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The Dark Side of Car Financing: 13 Dealership Tricks Exposed

Financing a car can be a complicated process. For many people, a vehicle is a necessity, and with that, financing is a critical part of being able to purchase a car. Without financing, many car owners would not be able to own a vehicle.

The complex jargon and terms surrounding financing can feel overwhelming, vague, and sometimes, maybe even a little shady. Unsuspecting buyers can easily fall victim to some scrupulous tactics used by some dealerships if they’re not cautious. 

While buying a brand-new car can be an exciting, if not daunting, experience, there are some pitfalls to be wary of. There are several things to consider and watch out for when financing your next car purchase at a dealership.

Spot Delivery Scams

Spot Delivery Scams
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Spot delivery is when a dealership sells you a car even when banks are closed, which can be a win-win for both buyer and dealer. The buyer gets to drive the car home; the dealer makes a sale. Spot delivery allows the buyer to sign a contract with the loan details, but the financing isn’t final until a lender is secured. Spot delivery can go awry and fall into scam territory when a dealership tells the buyer their financing is approved, but the buyer receives a call later requesting a higher down payment or increasing the interest rate. It’s important to be vigilant, but you can also take precautions by securing pre-approval from an external lender before visiting a dealership.

Payment Packing

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Dealerships might manipulate or inflate monthly payments. Payment packing, also known as packing the contract, is when a dealer extends the loan term, resulting in buyers paying significantly more over the life of the loan solely in interest. Take the time to review your loan terms in great detail and understand the total cost of the loan. If you focus on monthly payments alone, you might not see some of the hidden numbers that are inflating those payments. 

Pulling a Bait-and-Switch 

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This tactic is popular across industries, and it involves advertising a deal to secure a customer’s interest. In practice, the bait-and-switch tactic might look like promoting a low-interest rate but raising the rates last minute. The bait-and-switch method is meant to lure customers in, but then the dealer changes the terms or ups the numbers once the buyer is at the dealership. 

Enacting Yo-Yo Financing

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Yo-Yo financing is similar to spot delivery scams, but like a yo-yo, it can make customers feel yanked around through a messy financing process. The dealership permits the customer to take the car on a spot delivery, but the dealer gains the upper hand by not securing any financing at all. The dealer will claim that the financing fell through and continue to manipulate the buyer into accepting a worse interest rate, or in some cases, returning the car altogether. 

Pushing Unnecessary Add-ons

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Dealerships might push buyers into considering add-ons that can inflate the overall cost of the vehicle. A salesperson might push products and services, such as extended warranties, for example, claiming that they’re essential. Buyers should be smart and cautious when weighing the benefits of add-ons. Many add-ons are unnecessary and only contribute to increasing the overall cost you end up paying.

Claiming a False Credit Score

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In some situations, customers might be informed that their credit score is lower than it is. Some dealerships will make false claims to justify higher interest rates. As the buyer, you must be prepared before you invest in a vehicle. Check your credit and obtain a copy for your records. This way, you know your score and can avoid falling victim to this tactic at the dealership. 

Offering Low-Ball Trade-Ins

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Be wary of dealerships that attempt to low-ball your trade-in. Some dealerships may undervalue trade-ins, which ultimately affects how much money you receive to put toward your next vehicle. Not only does this mean you receive less than your car’s worth, but you’ll also have less for your trade-in. Do research beforehand. You might also want to get a few different quotes on a trade-in beforehand so that you can be better prepared to negotiate a fair trade-in value

Disguising Prepayment Penalties

A car salesman is explaining the purchase details and details in the car purchase contract before signing acceptance of the terms, the car sales contract through an agent. Car trading concept.
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Some loans might include prepayment penalties. This means that it can be mostly for you to pay off the loan early. If a lender plans to charge you for paying off the entirety or a portion of your loan early, you could get hit with a penalty fee. This ensures that borrowers won’t pay it back early, allowing a lender to collect interest throughout the entire life of the loan. Before you sign on the dotted line, check the terms and conditions. Ensure you have the flexibility to pay back the loan early if you so choose without incurring unnecessary fees. 

Tacking On Excessive Fees

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If you don’t read the fine print, you could easily get slammed with a variety of fees. These fees could range from documentation fees to processing fees, to administrative fees. Carefully review the breakdown of charges and be prepared to negotiate or walk away if the fees are excessive. A dealer should be able to clearly articulate what the fee is for, and if they’re unwilling to clarify what the fee is or negotiate it down, you’re better off walking

Asking About Payment Method

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Another dealership trick is to inquire about how you plan to pay for the car. It’s best to keep your payment plans under wraps until it’s time to discuss finances. Dealerships make their money from financing, so it only makes sense that they would manipulate pricing based on your financing. For example, if you plan to pay cash or through another secured lender, a salesperson might manipulate the price to ensure that they can make up for the sale that won’t be financed through their dealership. 

Obscuring the Small-Print

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That teeny, tiny small print at the very bottom of important documentation is there for a reason: in hopes that you will never thoroughly read the content. You should most definitely scour the small print and ensure you understand what you’re walking into or signing off on. That small print often discloses the disclaimers and stipulations that come with buying a car at that particular dealership and you’ll want to be apprised of those details. 

Marking Up Interest Rates

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Some dealerships might mark up interest rates and present buyers with higher rates than the ones they qualify for. If you know your credit score, it’s easier to turn down a dealer and plan to shop around instead. By doing your due diligence and planning, you can avoid falling pretty to inflated interest rates. 

Talking Buyers Into Leasing

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Dealers might push buyers towards leasing instead of traditional financing by emphasizing lower monthly payments. Leasing is a suitable option for some people, but there are many restrictions to consider, one of which is mileage limits. Many dealers will tout the short-term benefits without disclosing the potential drawbacks—or restrictions. Buyers should carefully consider their driving habits and preferences to determine if leasing aligns with their financial goals before being persuaded by a leasing pitch.

Author: Marisa Higgins


Marisa Higgins is a lover of good storytelling, and she’s spent the past decade teaching college English, and writing and researching about American Literature and Culture. She lives in Knoxville, TN with her husband, and their Beagle-Chihuahua, Rumi, and cat, Rory. Marisa’s work can be found at A-Z Animals, FuelsFix, and TellTaleTV. You can visit her website here:


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