Dealing with Deceptive Car Dealers: How to Avoid Scams

Dealerships, like any other business, are in the game to make a profit. It's a legal and essential aspect of their operation. However, their primary role is to provide a solution to the consumer's problem. Just like every other business, dealerships aim to retain their customers. The process of getting a customer through the dealership's door is arduous, and once a customer is there, the dealership wants them to return, not to be a negative reference or to sue due to being ripped off.

To ensure compliance with the fundamental rules of business, dealers must adhere to franchisors' codes of conduct, promote fair trading, and comply with the Automobile Associations' guidelines. Any breach can lead to termination of the franchise agreement and legal ramifications from all parties involved, including the consumer. A dealership's profitability hinges mainly on the 'back-end,' such as used cars, finance, insurance, after-market services, and parts. These areas often involve higher profits and, therefore, aggressive sales tactics.
By understanding these rules, you can maintain a fair negotiation and avoid falling victim to deceptive practices.

How Dealers Rip Off Customers

There are several ways in which dealers can take advantage of consumers, primarily by:

1. Lowballed Trade-Ins

Dealers often under-value trade-ins, hoping to pay less than the car's actual worth. To counter this, customers should research the true value using resources like Edmunds, Kelley Blue Book (KBB), and NADA. These sources can provide an accurate assessment of your trade-in's worth. Always aim to be paid fairly and not to accept offers that are thousands of dollars lower than the real value. A slight reduction is acceptable as trading often allows for a tax reduction.

2. Dealer Reserves

One unethical tactic is the dealer reserve, where they inflate the interest rate offered. For example, instead of presenting an approved rate of 3%, they might present a rate of 5%. This practice is legal but unethical. Always demand to know the exact interest rate. If the finance manager refuses to disclose it, it's a sign to walk away from dealer financing.

3. Overpriced Products in the Finance Office

The finance office becomes a gold mine for dealers due to the profit margins on the products they offer. No means no, and sometimes, it's necessary to say it three times to make it clear. Avoid falling for these deals by politely declining the products and considering alternative purchases later if they turn out to be essential.

4. Dealer Addendums

Dealers may add unnecessary items, such as nitrogen in tires on a separate sticker. This practice can be deceptive and unethical. Do not accept these items and be prepared to walk away if the dealer insists on payment. This is often a sign of a problematic dealership.

5. Fake Fees

Fees such as the document fee are frequently touted as necessary but are often fraudulent. These fees are always added to the contract and are not real. A savvy customer can adjust their offer to compensate for these false expenses. The only legitimate fees are those mandated by the government, e.g., sales tax and registration fees.

Arming Yourself with Knowledge

Being aware of these tactics empowers you to navigate the negotiation process more effectively and avoid falling victim to scams. Walking away if you feel uncomfortable is a valid option. A new vehicle is a commodity that is available from multiple sources, and you do not lose out by shopping around.

By understanding the dealership's incentives and potential unethical practices, you can stay savvy and ensure a fair and transparent transaction. Remember, the power to negotiate lies in your hands, and you have the right to reply and seek a solution through the CSI Customer Satisfaction Index if you feel wronged after a deal.