16 Car Dealership Red Flags and How To Avoid Them

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Protect yourself from falling prey to shady tactics at the car dealership.

Just like most businesses, car dealerships want to maximize their profits. While many of them do so in an ethical way, some engage in shady practices. If you’re in the market for a new or used car, it’s in your best interest to familiarize yourself with the most common car dealership red flags. This way you can save yourself (and your wallet) from disappointments down the road. The next time you visit the auto dealer to buy or lease a car, keep these car dealership red flags top of mind.

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1. Bogus Fees

When you buy a car, there are some fees that you can’t avoid like sales taxes, car title fees, inspection fees, registration fees, and destination fees. Unfortunately, however, some dealers charge illegitimate fees that should convince you to walk away. These include dealer preparation fees, loan payment fees, advertising fees, and market adjustment fees. Also, be cautious of add-ons you didn’t request such as paint protection, and window tinting. All fees should be clearly outlined in your contract.

2. No Inspection

A pre-purchase inspection is important, especially if you’re buying a used car. During an inspection, dealers should thoroughly examine your vehicle inside and out to ensure it’s in good working order and free of any rust, dents, fluid leaks, or other issues.  If a dealer doesn’t allow inspections or provide inspection reports, they may be hiding flaws in the vehicle history from a report like Carfax and sell you a car you don’t want.

3. Unbelievably Low Prices

It can be exciting to land a great deal on a car. But if a dealer makes you an offer that seems  extremely low or way below market value, you should question it. There might be issues with the vehicle that they’re not disclosing. Or if you’re buying the car online, you may end up with something different than you expected. Before you shop for a vehicle, check the average market values of the makes and models you’re interested in so that you have an idea of what’s “too good to be true.”

4. Negative Reviews of the Dealership

Not all car dealers are created equal. These days, reviews can give you a good idea of whether or not you’d like to do business with one. Take the time to find and read online reviews of any new or used car dealer you plan to visit. While a few bad reviews here and there aren’t concerning, too many of them should convince you to look elsewhere for a car. This is especially true if most of the poor reviews are similar and relate to issues like poor customer service or unethical behaviors. It might also be worthwhile to ask your friends and family about their experiences with different car dealerships in your area.

5. Confusing Window Stickers

Car dealers are legally required to display an MSRP sticker on each new vehicle, listing its price as well as all of its options and destination charge. They can’t change the sticker in any way and may face significant penalties if they do. If you find that a dealer adds their own window stickers next to the MSRP stickers, they’re probably trying to confuse you. Dealer add-on stickers or addendum stickers might look official but are actually designed to fool you into paying more for a vehicle.

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6. Verbal Warranties

If a car salesperson, financing manager, or senior management makes you a deal or offers you a great warranty, know that it doesn’t mean anything until it’s in writing. Make sure that everything you agree to is clearly documented in your contract. Stay away from any dealers that insist on keeping things “off the books”. There’s a good chance they’re trying to take advantage of you and won’t follow through on their verbal promises.

7. Packed Payments

When you shop around for a car, make sure you focus on its total cost instead of the monthly payments. If you negotiate based on monthly payments, you won’t know exactly how much you’re paying for the car and any extra add-ons you agree to. Some dealers charge packed payments to hide add-ons that you may not want, such as extended warranties, service contracts, or paint protection. Don’t sign a contract until you know how much you’re paying for the vehicle and any additional products and services you requested.

8. Low Trade-In Values

Trading in your vehicle can make your car purchase more affordable. Unfortunately, however, not all dealers offer fair trade-in values. They might quote you a very low price in hopes that you’ll accept it without any hesitation. To avoid this issue, do your research beforehand. Find out what your vehicle is worth and contact multiple dealers to learn how much they’ll offer you. Otherwise, you might get ripped off.

9. High Trade-In Values

If a dealer offers you a trade-in value that’s much higher than you expected, don’t get too excited. They might do this to build trust and make you feel like you’ve scored a deal but then jack up the price of a new car to make up for the money they’re losing on the trade-in. Again, make sure you know the value of your car in advance.

10. Curbstoners

Curbstoners sell cars “at the curb” or on the street instead of at dealership locations and don’t have the permits or licenses to do so. Oftentimes, curbstoners position themselves as dealers but sell personal vehicles in driveways, parking lots, or vacant lots, only accept cash payments, and offer cars with out-of-state or missing license plates. If you buy a vehicle from a curbstoner, you might be stuck with a car that has hidden problems that affect its value and safety.

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11. Yo-Yo Scams

Also known as the spot delivery scam, the yo-yo scam occurs at some dealers who want to take advantage of car buyers with bad credit. It’s when a dealer allows a buyer to drive off their lot in a new vehicle and contacts them days or weeks later to share that their financing didn’t work out and they must finance with a different lender offering a higher interest rate. Since a yo-yo scam can cost you thousands upon thousands of extra dollars in interest, don’t take possession of a vehicle unless your car loan has been approved and finalized.

12. Bait and Switch Scams

You might see an advertisement promoting a great car deal that encourages you to visit the dealership. When you arrive, however, the dealer may say that the vehicle has already been sold and try to convince you to buy a more expensive option. The goal of this “bait and switch” scam is to get you in the door. If you’d like to avoid it, call the dealership before you visit to make sure the vehicle is still in stock and ask them to send you a written statement that shows it’s available and for sale.

13. 4-Square Method

The “4-square method” is an in-person dealer negotiation technique intended to confuse potential car buyers. It mixes the price of the vehicle, down payment, trade-in value, and monthly payment into one transaction. Don’t commit to buying a vehicle until you receive a clear, written breakdown of all of the costs involved.

14. Early Parts Repairs or Replacements

Dealers earn a lot of money on replacing or repairing worn or outdated parts, such as batteries, brake pads, tires, and headlights. For this reason, some of them will inform you that you need to replace a car part long before you actually do. While it’s easy to just accept their recommendation, it’s better to visit an independent mechanic so they can inspect your vehicle and tell you the truth.

15. Backdated Contracts

Contract backdating is an illegal practice that occurs when you sign a contract and a dealership asks you to come back later and sign a second contract with the same date as the first. It usually happens when a dealer finds out that the original financing wasn’t approved. Without the current date, you may end up paying a lot more in interest than you have to.

16. Naive Contract Mistakes

Speaking of contracts, some dealerships give out contracts with “mistakes” that benefit them rather than you, the car shopper. This is why you must read the contract multiple times to make sure the numbers and terms are correct. You can also ask a trustworthy friend or family member to review it as well. If you don’t spot an error right off the bat and sign a contract with mistakes, you may buy a vehicle that’s more expensive than you wanted it to be.

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Be Careful When Car Buying

Ideally, all dealerships would be honest and genuinely care about their customers. Since this is not the case, it’s essential that you look out for these car dealership red flags and steer away from any dealer that engages in shady or unethical practices.

By car shopping for new or used vehicles with caution, you’ll reduce the risk of unwanted surprises and unnecessary costs in the future. In the event you do have a poor experience at a car dealer and believe they’re engaging in illegal activities, you can report them to the Federal Trade Commission (FTC). They can perform a thorough investigation and hold them accountable.

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About The Author


Anna Baluch

Anna has written for Credit Karma, LendingTree, Experian, Freedom Debt Relief, among many other publications. She is passionate about helping people from all walks of life make good financial decisions. Anna lives in a suburb of sunny Cleveland, OH and enjoys working out, trying new restaurants, and volunteering.


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