The Land Mines

In my recent discussions we have explored the practices of the auto industry. We have talked about buying new and used cars.

This article will reveal some of the sleazy practices of the less-ethical auto dealers. Do not assume that all dealers and salespeople resort to these tactics because they do not. I have known several very nice people in this field. However, some of the people in this industry have become masters at exploiting the ignorance of the masses, so now you will know what to watch for.

Eventually, you will settle on a vehicle you like. It would be nice if you could just take it to the cash register and get a good deal, but many dealers want to see how many extra dollars they can squeeze out of your pocket before they complete the transaction. Let’s take a look at some of the common “shifty” practices of the bad boys.

• Do not surrender your keys to the used car manager or anybody else in the dealership. Some dealerships will use this ploy to keep you from leaving. Once they have your car and the keys safely set aside, it is difficult for you to get out of there. If they want to test your vehicle go with them and get the keys back before you resume negotiating.

• One of their many sales techniques involves using a “manager” against you. The sales person first tries to get you to sell your vehicle for wholesale and buy his vehicle for full price, but when he meets any resistance from you, he starts talking about his manager. They want you to make a written offer, which “must be approved” by the manager. Naturally, the manager NEVER accepts your offer. They will always attempt to squeeze more out of you. They are willing to stretch the negotiations out for hours if necessary because they are obligated to be there all day. On the other hand, they expect you to grow impatient because you want to do something else. The dealer will try desperately to get you to pay more by telling you what a one-of-a-kind bargain this car is, or the other buyer who is just about ready to grab up the vehicle, but don’t fall for that. They don’t usually let real buyers get away and besides if you lose this particular auto, there are thousands of others just like it.

• When the first salesman suspects that he has exhausted your patience, he will call in a substitute. The “T.O. Man” (take-over man) is a master closer. This fellow is a little different than the mystery manager from the above example because you will actually meet him. He will ask you something like, “What do we have to do to put you in this car today?” Regardless of your response the answer is, “I can’t do that, but if I can get the boss (we are back to that practice) to agree to blank will you go along with him? What a loaded question!!! He has made no commitment at all, but has gotten you to establish your “starting point”. (see above). Tell him you want to know their best deal and you will decide to take it or leave it. Before you answer them be certain there are no additional fees (Like dealer preparation). We have already established what to pay.

• Once the price is hammered out, they will escort you to the office of the Financing Manager, where there are more sleazy tricks than anywhere else on the dealer’s lot; and, those with poor or substandard credit are more vulnerable than anybody else. Here is an interesting and common tactic that comes into play whenever the dealer helps customers to obtain loans from banks. The dealer offers to help you get your loan. He obtains up to five of your Credit Scores: these can include your FICO scores or standard scores or Enhanced Auto Scores from one or more major reporting agencies. Then he gets you approved based on your best score. But, when he presents the loan package to you, he pads the numbers any way he can. He writes up your loan based on whatever he can get you to pay above and beyond what the bank would have accepted. Since the bank cannot accept the overpayment, they kick-back the “juice” to the good ol’ dealer and you get screwed every month thereafter as you make your payments.

• Another tactic involves misleading you about your loan approval. They assure you they can get your loan approved and then they “help” you sign all of the paperwork. After those formalities are out of the way, they whisk you out the door with you new vehicle. About a week later they call you back, whether you got approved or not, and tell you your loan was denied because of poor credit. They advise you that your credit score falls into a high-risk category and lenders have to charge higher rates to off-set the risk. Naturally, they can save the deal for you if you pay more money down or make higher payments. When you squawk, they show you the “fine print” on their contract that says the deal is contingent upon getting financing. If you demand to undo the deal and get your trade-in back, they tell you they have already wholesaled it out and they do not have it any longer. If you get caught in this scam demand to see the rejection letter from the bank or tell them you will be giving the state attorney a call.

• They have a scam they pull involving cosigners. They tell you that you do not qualify and if you can get somebody else to sign for you, such as grandma, you can still get the car. Then they prey on grandma’s kindness and ignorance. She does not know what you have agreed to or about the fine print so she willingly signs anything they ask her to, and you can imagine where that leaves you. The bottom line is, if you need a cosigner you ought to ask yourself if you can really afford this particular vehicle.

• Beware when they tell you that your bank’s checks are not accepted. Sometimes they will say that your particular bank’s checks are no good or they take too long to clear, etc. Then they will try to help you get financing from their own bank. You know what happens from there. Once again tell them you would like to call the Attorney General’s office in your state to see if they know about any such practices.

• The finance manager is going to try to sell you an extended warranty, but I would NEVER ever get one because of my basic philosophies about insurance. However, if there is some reason you think your vehicle is more likely to experience severe maintenance problems than an average vehicle, then you can get good extended warranties on line, where there is real competition for your business. Never let the finance manager tell you that the lender requires an extended warranty, because lenders do not do that. If the bad boy persists, tell him to write down the fact that the lender requires it so that you can check with your state’s attorney.

• Many dealers like to sell service contracts. You pay an upfront fee and then you can bring your vehicle back for free oil changes, tire rotations and other routine jobs. If you do indeed use all of the coupons, you do actually enjoy a modest discount, but after the dealer has your money a lot can go wrong. You might forget to come back or sell the car or move away or it gets in a wreck. This program is designed to get you into the service department where you will be unlikely to get any great price breaks. I suggest you forgo this expense and look for bargains as you need them.

• Dealers are notorious for add-ons. This mostly applies to new vehicles but there are some of them in the used market as well. One example is they offer to upgrade your tires, then they charge you for the new tires and keep the other tires, whether they are new or not. Be sure to read your invoice well. Make sure they have not charged you for things like Dealer Preparation, under carriage rust protection, extra detailing or cleaning, service contracts, fabric guard, or paint sealant unless you already approved it, which I hope you did not.

This is just a partial list of the ways that naïve consumers get mistreated, but I am certain new tricks are popping up all the time. Fortunately, you can avoid falling into any of these traps just by knowing they exist.

Note: The above article and several of the ones that preceded it are part of one chapter in my upcoming book about family finances, entitled Stop Flushing Your Money Down the Drain.

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