Auto Dealer Scams

Status: Useful stuff to know if you're buying a car
Florida businessman Earl Stewart has started a blog, Earl Stewart On Cars, that's full of useful insights about the auto industry. Some of his observations about auto dealer scams and deceptive sales tactics are particularly interesting. Here's a few of them:
• The “Big Sale Event”. If you look in today’s newspaper, you will find that most car dealers in your area are having a sale of some kind. It may be because of a current holiday, “too large an inventory” of cars, to “reduce their taxes”, “the manager is out of town”, or some other nefarious lure... If you don’t buy a car during the tight time constraints of a phony sales event, you can negotiate just as good a price the next day.

“The Price I’m giving you is only good for today”. If a salesman or sales manager tells you that, it is probably only a tactic to push you into buying the car.

“Take the car home tonight and see how you like it”... there are two reasons the car salesman offers this. One is that you must leave the vehicle you might be trading in with the car dealer. This means that you cannot shop prices with other dealers. The second reason is the psychological impact of parking that new car in your driveway where your family and neighbors can see it. The slang expression for this is “the puppy dog”.

• The “really big” discount”... Federal law requires new cars to have a price sticker on the window named the Monroney label. A discount from this suggested retail price gives you a fair basis for comparison. Unfortunately, most car dealers today, increase the suggested retail price substantially with the use of an addendum to the Monroney sticker often referred to as a “Market Adjustment Addendum”. This “adjustment” can be several thousands of dollars. Be sure you know what the asking price is for the car when you have been offered a “big discount”.
In Hippo Eats Dwarf I noted an outrageous example of misleading advertising used by one car dealership. They had a "half-price sale" during which "The price you see is half the price you pay." Think about it.

Carl Sifakis has also cataloged a number of auto dealer scams in his book Hoaxes and Scams: A Compendium of Deceptions, Ruses and Swindles.

For instance, there's the practice (now illegal in many states) of "bird dogging" in which car dealers pay people who refer customers to them. Obviously someone getting paid for a referral might not be objective. Plus, as Sifakis notes, "car salesmen aren't about to give a customer referred by a bird dog an extra good deal." He then relates this story:
New car salesmen tell the standard story of the sharpie to whom a potential buyer was referred. The salesman promptly took him for almost list price, despite the fact that the customer had a trade-in that also netted the hustler an extra commission. The salesman also took the shopper for financing and insurance at very favorable terms—that is, for the car dealer. The kicker to the story showed up on the paperwork when the salesman filled in his contact for the sale. In the space naming the source, he'd written "Mother."
Then there's the practices of lowballing and highballing. In lowballing the salesman offers to sell a car for a ridiculously low price, only to reveal later that the manager hadn't approved the price, and that the real price is much higher. Many people will then buy the car anyway, because they've already got their mind around to the idea of buying it. Highballing is the same thing, but switched around so that the dealer will offer to buy a trade-in for a ridiculously high price, only to reveal later that the manager hadn't approved that price.

Advertising Business/Finance Con Artists

Posted on Wed Jul 19, 2006


I hate buying cars. I got Highballed twice on trades. Both times I walked out, and got my price before I could turn on the ignition on my prospective trade in. Sometimes ist's a good Idea to shop for a car before you desparately need one.

Of course, there is the time I rolled into the dealer with my trade in smoking. Of course the deal had already been made. Scared the salesman a bit. Lucky for him, the source of the smoke was just a pinhole leak in a coolant hose.
Posted by mmarvi  on  Wed Jul 19, 2006  at  01:45 PM
As some of you know, I sold cars for Ford and Nissan for 5 years. We used different tactics to out do the other dealerships down the road. Everyday is a sale though. But, there are times to where they won't sell a particular car at a certain price the customer had the previous day, I have seen it really depends on where the dealerships #'s are at.
Posted by X  in  McKinney, TX  on  Fri Jul 21, 2006  at  12:46 PM
this stuff isnt just cars in chinatown all of the jewelry stores have big going out of business signs in the windows and i work at a hotel and always tell people the room price is ten dollars higher than it is and then when they have a reason for a discount like military, AAA, or AARP i take the price down ten dollars to the original price of the room
Posted by kristina  in  San Francisco  on  Mon Jul 24, 2006  at  02:50 AM
I used to sell new Fords for about six months after college before I got a real job. Selling cars was an absolutely horrible way to make a living, and I despised it as well as most of the people I worked with in that classless, crass, dishonest business.

Here are a few things to watch out for:

1) The "Back end". Most dealerships receive a "cut" from the bank or financier when you finance your car through the dealer. The financier gives a "buy rate" that the dealership is authorized to offer you (an interest rate on the loan) and the dealership then tries to get you to sign for a higher rate... and the dealer and financier split the difference. Often, the amount of this "back end" money exceeds the profit made on the vehicle purchase itself.

2) The "dealer invoice" is a load of crap. Buried in that ridiculous dealer "invoice" are usually items called "pack" and "holdback" (or other names depeding on the brand) but basically these are charges shown on the invoice that the dealer either never has to pay or is refunded by the manufacturer after the sale of the vehicle. The invoiced but unpaid items usually total between 5-9% of the "invoice".

3) The end of the month is absolutely the best time to buy a car- most salesmen and managers get paid two bonuses per month: One for net profit, and one for total sold units. Most car guys want to make their net early in the month so that they can "blow out units" to make "unit bonus" at the end of the month. Managers are usually on some form of this plan as well.

4) "Show for your trade" is crap. The "price" that dealers "show" you for your trade-in is never accurate, it always includes part of any discount they are giving you so that if you shop it around before buying, their offer for your trade sounds better than the blue or black book price as well as any off-the-cuff price a salesman at another dealership might quote you. If you want to know what your trade's worth for real, you have to see the "Black Book" price, which is an industry regional guide. Some dealers will let you see it, even though they're not supposed to.

5) "No Credit Application Will Be Refused." Don't fall for this. Of course your "application" for credit will not be refused. They might refuse to give you a loan, but they'll take your frickin' application. Also "No Credit? Bad Credit? We Finance Anyone!" is crap too. Yeah, they'll guarantee to finance you... but if your credit is horrible they'll want 50% down and charge you 29.95% interest. I actually had to deal with a customer once when my dealership ran one of these "We Finance Anyone" ads, and this guy had horrid credit and when the bank sent us the buy rate, they would only finance him if he put down 60% (SIXTY PERCENT!) of the purchase price.

Just watch out, it's all crap and no car dealer ads are real. They're all unbelievably misleading.
Posted by SoxSweepAgain  in  NYC  on  Mon Jul 24, 2006  at  09:32 AM
What is wrong with wanting 60% down if the person is a total deadbeat and the chance of them paying for the vehicle is slim to none? Lets remember that the customer is the one that have the horrid track record of NOT PAYING HIS BILLS. So if by the grace of God that someone is willing to actually give this roach a loan I would think that if they have to repo the car that their risk is low that they will lose money when they sell it. And if the lender is going to take such a big risk to loan this person money I sure as hell would want a high yield return.....

Moral... Pay your frickin' bills and you wont have to worry about putting alot of money down OR paying high interest.
Posted by Pay your bills deadbeat  on  Wed Sep 06, 2006  at  12:25 PM
Of course dealers make a cut on the financing, remember they are finding you a bank to finance you. If it bothers you so much that they make a few bucks on that, pay cash or go to your own credit union which will also make money on your loan! People want everything these days when it comes to cars, yet the don't want to pay anything for it!

I love these sites, I sell about 4-6 cars a week, that's more than you will buy in a lifetime. I can beat you at any game, I do this all day, everyday. You do this once every three years!
Posted by Scott  in  Los Angeles California  on  Mon Oct 30, 2006  at  09:07 PM
"Lets remember that the customer is the one that have the horrid track record of NOT PAYING HIS BILLS."
A credit score does not necessarily mean a person has a horrid track record of not paying bills. You can get a crappy credit score from one year without a job, and 6 years later the score will still be bad. It takes 7 years for old history to go away.
Posted by Josh  in  Seattle, WA  on  Sat Jan 06, 2007  at  11:09 AM
I'm a single mother with a 4 year old daughter who I took with me to buy a car. The dealership sold me a 2002 maxima clean title never been wrecked. 2 months later they called me to come in saying they wanted to make sure the car was running properly, cause there were a discrepency on the title. I took it the next day and they told me to get my stuff out of the car and take a cab home which was 50 miles away. They said the title was salvaged. They detained me and my daughter there for almost 5 hours until the sgt of the police dpt came and said I could take the car home. Later I found out that the dealership never did own the title or the car. I still have the car but cannot get tags for it. The dealership payed my loan off. I'm still waiting to see if I get the title or not. I don't like dealing with dealerships because what I have been through with this one!!
Posted by Kennetha  in  Morristown  on  Wed Jan 24, 2007  at  11:08 AM
We purchased a 2002 Saturn for my daughter in August 2006. We purchased the car from a respected Dealership whom we had purchased cars from previously. WE have yet to get the title. Each time we call they state that it will be another 7 days before the title will be available. State law says that we can return the car to the dealership, but they stated they will charge us 35 cents per mile that my daughter has put on the car since it was purchased. This adds up to 4200.00, yep, 4200.00.We only paid 7600.00 for the car. Any thoughts?
Posted by Beverly  in  Utah  on  Tue Feb 13, 2007  at  05:55 PM
Well, sounds like you got scammed into a car lease. Know what you're doing when you sign those papers. I have visited dozens of dealerships and have gone through many chats with various sales people. I always say:

1. Get the true invoice cost of a car.
2. Visit and read Jeff's instructions on negotiations.
3. Pat yourself on the back for being an educated consumer.

Posted by Stoneman  in  Canada  on  Sun Feb 18, 2007  at  06:14 PM
You can find information and advice at kelley blue book site, nadaguide or edmund.

Some sales manager just target with their commission.
Posted by phipphin  in  Bangkok  on  Tue Mar 04, 2008  at  12:03 AM
I signed papers for a loan.. left my trade in. Took the new car home. They called a week later & said we found a better deal. When I went in they said the bank changed it's mind & wants more money down & a higher % rate. I don't have $2000 more dollars. They have both cars and my $5000 down. They say I have to pay the $2000 more and sign new contract or I get nothing.
Posted by David Miller  in  home  on  Sat Jul 05, 2008  at  10:22 PM
From one connoisseur of bad car salesmen to others, I thought you'd appreciate this... (warning: R-rated language)
Posted by Greg  in  United States  on  Tue Dec 30, 2008  at  01:37 AM
Make sure you get prices from different dealers in your area, or you may be in trouble.
Posted by JR  on  Tue Jan 26, 2010  at  10:14 AM
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