Every dealership is not out to get you, but you need to be aware and prepared for the ones that are:
Scam #1: "We'll Pay Off Your Loan or Lease No Matter How Much You Still Owe!"
How the scam works: You can't just ease out of a loan, it's a contract. If you break a contract the penalties are stiff, in the thousands, not to mention the negative report on your credit rating. Sure, they do get you out of your current loan, but the payoff penalty must be paid to the bank or loan company to end the contract. The dealer just wants your trade in so they can give you below market value for it, while selling you a new car at a high profit. Then you're stuck paying off two cars. Your payments are spread out over 60 or 72 months so you don't notice what just happened. In fact, it's possible that the payments could be less than your current loan, so you think you're saving money when you really got hoodwinked. They do pay off your loan but you're swindled in the process. This is what gets many people deeper into financial trouble and "underwater" in their loan or owing more than what their car is worth.
How to stop it: If you have an outstanding loan now, it's best to stay in it until the end. If you're in an "underwater", you need to wait until the car is worth more than what you still owe on it. If you really need to get out of your loan, think about transferring your loan to another buyer. Now your credit is not jeopardized and someone else has your financial burden.
Check out Gap Insurance online. If you owe $15,000 on your car, but it's only worth $10,000, you're "underwater". Suppose you total the car or it's stolen but your insurance company only gives you $7,500? You still owe the bank $7,500, plus your $500 deductible. Gap Insurance coverage protects you against all this.
Scam #2: They "Lie to the Customer about their Credit Score"
How the scam works: The finance managers may lie to you about your credit score, telling you it was really low, so you now have to pay a much higher interest rate than you should. This scam is pulled on people with good credit too, because most people do not know their own credit score.
How to stop it: No salesperson should know more about your credit history than you. Annualcreditreport.com will assist you in this area. This is why you should have 100% financing before you buy your new car.
Scam #3: The "Forced Warranty" Scam
How the scam works: The finance manager says you must buy a $2,000 extended warranty "because the bank requires it, or you won't get the loan". The bank is more concerned about making profit from the loan than whether or not you have a warranty on your car. Read the fine-print before you sign anything. People tend to spend more time analyzing a $2.00 watermelon in the store rather than contracts for a $20,000 car.
How to stop it: Tell them to put it in writing that the warranty "is required to be approved for your loan." Tell them you will show it to your State Attorney's Office, and you'll see how quickly they back off!
Scam #4: The Financing Fell Through Scam
How the scam works: A couple of weeks after you buy the car, the dealer calls you saying "Sorry, you didn't qualify for that low interest rate". The dealer knew exactly what you qualified for before you signed, unless you fibbed about your income. They knew your credit score. If it's above 680, you'll get a low APR. If it's below 680, expect a higher APR. There is a phrase on most sales contracts stating "subject to loan approval". In other words, the deal is not final, even though you signed the contract. They'll tell you that you need an additional $500-$1,000 and your payments would increase a little. They try this scam on people with bad credit, because it's believable. They think this group of people are desperate and will pay up. Most people in this category probably will.
How to stop it: Don't finance at the dealership if you have bad credit. Go online to get your own financing or your credit union and compare to the dealership's financing. By using your own financing, you won't be subject to monthly payment scams, and the deal will be based on the selling price of the car, not monthly payments. If you do finance through a car dealership, pay the deposit on your credit card, and don't take possession of the car until the loan has been approved in writing a few days later. If this scam happens to you file a complaint through the state's attorney general. The credit union can print your credit history and approve you within 10 minutes. Why subject yourself to waiting for hours in the finance office when there could be a problem like this? There is no problem, it's a scam.