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When buying a new car, always remember that everyone at the dealership is trying to extract maximum profit from the deal. That’s why consumers need to recognize car dealer scams to avoid becoming car dealer fraud victims. Not all car dealers engage in deceptive business practices, but if you spot one of these common car dealer scams, it is a warning sign that you could become a car dealer rip-off candidate.
Car Dealer Scams #1: The Negative Equity Scam
With this, one of the more common car dealer scams, the dealer promises to “pay off your trade-in no matter how much you owe.” This is disingenuous at best. If you are upside-down on your trade-in – you owe more on the loan than the car is worth, a position of negative equity – the dealer will take the car in trade, pay off the difference, and then roll the negative equity into the new car loan. In other words, you’re still paying for the old car, plus the new car. And now you have even more negative equity.
Car Dealer Scams #2: The Bait and Switch Scam
If a dealer advertises a car and the deal sounds too good to be true, it probably is. Look for a fine-print disclaimer on the ad that says something along the lines of “one at this price.” That means when you get to the dealership, that single vehicle will already be sold, or it will be so undesirable that you don’t want it anyway. Now the salesperson can upsell you to a more expensive model. With this common car dealer scam, you have been baited with the promise of a low price or payments, and switched to a more expensive, and profitable, vehicle.
Car Dealer Scams #3: The Dealer Addendum Scam
Using this car dealer rip-off practice, a dealer will add extra profit to a car by placing a dealer addendum sticker in the window next to the manufacturer’s official window sticker. This new sticker typically lists add-ons like paint sealant, fabric protection, an alarm system, pinstripes, and other things that pad the deal with hundreds, or thousands, of dollars in extra profit. Unless the car you want to buy is a hot-selling, brand-new model, a dealer addendum sticker indicates that you might also become victim to other examples of car dealer fraud at this particular business establishment.
Car Dealer Scams #4: The One Day Only Scam
Dealers will pressure you to buy on same day you arrive at the dealership. The fear is that if you leave, you will not return. So if you enter negotiations, the dealer may tell you that the selling price is good for one day only. Unless a rebate, incentive or bonus program is ending that day (typically on the last day of the month), this is probably untrue. In fact, if you wait awhile, you might even be able to get a better price. Don’t fall for this common car dealer scam.
Car Dealer Scams #5: The Low Credit Score Scam
Do not go to a dealership to negotiate for a new car and get a car loan unless you know your credit score in advance. You can get a free credit report from the three main credit reporting agencies – TransUnion, Experian, and Equifax. If you don’t know your credit score, you could become victim to car dealer fraud. With this common car dealer scam, the salesperson may quote you a price and payment that is acceptable, go to get the deal approved by the manager, and return claiming that due to a low credit score they need more money down, or to finance you at a higher interest rate, in an effort to add profit to the deal.
Car Dealer Scams #6: The Four Square Scam
Among car dealer scams, this one is quite popular. It operates like a shell game played out on a piece of paper, involving a flurry of numbers associated with the price of the car, the down payment, the monthly payment, and the interest rate. By the time this car dealer rip-off concludes, you’re so confused you’re not sure what just happened. To protect yourself, have your financing arranged in advance, and avoid trading your old car in to the dealership. That way, all you need to negotiate is the price of the new car.
Car Dealer Scams #7: The Good Cop, Bad Cop Scam
Using this common car dealer scam, your salesperson will play The Good Cop. Dealership management will play The Bad Cop. Your salesperson will be calm, understanding, someone who is on your side in negotiations with management, a friend looking out for your best interests. He or she will claim to have done their best, to have stuck their neck on the line for you, to have risked their livelihood to get the numbers as close as possible. And this will spark empathy. And you will sign on the dotted line. Do not be fooled. The more you pay for the car, the more money the salesperson makes. Don’t forget that.
Car Dealer Scams #8: The Disappearing Trade-in Scam
An example of outright car dealer fraud, the disappearing trade-in scam is most easily pulled when your old car is not worth very much money. With this car dealer scam, the value given to you for your old car is not reflected in the blizzard of numbers on the multi-page sales contract. Another way this car dealer rip-off is pulled is by promising to pay a certain amount for the trade-in vehicle but then removing discounts equal to that amount from the new car sale. Avoid trading in your old car if you can.
Car Dealer Scams #9: The After-Hours Spot Delivery Scam
Car dealers put you behind the wheel of your new car as soon as possible, a process known as spot delivery, or delivery on the spot. When you buy a new car after regular business hours, your purchase cannot be finalized until the next day. That means you are driving the new car home without financing in place. By accepting spot delivery after regular business hours, or on a Sunday, you open yourself up to potential car dealer fraud because the dealer can now call you back and claim that your credit score is not high enough to qualify for the deal. Your options are to come up with more money, or give the car back and face charges for wear and tear or mileage. Again, have your financing in place ahead of time, and don’t accept spot delivery until all elements of the car deal are finalized and approved.
Car Dealer Scams #10: The Title Washing Scam
Independent used car sellers or dealers typically pull this version of car dealer fraud. New car dealerships and large used car superstores do not engage in this car dealer rip-off practice. Title washing refers to the process of registering and re-registering a used vehicle with a questionable history in multiple states to rid the car’s title of salvage status, which is assigned if the car has been wrecked and repaired, flooded, stolen and stripped, or otherwise fouled in a manner that significantly lowers its value. To protect yourself when buying a used car, purchase from reputable sellers, always get a title history on the used vehicle, and know that if a deal is just too good to be true, it probably is.
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