Finance Representative Tactics at Car Dealerships: Nine Potential Deceptions to Watch Out For
Navigating the car-buying journey can be a real headache. With an average new car costing approximately $50,000 these days, the financial challenge is just the beginning. As if dealing with pushy salespeople wasn't enough, the real battle often unfolds when you're handed over to the finance department. These folks are masters of manipulation, eager to squeeze every penny out of you. Here's a lowdown on the tricks they might pull to get the best deal for themselves:
Aiming for the Wrong Target
Car salespeople are experts at making you focus on the wrong number. They're usually trying to hook you on the monthly payment. They'll size up your budget, probe your ability to pay more, and then work backwards to lock in a deal that benefits them in the long run. Traditional tactics include the infamous Four Square, where the salesperson dazzles you with numbers, talks fast, scribbles things out, and guides you to focus solely on that monthly payment.
Even if you ace the Four Square game and negotiate a rock-solid deal on the car and financing, that monthly figure can still trip you up. Watch out for situations where the monthly rate is just slightly off what you bargained for - it's a close match, but not exactly right. Time to dust off those reading glasses and meticulously comb through that contract, because something's been underhandedly altered. They might've snuck in extra fees or something else into the total price, and when spread over several years, these small additional payments are easy to overlook.
Playing with Trade-in Values
If you're trading in a vehicle, the salesperson could proudly announce that they'll value that trade-in at the exact amount you owe on it. That's awesome - as long as it's the truth. But the finance guys might tamper with the trade-in's value, valuing it lower than it's worth. Then, they'll add the difference to the overall loan principal - dealers get incentives to write bigger loans, and this tactic helps them do just that. While this may be illegal in your area, it doesn't stop them from slipping up occasionally.
Surprise Add-ons
You've negotiated your deal and you're feeling pretty good about the car price and the financing terms. Then you hunker down with the finance person, and suddenly, the price and payments are skyrocketing - because a long list of features and options you assumed were included in the deal have turned out to be exclusive add-ons. Now you're staring at paying more for the car you thought you were getting, or sacrificing car features you want to avoid going back to the drawing board.
Dished-Out Interest Rate Markups
If you finance your car purchase through the dealership, it pays to shop around for financing elsewhere. Dealer financing comes with a risk: dealerships often mark up their interest rates to boost their profit margin. They call their lender and receive a rate of, say, 6% for your car deal. But when they present the financing figures, the rate is 8% because the finance folks have jacked up the rate without telling you. Always ask if the rate in the contract is the dealer's "buy rate" or if they've tacked on some hidden charges.
The Yo-Yo Dance
This ain't as fun as it sounds. It goes like this: you negotiate the deal, buy the car, drive it home, and revel in your purchase. But a few days later, the dealer rings and tells you that your financing was declined, so you need to return to re-negotiate the deal. Dealers rely on the sunk-cost fallacy to drive you to renegotiate, offering less-than-favorable terms in the process. You can protect yourself by securing outside financing and carefully reviewing your paperwork. Look for language that permits the dealer to cancel the sale, like "conditional" or "not final." If the terms aren't clear, ask - and if you're not satisfied, walk away.
Wrapping Multiple Negotiations in one Package
Purchasing a new car isn't a solo task - you're usually trading in a car, negotiating the car price, and agreeing on financing terms all at the same time. Finance folks at dealerships love to blend these negotiations into one messy deal, making it harder for you to tell if you're getting a fair deal. For instance, let's say you dispute the value of your trade-in and push for an additional $500. The dealer agrees - and adjusts your financing terms to recoup that $500. The more entangled the negotiations, the harder it becomes for you to see the actual deals you're getting. The solution: keep the negotiations separate, focusing on each one individually to make an informed decision.
Sneaking in "Standard" Add-ons without Asking
After the finance folks and you agree on terms, you might find additional expenses in the contract - like gap insurance or extended warranties. They'll argue that these charges are standard costs required by the dealership instead of add-ons. Even though these products may prove useful, you should be aware of their associated costs before you're presented with the contract. Dealers might sneak these extras in even if you already have alternate, more affordable insurance options in place.
- In an attempt to manipulate the finance deal, car dealerships might present monthly car payments instead of focusing on the total cost, which may lead to hidden fees or expenses that are challenging to notice.
- Deception can occur when trading in a vehicle at a dealership, as the value of the trade-in could be intentionally undervalued by finance personnel, added to the overall loan principal, and inflating the final cost of the car.
- After agreeing on the car price and financing terms, consumers might find unanticipated additional costs in the contract, such as add-ons like gap insurance or extended warranties, sneakily mentioned as standard by dealerships.
