New Car Buying Scams

Unfortunately, new car buying scams exist; dealerships are out to make money, and not all of them are honest in their practices. However, with a little research and patience, you can avoid these car-buying scams and get into the best vehicle for you and your situation.

Types of Car Buying Scams

The following are just a few types of car buying scams to look out for when you're buying a car.

Trade-In Scams

Sometimes, dealerships make trade-in vehicles “disappear" within the hustle and bustle of paperwork. Before signing any contracts, make sure your trade-in value is reflected in the final documents; it is supposed to be shown as an amount applied to the overall negotiated new car price.

Push, Pull, or Tow

A type of trade-in scam, the “push, pull, or tow" scam occurs when dealerships advertise a guaranteed price on all trade-ins. The issue with this guarantee is that the money put towards your new car purchase from the trade-in actually comes from incentives and rebates you can put towards your car without a trade-in vehicle.
Essentially, you are giving the dealership your old car for free.

Negative Equity Scams

When you have “negative equity," it means you owe more on the car than it's worth. Some dealerships advertise that they'll pay off your trade-in vehicle, even if you have negative equity. However, often the reality is that they roll the negative equity into your new loan, essentially having you paying for both vehicles and leaving you with even more negative equity.

Four-Square Diagram Scams

The “four-square diagram" represents the:

1. New car price.
2. Trade-in vehicle value.
3. New car loan monthly payment.
4. Down payment.

Generally, dealers use this diagram to figure out what kind of buyer you are. Once they know which of the above you are more concentrated on, they will work to make that specific number sound appealing to you, but raise all the other numbers.
Protect yourself against this car buying scam by doing some research and then walking onto the lot knowing:

• How much the new car is worth.
• How much your trade-in vehicle is worth.
• Your credit history and score.
• Your financing options beyond the dealership.
• You might even obtain a bank auto loan before visiting the dealership.

Dealer Addendum Scams

Simply put, dealer addendum scams occur when a dealer adds on extra costs such as fabric protection or paint sealant.
Basically, this is “profit padding," and sometimes during the negotiations the dealer will remove the costs of these add-ons to make you think you're getting a better deal when, in fact, you're getting the original sticker price.

Poor Credit Score Scams

It's simple: Know your credit score before you go car shopping. If you have a poor credit score (or the dealer says you do), you're at risk for being talked into higher down payments and possibly even higher monthly payments.
Protect yourself against this situation by ordering a copy of your credit score from one or all of “The Big 3" trusted credit agencies (Equifax, Experian, and TransUnion) so you'll know exactly what you're working with and won't have to take the dealer's word for it.
Also, consider obtaining a car loan before actually buying a car (i.e. look for financing from a bank or credit union, or even a blank check auto loan, rather than use dealer financing); this way, the dealer doesn't have the power to tell you what you can and cannot afford. You'll already know.
Learn more about how credit scores affect the car buying process and how you can get a copy of your own credit history in our section on Credit Reports.

Low Monthly Payment Scams

If you present yourself as a monthly payment buyer (a buyer focused on getting the lowest monthly payment), the dealer could jack up the car price, ask for a higher down payment, and lengthen the auto loan term.
Avoid this situation by knowing what you're able to afford. You can do this by:

• Researching the price of the car.
• Determining how large a down payment you can make.
• Negotiating an interest rate you can afford.
• Deciding how long you want to pay for the vehicle (the “auto loan term").

Try our Auto Loan Calculator to get started, and remember, arranging financing before you visit the dealership can help you from getting labeled as a monthly payment buyer.

One Day Only! Scams

Unfortunately, dealerships use this scam to take away from the time you could be using to research a vehicle before you purchase it.
While rebates and incentives can have hard expirations dates, generally the deals offered on day only sales aren't deals you can't find on any other date.

Spot Delivery Scams

Spot delivery scams can happen when you bring home a car before the finance department has completed all the auto loan arrangements. Some dealers encourage this because they count on you being less likely to return the car if the loan arrangements aren't to your liking, i.e. the original financing plan “fell through" or the finalized rates are much higher than originally quoted.
You easily can avoid this scam by not driving away until all financial matters are handled.

Excessive “Dealer Prep" Fee Scams

Admittedly, a dealer preparation or “dealer prep" fee isn't as much of a scam as it is an often excessive fee the dealers are, usually, upfront about; they claim this fee is important because it offsets their efforts to fully prepare the vehicle for you.
However, unlike a warranty cost, you're not actually benefiting from a dealer prep fee in the long run.
Generally, dealer prep fees are permanently printed on buyer documents, but you can negotiate that they remove the fee and/or credit it on the document. If your dealer refuses, it's time to determine how badly you want this car from this dealership.

Additional or “Forced" Warranty Scams

Some dealerships claim you must pay for additional warranties, stating they're required by the bank to lower their risk of loaning to you, but there are experts who point out a bank wouldn't charge you additional money to lower their risk of already loaning money to you.
Simply put, never be forced into extra warranties, and always read the fine print before signing the final paperwork.

How to Check for New Car Tampering

The above reflects several types of car buying scams, but you should also watch out for new car tampering; remember, just because a car is “new" and not “used" doesn't mean someone hasn't tampered with it along the way.
Some of the most common ways to look for new car tampering include:

• Checking the vehicle identification number (VIN).
  
  • Generally, the vehicle identification number, or VIN, is located both on the engine block and the driver's side door jamb. Do a VIN check and make sure these numbers match.
• Inspecting the engine.
  
  • Simply put, make sure the engine looks clean and new. Sure, the new car probably has been driven a few times, but there's no reason for a new car's engine to be full of grease and grime.
• Reading the odometer.
  
  • Similar to the engine, the odometer will reflect that the new car has been driven a few times; however there shouldn't be hundreds of miles on it. Also, if the car looks a little worn but the odometer reading is extremely low, it's likely someone has tampered with the odometer.

Just walk away from these red flags. There are other cars—and dealerships—to check out.

Reporting New Car Buying Scams

Perhaps the simplest way to report new car buying scams is to report the situation to the Better Business Bureau (BBB). Not only can you use the BBB to report any scams you've fallen victim to, but also you can research car dealerships to make sure others haven't been the victims of car buying scams.
You might also consider contacting your state's attorney general, who is the chief legal advisor and law enforcement entity.
Also, don't forget the power of social websites. Today, many reputable websites exist to help consumers share their experiences and encourage—or warn—others about businesses practices.

Source : http://www.dmv.org/buy-sell/new-cars/scams.php
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