10 Outrageous New-Car Scams To Avoid

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For many families, buying a car is among the most expensive – and emotional – purchases they’ll ever make. But while many astute shoppers may come to the table fully prepared with reams of reviews and pricing information on the makes and models of their dreams, they could well face a rude awakening at the hands of a shady, even unscrupulous salesperson or new-car dealership.

“People can get into trouble because no one has ever taught them how to really go about buying a car,” says former car dealer and current consumer advocate and radio show host Nicole Markson. “People are not skilled at negotiating because they do it once every three to five years, while dealership personnel do it all day every day. The field is not level from the start.”

According to the Better Business Bureau, issues with new-car dealers remain among the top consumer complaints, and even a cursory investigation on the topic opens the proverbial floodgates to torrents of woeful tales. While some grievances can be attributed to inattentive or rude personnel or overly aggressive salespeople, many consumers find themselves the victims of egregious tactics that would make even the most brazen hucksters shake their heads in disbelief. Consider these horror stories provided to us by Edmunds.com:

Consider what happened to a buyer in Clearwater, Fla., who amicably agreed upon both a new vehicle’s transaction price and the amount his existing car would be worth in trade, only to later find that the former amount had since been inflated by the latter in the paperwork, thus negating the trade-in value altogether.

And then there’s the Air Force Reserve staff sergeant near Salt Lake City, who was told by a salesperson that since the sergeant had served his country, the dealership would “take care of him." They sure did. The salesperson insisted he needed the soldier’s credit card in order to quote a price on the model of his choice, only to charge $1,000 to the card and pressure the sergeant into signing a sales contract by claiming he’d already purchased the car.

Misrepresentations seem to be the most common complaints among car buying consumers. We’ve documented 10 of the most common new-car buying swindles, compiled with assistance from the experts at Edmunds.com, Autobytel.com, CarBuyingTips.com and ScamBusters.org.

Car-buying experts agree that one of the best ways to counter any suspected shenanigans is to simply head for the door. “If a consumer feels like he or she's dealing with a salesperson who is playing fast and loose the facts of the deal, the easiest thing to do is stand up, shake hands and walk away,” suggests Edmunds.com features editor Carroll Lachnit. “If you really want the car, but just need time to sort through the parts of the deal on your own, tell the salesperson you want to sleep on it. He may tell you that it's a today-or-nothing deal, but don't fall prey to pressure like that. Nothing takes the wind out of a shell game faster than the departure of the ‘mark.’”

If, after the fact, you feel you’ve been a victim of new-car buying fraud, first contact the dealership and give them a chance to correct the situation – many states require this before taking any subsequent action. Don’t rule out the power of public persuasion, particularly with regard to social media. Document your problems on web sites like DealerRater and Yelp and on car-related sites like Edmunds.com, which maintain special sections for registering dealer complaints (prospective buyers should check such sites to see how other customers have been treated before shopping for a new vehicle). “Car dealers are starting to realize how important their online reputation can be and are wanting minimize negative reviews,” Fidan says. “Warn the dealer you’ll be posting negative reviews online if the problem is not taken care of – that should perk up their ears.”

If the dealer won’t make things right, contact the appropriate state agency, which is often the attorney general’s office. Beyond that you’ll need the assistance of an attorney.

Still, as they say, the best offense is a good defense, so be sure to keep a watchful eye out for any of the scams detailed in the in the following pages to help protect yourself in the clinches next time you set foot on a showroom floor.

10. "Back End" Add-Ons

According to the National Automobile Dealers Association, an average dealership loses $180 for every new model sold. While doesn’t seem like a sound business model, there are far more ways for a dealership to make money and there’s no more profitable way that the so-called “back end” of the deal. In addition to financing, you’ll be offered – perhaps pressured is a better word – to purchase assorted add-ons that can suck the value out of what would otherwise be a good deal. These range from credit life insurance (conventional term-life or disability insurance is usually a better buy) to fabric protection (a can of Scotchguard can suffice), rustproofing (largely unnecessary with today’s cars) and paint sealant (little more than a good coat of wax). Simply refuse to pay for any of these high-profit items and threaten to walk out on the deal if they’re insisted upon. Buying a costly service contract that extends a manufacturer’s warranty for an additional two years or more may seem like a good idea, but they’re just insurance policies in which the actuarial odds favor the house and rarely deliver any real value for the money. If you feel it’s a necessity, try to get the dealer to lower the price or, better yet, shop around after the fact (or even ahead of time) to find one for less money.

9. The Spot Delivery Scam

Perhaps among the most onerous of car-deal cons, this swindle involves sending a buyer – often one with sub-prime credit – home in a new vehicle before the final financing arrangements have been completed. The dealer calls back in a day or two to tell the customer there’s a problem with the loan terms, subsequently subjecting him or her to a higher interest rate than expected and perhaps even requiring a larger down payment in order to qualify. The idea is that since the buyer has emotionally “bonded” with the vehicle by already taking possession, he or she will pay whatever it takes to keep it. Again, the best defense here is to shop around ahead of time for financing, especially to be aware of for which rates and terms you’ll qualify given your credit rating.

8. Negative Equity Scams

Never trust dealers who promise to pay off your existing car loan – no matter how much you owe on it. Motorists who’ve bought their current vehicles with low down payments and long loan terms often have “negative equity” in them, meaning they owe more than the car is worth in trade. Sure, the dealer will pay off the loan, but will simply wrap the amount of negative equity into the new-car deal, resulting in a higher balance, a costlier monthly payment and even a longer loan term. You’ll also be in the uncomfortable position of paying for two cars at the same time. It’s better to hold onto your current car until it’s paid for, or at least until the balance is whittled down sufficiently to realize actual equity.

7. Finessed Financing

Automakers regularly offer cut-rate financing on select models through their affiliated finance companies that can be real money savers. Unfortunately, as the ads state they’re reserved “for qualified buyers only.” While lenders have been easing up on their credit qualifications in recent months, only those with top FICO scores (usually 690 or better out of a maximum 850) will even come close to qualifying for the most favorable financing terms. Everyone else will be asked to pay higher rates and sometimes even a higher down payment; if your credit is particularly tarnished, you’ll pay dearly. Even those with stellar credit might find themselves being quoted a higher rate at the dealership than they might garner elsewhere. Facilitating financing is a major profit center for new-car dealers. Always shop around for a car loan ahead of time among local banks (and a credit union if you’re a member) to find the lowest rates for which you qualify. If the dealer can do better thanks to a promotional financing plan, so much the better; if not obtain a lower-cost loan elsewhere.