10 Ways a Car Dealership Hustles You

TEN WAYS CAR DEALERS MAKE MONEY OFF YOU Sources: carbuyingtips.com, listverse 1. THE MARK-UP This is the most obvious way a dealer makes profit. The difference between the dealer cost (invoice) and MSRP is typically 5-10%. When you consider you're dealing with thousands of dollars, the mark-up becomes significant: YOU ARE THINKING OF BUYING A CAR. Dealers have A DEALER COMPARISON inside-joke fees like a $50 "spiff": you get a customer to climb into the THE 1998 THE COW Congratulations. At some point in our lives, we all do. And chances are you ended up going through a dealer. This list is designed to help you know the tricks that the dealers use to maximize their profit and your loss. MITSUBUSHI ECLIPSE FARMER'S SUGGESTED PRICE: $2,840 A car sells for $30,000. trunk of a car SUGGESTED LIST PRICE: $21,636 and close the door to demo The dealer makes $3,000. month. You see where we're going here. the glow in the dark child safety A dealer can sell a few hundred cars a Shipping and handling Extra Stomach Two tone exterior 35.75 79.25 142.10 126.50 189.60 149.20 88.50 179.90 59.25 339.40 884.16 69.80 trunk release. Destination Charge Floor Mats Preferred Value Package 435.00 50.00 2,571.00 2. HOLD BACK & ADVERTISING When a dealer sells a new car, the sale is RDR'd to the manufacturer, informing them that one of their units has been sold. The manufacturer The manufacturer pays the dealer a set amount for “hold-back" & advertising. ADDITIONAL DEALER MARK-UP Sales Promotion Fund Dealer Advertising Association Holdback Dealer Flooring Assistance Produce storage compartment Heavy duty straw chopper 4 spigot/high output drain system Automatic fly swatter Genuine cowhide upholstery Deluxe dual horns Automatic fertilizer attachment 4x 4 traction drive assembly Pre-delivery wash and comb (Farmer Prep) 100.00 484.00 371.00 185.00 TOTAL LIST PRICE (Including options) gives the dealer a cut. $2,776.00 ADDITIONAL FARMER MARK-UP 300.00 (Delivery and Hay Fees) Here's your dealer, making you pay an extra $1140 in fees. Nice tie. TOTAL LIST PRICE $3,140.00 (Including options) 3. UNDERVALUING TRADE-INS When a person trades in a car, the dealer will surely attempt to undervalue the trade to make an immediate profit. If a car's actual cash value (ACV) is really worth $11,500 and the dealer only shows the customer $10, 500, there is an immediate $1000 profit. 5. THE CUSTOMER SERVICE FEE The biggest farce of them all. This is a dollar amount the dealer says goes to pay for the handling of your paperwork, tag work, title work, tax work, etc. Most of the paperwork can be done in a few minutes and over the phone, internet, fax, etc. The overage naturally goes into management's pockets. 4. THE 4-PACK New and used cars are “packed." This is a figure that is added to the price of the car (in addition to the already existing mark-up). This is money that goes to pay the owner of the dealership. THE OWNER Bad news. 8. THE SERVICE CONTRACT One of the big money makers in the business comes from Extended Service Contracts. Nine out of ten of these extended warranties will cover things that are unlikely to break. Oh, and you'll pay that deductible each time you claim. 9. GAP INSURANCE Gap insurance could turn out to be worth its weight in gold. It satisfies the car loan in the event of theft or total loss. It costs $599 at the dealership but you can get it at your local credit union for $150. YOU THE DEALER "The lender is requiring 20% down. You're going to have to pay your taxes in cash. The bank can play the good guy and the bad guy. 6. THE DOWN PAYMENT When a dealer or sales manager say these things, they are lying, especially if you can secure your own financing (personal bank, credit union, etc) before you buy. Down payments usually result in sheer profit for the dealership. 1. THE BUMP-STICKER It's a legitimate-looking sticker the dealer places next to the manufacturer's window sticker with a higher priced MSRP than the actual. The dealer will try and justify this added cost. The theory is once the sticker is negotiated away, the customer will feel that he got a great deal. 10. HOLDING PTS OF RATE The "buy rate" is the interest rate the lender has approved for the loan- let´s use 7.9%. Typically, the lender will allow the dealership to make 2 points of rate. That means your rate is 7.9%, but the dealer can contract you at 9.9% and the bank will pay the dealer the overage from the rate. This makes them LOTS of cash.