Category Archives: Consumer Education

Top 10 (New) Car Buying Mistakes

Here are a few of the mistakes that people (unknowingly) make when they buy a car. If you have purchased a car in the past, maybe you’ve made a couple of these mistakes.

1. Making an offer to a salesperson
A common way for car salespeople to get negotiating started is to ask you what monthly payment you can afford. Sounds fair enough – right? Wrong! Monthly payments are loaded with several factors: vehicle price, financing, and your trade-in are just a few of those factors. If you "offer" up the payment that you can afford, you’ve given them your bottomline and they no longer have to work to earn your business. This mistake can cost you thousands of dollars if you haven’t done your homework and do not know what other buyers have paid for the same vehicle.
Read More Negotiating Tips

2. Negotiating the purchase price, trade-in, and financing
With a monthly payment, a salesperson can structure things to appear as if you are getting a great price, financing, or trade-in – which ever appears to be your focus. NEVER negotiate the vehicle price, financing, and a trade-in all at one time. Do your research ahead of time, know what is a competitive price for the vehicle, know what your current vehicle is worth, and shop around for a low interest rate. This is the only way to know whether you are getting the best deal for all factors.

3. “Shopping” less than 5 dealerships
Throughout this site, you’ll find a common theme. COMPETITION = SAVINGS FOR YOU. By "shopping" 5 dealers, you increase the competitiveness of the negotiating and you will receive lower car quotes as a result. "Shopping" does not mean "visiting 5 dealers". "Shopping" means getting quotes from at least 5 dealers. This can be completed right at home on your computer by applying for FREE dealer quotes on websites like and . You simply fill out a short form and you will receive quotes from up to 4 dealers.
Read More About Car Quotes

4. “Visiting” more than one dealership
Using the internet, you should only need to "visit" 1 dealership. (You will visit 2 dealerships if you test drive the vehicle beforehand and end up purchasing the car at another dealership.) You can receive car quotes from multiple dealers right at your computer and save yourself hours of negotiating inside a dealership.
Read More About Car Quotes

5. “Paying "sticker price" for an extended warranty
As you complete the final paperwork for a new car, the finance manager will offer up several add-ons. One of those add-ons being an Extended Warranty. Unknowingly, many car buyers buy the Extended Warranty without realizing that they could have saved 30-50% by shopping around. The markup on these warranties is considerable. Companies, like Warranty Direct, make shopping for an extended warranty easy by offering free, no obligation quotes right on their website.
Read More About Extended Warranties

6. Buying without price-comparing interest rates
It’s easy to see how many people may fall for this trap. When many car buyers see commercials and advertisements for 2.9%, 3.9%, and 4.9% financing, they think that it is the "best deal". This isn’t always the case. If there is a cash back incentive offered on the same vehicle, you need to run the numbers NO MATTER HOW LOW the rate is. Yes, that’s right – even if you are offered 1.9% financing! Many manufacturers offer considerable cash back incentives and you may save more money by accepting the cash and financing your vehicle through another bank, like <Capital One Auto> or <HSBC Auto Finance>.

If you have bad credit, it is even more important for you to price compare interest rates! Since your credit score is low, you will be paying a higher interest rate. This is a gold-mine for dealerships. If you feel embarrassed about your credit and are afraid to look at your credit report, this is the time to tackle it head on. Whether you can correct blemishes on your credit report or not, you DON’T have to accept a higher interest rate from a dealership. There are companies, like RoadLoans and Harbor Credit Auto Finance , that offer competitive interest rates for people just like you. Price compare – it will save you money.

7. Buying without comparing insurance quotes
Buying a new vehicle or even a used vehicle can and will likely adjust your insurance premium. Whether you have been with an insurance company for 10 years or if this is your first time to get auto insurance, you may be able to lower your annual insurance premium. Insurance is calculated on more than your driving record. Your credit scores, where you live, and features on the vehicle may lower your insurance rates. With the internet, it’s easy to show around. Companies, like Esurance and 21st Century Insurance , offer fast online quotes and compare rates with several other companies as well.
Read More about Insurance

8. Buying a car on impulse
Yes, we get it. Car buying can be fun and exciting. However, it is still likely to be the 2nd largest purchase that you make in your lifetime. If you walk into a dealership and let the salesperson educate you, YOU WILL GET TAKEN FOR A RIDE. It’s just that simple. Do your homework. Research the price of the vehicle and understand the MSRP (sticker price), the invoice price, the holdback; know your credit scores/credit history, shop around for financing, insurance, an extended warranty, and most importantly have several dealers compete for your business!
Read More About Car Buying Steps

9. Buying without having dealers compete for their business
The number one way to overpay for a new vehicle is to buy from the first dealer that comes along. We aren’t suggesting that you spend countless hours driving from dealer to dealer. You can get 4+ quotes with just a couple of clicks of a button. Websites like, and offer FREE online dealer quotes. Just fill out a short form and they have up to 4 local dealerships send you a quote. The more dealers you include in the competition – the more likely you are to be quoted at or below the invoice price.

10. Financing a vehicle without knowing their credit scores
If you are about to finance a vehicle and are considering a dealer financing offer, you need to know your credit scores and what is on your credit report. Car Buyers with "bad credit" are particularly at risk with this mistake. If you do not know what is on your credit report, you will be taking the Finance Manager’s word for it when they tell you if they are unable to finance your new vehicle or offer you a higher rate due to your credit score. You should not be learning what is on your credit report from the dealer’s Finance Manager. Order your credit reports and scores beforehand, you can correct inaccurate information on the report and shop around for back-up financing before you visit the dealer. There are three credit bureaus (Experian, Equifax, and Transunion). They each maintain their own report on you and their own score for you. A Finance Manager typically pulls 2 of the 3 reports before offering financing. You can order free credit reports annually, BUT they do not include your credit scores. The best deal we found is through . They offer all three reports and all three scores as a package. Read More About Credit Reports

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Top 10 Car Dealer Scams of 2008

We’ve been reporting car buying scams since 1996. This is our 8th annual list of the "Top 10 Car Dealer Scams" you’ll likely encounter, based on our research from 10,000+ visitors daily. We receive complaints and compile this list based on currently running scams at some car dealers. Most dealers are honest, so this Top 10 list deals is about dishonest car dealers. You’re an ostrich with your head buried in the sand if you think there are no bad salespeople out there. We are not picking on car dealers, there are bad furniture salespeople, advertising salespeople, bad priests, bad judges, real estate agents, police, but we cover cars here. These scams are real, they happen to people every day. Some salespeople flame us, claiming these scams are no longer used, If scams are on our list, I can assure you they are still in use. People with bad credit are easy prey, likely to see most of these financing related scams. Read our chapter for people with bad credit: Bad Credit Auto Loans, Tips and Scams To Avoid. The nastiest scams occur in the finance office, where the foolish let down their guard after the sale. Some scams haunt you weeks later, when you though you had a signed contract and find they still have their tentacles in your wallet. Car buyers who see the fewest scams followed our advice, arriving with their own financing, no trade, and The Folder full of research. PLEASE also read our investigative report Guide To Check Fraud, Escrow Internet Fraud, Auto Fraud, and Nigerian Scams.

New Car Buying Tip: If you hate haggling, try sites such as, InvoiceDealers, Yahoo!Autos,,, and CarsDirect because you bypass the commissioned sales people, dealing with the fleet manager or internet sales manager, who usually ends up giving you a better deal, and with no scams.

Funny one liners salespeople like to use on you. Did they take the same sales training course?

"You’re stealing food from my baby’s mouth"
"Everybody pays this fee"
"We’re losing our shirt on this deal"
"The web sites you got the prices from are wrong."
"This car won’t be here tomorrow"
"The bank requires you to buy the extended warranty to get loan approval"
"Do you want the car? What will it take to make you sign today?"
Attention members of the press: You may quote this page provided you give appropriate credit. Click here: Press Information.

Is it a loan or not a loan?
Quite often the "car loan" you’re applying for at the dealer is not really a car loan. They are known in the car business as Retail Installment Sales Contracts, or RISCs. (an appropriate acronym). The dealer signs the RISC with you, then sells it to a bank, or other lender, hopefully at a good markup on the contract. Sometimes they also participate in the interest rate. So the higher APR they charge you, the more money they make. Car dealer financing is not a service they provide for you, it is a product they sell to you, explaining why some scams listed below exist. If they can get you a better APR, fine. But if not, have your own financing ready to fall back on.

Abuse of the Patriot Act?
We are getting complaints from car buyers who have their own car financing from a credit union or an online lender, and the car dealer forces them to sign a credit application anyway, falsely claiming "it’s required by the Patriot Act". There is no verse in the Patriot Act that I can find requiring you fill out a credit application, or allowing dealers to run credit checks on you when you bring your own car financing. Their bogus claim sounds believable, but armed with verbiage of the law, you can stop them. Here’s a link to the Patriot Act: Ask the car dealer to tell you which exact section of the Patriot Act requires them to make you fill out a credit application when you have your own financing, and collect your Social Security number, and run your credit report. Since they claim it’s required, they should be able to show you the verbiage (HINT: They can’t). The Patriot Act (H.R. 3162), Section 326 "Verification of identification" requires banks and financial institutions to verify your ID before you open an account. Since you are not opening an account with the dealer and they are not a bank, they don’t need you to fill out a credit application or a Patriot Act form. The Patriot Act form I filled out for my mortgage only asks for your loan number and driver’s license number, not your SS#, and it does not say "Credit Application" on it. The Patriot Act specifically calls out driver’s licenses or passports for ID verification. Nothing more. Dealers fool you into filling out the credit app, so then can run your credit through a half dozen local banks in an attempt to lead you into the dealer’s financing so they can get more commission. But why all the lies?

Top 10 Car Dealer Scams:

1) The Financing Fell Through Scam (Spot Delivery Scam)
2) The Straw Purchase Scam
3) The "Forget To Pay Off Your Trade In" Scam (New For 2006)
4) The "Lie To The Customer About Their Credit Score" Scam
5) The "Your Online Lender Bounces Checks" Scam
6) The "Forced Warranty" Scam
7) The "Dealer Prep" Scam (Excessive Fee)
8) "We’ll Payoff Your Loan No Matter How Much You Still Owe!!!"
9) The Previously Wrecked Used Car, Sold "As Is" Scam
10) The Fake Vehicle Escrow Service Scam (New For 2006)

Scam #1: The Financing Fell Through Scam (Spot Delivery Scam)
How the scam works: This is the oldest trick in the scam book, increasing in 2005. Lots of people complain about to us about this scam. You buy a new car, the "LieNance" manager says you got a low APR, hands you the keys, and you drive home. (Not all finance managers are LieNance managers, just the ones who lie, so salespeople stop whining to me about this name I made up for the few bad apples). Two weeks and 500 miles later, the dealer calls you saying "Sorry, you didn’t qualify for that low interest". This is where "subject to financing" clauses on contracts bite you in the butt. Everyone thinks that you sign papers it’s a done deal. The dealer knew exactly what you qualified for before you signed, unless you lied about your income.

They knew your credit score. If it’s above 680, you’ll get a low APR. If it’s below 680, expect a higher APR. Your credit union will print your credit history and approve you in 10 minutes. I got approved instantly online with Capital One Auto Finance. So why the problems with the dealer’s Retail Installment Sales Contract? There usually is no problem, it’s a scam. There is a phrase on most sales contracts stating "subject to loan approval". This Jedi mind trick means: "The deal is not final, even though you signed this contract." They’ll tell you that you must produce an additional $1000 AND your payments would go up. They pull this scam on people with bad credit, because it’s believable. They get the least resistance from this crowd, and figure you’ll just pay up somehow.

How to avoid the scam: DON’T FINANCE AT THE DEALER if you have bad credit. Line up your own financing and compare to dealer’s financing. Read our chapter on How to finance your car or use online car financing or your credit union instead. By using your own financing, you won’t endure monthly payment scams, and the deal will be based on the selling price of the car, not monthly payments. If they start negotiating the car by monthly payment, it’s time to leave. If they keep trying to shift your APR up or down depending on whether you buy a warranty or VIN etching, it’s time to leave. But if you do finance through a car dealer, leave a deposit on your credit card, and do not take delivery of the car until the loan has been approved in writing a few days later. Then you know the lender has approved your loan. The dealer hands you the keys and say it’s all right to drive off right now with the car, but don’t do it. For buyers who lease, dealers sometimes call you a week later and claim they "made a mistake and you need to come back and sign a new contract." WRONG. Your lease is a contract, and the dealer cannot make you undo a contract. Just think, if you tried to get out of a lease, they would come after you in court right?

What to do if this scam happens to you: If you you got a good price on the car, your best solution is to preserve your deal so get your own instant financing online. If you have a credit score over 650, go online right now to Capital One Auto Finance or HSBC Auto Finance and apply online, and get approved within the hour. They will FedEx you a check the next day, you’ll take it to the dealer to pay for your car, now you have a car loan, no "financing fell through!" If your score is below 650, then apply through AutoCreditFinders instead. If the dealer refuses your online check, you should try to get out of that deal. File a complaint with the Better Business Bureau at, and file a complaint through your state’s Attorney General Web site. They are all aware of Spot Delivery Scams.

Scam #2:The Straw Purchase Scam
How the scam works: We saw a resurgence of this scam in 2005 and 2006. It typically increases when interest rates go up, and fewer people qualify for loans as lenders tighten their belts. A straw purchase traditionally refers to handgun sales. When one person buys a handgun for a person who is ineligible to own one, it’s called a Straw Purchase, carrying stiff penalties. That’s how the Columbine High School student shooters got their guns. With car buying, the dealer tells you that with your horrible credit score, you can’t qualify for a car loan so you need to get a co-signer, plus they tell you that it will help build your credit again. No problem, Grandma will co-sign the papers for you. The dealer knows your horrific credit score could not possible ever qualify for a loan, even with a co-signer. Grandma is easily duped by the dealer during the paperwork shuffle, tricked into signing as the primary borrower, and 2 weeks later you find the dealer did not process a co-sign loan, the entire loan is in Grandma’s name! This does not help your credit, even though you are paying the monthly payments, because the loan is in grandma’s name, and the car dealer lied to you. State laws are vague but I hear some states like Texas have laws against Straw Purchases on cars.

How To Avoid The Scam: Have both signers there at the same time. You should have both signatures on the same contract, NEVER sign separate contracts. There should be a separate line item for co-signer. A notice to the cosigner is required by the Federal Trade Commission’s Trade Regulation Rule on Credit Practices. The cosigner should ask for a copy of that before they sign it. But another problem also surfaces here. If your credit is so bad that you need a co-signer, then the last thing in the world you should be doing right now is buying a new car. Try a used reliable Honda Accord if you really must buy a car.

Scam #3: "Forget To Pay Off Your Trade In" Scam
How the scam works: We saw an increase in complaints of this scam in 2005. You trade in your old car which you still owe money on, and the dealer is supposed to obtain a payoff figure and payoff the loan for you and add that payoff amount to your new car purchase. But something horrible happens. Two months later your are shocked to hear the new car dealer did not pay off your old car loan as promised. With this scam dealers effectively pay you less for your trade than they promised or steal it altogether. When the bank calls, YOU are responsible for the loan, not the dealer. The car loan is still in your name, until the dealer pays it off. As far as the bank is concerned, they have a loan with YOU, not a dealer and it’s in your name until paid off. Now your credit gets dinged with late payment alerts from your bank. Sue the dealer, the judge will ask to see your contract with the dealer obligating them to pay off your old car loan. Of course there is none.

How to avoid the scam: We always recommend against buying a new car when you still owe money on your current car. Pay it off yourself first, get your title from the bank, THEN trade it in or sell it privately, paying off your loan with sales proceeds. When buying new cars, if you trade in a used car which you still owe money on, make the dealer put in writing that he will pay off your car loan in 10 days, or no deal. Then he is liable in court. You don’t want to end up in court without proof that the dealer was supposed to payoff your trade-in. If the dealer refuses to put these promises in writing, it means they will pull this scam on you, and you need to leave immediately, taking your business to a more reputable dealer. It’s the same with houses and cars, if you call for a payoff figure, you typically have 10 days to pay off that loan or interest will accrue. Most dealers are good, but a dealer who pulls this scam should know better.

Scam #4: The "Lie To The Customer About Their Credit Score" Scam
How the scam works: This is one of my favorite Jedi Mind Tricks. The Lie-nance manager (not all finance managers are Lie-nance managers, most are nice guys) lies to you about your credit score, telling you it was really low, so you now have to pay a much higher car loan interest rate than you thought. This scam is pulled on people with good credit too, as it works well because most people do not know their own credit score. It’s funny, most people know their own cholesterol levels, but they don’t know their credit score. One buyer told us his score was 780 (Excellent) from 3 credit bureaus. At the car dealer four finance people came out after reviewing his loan application with "concerned looks" and a paper that said "credit score" on it with the number 580 circled in red. They stated they could only get him financed at 10.9% APR, not the special 0% interest rate. He pulled out his own credit score with 780 and asked why the dealer was different from his Equifax credit report. Three sales guys scattered, the last guy lied, saying that "credit agencies display better credit scores to consumers than to businesses". Our friend bought his car elsewhere with the low 0% advertised APR.

How To Avoid The Scam: No salesperson should know more about your credit history than you. If they pull this scam, pull out your credit score and put a stop to it. This is why we stress that you should have your financing 100% lined up before you buy your new car, never as an afterthought in the business office. Give them a chance to beat your car loan quote. If they pull any funny business, pay with your bank draft from your lined up car lender, or just leave. Read our chapter on Auto Loans Tips & Scams for tips on getting your credit score and online car loans.

Scam #5: The "Your Online Lender Bounces Checks" Scam
How the scam works: The dealer sees your bank draft from a credit union, or online car finance sites such as Capital One Auto Finance, HSBC Auto Finance or AutoCreditFinders. Not wanting to lose the extra gravy of selling you the car dealer’s RISC financing, they refuse your bank draft, lying to you that "online lenders bounce checks." They will say "their checks always bounce, so we don’t take them". But gee, the dealer is willing to provide you financing, at higher APR. CapitalOne and HSBC are household names and many car buyers already doubt the salesperson’s lies. So they may also tell you "well, they take too long to pay us".

Some salespeople stop at nothing. If your lender was bouncing checks, we’d hear about it via federal investigations. I get daily emails from people who financed with Capital One Auto Finance, HSBC Auto Finance with no problem. I used Capital One Auto Financeto finance my new 2004 Lexus GX470 SUV. Lexus had no problems accepting my CapitalOne check. My friend financed 2 used cars with Capital One Auto Finance. There’s nothing wrong with dealer financing if they can beat your best APR. If not, use your online financing. Unless you qualify for a manufacturer’s 2.9% financing, online banks will beat the local banks used by dealers most of the time, and online lenders often beat credit union rates. If a dealer spews out this scam and refuses your online financing, you the customer need to retain control and refuse to buy from that unethical and slanderous dealer. There are plenty of ethical dealers who eagerly accept online loans without the lies.

How To Avoid The Scam: Tell the finance manager you’re onto their scam, online lenders have been in business for years and fund loans without bouncing checks. Then get up to leave. You should also file a complaint with your state Attorney General’s Office, because we need to make this scam illegal for dealers who force you into higher APR financing. I get emails on this scam often, and if the state attorneys do not know this is going on, they can’t help us consumers. The federal government should wrap this into the Truth In Lending Act. Here’s our link to all 50 Attorney General’s Offices.

Scam #6: The "Forced Warranty" Scam
How the scam works: An old one that’s still in use. You’re ready to sign papers when the LieNance manager says you MUST buy a $2000 extended warranty "because the bank requires it, or you won’t get the loan". Let’s analyze the stupidity factor. The lender is worried about your ability to pay back a $25,000 car loan, so they want you to add another $2000 to the loan to qualify? Please! Many suckers fall for this and the credit life scam. Some dealers who quote monthly payments don’t even tell you that you’re buying a warranty. We get complaints that they tell you "it’s included" to make it sound like it’s free. The warranty is included, but you’re paying for it. It’s amazing how many people tell me they did not see it on the paperwork until they got home! I guess during the 20 minute drive from the car dealer to their house is when they mastered reading. If I live to be 100 I’ll never figure out why they don’t look before they sign. People will spend more time analyzing a $2.00 watermelon in the grocery store than contracts for a $20,000 car! This scam often accompanies the Spot Delivery Scam. Some finance managers start playing games with the APR if you buy the extended warranty, some claim the APR goes up if you don’t buy the warranty. Since when does the interest rate have anything to do with a stupid warranty? They lie to you about this because they know that you know nothing about it. The only thing that determines the APR you will pay is your very own personal FICO credit score. Nothing else whatsoever, not the cost of the car, not buying a warranty.

How to avoid the scam: Have them to put it in writing that the warranty "is required to be approved for your loan", so you can show it to your State Attorney, and the Better Business Bureau. Watch how quick they back off. Read our Tips For Getting A Good Car Loan and avoiding scams. Also read our Extended Warranty Scams & Buying Tips. This scam works on people with bad credit and they also "require" you to buy credit life insurance, or "your APR will go up". One of our visitors sent us her Ford paperwork with extended warranty, credit life, and disability for $3385! Do they want to sell you a car or insurance? If they refuse to remove the extended warranty, remove yourself from that devilship immediately. (Oops, I meant to say dealership). Many dealers sell you mechanical breakdown warranties, which are lame compared to some of the wear and tear warranties offered online. Also, dealers typically charge $500-$700 for Gap Insurance, which you can get online directly from companies like for half the price that car dealers sell it for. So if the dealer tells you the bank requires gap insurance, tell them you will go get it yourself. Most states have laws giving you a Warranty refund in 30 days if you have not used it.

Another way to avoid the scam: DON’T FINANCE AT THE DEALER if you have bad credit. Finance your car online or at a credit union. Now they can’t force you to buy a warranty, you eliminated their excuse to force a warranty down your throat. Credit unions and online lenders don’t force a warranty or credit life on you, so why would a car dealer? Why does APR go up if you don’t buy the dealer’s warranty? Cash flow shell games folks, remove their shells, and no more games.

Don’t fall into the gap!
If you owe more on your car than it is worth, if you lease, or if you put down less than 20%, you should get Gap Coverage from your insurance agent. Most people refer to it commonly as gap insurance". Dealers charge double what you can get it for, they charge $500-$700 when you can get it online directly from the source for less than 1/2 the car dealers price, check out Gap Insurance online. If you owe $20,000 on your car, but it’s only worth $16,000, you’re upside down. You total the car, or it’s stolen, your insurance company gives you $16,000. You must still come up with $4000 to pay off the bank, plus your $500 deductible! Gap coverage protects you against this. The better ones cover up to $500 of your deductible.

Scam #7: The "Dealer Prep" Scam (Excessive Fee)
About This Fee: A better definition here is "Excessive Charge", since this is not really a fraud, nor is it illegal. Most dealers do adequately disclose this fee on their paperwork. Many dealers even admit that its a way for them to recover some of their "losses" when discounting the car off MSRP retail price. But our position is that it is too excessive, and since it is printed permanently on their buyers form, what about the case when you pay full price on the car, now you have to pay $600 more in fees? Salespeople try to convince you that a team of NASA experts performed a 3 day 15,000 point check of your car. Dealer prep "covers their cost" of removing plastic from the seats, vacuuming, adding fluids, and preparing it for sale. Total time: 2 hours max. I’ve been there when picking up my new cars and know how long it really takes. Tons of our visitors report back that they convinced their dealer to drop this fee. MSRP stickers show these costs are covered by the car maker, so why does the dealer still charge you? Here’s the MSRP sticker from my Lexus:

See What I mean? It very clearly states that pre delivery service is included.

The factory pays the dealer for this pre delivery service. The day my Lexus SC300 arrived, it took the dealer 2 hours to peel film and cardboard, install fuses, check the liquids, perform a 10 mile test drive, and hand me the keys. I got out of paying it. If a dealer charges a $600 dealer prep, you’re paying them $300/hour for just 2 hours of work! Do YOU get paid $300 per hour?

How to avoid the fee: Often it’s permanently printed on the buyer’s order to make you think it’s mandatory, but many people make the dealer remove it by adding a credit on the next line. So if you see a $600 dealer prep on the form, have them add a $600 credit. If they won’t budge you need to decide how bad you want that car. I have no problem walking out of a dealer over a $600 fee. Go to the next dealer on your list, and tell them "Here’s the deal. Drop the dealer prep, and the deal is yours". Remember, Dealer Prep is not illegal, but it gives you zero intrinsic value. Either you agree with the fee, or you don’t.

Scam #8: "We’ll Payoff Your Loan OR Lease No Matter How Much You Still Owe!"
How the scam works: These are common ads on the radio and newspaper all the time. They rely on your brain to trick you, as if the obligations of your current lease or loan just magically vanish. You can’t just dump a lease, it’s a contract. By breaking the contract, penalties are stiff, in the thousands. They do get you out of your current lease, but these payoff penalties must be paid to your leasing company to end the contract. The dealer is not doing any favors at all for you, they just want your trade in so they can give you far below market value for it, while selling you a new car at a high profit. Then they resell your trade in for a high price, while you are stuck paying off the debt load of 2 cars. With this scam, if you are upside down on your car loan and you still owe $10,000 for it, the dealer pays off your loan, then you owe that $10,000 to the dealer. This gets financed along with the $15,000 car you are buying, now you are financing 2 cars for $25,000! Did you know that? Your payments are spread out over 60 or 72 months so you don’t notice what just happened. The more months they add to the loan, the lower the payments so you don’t notice. In fact, it’s possible that the payments could be less than your current loan, so you think you’re saving money when you just got shafted! Their ad made you think that trading in a car relieves you of your obligation to that car. It does not! This gets many, many, many people deeper into financial trouble. You are actually taking on double your current debt, when you thought you were dropping one debt for another and buying a new car. They misled you in their ad. Sure they did get you out of the lease or loan, but you are not really out of it. They dipped you out of it and then dipped you right back into it under their umbrella of debt. Very clever trick, but now you’re onto them. Next time you hear those ads, you’ll know what they’re up to. Here’s how ads would be worded if they were truthful:

"We’ll Get You Out Of Your Current Lease, then we’ll roll what you still owe plus penalties into your new purchase, so you can payoff 2 cars!"

How to avoid the scam: If you are in a lease now, it’s best to stay in it until the end. Ride it out baby, you slaughtered the cow, now you have to eat it. If you are upside down on a loan, now is not the time to trade in the car. You need to wait until the car is worth more than what you still owe on it. Try selling it privately. By mixing a trade-in with a new car purchase, you will lose the maximum amount of money possible. Don’t ever think you walked away ahead on a trade in. No one ever has. No one ever will. If you really need to get our of your lease, shift your strategy from terminating a lease early to a strategy of transferring your lease to another buyer via an auto lease trade. Use sites like and to transfer your car lease.

Scam #9: The Previously Wrecked Used Car, Sold "As Is" Scam.
How the scam works: The dealer tries to sell you a car that has previously been wrecked, only they tell you it’s in great shape, or lie about the wreck, or in some cases, they were honestly unaware the car was wrecked. The car has the federally required Buyers Guide sticker with the words "As Is, No Warranty" on it, which means you are buying this used car and assuming all risks, and cannot return the car, because you agreed to all accept any damages that accompany your "As Is, No Warranty". We sometimes hear from burnt car buyers who were not given this guide as required by Federal law.

Even "Certified Used Cars" can be previous wrecks, as we were surprised to find once after running the VIN on a certified used Lexus. We get emails all the time from people who believe the dealer when they are told the car was never wrecked, then they find out a few weeks later when they bring it in for service, or they run an AutoCheck Vehicle History Report showing that it was wrecked. When the scammed customers confront the dealer, they are reminded that they signed an "AS IS" paper, and have no recourse, because they can’t prove anything. The As Is paper is the best alibi the dealer has to fall back on. You however, have nothing to fall back on.

How to avoid the scam: Never ever buy a used car from a dealer "AS IS" with no warranty. When you buy a used car from a private person you have no choice, it’s "As Is". But from car dealers, try to get at least a 30 day warranty. If the car really is the cream puff they make it out to be, let them back that up with a 3 month warranty, otherwise they are just blowing smoke. You should always run an AutoCheck report on any used car before you buy, and get it inspected by a mechanic. That’s how we found that a Lexus dealer’s Certified Used Lexus had been in a wreck. Always have a mechanic put the car on a lift BEFORE you buy. They can tell you in 30 seconds if the car was wrecked. Many people fail to perform these crucial 2 steps. If you don’t do these steps, then DO NOT buy that car.

Scam #10: The Fake Vehicle Escrow Service Scam
How the scam works: This is actually not a car dealer scam, but it is a huge epidemic. I have been FIGHTING THIS FRAUD FOR YEARS, and it’s a growing eBay scam too, so it warrants inclusion in our list. Sometimes the scammers steal images from a car dealer and pose online as the car dealer. But mostly, these internet scams appear online as the seller of a used car. They place ads on Yahoo Motors, AutoTrader, Craigs List, eBay Auctions, eBay Motors, every known vehicle and motorcycle classifieds site on the internet has been hit. The scam begins with you buying a used car (or other product) online and you see a hot BMW or Mini Cooper, or Camry, or Mercedes, or Harley Davidson whose selling price is much lower than other listings for the same item. So you ask the seller a question. The seller replies with a "Dear Sir" form letter, rarely do they mention your name, it’s all scripted. It usually has poor grammar and spelling too, and the seller claims to be in Europe and cannot keep the car. Via email, they have you outside the eBay safe harbor, or whatever site you are using. He wants you to use a particular 3rd party escrow site, "he’s used them many times already." Unknown to you, he just created that fake escrow site only a few days ago and he’s lying. He is offering to pay shipping for the car! Do you know how much shipping is on a car across the U.S.? It’s usually about $900. That’s a big Red Flag. The "seller" has setup that fake escrow web site that looks better than most bank web sites and is about to steal your money. They convince you to register on the "escrow" site, and you get payment instructions to Western Union or MoneyGram the funds to the escrow company, then you never see your money again. No undo on the Western Union either, once your cash is wired, they can pick it up anywhere in the world in minutes, usually in UK, Spain, Romania, Russia, Netherlands, Europe. There are many twists to this scam, they often trick you by telling you they are signed up for escrow with Yahoo Motors, or eBay or Square Trade, none of which in reality do escrow or collect money for cars. You then receive official looking spoof phishing emails that appear to be from Yahoo, Square Trade, eBay, etc., with instructions on how to pay their "payment agents" via Western Union. The scams have the same goal, to trick you into thinking you are sending thousands of dollars to a trusted escrow company. This scam is so prevalent that from 2003 to 2004, I personally shut down over 600 fake escrow web sites through working with web hosting companies, police, eBay, and victims themselves. These sites pop up at the rate of at least a dozen per day, with thousands of scam listings and auctions running all over the internet at any time. Now that you know what to look for, they are easy to spot.

How to avoid the scam: NEVER EVER use cash wiring services such

Ways to Buy a Car when Your Financing Falls Through

Almost everybody wants to own a car. For some, it is a necessity, it is something used for going to and from work. Some find it a good investment, it can be considered as a useful and re-saleable piece of property. For others, it is a source of enjoyment and comfort. But whatever its use is, buying a car requires money.

Sometimes we are presented with an unavoidable need to purchase an automobile. But how do you go about this when your finances are in bad shape? Here are 10 ways to buy a car when your dealer financing falls through.

1. If you’ve been dealing with one for a while, get a car loan from your bank or credit union. Even if you’re in a financial bind as of the moment, make sure that you have a decent credit history, otherwise you won’t get that loan.

2. If you really need a car, just for transportation purposes, try getting a second hand car. It would be better if you could buy from someone you know and trust, so you’ll know you’re not buying a piece of junk.

3. You can go and scout around second hand or used car lots, but be very careful. Many of these cars might have problems. Make sure you know how to look at a car, or take someone who knows how to inspect a car. Canvas several dealer lots, look at the cars that you are considering, then negotiate.

4. Try to buy something strictly for utilitarian purposes only. Get a decent looking vehicle which has a good engine and is low on gas consumption. You’ll probably need it only for work, so stay away from anything fancy like sports cars and convertibles as these kinds of cars will cost you more than the value they provide you, as well as cause higher insurance rates.

5. If you’re really desperate for a car, why not join a contest if you have the time. This way, you have a chance to get a car totally for free.

6. Get a company car. Some companies provide their employees with service cars which they can buy from the company eventually. This way, you get to use the car while still paying for it.

7. You can also get good car deals from automobile auctions. These cars are often better in quality than those at used car sales. But here, you have to bid for what you want instead of just paying, so you can’t really negotiate for the price. This is where a lot of the used car dealers get their inventory, and then they mark up the price.

8. Try to avoid major repairs. You may get a really cheap car, but sometimes the repairs will make your finances suffer even more.

9. Japanese and Korean made cars are often cheaper than European and American manufactured ones. They are also more gas efficient, in many cases. That doesn’t mean that the quality suffers. If you’re looking for something just for transportation, these cars will do just fine.

10. Let your friends and relatives know that you are in need of a car, and specify what kind and what you’re price range is. They can ask around for you which is even easier than looking for a car yourself.

Basically, it will be hard for you to acquire a car when experiencing financial difficulty. You have to pay not only for the price of the car, but also for the papers, the repairs and check up’s and the gas. It would be best if you could just wait for your finances to recover before purchasing an automobile, you’ll not only have a car that you can use but you’ll also have to capability to buy a car you’ll enjoy.

Also, whatever you do, if you’re buying a used car, don’t spend your last dollar on it. Chances are it will soon need some repairs. Look at the situation as if transportation costs money, you either spend money on a new car that includes a warranty, or you spend less money on a used car, and then add more for repairs. In the end, it might just come out even. Buying used will help you get the transportation without spending all the money up front.

Written by Dennis Becker

What Dealers Won’t Tell You

Dealers would prefer consumers didn’t know two things in particular:

[list:3ijabtm2]1. How they are evaluated.
2. How they are rewarded.[/list:u:3ijabtm2]
1. Evaluations are based on:

[list:3ijabtm2]- Sales goals based on the number of cars sold
– CSI (Customer Satisfaction Index) ratings [/list:u:3ijabtm2]
Sales Goals
Dealerships are given monthly, quarterly, and annual sales goals to meet. This alone can make a difference in the price you receive on a new car. At the end of each month, there will be some dealers that are scrambling to meet their sales goal and some dealers that have blown past their sales goal. With multiple car quotes like the ones on and , it is much easier to tell which dealers are desperate to meet their sales goal and willing to sell you a car at or below invoice price.

Customer Satisfaction Index (CSI)

After purchasing a car, customers typically receive a letter or a phone call asking for their opinion of their overall experience with a dealership. Did you receive something in the mail after you bought your last new car?? J.D. Power & Associates is a well-known company that frequently conducts this research. J.D. Power & Associates has been known to send out a survey after a car sale that includes a $1 bill to elicit your participation. Low and behold, the results of these surveys determine the direction of dealerships’ business in the future.

Salespeople have even been known to bribe customers in exchange for “excellent” responses on C.S.I. surveys. This tidbit of information may come in handy when you negotiate the price of your next car. However, it isn’t necessary to tell the dealer that you are aware of this information though. Car Buyers that follow our tips typically have a easy car buying experience anyway.

2. Dealers are rewarded based on reaching these goals and good CSI ratings.

The results of these CSI ratings impact which cars a dealership receives, which auctions (used cars) dealers are invited to, the incentives paid to dealers, AND whether a dealership is allowed to expand its business. A low rating on overall CSI can be very costly to a dealership.

Auctions are big money for many dealerships. They buy used cars cheap and sell them for a profit. In July 2007, Chrysler banned 463 dealers from participating in auctions (12.5% of all Chrysler dealerships) as a result of relying too much on used-car sales and not reaching their new car sales goals.

To reward dealerships for reaching their sales goals, manufacturers offer some hefty incentives (manufacturer-to-dealer incentives). These incentives are typically not public knowledge and are not always available on the internet. provides a list of incentives, but not all of manufacturer-to-dealer or local incentives always appear on this site. These manufacturer-to-dealer incentives can amount to $100,000’s for each dealership. So, dealers keep a pretty tight lid on what they are getting paid by manufacturers.

Therefore, the lowest price quote won’t always come from the same dealer. Each month a different dealer may be desperate to reach their sales goal. If a dealer is desperate to meet a sales goal – your negotiating power will increase. Dealer participation varies with manufacturer – to – dealer incentives. The only way to weed out the dealers that are very motivated to sell a car is to use the multiple car quote approach.

The automotive industry is a volume based business and these incentives can play a major part in the price you receive on your car. “Turn and earn” is the term used to describe how many cars a dealer sells (turn) in a given period and how many vehicles the dealer will receive (earn) for the next period as a result of those sales. High Sales = More Vehicles in the Future. Unfortunately, there is no way to know which dealers are participating in a manufacturer – to – dealer incentive or how close they are to reaching their sales goals. Due to these manufacturer – to – dealer incentives, it is also impossible to know how much a dealer really paid for a vehicle. By using sites like and to get multiple car quotes, you increase the competition among dealers. Those dealers that are aggressively participating in the manufacturer – to – dealer incentives will compete. And When Dealers Compete You Save!

Written by

What is the Best Day to Purchase a Car?

Finally — The Truth About What Day (and Month) Are the Best Times to Purchase a Car

When — exactly — should you purchase a car?

To get the real answer to this question on when to purchase a car, we asked Peter Humleker, consumer advocate, consultant and author of the excellent book "Car Buying Scams, Auto Dealer Executive "Breaks Code of Silence!" to write an exclusive article for us on the topic.

Here’s Peter’s article on the very best time to purchase a car:
If I had a nickel for every time someone asked me this question, "What is the best day or month to buy a car?" I would be a very rich man!

This is without a doubt the single most frequent question I get asked.

If you have done any surfing on the Net about this question, you would think someone did a top-secret poll… and only they have the correct answer.

If you give them your blood type, finger prints, and social security number, then maybe they will give you the answer. <g>

Let me set the record straight once and for all about this most asked and misunderstood question:

It all boils down to bonuses and rebates.

Notice that I said bonuses and not dealer cash.

I can hear your brain already thinking, "What is the difference between bonus money and dealer cash?"

Dealer cash is money that the factory gives to the dealership for every car sold.

For example, they might have $500 dealer cash on a certain make of car for the month of March. So for every car sold of that particular make, the dealer receives $500 extra per car.

This is not to be confused with rebate money that is given to the consumer from the factory. Dealer cash goes to the dealer… and rebates go to the customer.

Now as far as bonus money from the factory goes, that is extra incentive money to entice the dealership to sell more of a certain model of car.

For example a manufacture may put out a bonus to its dealer network that says if they sell 100 XYZ cars (or more) in the month of October they will receive $200 per car.

That means if they sell only 90 cars, they don’t get the bonus. If they sell 100, then that is an extra $20,000 to the dealership.

A bonus can also be in the form of a paid vacation to the dealership owner or whoever he may want to give it to — such as his General Manager or General Sales Manager.

The point is that the bonus is not going to show up on one of the Internet sites… and therefore you are not going to know about it.

Bonuses always run to the end of a month though.

Therefore, common sense says that if a dealership is trying to hit their bonus and they only have a couple more cars to sell in order to get it, they are literally going to give those cars away at cost to make that bonus.

So the answer to the question of when is the best day to purchase a car:
It is always the second to the last day of the month… or the last day of the month.

Even if there is not a bonus happening during the month that you plan to buy a car, the sales people are still trying to make quotas for cars sold and last minute sales goals.

Therefore, it always benefits the buyer to purchase a car at the very end of the month.

Now let’s answer the question:

"What is the best time of year to purchase a car?"
It is always at the end of year because that is when manufacturers have the highest rebates going to the consumer — because manufacturers are trying to move the last bit of inventory to make room for the new year’s makes and models.

That means that you usually start to see really big rebates on the cars in September, October and November.

So if you combine all this knowledge, you’ll save the most money when you purchase a car at the end of September, October or November.

Peter has a lot more interesting information to share. If you’re interested in auto financing, click here.

Or click here to read about Peter’s book on car buying tips and secrets — with lots more information on how to avoid scams when you purchase a car.

Written by Peter Humleker

Wheel ‘n’ Deal

Auto salespeople have lots of tricks up their sleeves to get you to pay more, but you can beat them at their own game.

PRECEDENT-SETTING ZERO-percent financing, or single-digit interest rates, plus almost flat sticker prices are making it less expensive than ever to supply your company with vehicles, whether you decide to buy or lease. To make sure you’re aware of all the available deals, do your homework online or by telephone (see "The Search Is On" on page 50 for a comprehensive listing of manufacturer URLs), and consult with your accountant. Arming yourself with printouts of evaluations, reviews, prices and the market value of any trade-ins gives you an advantage. Then, visit several dealerships with a compilation of your target vehicles to compare prices, rebates and incentives.

When it comes to cost, don’t always make a decision based on low payments. Salespeople are adept at inflating interest rates, subtracting rebates and extending terms to accommodate your desired monthly payment figure, which means you’ll end up paying more over a longer period of time. When possible, arrange pre-approved financing at your bank, credit union or other lending institutions so you can easily nail down a better deal. If you have already secured financing, you can tell the salesperson you plan on paying cash so that monthly payment negotiations do not apply. That way, you can take one of the tools the dealership uses to add to its total tab off the table.

Once you have collected offers from several dealerships, decide which one is the fairest deal. In some cases, it may be better to work with a dealership you trust at slightly higher prices than to risk going with another that may have a poor reputation for servicing vehicles once they have been sold or leased. Slow service can keep your vehicles off the road unnecessarily, costing your business money.

While it is smarter to sell your old vehicles privately to get a higher price, a trade-in can provide savings on your new vehicles if you have taken the time to find out what the old vehicles are currently worth. Check out car values at the Kelly Blue Book Web site ( and other automotive sites. Don’t forget that dealers can make a nice profit off your trade-ins, if only for parts.

Written by Jill Amadio

The "Real Truth" About Car Sales People

I am a retired business owner and now sell cars for a living. I have been doing so since 1998. Just like many of you, I have read numerous articles on ways to beat the car sales person. As I read the articles from people who declare themselves to be former car sales people, all I can honestly do is laugh at their verbiage. Just by reading their articles, I can figure out that they tried to make it a career, and for whatever the reason, they simply didn’t make it. The day of the fast talking sales person is over! Just like modern day society with all of its technology, the present day car sales person has progressed too. Before I go any further, I am only speaking of dealerships and not a used car lot, by that I mean, what we (car sales people) refer to as a dirt lot. Just like in any job, car sales people have to be trained. Yes, we do learn ways to make the sale, but more so, trained in the product knowledge. Hours upon hours is spent studying our product! For many of us, we have to take test after test to be certified by the manufacturer in order to sell the product.

What many of these so-called "experts" failed to mention was the simple fact that in 2006, auto manufacturers reduced the MSRP. Manufacturers Suggested Retail Price. By doing so, many of the manufacturers who offer rebates, also lowered the amount on a rebate while the actual cost of the vehicle remained the same. There will soon be a time that the word "rebate" will no longer play a part in the automotive industry. On behalf of most car sales people, we wish that day were already here.

Written by Shawn Couch

The Art of The Buy: Hide Your Time WiselyIn


In an ideal world, the salesman is a doctor diagnosing your problems and needs and prescribing remedies. But let’s talk about the real world and the need to keep your timeline for buying a secret.

Another car buying travesty came across our desk and while interesting in its own right, one sentence in particular got our knuckles cracking for the post.

"I was trying to beat the 1% sales tax increase in New Jersey, so I really only had a few days to make the deal on the car final. Once I explained my situation to the dealer his demeanor changed for the worse…"

All you did there is point to a big lever in your back and say "pull here for easy access." When negotiating, never let the salesman know when you need to complete the sale. A salesman’s worse fear is that you will walk off the parking lot without buying. By saying time is of the essence, he figures he’s got you locked down and can ratchet up the pressure. He figures he can force concessions. Your time is your own, so keep it a secret from those who would use it against you.

The rest of Dawud’s letter is after the jump. Ultimately, he did the right thing by walking away from a high-pressure salesman. But how else could he have responded in the first situation?

Dawud writes:

"Hey guys/gals,

I just wanted to share my pain. I recently bought a new VW Rabbit and I shopped around a bit first to try to get the best deal. Anyway, the first dealership I went to was Hamilton VW, I should mention that this is my first time buying a new car, so while I did a lot of research I didn’t know what to expect from the dealer but I was optimistic. I’m a bit of a geek so I was pleased with VW’s whole ‘build your car’ feature, it takes you through and lets you choose your options and everything, and then it sends your information to a local dealer for a quote. A few days later I was contacted by the internet sales manager via e-mail about my quote and we set up an appointment for a test drive, so far so good. When I actually got to the dealership things started to go down hill.

The first problem I had was that the dealer was pushy, I wanted a 2 door and he kept trying to push me into a four door every time I asked about a specific feature he would start pitching the four door again which was irritating but I didn’t let it get to me.

Next we go in to talk numbers, I had been saving for the car for a while so I already knew how much I wanted to pay and I was willing to pay pretty much exactly what they were asking for the car, but for some reason what should have been a painless procedure turned into another hassle. In the middle of this we get interrupted by some other customers of his, apparently they wanted a Passat, which costs about 30k more than the Rabbit, and for some reason that’s beyond me the dealer basically indicated to me that I was small potatoes and he really had to take care of the Passat people.

Now I felt insulted, but it was about to get worse, the dealer left me at the desk to go talk to the other customers for about 20 minutes, afterwards he came back to tell me how sorry he was and pitch me the four door again, before leaving for another 20 minutes to woo the people who wanted the Passat. At this point I was getting really frustrated, but not knowing any better I stuck around and waited for the guy to get back to me.

So he finally comes back, apologizes again and asks me how I was intending to pay for the car. Being the responsible young man that I am I had been saving for a new car for the past two years so I had ~half the cost of the car covered with my down payment, and I had already secured a loan for the rest with a sweet 7% interest rate. I should mention here that time was of the essence because I was trying to beat the 1% sales tax increase in New Jersey, so I really only had a few days to make the deal on the car final (it was Wednesday and the increase was scheduled for Friday).

Once I explained my situation to the dealer his demeanor changed for the worse, he started telling me that he could only get a deal done that quickly if I went through VW’s financing and that if he did he probably couldn’t get me an interest rate as good as the one I had. I explained that I had good credit and that it wouldn’t hurt to put in a credit application for me to see what kind of number I would get back, and if it was agreeable I would see what I could do. Then he told me that it would be $500.00 for the credit application. I was surprised because I was under the impression that credit applications were free. Sales guy replies back that the $500.00 is for the deposit on the car, and that I need to put down a deposit before he can do the credit application.

I had never heard of this before, but as it was my first time buying a new car I conceded and gave him the $500.00 bucks. On my way home I’m feeling mildly violated, like that feeling you get when someone touches you in an intimate area and you can’t decide if they did it on purpose or if it was an accident. TMI? Okay, moving on. So I’m waiting for him to get back to me optimistically hoping that I’ll still manage to beat the sales tax thing.

On Sunday I gave up and went to another dealer (Princeton VW/Audi) and my experience there was completely different from Hamilton, the dealer treated me like I was there to buy the most expensive car on the lot, when it came time to fill out a credit application not only was it free of charge, he told me that I shouldn’t have given the other guy a dime, and he didn’t try to sell me any more or any less than exactly what I wanted.

So now everything was great except I was short the $500.00 I paid Hamilton for the credit application. I called up the Hamilton guy and got his voicemail and explained the situation and asked for my money back. Still didn’t hear back from him, so I sent an e-mail (remember this guy is supposed to be their internet sales manager) and I still didn’t hear back. So then I contacted American Express, because no scumbag pushy car salesman is going to cheat me out of my money. That’s the end of my story, to sum it up:

If you’re buying a VW in central jersey don’t go to Hamilton VW because they are douche bags. Do go to Princeton VW though, those guys are awesome and don’t leave you waiting around so they can whore themselves out to someone who looks like they have more money than you.


Written by Dawud

The Art of the Car Deal

This is the Second Largest Purchase You’ll Ever Make, and You’re Cruising for a Financial Bruising If You’re Not Willing to Do at Least as Much Research as You Would when Buying an Off-the-rack Suit at the Mall

The wheels of your old ride are falling off, the roof leaks, the tires are bald and every time you crank the engine it sounds like the local teen band tuning up in your garage. Even your spouse agrees it’s time to trade in the old clunker and start looking for some new wheels. So you clinch your teeth, put a rubber band on your wallet and head down to the neighborhood car dealer.

Hold it right there, pal! This is probably the second largest purchase you’ll ever make, and you’re cruising for a financial bruising if you’re not willing to do at least as much research as you would when buying an off-the-rack suit at the mall. Nearly 17 million new and an untold number of used cars were sold in the United States in 2005, and the amount of money consumers overspent would pay off the national debt.

Anyone who’s bought a car since 2000 and didn’t wear out their mouse surfing for information on the Internet before going to the showroom probably could have saved the equivalent of a year’s fuel costs. It’s all there, readily available and most of it is free.

You know the car and the cool gadgets you want and you know what the dealer paid. Now what? Experts agree that it’s always a good idea to make the salesperson aware that you have the true numbers and know how to use them. Always remember that you’re the boss.

That doesn’t mean that you should enter a showroom with an attitude. Both parties are on a mission: his is to make as much money as he can; yours is to make sure he doesn’t. Opposing goals for sure, but when an informed buyer does business with a professional salesman, a fair deal can and should be struck.

One top salesman reminds buyers that car dealerships are buyers first.

"The manufacturer didn’t just loan us those cars out on the lot and hope we sell them," says Joe Pisciotta, an assistant sales manager in St. Louis. "We bought every one of those cars and our job is to sell them as quickly as we can. At a profit. There’s no free lunch, but not many reputable salespeople or dealers are going to really try to rip you off. You’ll eventually find out and we want you to come back again. But we’re not going to lose money, and that’s a fact."

Consumers should listen when pros like Joe Pisciotta are willing to talk about the intricacies of buying and selling cars. Now in his 19th year of pounding car lot pavement, the decidedly non-fast talking Pisciotta was the top salesman in his 27-state region for five consecutive years.

He dispels the myth that salesmen and dealers make huge amounts in commission on every car they sell. "I average about $300 in commission on each sale," Pisciotta said. "The dealer also gets his share, in addition to manufacturer incentives. That’s a fair profit because I do a lot of work. I’m not going to work from 7:30 a.m. until 9 p.m. five or six days a week for 70 grand a year."

Do Your Homework
There’s that word again. Pisciotta emphasizes the importance of knowing everything you can about the car, prices and consumer reviews before entering the negotiation phase. "Don’t start your new car hunt without information. "Use the Internet," he said. "Knowledge is power and the Internet has all the information you’ll ever need." Managing to suppress a sigh, he added, "The Internet has made everybody smarter."

Some of the more informative Web sites that offer reviews, pricing information and other buying tips include:
Consumer Reports ( (
IntelliChoice, Inc. (
Kelley Blue Book (

The Internet is your most valuable resource, but nothing can replace the intimate act of getting behind the wheel for the first time, inhaling that new-car aroma and peeling out of the dealer’s lot for a test drive.

Some consumer advocates suggest you take more than one test spin. The first time out you’ll probably be more concerned with avoiding an accident in a strange vehicle than you do paying attention to the details of the drive. Is the drive hard or soft? Is there room in the trunk for the golf clubs? How does it handle pot holes? Is there leg room in the back seat? Are the controls accessible and convenient? How about road noise? Can you easily get in and out of the car? How difficult is it to paralell park?

Keep your thoughts to yourself during the test drive. Savvy salesmen will take advantage of you to talk about things you want to keep to yourself. How much can you afford, and how much do you want for your trade-in? Keep your eyes on the road and the information to yourself until you’re ready to deal.

Tips from the Pros
Consumer advocates caution buyers to go into car deals with their eyes wide open. Here are a few sales traps to avoid:
Don’t tie yourself to a monthly payment. Salesmen begin salivating immediately when they learn their prospective customer is a "payment buyer." Heck, you’ll pay a small fortune for that Chevy that’s been on the lot for month if you can keep the payments down to $350 a month! They’ll juggle trade-in value, MSRP numbers, the length of the financing and amount of your down payment until they reach that $350 monthly payment that’s so important to you. Actually, the only thing that should matter is the cost of car. Everything else is irrelevant.

Forget about the "extra protection." Never pay more for paint protection, rust proofing or undercoating. This stuff costs a fortune, it’s pure profit for the dealer and you don’t need it anyway because most new cars already have 100,000 mile rust warranties. No thanks, it’s a sucker deal.

How about that extended warranty? Maybe, maybe not. Buying an extended warranty at the time of purchase may be a good idea if you’re absolutely sure you’ll be driving the car long after the original warranty expires. It’ll be cheaper at the time you buy the car and the the dealer’s price will usually be less expensive than that offered by a third party. But proceed with caution. Consumer Reports magazine, the Grandaddy of all consumer advocate organizations, does not recommend.

Negotiate the price first: Don’t start talking trade-in value of your old car before locking down a price on a new one. First get a fixed price, then talk about trade-in. Any other way, the salesman will toss so many variables into the formula that you’ll be dizzy. And make sure you know ahead of time what the proper trade-in price for your car really is. Don’t let the salesperson tell you what your car is worth. You tell them how much you want based on your research, then let the negotiating begin.

Rebate or Low-Interest Rate? What’s the better deal, a low or zero percent interest loan or a big rebate at the time of sale? It all depends on how much you’re borrowing and the amount of the loan, so put some batteries in your calculator and start crunching the numbers. First, figure out the monthly payment under each offer. Take that amount and multiply it by the number of months of the financing term. Then, subtract the cash you’re saving from the rebate and compare the net costs.

Why is my salesman running back and forth to the sales manager? It’s annoying, but there’s not much you can do about it. Turnover is huge in car sales and dealers know that inexperienced salespeople bear watching. The sales manager holds the key to the information treasure chest of manufacturer rebates and incentives, and your guy probably doesn’t have the authority to close the deal anyway. If the runaround gets too frustrating, demand to speak directly to the sales manager. Who knows, it might work!

Is There a Best Time to Buy?
You bet. Most experts agree that there really are best times of the month and year to prowl the showrooms. The end of the month is always good because dealers are trying to clear their lots, wipe the slate clean and start the next month anew. Another good time to strike is when the next year’s models are introduced. Once again, dealers will do everything they can to clear out their old inventory and put the fresh stuff on the floor.

December is always good. The new cars are out, but most showrooms are empty because everybody is out shopping for Christmas gifts. It’s also wise to strike when bad weather hits town and all the customers are at home staying warm and dry. The forlorn Maytag man looks like a Manhattan socialite compared to a car salesman with no customers to pressure. Want a convertible? Visit your local dealer during a January blizzard. Try buying a rag top in August when every other surfer wannabe is on the prowl and you’ll find out why.

Buying a new car needn’t be as painful as a root canal. Consider it a challenge. Just be prepared, be patient and enjoy the ride.

Did we mention to be prepared?

Written by Dan Allsup

The Most Closely Guarded Secret in the Car Business!

The Finance Dept. in the car dealership, otherwise known as the "Business Office" or the "F & I Dept." has only ONE JOB; To make sure you walk out with the HIGHEST PAYMENT POSSIBLE!

That nice, friendly person behind the desk in the Finance Office who is offering to arrange your car loan "so you don’t have to be bothered with it" is truly a "Wolf in Sheep’s Clothing!" And he or she is usually working on a straight commission pay plan!

Trust what I tell you. I was a trained and very experienced, straight commissioned F & I guy!

When you negotiate a car deal based on your monthly payment the dealer is going to quote you a "loaded payment." This means any payment quoted to you is going to contain a plethora of profit builders for them. . .at your expense, of course!

What the car dealers don’t want you to know is that they make as much, and often more money from arranging the car loan then they do on the car deal itself! This is because when they arrange the loan it will include a higher Interest Rate, (that is, higher than you can get on your own) and often Credit Life & Disability Insurance and an Extended Auto Warranty.

Here’s how it works:

When you let the dealership arrange your financing they will receive a Kick-Back from the bank equal to a certain percentage of the Amount Financed! The higher the interest rate the F & I person can talk you into – and often you won’t even know what rate they’re using – the higher the Kick-Back is going to be. The Kick-Back could be as high as 10% or MORE of the total amount financed.

For example, if you were financing $20,000 the bank or finance institution that the dealer is associated with will be Kicking Back as much as $2,000 or more to the car dealer.

That $2,000 is packed into Your payment! In other words you’re paying it! Needlessly! Just to line the car dealer’s pockets.

You can avoid this rip off by arranging your own car loan before you ever step foot in the car dealer’s showroom. You can either arrang it through your own bank or credit union or visit RoadLoans They will give you a Low Interest car loan and a RoadLoansCheck® to go shopping with. This way you can avoid getting caught up in the car dealer’s trap!

If you do allow the dealer to arrange your loan there’s an excellent chance the dealer will add Credit Life & Disability Insurance to the loan – very often without your knowledge – and this will increase your payment significantly. It’s your choice to get this coverage or not, but you should at least know about it first! Most of the time they will just try to sneak it in on you.

There are two kinds of Credit Insurance that the Finance Person will try to slip in on you. Credit Life Insurance is the first. This covers you in case you should die before your car loan is paid off! If you have an auto loan in your name with Credit Life on the loan and you die before the auto loan is paid off, The insurance will pay off the balance.

If there are two names on the car loan like a husband and wife you can get Joint Credit Life to cover both people.

The second kind of Credit Insurance is called Disability or Accident and Health. This coverage is very expensive, and it covers you in the event that you become disabled through sickness or injury and are unable to work.

This coverage will make your payments for you until you get back to work. You usually have to be disabled for at least 15 to 30 days before you become eligible. Also, there is much fine print for pre-existing conditions.

Now don’t get me wrong! Many people think these coverages are a good idea. It’s just that the car dealers usually earns 50% of the price of this coverage as commission which can amount to thousands of dollars in the dealer’s pocket. That money is buried in your car payment! So you’re paying for their commission!

Now as for an extended auto warranty I personally think it’s a good thing to have as long as you don’t get grossly over charged for it. You can learn more about extended auto warranties at Extended Warranty Tips.

However, when you allow the car dealer to include a warranty in your payment – and again, they may pack it into your payment without you even knowing about it – they are going to mark it up substantially! I have personally seen car dealers mark-up extended warranties as much as $2,500. That’s $2,500 over and above their cost!

If that’s not bad enough, you are at there mercy as to the quality of the warranty itself. There are only a few good extended warranty companies out there. Most of them aren’t worth the paper they are written on. To find out the only two warranty companies I can recommend to you with a clear conscious go to Extended Warranty Tips.

So now you see all the different ways the car dealer can make money on you in the Finance Office. There are other products they might try to pack into your payment such as Gap Insurance, rustproofing, window etching, stereo upgrades, alarms, paint sealant and on and on it goes!

Do yourself a big favor and arrange your own financing before you go car shopping. You’ll save thousands of dollars and a lot of aggravation. RoadLoans is a great place to start.

Written by Tony Lorio