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- A Car Dealer Scam You Should Avoid

new porsche cayman s.jpgFor many people buying a car is like going to the dentist; you’ll get rid of some long term pain by undergoing a few of the most grueling hours imaginable. It’s not made any easier by some of the crap the dealers pull in an attempt to scrape a few, or more bucks from every sale. Some of the techniques they use are not so bad, but others are downright unscrupulous. Not all car dealerships operate this way, many are great businesses that operate under the principle of “treat the customer right and they’re yours for life”. Others  however, more than deserve the bad reputation the industry as a whole has earned for itself.

Here is a dealer scam you should look out for if you venture into a car dealership this summer. As with any major transaction, you should bring your best stuff and keep your guard up. Make sure you read every little thing before you sign it. It won’t be easy, with the 40 page contract you may be handed, but think about it for just a second, please. If there are uh, questionable, clauses in the contract where would you expect to find them? Well, buried deep within it, of course, and probably in small type.

One way you can avoid the following scam, and many other questionable car dealer practices, is to secure your own car financing before you venture anywhere near the dealer’s lot. They make a substantial percentage of their profit on what’s known as the back end of the deal. That includes everything that you buy besides the actual car itself. One of the main profit centers of most car deals is the financing package. That’s because the dealer often sells the financing contract for a nice bit of extra money over and above what they made on the vehicle. They can make as much, or in many cases more, than they do on the car sale itself. There are some dealerships that almost use the car deal as just a vehicle to sell financing products. It’s amazing.

I know; I worked at a Nissan dealership for a summer during college. Looking back on it now, it was a great education. I know now they were not one of the dealers you’d want to send your friends to. That’s probably one of the reasons they went out of business years ago. Sorry, I digress.

The scam that makes me hot is known as the “spot delivery scam”. You may have had it happen to you or someone you know before. It’s pretty simple, really. You go to the local car dealership and find that fantastic bit of plastic, aluminum, and steel that’s been keeping you up nights for the past year. It drives even better than you imagined. Oh my god! The power just shoves you back in the seat when you barely tap the accelerator. It corners like it’s on the proverbial rails, too. The leather on those seats is so butter soft, and smells out of this world (sorry, PETA!).

The salesman seems like a pretty nice guy too. After a bit of haggling (you weren’t born yesterday, after all) you work out a great deal on your new plastic fantastic and go zooming off the lot, sun streaming through your new sunroof. You really worked them over, didn’t you? Boy, that motor sounds great! After a week, your enthusiasm for your new love hasn’t diminished in the slightest. In fact you are more enthralled with your new car than you were when you first took it home. By now you’ve showed it off and bragged about it to all your friends, your associates at work, parents, and the guys on your softball team.

That’s when the phone call comes. “Mr. Jones, hi, it’s Mike down at XYZ Motors. How are you liking your new ride?” Yeah, we sell a ton of those, we can’t even keep them in stock. They’re one of the best cars in the past 5 years. I knew you’d love it. Hey, we got a call from XYZ financial today. It seems there was a little problem with your financing. It’s no big deal, really.” ”I’ll take care of it for you. I just need you to come in and sign a few papers. It’ll only take a second, and I’ll get you back out on the road. You want another excuse to drive your cruiser anyway, don’t you? Would you rather come down this afternoon or in the morning?”

You have just been victimized by the spot delivery scam. They let you take the car but hadn’t actually approved the financing. You signed a contract with a “upon approval of financing” clause. So, you signed a contract, drove off the lot in your new car and actually didn’t own it yet. After you take mental ownership of the vehicle, they call you back and lower the boom.  If you’re lucky, you can just take the car back, but don’t count on it. For one thing, due to human nature, few people would ever do that anyway. In their mind, it’s now their car. They want to keep it that way, and if they only have to pay an extra $20 - $50 a month, they’ll do it.

The scam is worse because the dealer knew exactly what financing you were qualified. They knew more about your credit than anyone but the feds and your bank. They can get you into a higher interest loan with this scam, however. They basically bait you into the car with a low interest loan, let you mentally embrace it, take mental ownership of it, and then hit you with demands to revise the financing terms you agreed to. Most people just go along with it. That’s one of the reasons to secure your financing before you ever go near a car lot, and to get your credit rating up as far as possible before you make a major transaction.

That’s only one of the little tricks and psychological games you’ll encounter when you’re buying a car. There is a litany of others, ranging from extremely subtle to the completely insane. The best way to counter these is to be as informed as possible and to have your financing before you go to shop for a car. The car dealer should obviously be able to make a profit. They have high overhead and provide jobs and a service for the community. But they should not be underhanded and try to screw the consumer, which some do, and do it with gusto.

A fantastic resource to discover what you’ll face at the dealership, and show you how to potentially save large sums of money is Peter Humleker’s book Car Buying Scams. As a former dealership general manager, he’s seen it all and can give you a rare insider’s perspective on what you’ll encounter and what to do about it.



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