When you’re buying a car, it’s crucial to be aware of the tactics that dealerships might use to inflate your loan amount without your knowledge. Understanding these tricks can help you negotiate better and save thousands. Here are six common dealer tricks that could add unnecessary costs to your loan.
1. Marked-Up Interest Rates
Dealerships often have access to financing rates that are lower than what they offer you. They may present you with a higher interest rate than you qualify for, pocketing the difference as profit. This markup can significantly increase your monthly payments and the total cost of your loan over time.
To avoid this, do your homework before visiting a dealership. Check your credit score and shop around for the best financing options from banks or credit unions. This way, you’ll have a solid baseline to compare against the dealership’s offers.
2. Add-On Products
Dealers frequently push add-on products like extended warranties, paint protection, or gap insurance. While some of these products can be helpful, they often come at inflated prices when purchased through a dealership. You might find that they add thousands to your loan without providing real value.
Before agreeing to any add-ons, research their market prices. If you decide you do want any of these products, consider purchasing them separately from third-party providers, which can save you a considerable amount of money.
3. Unnecessary Fees
Dealerships sometimes include a variety of fees that can be hard to justify, such as documentation fees, dealer prep fees, or advertising fees. These can add hundreds or even thousands to your final loan amount, and many are negotiable or entirely avoidable.
Always request a breakdown of all fees included in your deal. If you see something that seems excessive or unnecessary, don’t hesitate to question it or ask for it to be removed. Being proactive can save you significant amounts in the long run.
4. Trade-In Manipulations
When you trade in your old vehicle, the dealer might undervalue it to lower the amount they credit toward your new purchase. This can effectively increase the amount you need to finance, costing you more in the long run. Dealers may also apply this tactic by presenting a high price for your new car while giving you a low ball offer for your trade-in.
To avoid this, research your trade-in’s value using resources like Kelley Blue Book or Edmunds. Having this information gives you leverage during negotiations and ensures you receive a fair trade-in value.
5. Loan Terms Manipulation
Dealers may extend loan terms to make monthly payments appear lower, but this can lead to paying significantly more in interest over the life of the loan. A longer loan term might seem appealing, but it often results in higher overall costs, including interest payments that could stretch over several years.
Always calculate the total cost of the loan, not just the monthly payment. A shorter loan term may mean higher monthly payments, but it can save you thousands in interest charges and help you pay off the car sooner.
6. Bait-and-Switch Tactics
Some dealers may advertise a low price to attract buyers but then claim the vehicle is no longer available when you arrive. They often try to sell you a more expensive model instead. This tactic, known as bait-and-switch, is not only unethical but also can lead you to spend more than you initially intended.
Stay vigilant and don’t fall for this trick. If a dealer uses this tactic, walk away. There are plenty of reputable dealers out there. Stick to your budget and be prepared to shop around to find the right deal without falling for misleading sales tactics.
Being aware of these dealer tricks can empower you to negotiate effectively and keep your loan costs in check. Knowledge is your best tool when navigating the car-buying process, so stay informed and protect your wallet.
More from Steel Horse Rides: