Did you ever wonder why buying a car takes so long? The process is complicated especially with financing involved. To make matters worse dealers like to add on extras with potential scams to boot. Here is a list of the top 10 car dealer scams:

VIN # Etching
Low/No Financing
Bad Credit Score
Mandatory Warranty
Dealer Add Ons/Certified Used
Dealer Mark Up
"We'll Payoff Your Loan"
Used Car Sold “As Is"
Bounced Check
Mandatory Credit Application
The VIN # Etching Scam

The dealer may try to charge you upwards of $1,000 for window etching. They may claim the financing bank insists on it for insurance reasons. Ask for more detail or a copy of the policy to see where it is in writing.

Some dealers might claim it is free up front but they may add it to your loan and balloon your monthly payments. Ask for this in writing so you have recourse if they add it on later.

A lender doesn’t require you purchase extras. They don't care what is included in the price. The lender only wants you to pay your monthly payments. Etching is simply a dealer add on.

The Low Or Bad Financing Scam

When you trade in your car the finance manager offers you an initial interest rate for your car loan. After a week or two you get the call saying you didn’t qualify for the original interest rate. In your contract there is a clause stating the deal is “subject to loan approval.”

This gives the finance manager way to get more money out of you. The contract can still change after you have signed it with the car in your possession as long as it is under the conditions in which you signed. At this moment you own the loan on the car. The bank currently owns the car until the loan is fully paid off.

The dealer may have free rein to charge more in finance fees (with interest) which will increase your monthly payment. This usually happens with loans to people with bad credit.

Their modus operandi is to sell you a car. If you have bad or no credit and you finance a car at 6%, expect a phone call in the near future.

If you suffer from bad credit apply for financing at a credit union before hand and see the total amount you are approved for. Buying a car should be made on the total price of the car and not the individual monthly payments.

The Bad Credit Score Scam

If you are unaware of your credit score the dealer will claim your credit score is trash and you're approved for a junk loan. You may have a 780 score but if you don't check beforehand they may claim you are only approved for a 4.5% loan when you should get a 1.5% loan. There is no getting around it unless you go in armed with the correct information.

Keep a record of your recent score or if you have access to your credit score with your online banking app show them what you know. If need be walk out and let them chase you down. They may magically inform you they have a secret financing offer you were just approved for when all along it was original offer they didn't tell you about.

"...it seems like you may be saving money by using their financing, they prefer you pay this way as they make more money..."
4. The Mandatory Warranty Scam

The finance manager may claim they can lower your loan rate if you purchase the extended warranty. They will give you a better deal if you pay more overall. Financing is based on the banks assessment of your ability to pay back the loan. The better chance you will pay it back, the better rate you will receive.

If you are approved for one rate and then you add up to $3,000 more to the loan your ability to pay back the loan will be more difficult. If anything this should INCREASE your interest rate not lower it.

Once again have them put it in writing it is required by the bank that you are required to pay the extended warranty to receive a more favorable interest rate. This claim has no basis and they may be liable to fraud. In other words, they will never give you this claim in writing.

5. The Dealer Add Ons or Dealer Certified Scam

The dealers certified inspection includes a long list of things the dealer addressed before offering the car for sale. This is another way for the dealership to raise the price of the car. They may tell you "our 125 point inspection is worth $1,400" when in fact it's something anyone can do. Sometimes the dealer does not complete these inspections at all.

Sometimes the dealer will inspect the car while the original owner is trading it in. Boom, 125 point inspection complete:

- "That'll be only $2,000 extra, Bob."

On new cars they leave the manufacturer delivers the car or truck with a rigorous quality inspection completed. The delivery fee is included and there is no more work to be done. The car is retail ready and any additional charges are simple extortion. Walk away if they won't budge.

6. The Dealer Mark up Scam

Dealers post a manufacturer’s suggested retail price (MSRP). It can include premium extras added at the dealership, not from the factory. These are simply added on costs transferred to you, the consumer. Some will pay without knowing they can be taken off a lot of times. Others assume they come with the car becasue they haven't done their research.

The dealer can charge a premium for these options or they can throw them in at the original cost of the vehicle. Be aware of what is factory stock and what was added at the dealership for an enormous premium.

"Read the final contract before you sign. Do your due diligence one last time right up until the very end of the process. You have no recourse if there was something sneaky thrown in in the final seconds."
7. The "We'll Payoff Your Loan" Scam

The dealer will offer to pay off the amount owed on your trade in no matter the amount. The buyer assumes the debt on the car is paid off by the dealership and they are off the hook. But in reality that is not the case. forgetting to tell you how high your fees are going to be for breaking the lease agreement with your old dealership.

If you leased a car you will be on the hook for the early termination fees. If you financed your trade in they will give you a value far below what it is worth and turn around and sell it turning a profit. They will then add what you owed minus their assessed value to your new loan. They can try hiding the increased loan amount by extending the loan term. Be careful you may end up paying another year of payment.

8. The Used Car Sold “As Is” Scam

When a car has suffered significant damage and it has not been totaled (it still carries a clean title) the dealer can sell it "as is" or without a warranty. You can't return it if it breaks down leaving the lot.

You have no recourse if anything goes wrong. They won't off an extended warranty either, something that is really pushed onto customers with new and certified cars (because they won't have to work on these care = free money = ca-ching = don't do it). The offer may sound great but if the dealership doesn't trust their own repair work why should you?

Pro tip: When going through a divorce you can offload a bad asset such as a precarious auto on your future ex.
9. The Bounced Check Scam

Some dealerships will not accept checks from certain banks or credit unions. They have this policy, not to protect their interests, but you get you to buy with in house financing. They make more money off of financing vehicles than selling them cash from your pocket or from another lending institution.

Call ahead and ask if they have any problems with financing through your bank before you walk in. It may save you a lot of time and hassle wasted in person as you can just hang up if they try their sales tactics.

10. The Mandatory Credit Application Scam

If you are hoping to pay for a car outright, do it in  cash or check. Some dealerships will try to get you to pay through their in-house or partnered financing.

While they may try to spin it so it seems like you may be saving money by using their financing, they prefer you pay this way as they make more money off of long term interests rather than a cash deal. You may hear them tell you one of these lines:

“Everyone fills out a credit app first."
“It’s company’s policy”.
“State laws requires all customers fill this out.”

If you hear any of these lies know will what’s going on. When you are paying cash there is absolutely no reason to fill out a credit application. No state will force you to apply for credit. #Merica

These are the most common auto dealership scams we have come across. There may be more so always be on the lookout when purchasing something this large. Being patient and doing your research before hand can save you a lot of money in the long run.

If you have come across more scams not listed share them below. We would love to add them to this list so more people can make car dealers honest citizens.

Have a good one and stay dirty.

A continuation Part III: Negotiating At The Dealership