U.S. auto prices remain stubbornly high through the first quarter of 2023.
The nation’s car buyers paid, on average, $46,437 for a new vehicle in January, according to J.D. Power.
Prices continue to climb for used autos, as well, with the average price rising 4.3% from January to February 2023.
With vehicle costs rising so high, why would today’s car buyers allow auto dealers to play fast and loose with vehicle costs, and let them get away with the tricks – some old and some new – that dealers routinely used on unsuspecting auto buyers?
“When purchasing from an auto dealer, car buyers often find getting a fair price for their cars challenging,” said 4WheelOnline automotive specialist Joyce Ann Gutierrez. “Due to the numerous sneaky tricks and tactics, some dealers use to add thousands of dollars to car prices.”
“Car buyers need to be aware of such practices to protect themselves from being ripped off by dealers,” Gutierrez added.
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The Five Worst Tricks Auto Dealers Play on Buyers
What are the most underhanded plays auto dealers use to separate vehicle buyers from their money?
These tricks of the trade are at the top of that list.
The “market adjustment” charge. This ploy stems from the pandemic and the resulting lockdowns and supply chain fiascos that thinned out dealer inventory. In short, auto manufacturers and dealers took their lockdown-related losses and passed them on to customers. They’re still doing so today.
“Throughout the pandemic, new car dealers were in a market with very short supply and huge demand,” said WeeL chief executive officer Robert Ostfield. “They tried to maximize their profit, and started imposing "market adjustment fees" of anywhere between 5-50%.”
“Basically, the market adjustment fee is an additional cost on top of the vehicle selling price, and other standard dealer/government fees,” Ostfield said.
Base versus fully loaded. Dealers may pull a bait-and-switch mismatch between the car in the advertisement versus the car on the lot:
“Dealers may run an ad showing a fully-loaded model, but at the price point of the base model,” said CoPilot chief executive officer Pat Ryan.
Hidden add-ons. When the buyer arrives on the lot, dealers may add extra features, like a sunroof, to the vehicle advertised – which the buyer did not request. “That move could add hundreds or thousands of dollars to the listing price,” Ryan noted.
Loan markups. Auto buyers don't realize that a dealer adds as much as one-to-two percentage points onto the loan rate they get from a bank before providing dealer financing. “That’s why it’s a good idea to get preapproved on an auto loan from your local bank or credit union to give you negotiating leverage,” Ryan added.
Pricey add-ons. Some of the most common and expensive tricks dealers use include “add-ons like rustproofing, extended warranties, gap insurance, and paint protection,” Gutierrez added.
Be Prepared
What can car buyers do to avoid being tricked into paying more for a car? What strategies work the best?
For starters, be informed.
“Before you visit the dealership, have an understanding of the current market as well as a clear idea of your budget,” said Kunes Auto Group chief operating officer Scott Kunes. “We educate our buyers to see the car as an entire purchase that includes the price of the car, insurance, and any applicable taxes."
Also, know what add-ons you’ll be offered, and if they make sense for you.
“If you're buying brand new with a factory warranty, maybe the extended warranty isn't for you,” Kunes noted. “If you're buying used and don't keep an emergency fund for repairs, an extended warranty could be very beneficial.”
Additionally, use online tools like CoPilot or Kelly Blue Book to research the fair market value of the car you’re looking at. That way, you’ll feel confident in that number before you head to the dealer.
It’s also advisable to set a budget ahead of time and stick to it.
“If it’s helpful, bring a friend with you to the dealership to hold you accountable to your budget,” Ryan said. “Don't fall in love with only one car, so you have the power to walk away if you don't like the deal.”
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