The Real Cost of Car Buyer’s Incentives
0% Financing, Cash Back and Other Shady Car Dealer Tactics.
Let’s face it; car dealers get a bad rap! However it’s mainly because of the various forms of trickery they use to sell you a car. A car salesperson is like a psychiatrist in many ways – they have a natural talent at reading human emotions. For instance if you are in love with that 2008 BMW with leather interior, but can realistically only afford the Toyota Echo you better bet the car dealer will be able to read you like a free newspaper on a Sunday afternoon – and he or she will try to push your hot buttons to get you to agree to lease that BMW that you want so badly.
An automobile is probably one of the most expensive items you will every purchase – besides your home of course. People get stressed when they have to pay out a lot of money on a car down payment, or when they have to sign a car loan that will tie them down to monthly payments for the next 3 to 5 years. A car dealers shiesty sales tactics makes this transaction that much more stressful. Excuse the cliché connotation, but it’s like selling your soul to the devil…only the devil is giving you a brand new automobile.
Not all car dealers are crooks, it just takes one brush with a slimy car salesperson and you’re trust level for the whole industry is shot.
Buying a new car should be an exciting experience. Sure you might not be able to afford that Bentley you always dreamed of, but driving off the lot surrounded by that “new car” smell shouldn’t be ruined by the suspicion that you just got ripped off by the person who sold you the car. That’s why we’ve put together this handy list of dealer tactics for you. We want you to be able to enjoy your car buying experience. And if you think you’ve come face to face with the devil in a car salesman get-up, we want you to be able to say “I think I’ll buy me car elsewhere”.
Top car dealer tactics exposed
The price-pack on – You’ve discovered this when you’ve purchased a television, stereo or dishwasher for your home. I’m referring to all of the little extras; you know the ones that are added on after you’ve agreed to a final price? These “extras” are packed on to the final price that you’ve agreed on in the guise of extended warranties or bonus insurance policies. Be wary of any car dealer that gives you a final purchase price for a vehicle and then mentions an extended warranty. They may also try to sell you on a gap insurance policy, which covers the difference between what the car’s value and the balance that you still owe. This is also called a car life insurance policy, which means that if you die before your car loan is paid off; the policy will pay off the balance of your loan. Remember these extras add up. They can tack on thousands of dollars in unnecessary warranties and insurance policies to your car bill that you’ll never use.
Padding the bill – This tactic is very similar to the old price pack-on, but this car sales scheme has the dealer adding on labor fees for work that is supposed to be done to your new car such as car stereo, tire, car interior and engine upgrades. My advice, tell the dealer you want a final price on the car – all upgrades considered – or else you are going somewhere else.
Unnecessary sense of urgency – It’s ironic how you can go to a dealership with 10 Ford Focuses on the lot, but for some reason the dealer will tell you that if you don’t buy NOW you won’t get the “special one-time discount price” on the vehicle. The dealer is really only creating a false sense of urgency, to make you feel pressured into making a quick decision. Most often these “discounted prices” offer thousands of dollars off the car’s sticker price – or so it seems. The dealer is actually cutting the sticker price to get you to buy the car, but bumping up the financing terms in order to get that money back. My advice is read the fine print. A car is a major purchase that will cost you a lot of money over the long term, so don’t let a car salesperson make you feel pressured into making a major purchase just because their waving a reduced price tag under your nose.
Haggling over sticker price – A car’s sticker price means absolutely nothing to American society at large. We feel that it’s in our distinct right to go to a car dealership and haggle with the sales rep over price, and we feel mighty good when it’s knocked down by even a few hundred dollars. However what is a hundred dollar difference off the sticker price of a $65,000 BMW? Not much sweat off the dealer’s back – especially when they tack that $500 you think you just haggled off the sticker price back onto the final price in the guise of a warranty. The truth is, when it comes to getting a deal from a car salesperson – we don’t stand a chance! However the dealer will play your haggling game because they know it inflates your ego – when really you’re paying exactly what they want you to for the car. My advice: Don’t let your ego get in the way and fog your judgment during the car buying process.
Low financing fiascos – Zero percent financing sure sounds like a sweet deal doesn’t it? Really it’s just the dealer’s way of getting you to feel rushed to make a car purchase. They will say things like “well the 0% financing is only on until the end of this week”, when really if you purchased the car for 0% financing they’d just boost the sticker price on the car to make up for what they’d lose in financing costs. That’s why it’s important to do your research on the car you want to buy. Go to the manufacturer’s websites and print out a price sheet on the car you want. A dealer can’t argue with paper evidence now can he? Also watch the length or your loan (the term of the loan) when 0% financing is offered. Oftentimes dealers will extend the term of the car loan to get the extra money out of you. So instead of a car loan with 1.2% financing over a 3 year term, you are getting a 0% financing over a 5 year term – however your payments are still $300 per month with both options – get it?
The old “poor credit” hoax – Dealers assume you have no idea what your credit score is, and they will use it against you? They will tell you lies like “your credit fell through” or “you won't qualify for low interest rates on your loan with your credit”, when really your credit score is perfectly worthy of low financing rates. You will challenge them if you know your credit score is good, but if you ever missed a credit card payment, you might just believe them and fall for this hoax. That’s why you should go to the dealership armed with a copy of your credit report. You can get a free copy annually from the Federal Trade Commission website, which states that every United States citizen has the right to request a copy from the top 3 crediting companies - Equifax, Experian, and TransUnion.
Cash incentives that you’ll never know about – Dealers are given annual cash incentives by the manufacturers. These are meant to be given to customers to encourage them to buy last year’s models and slow selling makes and models of cars. However don’t expect the dealer to advertise these incentives. It’s up to you to ask about them – and it just might save you a couple thousand dollars off of a car’s ticket price.
Comments