How to Protect Yourself From Fraud When Buying a Car
When you go out to shop for a new car, your thoughts are probably focused on what color you’ll get and how much you’ll pay. The last thing on your mind is getting scammed. Unfortunately, some auto dealers are not keeping your best interests at the top of their to-do lists. Some are more concerned about how much of your money they can keep for themselves. It will be up to you to make sure you’re getting a fair deal.
The Federal Trade Commission (FTC) recently announced a crackdown on deception and fraud within the auto industry. The commission collaborated with several partners in law enforcement to introduce Operation Ruse Control, which is a national effort to shield consumers from fraudulent auto industry practices. The FTC says six new cases against dishonest auto dealers resulted in roughly $2.6 million in judgments. The judgments include deceptive advertising, odometer fraud, and deceptive add-on loan servicing fees. Both independent and franchised dealerships were targeted in the crackdown.
The Cheat Sheet spoke with two auto experts to get advice on staying scam-free while shopping for a car. Here’s what you can do to protect yourself from shady auto dealers.
1. Be cautious when evaluating car advertisements
The FTC warns consumers against becoming easily draw in by ads touting rock-bottom prices, low or no up-front payments, low- or no-interest loans, or very low monthly payments. Sometimes a deal is not what it appears to be. There may be additional fees lurking in the fine print. In addition, the FTC says an advertised price might only be temporary and balloon at a later date.
2. Do your research before shopping
Take the time to do some legwork. Walking into a dealership unprepared will put you at a disadvantage. Doing your best to educate yourself about your purchase might save you from a big headache later. Tara Baukus Mello, auto expert for Bankrate and founder of She Drives, says:
Buying a car is typically the second most expensive purchase that anyone makes (next to a home) and it’s not one to be made lightly. Educate yourself before you even visit a dealership to “look.” Know how much the invoice price is of the car you are interested in by using an automotive information website. Go to the manufacturer’s website to find out what rebates and incentives are available. This way you’ll know exactly what the price should be.
3. Be leery of add-on auto finance plans
Some dealerships may offer a plan to help you pay off your auto loan quicker, but it could significantly increase your total cost so much that it eats up your savings. If you’re looking to reduce costs, your best bet is to investigate your options with a credit union, which may offer rates that rival a dealership’s offer. Jeff Fortson, auto expert and founder of JeffCars.com advises:
Get pre-approved prior to going to a dealership. A credit union typically offers the best rate, unless there is a special low-financing deal being offered by the automaker. Thus, you’ll know in advance the terms and the interest rates. So once you’re signing off on the paperwork at the dealership you can opt to go with the pre-approved financing or the dealership financing. To avoid fraud, make sure the price, the interest rate, and the terms are what you agreed to before closing the deal. Dealers can usually alter one of those three, which could lead to higher payments and drive up the overall cost to pay off the vehicle.
4. Beware of bait-and-switch sales tactics
You might be lured into a dealership by the low price on one particular vehicle, but once you arrive in person, a salesman might try to convince you to purchase a different car that’s much more expensive. Don’t let a crafty sales pitch keep you from making a smart buying decision.
“In this day and age where consumers have access to tons of data, some dealers are still using a ‘bait and switch’ process,” says Fortson. “They’ll advertise a price on a stripped-down vehicle that is too good to be true and once they get you into a dealership they will switch you to a higher-priced model with more equipment.”
5. Prepare to negotiate
Mello recommends negotiating based on a car’s invoice price instead of the monthly payment. She says this will guard against a dealer quoting you the monthly payment you want but for a longer loan length. Mello also says consumers should negotiate the price of the trade-in separately so that it will be clear how much the dealer is offering to pay for the old car.
6. Be ready to walk away
Be firm about what you want. Do your best to negotiate a deal, but be ready to walk away if you have to. Remember that this is your money and your decision to make.
“You can always walk away at any point in the purchase process if you feel uncomfortable or even if you are just tired or need a bite to eat. If you still have questions when you are at the dealership, go home and do additional research before you return,” says Mello. “In many cases, you can even do additional negotiation with the salesperson you are working with over the phone or via e-mail to save time, only returning to the dealership to finalize the purchase.”
You can report fraud to the Federal Trade Commission through their online Complaint Assistant.