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How Car Dealers Pad Their Pocket at Your Expense

Last Modified: July 31, 2018 by Jeff Ostroff  | Originally Published July 7, 1999

Here are some of our additiioanl new car buying tips. Using our car buying advice and tools, you'll get a great deal that is still more than fair for the dealership. If you'ren't prepared then prepare to get ripped off, it's that simple. People have no problem taking weeks to plan a vacation, but don't spend a few hours doing research before they get a $30,000 vehicle. You'll be able to save a ton of money if you follow our advice.

6. Warning About Car Dealership Advertising

The number one goal of any car dealer is to get you in the door. If you'ren't there they can't pull any tricks or scams on you. They hire the best advertising and marketing companies to come up with ads to get you there.

Optical Illusion

Advertisers spends millions in psychological wording research to trick you. Take a look a the image to the right. You thought it said "I love Paris in the Springtime" right? Wrong! See the extra "the"? It really says "I love Paris in the the Springtime." Your brain tricked you. Advertisers rely on your brain to trick you so they don't have to lie.

Take a look at our collection of misleading dealership ads so you'll what to look out for.

7. How Car Dealers Profit From New Car Purchases

You think dealers have just one way to coax money out of you when your purchasing a vehicle? Thank you for playing. Some dealers convince you to spend so much, you didn't know you were taken for a ride! Consumers who brag of high trade in value were asleep at the wheel leaving money on the table in other parts of the deal.

  1. Offers you $3,000 to $4,000 below market price for your trade-in
  2. The new automobile purchase price when getting a vehicle
  3. Marking up the rate they give you for financing
  4. Environmental package extras and extended warranties

The dealership is always trying to maximize their profit. Of course they should make a fair profit on the deal but they shouldn't rip you off. They trick you into a bad deal using what I call the "Car Dealer Cash Flow Shell Game™"

8. Beware of The Cash Flow Shell Game™

shell game

Dealers have spent years perfecting this system to maximize profits. Know how the game is played, so you're on a level playing field. Let me teach you how the game works. The cash you spend at the car dealership pours into various buckets. For the best deal you want the most for trade-ins, discounted MSRP, low APR, no extras and few fees. So, here's what you want:

Trade-In

+

Selling Price

+

Interest Rate

+

Add Ons
- Insurance
- Rust Proof
- Sealant

+

Extra
Fees
- Prep
- Admin

=

Dealer's Profit
$$$$

The dealer has other plans. This is what the dealer wants:

Trade-In

+

Selling Price

+

Interest Rate

+

Add Ons
- Insurance
- Rust Proof
- Sealant

+

Extra
Fees
- Prep
- Admin

=

Dealer's Profit
$$$$

The dealer low balls your trade-in, charges full MSRP, high APR on the auto loan, high profit extras, dealer prep and ad fees and ends up with a huge profit. If you have bad credit they'll lie and say that credit life insurance is required, get more profit and call you 2 weeks later to tell you financing fell through and you need to come up with $2,000 more. A similar abuse of the situation occurs if you're upside down on your current auto loan.

If they know you're a trade-in buyer, they give you what you want for your trade-in. But look what else they do. They jack up the price to MSRP, pile on extras and fees. The amount of cash involved doesn't change, it gets shuffled around the buckets.

Trade-In

+

Selling Price

+

Interest Rate

+

Add Ons
- Insurance
- Rust Proof
- Sealant

+

Extra
Fees
- Prep
- Admin

=

Dealer's Profit
$$$$

Here's a good one. They bait you with 0% or a low APR. But then they jack the price to MSRP, low ball your trade-in, pile on fees and dealer extras. Note again that their profit is still the same large amount.

Trade-In

+

Selling Price

+

Interest Rate

+

Add Ons
- Insurance
- Rust Proof
- Sealant

+

Extra
Fees
- Prep
- Admin

=

Dealer's Profit
$$$$

The folks here at CarBuyingTips.com hope you had fun playing the Cash Flow Shell Game.

Dealers have perfected this system over decades. The odds are in their favor. Don't get me wrong, dealers have the right to be profitable. You should know how the game is played, so it can be played on a level playing field. The dealer can make a fair profit while you get the automobile of your dreams.

Read Our Chapter on New Car Financing >

CarBuyingTips.com has affiliate relationships with multiple web sites. We are paid referral fees for leads or sales generated from visitors that click on some links or fill out certain forms on this site. Please view our advertising policy page for more information.