The process of buying a new car can be both financially and mentally straining. Aside from a limited number of sellers such as CarMax, dealerships that offer fixed prices on new cars are hard to come by. On top of that, the industry is rife with deceptive sales strategies that consumers need to be aware of so they can get the best price on a new ride.
Problems with new-car dealers consistently rank near the top of the Better Business Bureau's list of consumer complaints. Many dealers are armed with salespeople trained to tack on as many unnecessary costs as possible, such as extended warranties that offer minimal coverage and add-ons (such as a GPS) that are already installed. It's an issue that affects everyone from cash-strapped consumers in the market for an economy car to families in search of a middle-of-the-road van, all the way to those looking for a new sports car. Across the board, people who don't do their homework before hitting the dealership are most susceptible to being taken advantage of.
Some sly sales tactics are more common than others, but that doesn't mean they're any less egregious. U.S. News spoke to industry experts for advice on how to recognize and avoid five of the biggest tricks:
The old "bait-and-switch." Due to its effectiveness, this type of hustle has been around for a while and also takes place in real estate and other industries. Buyers are often enticed by an advertisement for a certain vehicle, but when the arrive at the dealership, they're told the car is no longer available. It's important to remember that there are a large number of models in a dealer's new-car inventory. Consequently, if a salesperson says the advertised car no longer exists--that it was "just sold"--that's usually a sign of a shady dealership, says Joe Wiesenfelder, executive editor of cars.com. He recommends contacting the seller to inquire about a particular vehicle before stepping onto the lot.
[Read: Protect Yourself From 10 Menacing Financial Scams.]
"It's time for a new one." Many times, the first words a new-car buyer hears are, "What brings you in today?" Sure, it may sound friendly and innocent, but that's not always the case. Instead of simply asking what customers are looking for, salespeople are also hoping to find out what's happened to their current vehicle. If the owner lets on that the car has been damaged or is at the end of its life, the salesperson may try to pressure the person to make a purchase. However, consumers should keep in mind that there's room to negotiate. "Saying you just cracked up your only car and can't get to work the next day without one isn't going to work in your favor," Wiesenfelder says.
Also worth noting: Car salespeople aren't mechanics, so you shouldn't take their word for what shape your car is in.
"Come on in and we'll talk." The dealership may be down the street, but that doesn't mean you have to drive there to talk business. Gregg Fidan, creator of the peer-to-peer car-buying resource RealCarTips.com, says buyers should negotiate the price by phone or email--not at the dealership. "If you go to a dealership to negotiate, they have the upper hand," Fidan says. "You've taken the time to go there, which means you're in a controlled environment, in which they'll try to wear you down until you agree to their price."
Keep in mind that a salesperson's job is to close the deal as soon as possible, so don't be fooled by the claim that an offer is only good that day. "Technically, a dealer can sell any car at any price at any time, regardless of whether there's a 'tent sale' ongoing," Wiesenfelder says.
[Read: How to Bargain for a New Car]
"Yo-yo financing." Prospective car buyers with poor credit are especially vulnerable to this trick. It's a basic scheme: The dealer sells you the vehicle on the spot--before the financing is complete. They'll then give you a call a few days later saying your loan application fell through and you have to come back in and sign one at a higher interest rate.
To maneuver around this issue, consumers should get pre-approved for a loan by a credit union or bank before heading to the dealership, says Ronald Montoya, Edmunds.com's consumer advice editor. That way, you'll walk in knowing what you qualify for and can see if the dealer will beat the price.
"The four-square." When you sit down with the dealer to calculate the costs, he or she may pull out a sheet of paper divided into fourths: one corner for the trade-in price for your car, one for the purchase price of the new car, one for the down payment, and the last for the monthly payment. From there, the salesperson begins crunching numbers--most likely making it too hard for you to follow.
[See 50 Smart Money Moves]
Throughout the process, the salesperson tries to draw your attention to the monthly payment. If you're focused on that payment, you may get locked into a higher interest rate. "Don't lose sight of the other, more important aspects of the deal by fixating on the monthly payment," says Montoya, adding it's easy to lose track of the final cost.
The bottom line: Arrive at the dealership armed with knowledge so you can hit the road knowing you've snagged a great offer.
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