Car dealer tricks

Don't get taken for a ride when you're buying a new or used vehicle

Consumer Reports Money Adviser: November 2012

Some car dealers are up to their old shenanigans, judging by allegations made by state attorneys general and the Federal Trade Commission in the past year or so. Here are a few of the complaints we’ve seen recently, along with our advice on how to avoid getting scammed.

Incomplete paperwork
A buyer might be asked to sign incomplete purchase contracts or other paperwork, which the dealer promises to fill in later. When he does, he writes a higher price than what had been agreed upon, often by including charges for unwanted or undisclosed warranties and other add-ons.

Protect yourself. Don’t sign anything that’s incomplete or that you don’t understand. Ask the dealer to put spoken promises in writing. And use a credit card for your down payment in case you need to dispute the charges.


Damaged goods
Some used-car dealers sell previously damaged vehicles without revealing that they had hundreds or even thousands of dollars worth of repairs. Earlier this year, the New Jersey attorney general accused a dealer of misrepresenting such vehicles, in some cases advertising them as “absolutely mint” or “pristine.”

Protect yourself. Ask the dealer for a car-history report from CarFax or AutoCheck, and call to verify the report’s authenticity. A free VINCheck report from also might reveal if the car had been reported as stolen or salvage. But never rely solely on a car history report.

Next, ask the dealer to see the title, and check it front and back for “branding” with such words as “salvage,” “rebuilt,” “flood,” “manufacturer buyback,” or “recovered theft.” Ask for contact information for the previous owner, and call that person to check for any problems, advises the Federal Trade Commission. The dealer probably won’t have contact info for a lease-return vehicle, which will be titled in the name of the leasing company.

Finally, have a reliable mechanic thoroughly inspect the vehicle.


Tampering with the mileage
Some dealers sell vehicles that have more miles on them than what’s indicated on the odometer, as one Missouri dealer was accused of doing earlier this year. Odometer tampering is a federal crime.

Protect yourself. Verify mileage using the same tactics you would to check for previous damage. A vehicle-history report and mechanic’s inspection can help detect tampering. Also examine the title and any other vehicle paperwork for an odometer disclosure statement.


Excessive interest rates
Customers who opt for dealer financing are sometimes charged outrageous interest rates. Dealers often mark up loan rates that customers could otherwise get from a traditional lender. In Iowa, a dealer was accused of charging some customers rates of more than 30 percent, exceeding the state’s rate cap—which, at 27 percent, was already outrageous. People with poor credit are especially vulnerable.

Protect yourself. Find the best rates you can get from local banks, credit unions, or online lenders, such as and, ideally, get preapproved for a loan. Then you’ll have an idea of whether the dealer’s rate is competitive. If you finance with the dealer, make sure the rate you’re quoted is final. Driving away with a non-final loan risks that the dealer will later ask you to pay a higher rate or return the car if the initial loan falls through—a deceptive practice known as yo-yo financing.


Promises to pay off old loan
Two problems can arise when you buy a new car and the dealer promises to pay off the loan on your trade-in vehicle.

In the first case, the dealer pays off the loan but then adds the pay-off amount to the new-car loan. So you end up paying off both loans. This is a widespread problem. The Federal Trade Commission charged dealerships in Connecticut, North Carolina, South Dakota, and West Virginia with this practice.

In the second case, the dealer doesn’t pay off the loan on your trade-in at all, usually because he’s in financial trouble. Weeks or months later, you find out that you still owe the finance company the balance on the original loan, as well as the one on your new car. And if you’re the unlucky person who bought the vehicle that was traded in, you’ll find that you can’t get it registered or titled in your name. It might even be repossessed.

This is not a new concern. The Illinois attorney general last year reported that at least 60 car dealerships closed down since 2000, leaving hundreds of customers victimized by the problem. Some states, including California, Illinois, Virginia, and West Virginia, have established special funds to help consumers who have been hurt by dealer closings.

Protect yourself. Don’t leave it to the dealer to pay off the loan on your old car or trade-in. If you’re buying a used car, verify that the dealer has the title document and lien release form, if applicable.

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