More Dealer Thievery Exposed!

One of the auto industry's dirty little secrets is the practice of lenders giving kickbacks to dealers for charging their customers higher interest rates. As an example, when your qualifying interest rate on a loan is 8% (known as your buy rate), the dealer can and will attempt to charge you a higher rate. Say for instance that your good credit standing qualifies you for an 8% rate on your car loan, the dealer signs you up at 12% (you don't know any better) Now, you'll finance your $20,000 vehicle purchase for five years............your payment at 8% would have been $433.56 however, you signed the purchase contract at 12% so your payment is now $475.64! Who receives the "extra" money?............that's right THE DEALER!

This practice is entirely legal and does not have to be disclosed by the dealer or lender, and in some states dealers are allowed a 5 percent markup! The dealer gets to keep the difference between the "buy rate" and "signup" rate! This is done on both loans and leases, and because it's done without any disclosure to the customer, we consider this practice outright thievery!

Money Saving Tip

To get the best possible deal on a new or used car or truck, knowledge and information is your best bet. Dealer tricks and scams (like the secret interest rate increases mentioned above, packed payments and other common rip-offs) can quickly remove any savings that you thought you were getting, so learn how to calculate your own monthly payments. Use the Internet to get at least three quotes before you start negotiating with dealers. For free quotes on new and used cars & trucks, we always recommend Stoneage.

Packed or Loaded Payments

When a dealer "loads" your payment: this practice is deceptive and common thievery.

Here's how it works: When the customer asks how much the monthly payment would be on a particular vehicle, the salesperson gives them an inflated figure that represents a higher loan amount or APR. For example, if the correct loan payment was $325, the customer might be quoted a payment of $365. On a typical 5-year loan, this would end up costing the customer an additional $2,300 and allowing the finance and insurance person to add on services you don't need or didn't approve.

If the customer (unknowingly of course until now) agrees to the packed monthly payment, the dealer then moves on to step two of the Rip - Off. For example, the customer might be talked into getting one or more high-priced (and high-profit) items like an extended warranty or perhaps undercoating, "at little-or-no cost." (At least that's what the dealer will tell you.) Or you may be charged an APR of 12% on a loan when your buy-rate is only 8%, so the dealer can pocket the additional four percent as profit. And if packed payments were used on a lease, the extra money could represent a secret price hike or interest increase.

This brainless piece of fraud is used to trick people into leases: Dealers simply quote highly - inflated loan payments to make a your purchase look much more expensive than a lease. You can avoid this thievery by using the Internet to find competitive rates on car loans then calculating your own payments. For free quotes on new and used cars & trucks, we recommend Stoneage.

Extended Warranty Scams

Selling extended warranties has always been a huge moneymaker for car dealers. Since their customers have no idea how much markup and profit there may be on a particular warranty, many dealers have been able to make as much profit on that item as they made on your purchase. And instead of selling factory-related policies, some dealers have sold practically worthless warranties at outrageous prices, just to make additional profit.

Another way to avoid the high prices that dealers charge for their service contracts and extended warranties can also be purchased from other sources. These warranties are available for most new vehicles at prices that are generally around $500 to $700. Remember this when the dealer tries to sell you his warranty for $2,500 to $3,000 - plus $500 in additional interest if you finance the warranty as part of your car loan.)

Money Saving Tip

Don't pay those high dealer prices on extended warranties! Get free online quotes and discount prices from these extended warranty companies.

Dealer Prep Lies

Charging you for "dealer prep" is an old trick that's been used to pick up an easy $250 - $500 in extra profit. Since dealers are already being paid by the factory for new-car preparation (didn't know that did you?), any amount that you pay for this service is pure profit. Don't fall for this, just refuse to pay it. If your dealer refuses to remove this charge, walk out. We don't recommend doing business with any dealers who so blatantly rip-off the buying public.

Common Mistakes

Many car buyers who rely on the Internet as their only source of information end up paying a lot more than others who do a little more homework. How much more? Typically $1,000 to $1,800 on an average $20,000 vehicle, and sometimes as much as $2,500. Why are people paying so much more - and for the same vehicles? And what secrets do the "smart shoppers" have that enable them to get better deals? Knowledge and Information! Car buyers armed with knowledge and information are perceived differently by the dealer and as a result get the best deals.

Far too many people make the mistake of thinking that all they need is the "dealer invoice" figure to get the best deal. Those of you who are thinking that "dealer invoice" is the same as "dealer cost" are wrong, while at the same time many consumers believe that they can get accurate dealer cost information on the Internet, for free. You can here.

In addition, another common error is not knowing the actual prices that others in your area are paying for the same vehicle. Have you ever thought that a dealer who belongs to an Internet buying program is going to give you the lowest price in town? NOT TRUE! Try our free, no obligation Purchase/Lease Analysis! Other sites offer lease/purchase analysis for as much as $500 for 1/3 the information!

Mistake: not having a recent credit report available. Dealers will use your credit against you if you let them. Too many "credit inquiries" will hurt your rating. Visit 5 dealers = 5 credit reports.

Mistake: not researching specific loan and lease rates before visiting the dealer. This is by far the most common error we find from our site visitors.

Mistake: believing your dealer when he says, "This is the best I can do!"

Mistake: not knowing how to calculate your loan/lease payments.

Mistake: buying a service contract from the dealer.

We sincerely hope you will use this information. If you do, we can guarantee the best car purchase ever!

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dealer scams | before you purchase | buying new | buying used | leasing | invoices