There are plenty of honest car dealers. There are also plenty of scam artists. Often dealers don’t even think they are pulling a scam. To them, it is just the way you do business. Like it or not, buying a car is usually an adversarial process, especially once you reach the financing part of the deal. Here are some scams to look for and some advice on how to make your best deal.
The Key Scam
One of they ways dealers like to control the buyer is by taking away the keys to their old cars. They will ask you for them so that they can evaluate your car for its trade-in value. You never get good value for a trade-in anyway, so I would resist the urge and sell your car separately, but if you do want to use it as a trade-in, be careful with your keys. They won’t give them, or your car, back very easily until the deal is done. If you do give them a key to your car, give them only a SPARE key to your car and never your house or other keys. Make sure you still have a key so that, if they lose your keys, you can still drive home.
The Financing was Denied
If, after you buy a car and agree to financing, they contact you and tell you that it fell through, you’ve been scammed. Dealers know from your credit rating what you will qualify for, and they almost never make a genuine mistake in this area. Avoid this problem. Never finance through the dealer. Get pre-approved by an outside bank or credit union before you ever go to look for a car. Never take delivery on a car before the financing is secure, and never leave a check or cash deposit. Also, always get your credit score from Equifax or another agency before you shop for a car. Some financers will tell you that your credit score is lower than it is. Dealers will pull any trick to get you to finance through them instead of the bank. Gouging people with financing is where they make the most money. If for any reason a dealer won’t work with your pre-arranged financing, (Uhhh, yup, this bank bounces checks, we don’t work with them) walk out.
Fill Out a Credit Application Scam
If you have already lined up financing, or you have cash, do not fill out a credit application. It is NOT required and they can use it to lower your credit rating.
VIN Etching
Do not pay the car dealer a fee to have your VIN (Vehicle Identification Number) etched onto your car window. It is not required by any bank, and the service should never cost above thirty dollars. WIN etching can (but often doesn’t) lower your car theft insurance deductible, but it isn’t worth paying a large fee just to avoid a slightly larger (or even smaller) deductible. If you really want to get your VIN number etched, go to a car glass installer or buy the kit from caretch.com. Be careful, some dealers will try to hide this fee in your paperwork. Always avoid costly add-on services from dealers such as scotch guarding, desert/winter proofing, dealer prep or any other fancy term that means they sprayed something on your car or did something else just as silly. The price of the car should be the price of the car, period. If they try to convince you that these are fixed costs that can’t legally be removed (a lie), tell them to just add a credit on the next line for the amount. That’s legal!
Warranty Scams
Do not buy additional warranties from your car dealer. Be especially suspicious if they try to convince you that you need the additional warranty or the bank won’t finance the loan. Remember, you can avoid any questions like this if you secure your financing before you look for your car. If you want an additional warranty, talk to your insurance agent. They generally offer as good or better warranties on cars, and you can take it to whatever mechanic you choose, even the dealer. While you’re there, be sure to ask your agent about GAP insurance. This insurance kicks in if you’re in an accident and the car is totaled but you owe more on the car than it is worth. Never get this insurance through a dealer, your agent will be cheaper, and they are the ones you already trust with your insurance.
ADMs
If you see an ADM fee listed anywhere in your paperwork, immediately demand that it be removed and walk out if they won’t. ADM means additional dealer markup, in other words, it’s the additional price they’ve decided to charge above the manufacturer’s suggested retail price. Never pay it. Ever.
Pay Off Scams
Never go to a dealer who offers to pay off your old loan or lease, “no matter what the cost.” They aren’t paying it, you are. They just pack the amount onto your loan. The main problem with this is that there are generally penalties involved in breaking an old deal. You don’t save money by having car dealers do this for you. You lose money. Generally, any special deal advertised on the radio is some sort of scam. A car costs what it costs, you won’t magically get the car for less than it is worth. Avoid dealers who try to convince you otherwise.
How to Avoid Getting Taken
- Never finance your car through a car dealer
- Get pre-approved for a loan before you shop for a car
- Base decisions on price, not payments
- Never give up your only key to your car
- Never give up any keys besides your car keys
- Fight any fees above the actual price of the car
- Buy warranties through an insurance agent, not the dealer
- Avoid dealers who are always offering special deals such as pay offs
- If for any reason you are suspicious, do not take the deal. It is better to wait for a deal you are sure of
- Bring two friends with you, one who knows cars and another who understands money