BUYER BEWARE: TOP CAR DEALER SCAMS FOR NEW CAR SALES
OFFERING LESS THAN TRADE-IN VALUE FOR YOUR VEHICLE
Trading in your car is NOT always a good idea – especially if you have no idea what your car is worth. Many people think what they owe on their car determines the value but that is not correct. Many people don’t want to go through the hassle of trying to sell their car on their own but if you simply trade it in, you may be giving up hundreds, maybe even thousands, of dollars.
Before you decide to trade your car in, visit www.nada.com, www.kbb.com and www.edmunds.com to determine both the current retail selling price for your vehicle as well as the trade-in value. When figuring the value of your car, be sure to include all of the options and the accurate mileage. And, be sure to enter your zipcode so the price is calculated for your geographical area. Then, average the information from all three sites for both retail and trade-in values. Next, if you still owe on your vehicle, call the bank or credit union and get the current loan payoff amount. Finally, check the classified ads in your local newspapers to see what others are asking for similar vehicles. Once you have all of that information, you should be able to establish the high and low value for your vehicle.
If you still decide to trade in your vehicle rather than sell it, you will be better informed to determine what you will or won’t accept for your trade-in. Remember: the trade-in value is also a negotiation so be prepared!
Here is why you need to be prepared. If you accept the first trade-in offer, it will very likely be lower than fair trade-in value and you will enable both the dealership as well as the salesman to profit from your ignorance since your car is probably worth more. Car salesmen call this "stealing from the trade" and it's a common ploy.
The rule here is to FIRST negotiate your trade-in value and then negotiate the price of the vehicle you are purchasing. Do not allow the dealer to negotiate only on your new car price. You need to know two figures: the value of your trade-in and the selling price of the new vehicle you're buying. Pretty soon the salesman will be discussing your monthly payment and loan terms and the more numbers you talk about, the more confusing it becomes. It doesn't matter how sharp you are because the dealer has a computer or calculator at his fingertips. He can jumble the numbers around any way he wants.
FORCING YOU TO ACCEPT MANDATORY ARBITRATION OR TO SIGN AN ARBITRATION AGREEMENT
As part of the purchase process, more and more car dealers are using a small print clause on the front or back of the sales agreement (or a separate piece of paper) stating you agree never to file a lawsuit against them but instead to “arbitrate” any dispute you may have. If you question what you are signing or ask what it means, the dealer often glosses over the clause and instead tells you that if a problem occurs, they will make it right and you won’t need a lawyer. For many people, that sounds good so they sign it never realizing that by doing so, they may be giving up some or all of their legal rights to sue the car dealer, no matter what he does. The fine print may also say the car dealer gets to choose the arbitrator or it may say you have to pay the processing fee and it may also state that you cannot appeal the decision. If you sign this kind of “agreement” many if not all of your legal rights and your only recourse, should you have a problem with this car dealer, is to use a process the car dealer has put in place.
Some new car & RV manufacturers (like Kia and Hyundai) are now putting mandatory binding arbitration clauses in their warranties too. So read your warranty. If you see an arbitration clause, you likely will also see a sentence that says you can revoke an arbitration if you promptly send them notice. Do it. Do it fast - use certified mail and keep a copy. Otherwise, you could lose your legal rights. Arbitration can hurt your lemon law rights!
DON”T buy from a car dealer that requires an arbitration agreement! Better yet, call ahead and ask if he dealer has an arbitration clause. If they say yes, find a car dealer who doesn’t have an arbitration clause because chances are, their business practices will be more fair and trustworthy.
USING ELECTRONIC SIGNATURE PADS
Electronic signing pads are becoming more and more prevalent and with every convenience comes a risk. There may be minimal risk when signing a short sales receipt that shows you the cost of the item, the sales tax and form of payment. However, the risk increases substantially when you electronically sign contracts for a vehicle purchase because you are often asked to sign something you never see and the only explanation for what you are signing is given by the sales person. If the car dealer is not reputable, you may incur the expense for products or services that you don’t need or want, agree to terms that hurt you rather than protect you, pay more for the vehicle than you were told and/or incur a higher interest rate – all of which could cost you thousands and thousands of dollars. Electronic signing can be risky and cost you thousands of dollars.
DON”T sign for anything without first reading what you are being asked to sign. If they won’t let you read it before signing, stop the process and don’t buy from that car dealer!
TAKING POSSESSION OF YOUR NEW CAR W/O FINANCING TERMS (SPOT DELIVERY)
This scam is called a “spot delivery” and occurs the car dealer tells you that although your loan hasn’t been officially approved, you can drive the car home.
Typical Scenario: The car dealer tells you they think they found good financing for you but can’t reach the right person to approve it so rather than hold you up, they encourage you to take the car home. A few days or sometimes a few weeks later, the dealer calls to say that your loan wasn’t approved by lender “A”, but they have found a new lender and you need to come in and sign new paperwork. When you arrive, you are asked to sign a new set of paperwork which often includes a higher price for the car, more warranties or products and services you neither want or can afford, a higher interest, and/or the loan term has been extended. When you say you don’t like the new terms or feel you can’t afford them, they tell you they’ve already sold your trade-in so you feel like you have no option but to sign the new loan papers and keep the car.
DON”T drive the car off the lot until the dealer says the financing terms have been approved! Better yet, arrange for your own financing so you know exactly what the loan rate will be.