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6 min read Published October 06, 2022

Written by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers with the ins and outs of securely borrowing money to buy an automobile. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are dedicated to helping their readers gain the confidence to control their finances with concise, well-studied information that breaks down otherwise complicated topics into bite-sized pieces. The Bankrate guarantee

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Car dealer tricks to watch out for These are a few ploys some dealerships — even the ones that are legitimate- may try to run over you when it’s time to buy. 1. The credit broker might inform you that you aren’t eligible for rates that are competitive. And while this may be true in some cases however, the salesperson may suggest that your credit is worse than it is, so you think you’ll have to pay a higher interest rate. How to avoid: Come to the store with your cash prior to meeting with the dealer to ensure they don’t try to trick you. It’s better to get an auto loan to ensure that you don’t need to rely on dealer financing. 2. The single-transaction strategy Many people view purchasing a vehicle as a single transaction. However, dealers are aware of this. It’s actually three transactions that are rolled into three: the new car price, the value and financing. Each of them is a way the dealer can earn money , which means all three are places you can save. What to do: Treat every transaction in the same way the dealer treats each transaction: individually. In fact, you can compare your trade-in with multiple dealers to obtain the best price. And coming in with common sale prices for the vehicle you’re considering will ensure that the salesperson is honest. 3. The payment ploy The sales or finance team could throw an amazing monthly payment — one that you reasonably could qualify for. However, there’s usually a catch. In some instances the dealer might have included a substantial down payment or extended the terms for the loan to 72 or . What to do: Concentrate on the cost of the vehicle, not the monthly payment. Do not answer the question “How much can you spend each month?” Stick to saying, “I can afford to pay X dollars to purchase the car.” You should also be sure that the price that you negotiate is the total prior to your trade-in or utilized. 4. The sticker trick The vehicle price on the vehicle’s window is is known by the name of manufacturer’s recommended retail price, or MSRP. However, that’s not what’s most important. It is important to know the value of the invoice — the amount that the dealer paid for it. Starting with the invoice is much easier than trying to subtract from the MSRP. What to stay clear of: what is the value of cars after taking into account any consumer or dealer incentives. Some hot cars go at the sticker price or more. Prices will decrease as demand lessens. 5. The holdback scam Manufacturers frequently provide cash-based incentives (sometimes referred to as holdbacks — to dealers in order to get them to shift slower-selling models. This typically isn’t mentioned in advertising. Tips to avoid it search for holdbacks and other factory-to-dealer incentive options for the car you are considering. While it’s not a given you’ll see the seller offer one of these incentives to the car you’re considering It’s not a bad idea to inquire. 6. Spot delivery financing Some dealers have been known to contact customers days up to weeks or months following the time they have signed a purchase agreement, to inform them that their financing didn’t go through. This is a scam. Spot delivery, sometimes referred to as spot financing, is a scheme to get you to sign a loan contract at a higher rate of interest. The lender can tell whether you’re eligible for financing quickly. The purpose of the subsequent phone call is to persuade you to sign an loan that has higher interest rates because, according to them, they just found out you weren’t eligible for the rate that they offered at a lower percentage. Avoid this: Don’t leave the showroom without signing contracts that detail each and every line left in. Verify that you’ve been approved for the loan your dealer is offering. If you have that, they can’t retreat on the loan. 7. The insurance scam Some dealers may try hard to convince you to purchase an insurance policy when you’re buying your car. One kind of insurance, called gap insurance , will cover the difference between what the vehicle is worth and the amount you still owe on it. It’s usually just an extra expense, but if you are interested typically, gap insurance is cheaper when bought from your regular . Another option, credit life insurance will pay off the amount of your loan if you die before you’ve been able pay it back. If these policies appeal to you, you will want to understand what you are purchasing and that you are able to choose to decline the policy and look to find better rates. The price of these policies at the dealer could be huge, in part because the insurance companies that sell the policies to dealerships offer them huge incentives that range from cash to first-class travel to encourage the policies. What to do: Don’t automatically agree to the insurance plan offered. Some insurers include the benefits of gap insurance as part of their standard comprehensive auto insurance, so check there first. In the case of credit life insurance, you’ll likely want to stay clear of it. In most cases it’s not a good idea for you. 8. The rate razzle-dazzle It certainly seems appealing to finance a brand new vehicle. But, this offer might not be the ideal one for your budget. In the beginning, many financial incentives are for short terms, and you must have a great credit score. With short-term loans, such as 36 or 24 months for an affordable car could be astronomical. Furthermore, you might prefer to find the financing yourself and accepting the rebate offered by the dealer if one is offered. If you’re considering an automobile worth $20,000 and receive $4,000 as a trade-in. You have the option of choosing 0 percent financing or financing at 3.49 percent with an additional $2,000 in rebate. The length for the loan is 36 months. Over the course of the loan you’ll end up better than $1,200 when you use the rebate along with 3.49 percent financing. 3.49 percent financing. What to do Calculate the actual dollars over the term for the loan to figure out what is the best deal for you. 9. The rollover scam It could be tempting to trade for a higher-priced car after you’ve paid off the car you’re currently driving. One method by which some buyers take advantage of this is to roll over the remaining balance on their current car to the new vehicle loan or lease. This is an extremely risky decision. It could result in you owing more on the second car than the value of the car. In the language of the auto industry it’s a ” ” in the vehicle. If it is totaled in an accident or if you decide later to sell it you’ll be writing out a big check to cover the remainder amount of the loan. How to avoid the situation: Don’t roll over an old car loan into a brand new one. Instead, try to get the best price either through a trade-in, or private sales. And if you can’t stay with it, do the car. Unless you desperately need a new vehicle There’s no reason to purchase a car before you have paid off the old one. 10. The long-term trick There is nothing legal or even fraudulent concerning dealers who offer loan durations that last for 6 or 7 years. For one thing, the majority of cars are more durable than they did in the past and this means your monthly payment is lower. Still, it’s not ideal. You are likely to continually owe more on your car than it’s worth since your vehicle is declining faster than you’re paying off. Tips to avoid this the problem: If you’re considering a long loan time, you ought to consider an affordable vehicle that’s more suited to your budget. 11. The balloon scam is similar to the one that occurs when certain dealers will try to convince the purchase of a vehicle for unrealistically low monthly payments in the present, but with a larger balloon payment at the end of the loan period. In a few cases this could be a legitimate method to finance an automobile. For example, you might have recently graduated and realistically assume that your income will rise when the balloon payment comes due. For the majority of people the balloon payment simply is a way of rolling over the amount into an additional loan. What to do Avoid these offers and know the fact that your situation could alter by the time the balloon payment due, and you may struggle to pay it. 12. Bait and switch The bait and switch is when you’re in the market for one car and the dealer is able to put you at the steering wheel of another one. Dealers might use deceitful tactics to convince you to go to the lot, only to tell that the car you’re looking for isn’t in stock and then attempt to convince you to buy something else, often at a higher price. Avoid this by sticking to what you’re looking for. If you’ve done your research and know what you are searching for, then you don’t need to doubt your own thoughts. Wait it out or try another dealer that does have the car you’re looking for. 13. Contract cons Keep an eye for clauses hidden in the small print that you may be able to miss. These could take the form of changes to the loan period, additional terms which you didn’t agree to or other services which could lead to substantial expenses. A legitimate lender won’t try to dupe you in this way However, it’s important to be careful. If you find any differences, make sure you make sure you point them out. And if the dealer refuses to fix it, walk away. Tips to avoid this: Read carefully through the contract. Make sure you know all the charges and ensure that the terms are clear to both you and the dealer. Be sure to keep a copy of the contract to be prepared in the event of any issues later on. The goal is not to be an experience where you are tricked, and you leave feeling as if you overpaid for your vehicle. The more you know, the better. take note of these typical dealer tricks to ensure you aren’t getting tricked. Find out more


Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers with the ways and pitfalls of borrowing money to purchase cars. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are dedicated to helping readers gain the confidence to manage their finances with precise, well-studied information that breaks down complex topics into manageable bites.

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