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Ten (or more) Things Dealers Don't want you to know!
- Here we go again...Hidden costs!
We are starting to see a new "misleading tactic" by some dealers when they advertise a low price on a used vehicle. Look out for dealers that pull the "freight cost" out of their "advertised sale price" only to add it back when you try to buy it! For example, you see an advertisement for $9995 (plus tax, license and freight). When you get to the dealer and try to buy that vehicle for that price, they add another $500-$800 for freight. Your low advertised price suddenly isn't a good deal at all. It is true that sometimes a dealer has to pay freight on a used vehicle, but it is rarely more than $300 and a vehicle should never be advertised without it included in the price. Not a nice surprise.
- The "$88 down and $88 per month" gets you a brand new car
Sounds fantastic but the only problem is that the $88 per month is only for the first 3 to 6 months! Then, the payments skyrocket up for the remaining 5 to 6 years. What makes matters worse is that you are paying more interest in the remaining months to cover the artificially low payment in the first months of the contract. Mom and Dad always taught us, "If it sounds to good to be true, then it probably isn't true!
- "No payments for a year" sale
The problem with this promotion is that since you have no payments for 12 months, you are also not paying down the principle balance of the loan. Everyone knows that vehicles only go down in value…. they only depreciate. This poses a real "double whammy" for you when you eventually want to trade out of that vehicle. Since you have delayed paying down the amount owed on the unit and at the same time it is rapidly going down in value, the chances are quite good that you will owe a significantly higher amount than the vehicle is worth at the time you want to trade. This type of promotion preys on the human emotion that we can get something for nothing. Remember what your parents told you about "getting something for nothing". They were right….it will always costs you more.
- The limited time only "$39 Acquisition Sale"
Some dealers advertise a "$39 Acquisition Sale". The implication is that you are going to take over an existing loan for a small fee. The reality is that you are just buying a car the normal way. You may be asked for a larger down payment and will be starting a brand new loan. Most of these sales use professional "closers" that use high-pressure tactics and tricks. For example, you might be presented with a "four square" deal. You will be shown a payment that is extremely high and a down payment that is very high. You will also be shown very little for your trade and a short-term loan. The idea is to "shock you" into paying either more down, more payments or longer terms or take less for your trade. It's the old idea to "start you high and scrape you off the ceiling". A dealer might average over $4000 per deal with this so-called "sale".
- The "We'll pay you $2000 over what your trade-in is worth"
The way this works is very simple. A dealer will build an additional profit into the sales price to allow you a guaranteed amount. For example, if the guarantee is for $2000, the dealer will mark up the vehicle he is selling you an additional $2000 to cover that amount. If your trade is truely only worth $2500, you will be allowed $4500 "on paper". The reality is, you are paying for the guaranteed higher value of your trade in the form of a higher sales price. It's just a "shell game" with the numbers to get you in the door.
- Retail prices not posted on the vehicle. "Don't the dealers know what they are worth?"
Of course they do, but what they are hoping is that you don't. Most dealers don't post the price on the window because every customer gets a different price. Normally, when you ask a Salesman the price of a used car, he responds with a question like: "Do you have a trade?" If trade value is an important issue to you, he will build an additional amount into his sale price so he can give you more for your trade-in. His intent is to find out as much information from you to determine how he can maximize his profit on the deal. That is why the last thing you will get from him is a price.
- "We Will Pay Off Your Trade, No Matter How Much You Owe"
The fallacy here is that all deals are structured this way. You will always pay back the balance of the loan on your trade-in, with the new loan. If you trade in a vehicle with a balance owed to any bank, the new amount that you borrow on your new vehicle will include the deficit balance on the new loan. The final amount borrowed may also be affected by how much down payment you make. Check your paperwork. That payoff balance on your trade does not just disappear.
- "Just Take Over the Payments" Sale
By advertising this way, you are led to believe that someone has already paid down the balance on the loan and you are getting a great deal. Not the case. You aren't going to take over anyone's payments but your own! There are very few Banks that allow someone to "take over the payment" any more. Many years back, it was done on a very small scale. The deal is that you will be getting a new loan, not take over one.
- The "Slasher Sale"
Typically, a tall fence is put around the entire inventory. The idea is to build "hype" that only certain folks will be allowed in (did you get an invitation?). Once the gates open, the Price Slasher writes the discounted sale price across the windshield. The catch is that the new price is probably higher than the price that was on that same car yesterday! Most of these sales have the same type of high-pressure closers that were described in the Acquisition Sale.
- "Manufacturer Rebates"
Now this is legit. You really do get a rebate from the Manufacturer and it doesn't cost you a dime……not right away. The truth is that this is the Manufacturers way of saying "my price is too high, so we're going to adjust it." That's fine is the short term, but think about what that does to the price of that vehicle after you drive it off the lot. Not only do you suffer the normal depreciation, but you also will suffer the amount of the rebate. Your "new" car is now used, and is worth much less. The used car market will adjust to the rebate as well, when you decide to trade. The real shame is that new car prices (M.S.R.P.) have actually risen over the past year and normally do throughout any year. Why would a manufacturer raise the suggested retail price (M.S.R.P.) and at the same time offer a rebate on it? Because they have conditioned the buying public to buy when there are rebates and this allows them to slowly increase the new car price over time.
- All Credit Applications Accepted"(or no credit application refused)
The wording wants to make you think that the lending institution will automatically approve your credit. The dealer wants you to believe that you will get a loan, no matter what your credit status is …..and that is not true. What it really means is that the dealer will accept a completed application from you and try to get the loan approved. Credit approval is not guaranteed. The dealer wants to imply that they can do something that another dealer can't.
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