing," J.D. Power's
Tews says. "They should talk to the loan officer at
their bank or credit union before going to the
dealership so they know how much they can spend
and understand their financing options and can
compare them to the options provided by the
captive provider."
A general rule of thumb is that a car
payment should cost no more than 12% to 15%
of your after-tax monthly income. Don't mention
any price at all until you've selected a vehicle to
buy, and then ask the salesperson for his or her
very best offer. Don't discuss add-ons like
warranties or trade-in prices until you've agreed on
the price for the car itself--that will only muddle
how much you're actually paying for it.
The good news is that these days,
buyers have substantial negotiation
power at their fingertips--which will help with
fending off a bait-and-switch or a lemon sale.
Online sources like Autotrader.com, Kelley Blue
Book and the National Automobile Dealers
Association can significantly narrow down the list
of what type of car might work best and provide a
reasonable price range. And the Better Business
Bureau Web site lists accredited car dealers by
region as well.
If all else fails, use common sense, Gerhard says. If
something seems amiss, walk away. There will
always be another car, another day.
Car Dealer Scams To Avoid
It helps to know what you may face before hitting
the showroom. That way, you'll be prepared to
avoid the stress of being ambushed by a team of
salesmen or accosted by a loan shark. And you'll
have more confidence in the face of undue
pressure to seal the deal.
Top Car Dealer Scams To Avoid
1. The Ambush
Beware of being shuffled among a never-ending
team of auto pros--you shouldn't have to talk to
the sales guy out on the lot, the sales manager,
the finance manager, the floor manager and the
used-car manager just to buy a car. Pick one to
deal with and stick with him.
2. The Confiscation
Whatever you do, don't give up the keys to your
current vehicle--even if the "used-car manager"
asks for them to asses the car for its trade-in
value, even if the "sales manager" asks for them
as collateral while you take a test drive. If
negotiations should go amiss, it's impossible to
walk out on the deal if you have no way to start
your car.
3. The Bum Rush
Salesmen love to hurry you into a deal today.
They'll try all kinds of things: On-the-spot delivery,
haggling over details, one-time offers. Don't let
them pressure and bully you into an impulse buy.
Show up knowing what kind of car you need and
what you can afford to pay--and if they can't
provide that, leave.
4. The Buried Bill
Read over final invoices carefully before signing
anything, in order to make sure you're not
charged for something you didn't request.
Alarms, extra cleaning, "prepping," rust-proofing,
fabric protection and paint sealant are all
common add-ons that sometimes appear on the
invoice unknown to the buyer. Hint: Consider
doing the VIN (Vehicle Information Number)
etching yourself. Dealers charge hundreds of
dollars to do it, but a home-etching kit costs as
little as $20.
5. The Bait and Switch
Dealers may advertise one model in the paper,
loaded with extras for a reasonable price, but
then have only a lesser model (with less overall
value) on the lot when interested parties show up
to buy the one they saw in the paper. Best way to
avoid this trap: The minute you realize the con,
walk away.
''Auto Finance Tips: Learn more
about financing a vehicle, Money
Saving Tips''--
It helps to know what you may face before hitting
the showroom. That way, you'll be prepared to
avoid the stress of being ambushed by a team of
salesmen or accosted by a loan shark. And you'll
have more confidence in the face of undue
pressure to seal the deal.
Top Car Dealer Scams To Avoid
1. The Ambush
Beware of being shuffled among a never-ending
team of auto pros--you shouldn't have to talk to
the sales guy out on the lot, the sales manager,
the finance manager, the floor manager and the
used-car manager just to buy a car. Pick one to
deal with and stick with him.
2. The Confiscation
Whatever you do, don't give up the keys to your
current vehicle--even if the "used-car manager"
asks for them to asses the car for its trade-in
value, even if the "sales manager" asks for them
as collateral while you take a test drive. If
negotiations should go amiss, it's impossible to
walk out on the deal if you have no way to start
your car.
3. The Bum Rush
Salesmen love to hurry you into a deal today.
They'll try all kinds of things: On-the-spot delivery,
haggling over details, one-time offers. Don't let
them pressure and bully you into an impulse buy.
Show up knowing what kind of car you need and
what you can afford to pay--and if they can't
provide that, leave.
4. The Buried Bill
Read over final invoices carefully before signing
anything, in order to make sure you're not
charged for something you didn't request.
Alarms, extra cleaning, "prepping," rust-proofing,
fabric protection and paint sealant are all
common add-ons that sometimes appear on the
invoice unknown to the buyer. Hint: Consider
doing the VIN (Vehicle Information Number)
etching yourself. Dealers charge hundreds of
dollars to do it, but a home-etching kit costs as
little as $20.
5. The Bait and Switch
Dealers may advertise one model in the paper,
loaded with extras for a reasonable price, but
then have only a lesser model (with less overall
value) on the lot when interested parties show up
to buy the one they saw in the paper. Best way to
avoid this trap: The minute you realize the con,
walk away.
''Auto Finance Tips: Learn more
about financing a vehicle, Money
Saving Tips''--
Where Does the Car Dealer Make Money?
"Follow the money," is good advice for someone trying to
understand the hidden side of any business. Nowhere is this more
important than on a car lot. Rows of shiny new cars on a dealer's
lot make consumers believe that's where the big money is. But if
you follow the trail of dollars, it leads in a surprising direction. And
knowing where the profit is will make you a better shopper.
Invoice as Guidepost
The pricing of cars is a complicated process. To simplify things,
consumers have been told to look at the invoice price of a car and
assume that's what the dealer paid for the car. Offer a small
amount over the invoice and you have a great deal. While invoice
provides a valuable reference point, both holdback and dealer cash
increase the dealer's profit with financial sleight of hand.
Used Car Cash Cows
While most people ogle the new vehicles on a car lot, the used cars
are far more profitable for a dealer. One dealer reported, "In my
experience...$5,500 markup on a used car would be considered a
nice profit." While that seems high, the point is that used cars have
the potential to make the dealer far more profit than new cars,
Salesmen and Internet Managers
While the dealer tries to make as much profit as possible, the
salesman is trying to get his slice of the pie as a commission.
These two desires actually go hand in hand. The salesman's job is
to boost the dealer's profit by being a savvy negotiator so his
percentage of the commission will be greater.
In "Confessions of a Car Salesman" Chandler
Phillips wrote, "Commissions were based on the 'payable
gross' to the dealership and were applied in three tiers. If the
payable gross was from $0 to $749, our commission was 20
percent of the profit; from $750 to $1,249 the commission was 25
percent of the profit. Above $1,250 the commission was 30 percent
of the profit. In other words, the higher the profit for the dealership,
the higher the commission I would earn."
Phillips observed, "Naturally, the salespeople tried to hit that point
where the commission was bumped to the higher percentage. That
might mean moving you into a higher-level vehicle. It might mean
increasing the profit by financing sleight of hand. In both cases, this
smiling salesperson, with the personable air, didn't have your best
interests in mind."
The F&I Room
Once the price of the car has been established by negotiations with
a car salesperson, the buyer is routed into the F&I (finance and
insurance) office. This is the last place the dealer can make money
before the consumer leaves the car lot.
As described by Nick James in "Confessions of an Auto Finance
Manager," the F&I manager poses as a financial advisor who is on
your side while arranging a loan. However, they are really there to
make extra profit for the dealership by increasing interest rates,
selling extended warranties and add-ons such as fabric protection
and paint sealant.
How much does the F&I room contribute? In a typical
deal, an average of $947 is generated in the finance and insurance
office, according to F&I Magazine. The National Automobile Dealers
Association (NADA) estimated that 28.5 percent of the profit from
selling a new or used vehicle came from F&I.
The Service Bay
If an aggressive car buyer is able to get a rock-bottom price, the
dealer knows there is still profit to be made when the car is
serviced. It's so profitable that, in economic hard times, the service
bay has kept many dealerships afloat.
Here, too, commissions play a big part in getting the service staff to
boost sales. The service advisor, who positions him or herself as a
trusted advisor" is actually receiving a commission on all the parts
and services you agree to.
"Follow the money," is good advice for someone trying to
understand the hidden side of any business. Nowhere is this more
important than on a car lot. Rows of shiny new cars on a dealer's
lot make consumers believe that's where the big money is. But if
you follow the trail of dollars, it leads in a surprising direction. And
knowing where the profit is will make you a better shopper.
Invoice as Guidepost
The pricing of cars is a complicated process. To simplify things,
consumers have been told to look at the invoice price of a car and
assume that's what the dealer paid for the car. Offer a small
amount over the invoice and you have a great deal. While invoice
provides a valuable reference point, both holdback and dealer cash
increase the dealer's profit with financial sleight of hand.
Used Car Cash Cows
While most people ogle the new vehicles on a car lot, the used cars
are far more profitable for a dealer. One dealer reported, "In my
experience...$5,500 markup on a used car would be considered a
nice profit." While that seems high, the point is that used cars have
the potential to make the dealer far more profit than new cars,
Salesmen and Internet Managers
While the dealer tries to make as much profit as possible, the
salesman is trying to get his slice of the pie as a commission.
These two desires actually go hand in hand. The salesman's job is
to boost the dealer's profit by being a savvy negotiator so his
percentage of the commission will be greater.
In "Confessions of a Car Salesman" Chandler
Phillips wrote, "Commissions were based on the 'payable
gross' to the dealership and were applied in three tiers. If the
payable gross was from $0 to $749, our commission was 20
percent of the profit; from $750 to $1,249 the commission was 25
percent of the profit. Above $1,250 the commission was 30 percent
of the profit. In other words, the higher the profit for the dealership,
the higher the commission I would earn."
Phillips observed, "Naturally, the salespeople tried to hit that point
where the commission was bumped to the higher percentage. That
might mean moving you into a higher-level vehicle. It might mean
increasing the profit by financing sleight of hand. In both cases, this
smiling salesperson, with the personable air, didn't have your best
interests in mind."
The F&I Room
Once the price of the car has been established by negotiations with
a car salesperson, the buyer is routed into the F&I (finance and
insurance) office. This is the last place the dealer can make money
before the consumer leaves the car lot.
As described by Nick James in "Confessions of an Auto Finance
Manager," the F&I manager poses as a financial advisor who is on
your side while arranging a loan. However, they are really there to
make extra profit for the dealership by increasing interest rates,
selling extended warranties and add-ons such as fabric protection
and paint sealant.
How much does the F&I room contribute? In a typical
deal, an average of $947 is generated in the finance and insurance
office, according to F&I Magazine. The National Automobile Dealers
Association (NADA) estimated that 28.5 percent of the profit from
selling a new or used vehicle came from F&I.
The Service Bay
If an aggressive car buyer is able to get a rock-bottom price, the
dealer knows there is still profit to be made when the car is
serviced. It's so profitable that, in economic hard times, the service
bay has kept many dealerships afloat.
Here, too, commissions play a big part in getting the service staff to
boost sales. The service advisor, who positions him or herself as a
trusted advisor" is actually receiving a commission on all the parts
and services you agree to.
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Long-term care insurance?
Is a long-term care insurance policy really provides money to help cover the costs of
living if you are no longer able to take care of yourself.?
SOCIAL SECURITY RETIREMENT GUIDE. HOW DOES SOCIAL SECURITY WORK?
What is the importance and benefits of life insurance in real life, and at retirement
age?
Pension Plans / IRA / INDIVIDUAL RETIREMENT ACCOUNT. What is an IRA? And what
does it matter?
What is Annuity Insurance Investment, Annuity & Pension Insurance? Are Annuities
Planning today for a secure tomorrow?
South Florida, HOW TO OBTAIN AN INSURANCE LICENSE, AND GET HIRED,
START WORKING IMMEDIATELY WITH ONE OF THE GREATEST
INSURANCE COMPANY IN THE WORLD?
FREE INSURANCE SCHOOL, FREE COURSE, FREE TRAINING, FREE
FINGERPRINT, FREE BOOKS FOR THOSE WHO LIVE IN MIAMI DADE
AND BROWARD COUNTY FLORIDA. LEARN MORE HERE...
Long-term care insurance?
Is a long-term care insurance policy really provides money to help cover the costs of
living if you are no longer able to take care of yourself.?
SOCIAL SECURITY RETIREMENT GUIDE. HOW DOES SOCIAL SECURITY WORK?
What is the importance and benefits of life insurance in real life, and at retirement
age?
Pension Plans / IRA / INDIVIDUAL RETIREMENT ACCOUNT. What is an IRA? And what
does it matter?
What is Annuity Insurance Investment, Annuity & Pension Insurance? Are Annuities
Planning today for a secure tomorrow?
South Florida, HOW TO OBTAIN AN INSURANCE LICENSE, AND GET HIRED,
START WORKING IMMEDIATELY WITH ONE OF THE GREATEST
INSURANCE COMPANY IN THE WORLD?
FREE INSURANCE SCHOOL, FREE COURSE, FREE TRAINING, FREE
FINGERPRINT, FREE BOOKS FOR THOSE WHO LIVE IN MIAMI DADE
AND BROWARD COUNTY FLORIDA. LEARN MORE HERE...
..TERM INSURANCE ADVANTAGES, TERM INSURANCE GENERAL
KNOWLEDGE. Buy the term, and invest the difference.
.. INVESTMENT PRODUCTS: Investing & Money Management
Basics. FINANCIAL SOLUTIONS, TOOLS & RESOURCES. LEARN
MORE...
INSURANCE PRODUCTS: How to make profits with the insurance
companies?
..RICH GUIDE, WHY AREN'T RICH?
BUILDING FINANCIAL WEALTH, OBTAIN FINANCIAL FREEDOM,
BECOME A RICH PERSON; YES YOU CAN...
..RULE OF 72: The compound interest and financial success.
Rule Of 72 is the most important and simple rule of financial
success.
..MILLIONAIRE: How To Make Your First $1 Million? The
Millionaire's Mindset
..FORTUNE: BEFORE INVESTING IN THE STOCK MARKET LEARN
THIS FIRST!...
..GOVERNMENT: Government's general information; Local, State,
and Federal.
Housing Finance Authority of Miami dade, Monroe, Broward, and
Palm Beach County
..EMPIRE: THE ABC's OF INVESTMENTS, Ways to Save. THE
TRIANGLE OF SUCCESS...
..INVESTORS: CREATIVE FINANCING:
TOP 10 CREATIVE FINANCING TECHNIQUES AND STRATEGIES TO
FIND MONEY TO INVEST!
The Five C’s of Credit: LEARN MORE..
CREATIVE FINANCE CAN AND WILL MAKE ALL THE DIFFERENCE
WHEN AN INVESTOR DECIDES TO INVEST IN REAL ESTATE...
..HOME INSPECTION: HOW TO GET THE BEST OUT OF IT..
Top 10 home-buying mistakes to avoid!
HOW TO USE HOME INSPECTION REPORTS TO NEGOTIATE SALE
PRICE?...
...ACCOUNTING: The Basics of Accounting...
...TAXES: THE FUNDAMENTAL OF TAXES. THE MORE YOU KNOW,
THE LESS YOU PAY...
...ANALYTICS: Top 9 Real Estate Financial Calculator Problems
every investors should know about...--
-- BUILDING WEALTH
RICH GUIDE: WHY AREN'T YOU RICH? BUILDING FINANCIAL
WEALTH, OBTAIN FINANCIAL FREEDOM, BECOME A RICH
PERSON; YES YOU CAN... Learn More!
Financial Education - Financial Knowledge Everything You Need
To Know About Finance.
Dubai- The World Largest, Biggest, Tallest, Greatest of Almost
Everything. Learn more about this magnificent place and as well
as other countries.
COPYRIGHT-- What is Copyright? The Basics About Copyright
Registration. The procedure for copyright registration.
Do I need copyright protection? How do I register? Learn More!
..Dealership secrets revealed. Before you buy a car; read this
first... CAR BUYER'S WINNING PLAN!
..AUTO LOANS: Read this first before taking a car loan. What to
avoid when financing a car..
KNOWLEDGE. Buy the term, and invest the difference.
.. INVESTMENT PRODUCTS: Investing & Money Management
Basics. FINANCIAL SOLUTIONS, TOOLS & RESOURCES. LEARN
MORE...
INSURANCE PRODUCTS: How to make profits with the insurance
companies?
..RICH GUIDE, WHY AREN'T RICH?
BUILDING FINANCIAL WEALTH, OBTAIN FINANCIAL FREEDOM,
BECOME A RICH PERSON; YES YOU CAN...
..RULE OF 72: The compound interest and financial success.
Rule Of 72 is the most important and simple rule of financial
success.
..MILLIONAIRE: How To Make Your First $1 Million? The
Millionaire's Mindset
..FORTUNE: BEFORE INVESTING IN THE STOCK MARKET LEARN
THIS FIRST!...
..GOVERNMENT: Government's general information; Local, State,
and Federal.
Housing Finance Authority of Miami dade, Monroe, Broward, and
Palm Beach County
..EMPIRE: THE ABC's OF INVESTMENTS, Ways to Save. THE
TRIANGLE OF SUCCESS...
..INVESTORS: CREATIVE FINANCING:
TOP 10 CREATIVE FINANCING TECHNIQUES AND STRATEGIES TO
FIND MONEY TO INVEST!
The Five C’s of Credit: LEARN MORE..
CREATIVE FINANCE CAN AND WILL MAKE ALL THE DIFFERENCE
WHEN AN INVESTOR DECIDES TO INVEST IN REAL ESTATE...
..HOME INSPECTION: HOW TO GET THE BEST OUT OF IT..
Top 10 home-buying mistakes to avoid!
HOW TO USE HOME INSPECTION REPORTS TO NEGOTIATE SALE
PRICE?...
...ACCOUNTING: The Basics of Accounting...
...TAXES: THE FUNDAMENTAL OF TAXES. THE MORE YOU KNOW,
THE LESS YOU PAY...
...ANALYTICS: Top 9 Real Estate Financial Calculator Problems
every investors should know about...--
-- BUILDING WEALTH
RICH GUIDE: WHY AREN'T YOU RICH? BUILDING FINANCIAL
WEALTH, OBTAIN FINANCIAL FREEDOM, BECOME A RICH
PERSON; YES YOU CAN... Learn More!
Financial Education - Financial Knowledge Everything You Need
To Know About Finance.
Dubai- The World Largest, Biggest, Tallest, Greatest of Almost
Everything. Learn more about this magnificent place and as well
as other countries.
COPYRIGHT-- What is Copyright? The Basics About Copyright
Registration. The procedure for copyright registration.
Do I need copyright protection? How do I register? Learn More!
..Dealership secrets revealed. Before you buy a car; read this
first... CAR BUYER'S WINNING PLAN!
..AUTO LOANS: Read this first before taking a car loan. What to
avoid when financing a car..
How To Guard Your Wallet
"There is a built-in conflict of interest when buying a car," says
Weintraub. "Of course you want to believe the clean-cut guy in the nice
suit with a sparkle in his eye. But while many dealerships out there want
to give the consumer a good experience, who knows if what they are
telling you is true or not?"
Instead of questioning the dealer's integrity, understand the flow of
money. Remember these points:
Dealer profit is based on the car but also on related products and fees.
A salesman's commission is dependent on the percentage of profit.
A car's invoice price is a useful reference, but other behind-the-scenes
monies are in play.
The salesman, F&I manager and service advisor are all
commission-based positions.
Information and negotiation are always the keys to getting a good deal.
"There is a built-in conflict of interest when buying a car," says
Weintraub. "Of course you want to believe the clean-cut guy in the nice
suit with a sparkle in his eye. But while many dealerships out there want
to give the consumer a good experience, who knows if what they are
telling you is true or not?"
Instead of questioning the dealer's integrity, understand the flow of
money. Remember these points:
Dealer profit is based on the car but also on related products and fees.
A salesman's commission is dependent on the percentage of profit.
A car's invoice price is a useful reference, but other behind-the-scenes
monies are in play.
The salesman, F&I manager and service advisor are all
commission-based positions.
Information and negotiation are always the keys to getting a good deal.