Common Car Dealer Scams To Watch Out For

 abcnews

Beware of 'Extra Features' and Extended Service Contracts

While you're searching for great deals during the spring car-buying season, be on the lookout for aggressive sales tactics that could wind up costing you a lot more money.
Most car salespeople aren't predatory sharks. They are, however, out to maximize their profit. And they've got a litany of tricks up their sleeve to squeeze more money out of your wallet.
"The days of the plaid-jacketed guy who's going to rip you off are gone for the most part," says Jon Linkov, Consumer Reports' managing editor for autos. But there are plenty of dealers who are willing to take advantage of consumers with low credit scores or a lack of financial savvy.
Beware of dealers trying to sell you extra features like rust-proofing, fabric protection or windshield etching of the vehicle identification number. You don't really need them. You can buy a VIN etching kit for $20 at any auto parts store and easily do it yourself.
And Consumer Reports advises against plunking down extra money for an extended service contract. "You don't want to get suckered into that," says Linkov. "Buy a reliable car and take the money they want to charge you for an extended service contract and put that in the bank. If the car's out of warranty, use that money to pay for repairs," he advises. A reliable car isn't likely to incur costly repair bills anyway.

The easiest way for dealers to pad an invoice is by bumping up the interest rate on your loan by suggesting you didn't qualify for a better rate. The solution is easy: Know your credit score before you go car shopping.
Some dealers will say you have to fill out a credit application--including your Social Security number--to comply with the post-9/11 law to combat money laundering and terrorism. They want to run your credit report so they can try to lure you into dealer financing. Don't give up that information. If you show up pre-approved for a loan from your bank or credit union, you can use it as leverage with the dealer.
Four out of five car buyers finance their vehicle through the dealership, and odds are they're paying too much, says Mukesh Chatter, chief executive of MoneyAisle.com, an online auction site for auto loans. "A mark-up of 2% to 4% is standard in the auto industry," he says, and can be even higher for those with less than perfect credit. If you already got rooked on your car loan, you can refinance online at sites like MoneyAisle.com or bankrate.com.
At MoneyAisle.com, consumers can watch as up to 150 banks and credit unions bid on their loan in less than a minute. It's then their choice whether to follow through with the winning bidder. The auction is free for consumers. Chatter says the average consumer saves $1,243 a year refinancing through his site.
Another dealer tactic that could wind up costing you more money is negotiating the monthly payment rather than the price of the car. If you tip your hand about what kind of payment you can afford, the dealer could steer you toward a long-term loan with a very high interest rate, and a $299 monthly payment. "That's how you end up with a $40,000 Nissan Versa," quips Linkov.

Edmunds.com, eBay Motors and other car-buying sites also warn consumers to be careful when they are buying a car over the phone or Internet. Some unscrupulous sellers will ask buyers to send a check to an escrow account while a long-distance sale is completed. It turns out there is no car, and now they've got the buyer's money. Any time an escrow account is used to facilitate a deal, the buyer should establish it, not the seller, says Philip Reed, senior consumer advice editor at Edmunds.com.

The most important advice is to read all the documents before you sign anything. And whatever you do, don't drive away in your new car until you understand every detail of the purchase contract. Sometimes dealers will hand over the keys to the buyer and then call a few days later saying, "your credit application didn't go through." It's a ploy to force the buyer into a higher-priced loan that's more profitable for the dealer.
"You should always be prepared to walk," says Linkov. "Don't become emotionally invested in it. If you feel pressured, that's when you want to step away."