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How Car Dealerships Rip You Off

There are still tricks on how car dealerships rip you off, whether in the showroom or online.

Car buyers enjoy a more convenient shopping experience, whether car shoppers are searching for used cars or new vehicles thanks to the internet.

Covid-19 has made online purchases a necessity, having consumers buy nearly everything with a stroke of their key.

Consumers can compare the sticker price of the vehicle (MSRP), review a car’s add-on features, and buy online without ever stepping into an auto dealer’s showroom.

In fact, consumer law experts state it’s good to do your homework, making sure you research the Kelley blue book price of the vehicle you’ve got your heart set on.

Car Dealer Tricks to Rip You Off!

No one likes to be swindled. We’ve all heard horror stories of odometers being rolled back or bait and switch advertising scams.

Here are some common red flags to be aware of:

1. Financing To Meet Your Monthly Payment

You know your budget better than anyone. When shopping for a car, most people have an amount in mind that they can pay each month to finance it.

If you give this number to a salesperson, they can figure out how to reach that price of the car while making the most profit they can.

Once they know the monthly payment you can afford, they can combine the trade-in value of your used vehicle with the price of the new car and financing terms to hit your payment figure.

The financing terms or new car price could rise to meet your monthly payment.

A common tactic is to raise the auto loan terms by a year. Instead of paying the car off in 48 months, it will take 60 months. The monthly payment will drop but you’ll pay more over the long term, proving it a bad deal.

To avoid all of this, don’t tell the sales manager how much of a car payment you can afford each month. Negotiate the price before you discuss your trade-in. Get pre-approved for a car loan from your bank.

2. Higher Financing Costs

If you negotiate a fair price for the car and leave the dealership with little profit on the sales price, the dealer may try to make money through financing and other revenue streams.

With in-house financing the dealer will typically shop your loan application to several lenders to see what interest rates you qualify for.

If the best interest rate they can find for you is 4 percent, they may come back with a rate 2-4 points higher and keep the extra interest as profit.

The extra interest may be split with the finance company.

You won’t be told of the difference, which won’t affect your monthly payment by much anyway but adds up over the length of the loan.

Here’s an Example: You finance a $25,000 Toyota Tacoma on a 60-month loan that you qualify for at 4 percent interest. The payments would be $460 per month. Increase the rate to 6.5 percent and the monthly payment only goes up from $29 to $489. But over the life of the loan, it adds up to $1,724 more, which is pure profit for the car dealer.

3. Spot Delivery Scam

Dealers can also cash in on delivery costs. Some allow potential buyers to leave with a new car before the financing has been finalized.

The dealer calls a few days later, telling them the loan has fallen through and the car needs to be returned or it will be repossessed.

When returned, the dealership’s finance officer has a different loan at a higher interest rate or larger down payment.

This scam is most commonly used against people with bad credit scores because they may not have other options for paying for the car.

To avoid this, don’t take delivery of a vehicle until you’ve been fully approved for a loan by the dealer or your bank.

4. Extended Warranties

Like many things you buy new, an extended warranty isn’t worth the cost. New cars come with manufacturer warranties for the first one to three years, when problems are most likely to arise.

Extended warranties only take effect after the basic warranty, also called the factory warranty, expires. They’re backed by a third-party underwriter for coverage you may never need. And even if you do, the money you save on the repairs probably won’t cover the cost of the warranty, according to Consumer Reports.

It found the median savings on repairs covered by extended warranties was $837, which can cost $1,200 to $1,500. Car dealers can earn commissions of 50 percent or more on them.

Instead, put the money you’d spend on an extended warranty in an emergency fund for car maintenance. If you never use it, then put it toward the down payment of your next car purchase.

5. Extras

You’ve probably heard that rustproofing, undercoating and paint sealers sold by auto dealers are wasted extras you shouldn’t buy.

These and other “dealer-installed options” are offered after the sales price has been negotiated.

Don’t buy them. They’re pure profit for the dealer and of little value to you.

Fabric protection and VIN etching where the vehicle identification number are scratched into the windshield are other unnecessary options.

Some dealer options are added automatically and you’ll only notice them on the sales invoice at closing.

If you see items you didn’t ask for, draw a line through them and refuse to sign anything until the items are removed from all copies.

If the worst-case scenario happens and you’re sold a “lemon”, check your local state lemon laws, written to protect you from a bad purchase.

6. Being Rushed

If you’re hesitant about buying, a salesperson may try to push you into a sale by telling you that the deal they offered is only good for that day or another buyer is interested in the same car.

Don’t be rushed into an emotional or impulsive decision. Be prepared to walk away. You have the advantage–there are plenty of other car dealers to shop at.

This article is not meant to provide legal advice. Please seek legal counsel if you find yourself in the unfortunate situation of a dealership scam.


  1. Thanks for the knowledge you have given to us about How to Tell If You’re Getting Ripped Off at a Car Dealership. It’s a very useful article.

  2. I’m always telling my children by the time you make the deposit & take that vehicle home you truly don’t know what you had purchased. Supposedly the vehicle supposed to be in good shape & there’s supposed to be an extended mechanical cost or that warrrenty! But if you notice like with anything you purchase specially with something not brand new it’s like you end up renting that vehicle instead by the time the warranty runs out it breaks down & by then you are spending more money on getting it fixed up to where it puts you behind on your car payments! & It ends up getting repoed for someone else to drive! Wouldn’t it be better to find a decent car so you can own right off the bat? That way you can spend that money fixing it up & not having to worry about it ever getting repoed!! But for that to happen they need to quit ripping people off & come down on the prices because the amount they charge & the taxes added on along with getting that tag is rediculous!!!

  3. So, if I went to a dealer with the mindset of an $8,000 car, bought said car as is, and sales tax at the DMV came out high. A second look at the bill of sale shows the vehicle price AFTER interest so now the bill of sale shows over $11,000. Did I get ripped off?

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