Car Dealer Scams

The car dealer scams listed below are a sample of the more common scams you may encounter.

Most car dealers are honest, but unfortunately, like in most areas of life, there are always people who want to take advantage of other people for personal gain.

The car buyers who are scammed the least are the people who arrange their own financing, have no trade, and do their research and arrive prepared.

The dealers have three opportunities to make money from you: the sale of the vehicle to you [front-end profit], your trade in vehicle, and the add-ons such as financing, gap insurance, warranties etc [the back end profit].

Sometimes the dealer will reduce the profit on the front-end because they anticipate loading up the back end profit.

Types of Car Dealer Scams

The Deal Wont be Here tomorrow

This is based on the assumption by the dealer that if you leave the lot without purchasing, you are unlikely to buy. So the strategy is to get you to believe that if you leave the dealership and come back tomorrow, the same deal won't be on offer!

If you are unsure about the deal, you should always go home and sleep on it or get further advice. It is unlikely the same deal will not be there tomorrow.

The Credit Score Scam

You may hear the phrase that "With your credit score, you won't qualify for competitive finance rates". It is important to find out your credit score before visiting a dealership to avoid the car dealer scams. Some dealers have been known to state that your credit rating is lower than it really is, in order to increase the finance rate on the loan.

The salesperson should not know more about your credit history than you and is one of the easier of the car dealer scams to avoid by bringing your own credit score with you.

You can contact the major credit bureaus and ask for a copy of your credit report. The credit agencies are Experian, Transunion, and Equifax.

Spot Delivery Scam

This care dealer scam is about the financing falling through after the purchase. During the purchase you are told that the dealer was able to get you a low APR and so you proceed with the sale and drive the vehicle away.

A week or so later the dealer calls you and advises you that you didn't qualify for that low interest rate. They are covered by a clause in the contract that states 'subject to loan approval'.

Although you have signed the papers, the deal is not final until the loan is approved. Some dealers take advantage of this and then advise you that you will have to pay an extra $1,000 and you monthly payments will also go up.

This scam targets mainly people with bad credit who are less likely to question it. You can avoid this by arranging your own financing.

Payment Packing

car dealer scams

Payment packaging occurs when the monthly payments are packed with items such as GAP insurance, warranties, life and disability insurance and anything else they want to build in.

When you get to the finance office you are not told the inflated monthly payment already has the extra back end products included in it.

If you agree to the monthly payments, only then are you told it includes all of the back end products, which makes most people happy as they feel they are getting a good deal with all those items and the payments haven't gone up.

This is one of the more common car dealer scams.

The Extended Warranty Scam

If you are advised that you have to take out an extended warranty or the loan won't go through, or the interest rate will go up, it is another example of the car dealer scams.

The loan is determined by the credit score, and has nothing to do with the car. If the dealer insists it is required, get them to put it in writing that the loan requires an extended warranty for approval.

Some finance people tell you that the warranty is included in the price, implying it is free, however what it really means is that they have simply added it to the final price.

Advice to Prevent Car Dealer Scams

  • Shop around and find the best loan and interest rate to suit you, and compare this to the offer at the car dealer
  • Have an independently licensed car mechanic inspect the vehicle you are considering buying and specify any problems that are picked up are to be remedied before signing the papers
  • Focus on the TOTAL cost of the vehicle, not the monthly payments as the monthly payments can be reduced by the dealer by increasing the time it takes to pay off the vehicle [such as 60 or 72 months], and therefore the interest rate and total cost goes up. Don't tell them how much you can afford to pay each month - just tell them the price you can afford for a vehicle
  • Get the dealer to list the following before you sign: the sale price, the finance rate, the term of the loan, and the amount financed. Getting these specified should prevent other back end products being packaged into the deal without your knowledge or understanding
  • Check the vehicle history, especially if it is an 'as is' sale. Don't trust the dealer if they say it has never been in a serious accident or never been a wreck. Check the history of the vehicle Autocheck
  • Research the type of car you are looking for and find out what it normally sells for and any incentives and rebates by checking out sites such as; Kelly Blue Book,,, and

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