8 tricks up your auto dealer’s sleeve

Dollar bill shaped like a car with quarters for wheels

Auto dealers have lots of ways to make the most off of every sale.

Everything from interest rate markups and dealer add-ons to longer and longer loans can drive up the cost of buying a new car or truck.

If you're not careful, you can wind up paying more to buy and finance a new car or truck than you really need to.

That's a total waste of money for anyone trying to build financial security for themselves and their families.

Look out for these 8 well-known tricks when you visit the showroom.

Dealer trick 1. Preying on your lack of information.

There's nothing a salesperson loves more than a clueless car shopper.

You can't negotiate a fair price for a vehicle when you don't know what that price should be.

Before taking off for the dealership, go to Edmunds.com and Kelley Blue Book to find the average transaction price for the car or truck you want to buy.

Or add the Edmunds or Kelley app to your smartphone and punch in the model, trim level, equipment packages and other options listed on the window sticker for any car on the lot.

Either way, you'll know what car buyers are actually paying for the ride you're considering, and it's usually hundreds, and often thousands, of dollars less than the suggested retail value posted on the window.

You want to be the smart shopper who pays a little less than the average transaction price.

Dealer trick 2. Making it all about the monthly payment.

Salespeople often ask potential buyers what's the biggest monthly payment they can afford.

With that number in hand, they'll calculate the most you can possibly spend and still hit that monthly payment by dragging out the loan for as long as possible.

Then you'll be shown cars and trucks in that price range, which is often higher than what you wanted to spend, while you're reassured that a better ride is well within your budget.

Let's say you came in to buy a compact sedan that cost about $20,000 but let slip that you could afford a payment of $450 a month.

The salesperson immediately recognizes that a 60- or 72-month loan would allow you to buy a $25,000 midsize sedan while keeping your payment at about $450 a month — and that is what he or she will try to sell you.

The bigger sticker price, and longer loan, both mean more money for the dealership.

Use the 20/4/10 rule to see what you can really afford.

It says you should put down at least 20% on a vehicle, finance it for no more than four years and not spend more than 10% of your monthly income on your auto expenses, including your note, maintenance and insurance.

Here's how to put that rule to use before you go car shopping and come up with a purchase price that won't drain your checking account every month — and then stick to it.

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Dealer trick 3. Imposing finance charge markups.

You've picked the car you want to buy, and now the finance manager is searching his computer for the best deal on a loan.

But the dealership is not required to tell you the cheapest loan you've qualified for and can legally pad the interest rate with a couple percentage points for themselves.

Let's say the bank or finance company says you're eligible for a 5% loan, but the finance manager tells you 7%.

On a $22,000 five-year loan, that extra 2% will add an extra $1,277 to your payments.

The lender is in cahoots with the dealer. It collects the extra money, keeps half for itself and sends the other half back to the dealer.

While this is quite legal, the U.S. Justice Department and the Consumer Financial Protection Bureau have been investigating whether dealers and lenders are prone to discriminate against women and minorities by adding markups to their loans more often.

Dealer trick 4. Making deceptive payoff promises.

Let's say you're looking to buy a new car but still have a balance on your current car loan.

To close the deal, a salesperson will often promise: "We'll pay off your loan no matter how much you owe."

Most dealers will make up for that loss by charging more for your new ride, offering less on your trade-in and imposing a finance charge markup.

But unscrupulous showrooms pay off your old loan, just as they promised, then secretly add that amount to your new loan.

To get away with that, they're counting on you to focus on the monthly payment and ignore the total amount you're financing.

Initially you might have been told that your monthly payment would be around $400, which is what it would be if you financed $20,000 over 60 months at 6%.

When you sit down to sign the papers, the finance manager points to the monthly payment line and, sure enough, it's $397.

What you don't see is that the dealer added that $4,000 payoff to the balance on your loan and financed that $24,000 over 72 months, committing you to pay on that car for an additional year.

Dealer trick 5. Pushing you to lease.

Some salespeople may steer you to leasing because it may get you a new vehicle at less than half the monthly payment it would cost to buy.

The problem is, you'll still be making years of monthly payments — at the end of which you will own nothing.

If you need to lease a car to "afford" it, you probably can't afford it in the first place.

Read our story about why leasing is a bad deal.

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Dealer trick 6. Saying the deal is only good now.

Salespeople love to pressure buyers for quick sales with things like "the deal is only good today."

It's a common tactic to prevent you from checking other dealerships or having second thoughts. They're worried if you leave the lot, you won't come back.

Chances are you'll get the same deal if you return.

The one exception would be around the end of the month when incentives provided by the car companies — rebates and discount loans — often expire.

Click here to find all of the current automaker incentives and exactly how long they last.

You don't want to make impulse decisions or be pressured on such a big purchase anyway.

Don't be scared to sleep on it.

Dealer trick 7. Trotting out the old bait-and-switch.

You see an ad for a great price on a car you've been considering.

Then you get to the showroom and find that's only for a stripped-down model, or trim level in auto lingo, which no one ever buys.

The salesperson is sympathetic. When was the last time you saw a car with crank windows and no air-conditioning?

Over the next hour, he or she shows you better-equipped versions. By the time you finally see the car you thought the ad was touting, you're paying $4,000 more.

So ignore the prices you see in ads.

Most dealers now have their inventories on their websites, allowing you to find the fully equipped model you're really interested in buying before leaving home.

Take those VINs (vehicle identification numbers) or stock numbers with you to the showroom.

Not only will you have a more realistic idea of how much the car you want really costs, it shows the salesperson you did some homework.

Dealer trick 8. Selling worthless or overpriced dealer add-ons.

Dealers boost their profits by selling all sorts of accessories, from roof racks to premium sound systems.

Take a careful look at the cost. You can usually get the same thing for half price or less at electronics or auto parts stores.

Be especially alert for surprise add-ons salespeople try to slip in as you're wrapping up the deal.

VIN-etching is the latest add-on to avoid. Also, be on the lookout for paint protection, fabric protection, rust-proofing and car alarms.



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  • LMV

    So how much mark-up do you think dealers have on a MRSP of 60K vehicle? I don't have an IT guy to help me.

    • Steve032

      10% on most cars. $40000 truck would have cost the dealer about $36000.

  • James A Rowe Jr

    I just had to answer your question. Cash means that you are a highly qualified buyer and can pay for the car. The leverage it gives you with the dealer is that you can buy right now! Ay dealer mworht his salt will make some kind of concession. There is a car deal if an agreement is reached. Many buyers believe paying cash on the spot entitles them them to astronomical discounts. It doesn't. Whether you finance, pay cash on the spot or bring a check from the credit union, it all hits the dealers bank at the same time.

    Regarding the price a dealer will accept ,make an offer, but don't assume the mark up is astronmically high.

    • Inacrysis

      Question, if I owe 31k and want to pay cash for a veh at 16-20k will the dealer pay off my trade? I do not have neg eq. My truck is worth 37-38k but I just want them pay off so i can buy an cheap get around veh for work as I have another car for weekends any help will help thanks

  • James A Rowe Jr

    Good advice Andrew.

  • Edward Fradera

    I saw a sweet car at this advertised dealership. long story short, after making a deposit of around 4 grand, the general manager said that i needed to pay another $1,000 if not i couldnt have the car. This was after i was there for hours and had made a deal with both the sales associate and the manager.

  • DainLaguna

    oh man. This is so epic! I probably wont ever get a response, but what on earth were you able to dig up on them???

    I feel like regardless, if you go into a situation where you have negative equity, the dealer isn't going to bend over backwards for the average consumer to accommodate them you know?

    • http://www.schnittshow.com Schnitt

      I concur, if you have negative equity then you no longer have any power.

      Thus I've been advised by dealership owners that when you have a vehicle in which you owe more than its worth, never trade it in, sell it outright for what you can and just write the check to the finance company for the balance.

      Now if you're not concerned about this fake system of credit worthiness is this county we have, then you'd get the new car first and just have the finance company take the other one back as a repo.

      However unless your willing to live the Dave Ramsey lifestyle of having no credit score for the remainder of your life, ID caution against the latter tactic.

      • scarhill

        You will usually get more if you sell rather than trade. However, the difference can easily be offset by the tax advantage from trading. In most states you do not pay sales tax on the value of the trade.

        For example, you may sell for $13,000. You might trade for $12,000. A $1,000 difference. However, you do not pay sales tax if you trade. At a 6% tax, that is a $720 savings. Therefore the difference is only $280. Is $280 worth the effort?

        It really makes no difference if you sell and pay off or trade. Other than the difference in what you get by selling or trading. For example, if you owe $15,000 and you sell for $13,000, you will need to pay the $2,000 difference. If you trade for $13000 you also need to pay the difference of $2,000.

        Negative equity does not impact your power. It may limit your options but it does not impact your power.

        You, the buyer still control the deal. You can still walk away. Allowing a dealer to control the process always results in a bad deal. Sales people always think they control the negotiation. They do only if the buyer lets them. Smart buyers always control the process.

        • j town

          if you sell a car someone they pay the sales tax. the have to pay it at the tax office when they get their tag. it is unlawful to absorb sales tax

          • scarhill

            You do not understand.

            If you buy a $30,000, the sales tax is 6 percent, the amount of sales tax is $1,800.

            If you trade and get $15,000, th sales tax is computed on $15,000 ($30,000 - $15,000). The amount of sales tax is $900.

            The difference of $900. ($1,800 - $900) is the sales tax advantage of trading.

            Got it.

  • Fitzgerald Darbone

    You still lost, it's a Hyundai

  • boriel

    i bought a car on monday for 430 a month for 72 months, now the bank says that they cant do that deal, they want me to pay 579 for 72 months with 7% interest, they send a letter after 6 days of financing the car, what can i do? i already signed the original payment with the dealer.

  • Ana Jimenez

    Hi, I recently traded in my mini van, i owed 19k on it. I traded it in for a brand new subaru legacy for 25k. We paid the negative equity and a down payment on top of that 6k total. A month and a half later, subaru calls me and tells me I owe them 210 because the payoff was more than expected. I refused to pay anything and now they are threatening to take me to court. Are they allowed to charge me more money?

  • David Shannon

    But there is more money dealers make besides the invoice. Why would a dealer sell a car to an affiliate member at 1% below invoice for instance. There is usually a 5-7% profit holdback just at invoice pricing. In addition to that there are dealer incentive to sell certain cars. Then the dealer receives a price per unit sold and bonus money for meeting quota. So even below invoice the dealer is making money. If a car depreciates 20% leaving the lot how much of that is dealer profit.

  • kris

    My FICO is 800+++, been looking for an Automobile, and I still feel that pipe going deep into my azz. The sad fact is somebody is getting all the bucks, I don't think it's the Salesman, nor the Secretary, I believe the Manager and Corporate gets it all. The employees get a kick in the butt. I was armed with KBB, Black Book and Consumer Reports, so they did not like me. Please, all you Peeps, read up, be prepared, it is MONEY. Remember, they do not care whether you make your House Payments, feed your Children, or pay your children's or your Medical Bills. At least be Prepared. They hate that, so you must Make your Game Plan and stick to it. Consumer Reports this month lists the best cars to make it to 200,000 miles. Honda Accord followed by Toyota and only one Ford in the top 10, an F150. Some very good Used Cars are in Consumer Reports this month and last month 4 and 5/16. Homework Matters. SEMPER FI AMERICA. You work hard, You spend Softly!! Be Smart for your Family and Yourself!!

  • Charmaine Taylor

    I got same deal from my used car dlr l, BUT I called CU and confirmed If i sign the contract at 1.9 THEY must accept it once dealer made the contract..but when i went to inquire on closing date dealer rudely says i don't qualify, he never ran my credit..WTF?? HIS responsibility. I said YOU offered, you gave a verbal contract and several models with this 1.9 financing are on paper, so YOU go back to CU and get me that rate, he DID. because I can walk. I am putting 42% DOWN...bird in hand, well qualified even though I DO lead the Dave Ramsey "invisible" credit score life..banks want to shill me to 5.5% for having NO debt, own my home clear, cars too, pay off Biz CC monthly..just POOR treatment to debt free people. My approach may be to get the price down as far as I can, agree to 60 months ( he's drooling thinking he told me "sure pay it off sooner if you want" he still makes MOST of the interest, I lose hundreds! but a 36 mo loan is best for me. BUT at absolute lowest everything I just agree to the final price taxes and all, then pull
    out my checkbook and pay cash. done.

  • Kevin Beckworth

    Andrew, if your willing to assist me with a few questions I'd love to ask you. You could kindly email me at Kevin.beckworth1@gmail.com. It's in regards to an f150 platinum purchase I'm trying to make at a local ford dealership. (Hopefully not yours)

  • Troy Carollo

    Im pretty sure that when you trade in a car the dealer is giving you the
    "cash" to put down on the car your financing. So I'm pretty sure that if your son had $3000 cash to put down on a car vs the dealer giving him $3000 for a trade in on his previous car, all the bank would care about is the $3000. Although i have no experience in finances and i could be completely wrong. But i can assure you he will not get in trouble lol quit being so paranoid.

  • Jasmine Dover

    Do you truly desire a genuine loan from a reliable lender then you don't have to look elsewhere or think of a way out anymore for anzjacksonfinancingplc@yahoo.com is the right choice to make because i recently got my loan from them.

  • H. Zayre

    I wonder if I used a Latino name if I could get a lil bit sweeter deal? Should I try Senjor Pepe???

  • Dave Norris

    Your misinformed "dealer trick 4" is wrong.
    Yes, they do add your payoff back in, however, they gave you money off of your purchase for the value of your trade, pretty much what the dealer can buy one in similar condition for.
    For example, if you are buying a car for $20000, and they give you $5000 for your trade, but you owe $10000, you would be responsible to pay back $25000 (not including your taxes and fees). If you owed nothing, that number would drop to 20k.
    The way you explain that, that 25k would be 30k.
    What your trade is worth andwhat you owe on it can very often be two different numbers.

    • Benjamin Wexler

      Im looking to finance a 2016 Nissan Rogue S
      1) i currently am in a 2014 Toyota Camry LE lease, with 2 months left
      2) i got a True-Car quote on the car thats much less than the MSRP (22,767)
      3) i have more than 20% down payment ( $6k)
      4) most probably will go with Credit Union Financing and not Dealership Financing.( never done this before, so don't know procedure)

      Questions
      1) Can/should i negotiate the purchase price?
      2) If i wait til end of lease, the only additional fee i would have to pay is the disposition fee to Toyota, correct?

  • Dave Norris

    Because you owe 17k on the vehicle, not zero? He didn't add 17k to the 59k price, he added it to your trade difference. You got 13k for your trade.

  • Dave Norris

    Simply put, it looks like some of the incentive is based on financing with Mazda Finance. Manufacturers do it all of the time. To figure out the best way to go, simply look at which payment is lower, assuming the term is the same. If say, your credit union payment is $375 and Mazda is $365, Mazda is the way to go.
    Anytime you save money off the financed amount up front vs. over the life of the loan, it's a better deal, since very few people these days keep a car for that long.

  • Debi

    How about if a dealer keeps selling my loan to a finance company then not providing title and buying loan back? This has happened three times now and my principal is just about the same as when I first purchased the car six months ago.

  • Weazlegirl

    We're looking at a car now - They have listed $16,000 for a 2014 Camry. What happened is the car we were interested in wasn't there. It was being shipped to the store. It's supposed to get here tomorrow, I believe. So they said they would cut us a deal and give us the same price as the 2014 for the 2015 Camry that they had right there. We test drove it and all was well. What he was saying as the "same price" was the monthly payment, but they were going to tack on an extra year. They also said they would pay for the TT&L, but I'm relatively sure they were just going to tack it on to the end of the payment. But anyway, my husband I said thank you and walked out.

    My credit is pretty great. I'm not really worried about getting a lower interest rate. I've even been pre-approved through the credit union for 2.99% interest rate. However, my question is this - do you think it's unreasonable to ask them for the TT&L in the price of the car? I've also got a $250 coupon through their website. I just want to make sure I'm not being unreasonable. I just figure if they were willing to give it to me for the 2015 Camry, why wouldn't they for the 2014 Camry? Also, when should I tell them I've been pre-approved? When they show me their finances? I know once I tell them, they're not really going to negotiate the prices, much less the TT&L.

  • Ashley

    I completely agree! I work in a Ford F&I office in Canada and I would never work here if it meant being a sleeze ball to maximize profits. I firmly believe that if my clients can trust me that that will take me much further in my career and keep my consious clear! I would rather be someone that people can trust. There are many reasons we offer extended warranty, maintenance, family and credit protection, ect. and that is for protection. These products have value and they help protect you. Now that is not to say every single one benefits every single person as everyone has different needs and its my job to show them the features and benefits and for my clients to decide if it does or not.
    Another thing!! You must realize that we are under LEGAL OBLIGATION to present these products. If I do not and the client is in a situation that they would need the benefits of a product we offered and it is found that I did not offer it to them that I can be sued! For an example Life/ Family protection insurance- Customer was not offered- customer passes away- wife stuck with vehicle- wife now losing vehicle- found out there was a protection that could have prevented this- she can sue me- I will lose lawsuit...
    People make F&I out to be the enemy.. now I get it there are F&I managers that will try to take you for every penny they can but that is not all F&I and that is why it is extremely important that you are educated and ask your questions. Don't allow yourself to be taken advantage of but don't shut out the Finance Office in fear of being screwed over.. hear us out.. research.. ask questions.. read fine print. ask about fine print. We are (supposed to be) here to help you and guide you through to the process.. not all of us here are here to take all your money. Yes we are here to make money.. that is no secret.. but isn't that the job of any business??? I do need to make my company money as well as make a paycheck myself but that doesn't mean I am ripping you off.. As a single mother I care very much about your financial struggles, I care that you need to feed your family, I care about you. This is why I offer you these things.. keep that in mind.

    • jah

      Well I happen to know of many scams they do. Research people what thy call the pit man (sales people manager. Believe nothing they say and research their many scams and do NOT sign anything until you take it all home and read it. Been there with many others and many commit fraud everyday and it is time to put a stop to it and I intend to!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  • Reggie

    No no no!!!!!

    The car is 59k
    The rebates are 13k
    You owe 17k
    He giving you 13k for your trade.

    59k minus 13k is 46k
    Ttl takes it back to 49.5k
    The rebate takes it down to 48.5k
    You have 4k in negative equity.
    Total out the door is $52,500