This is the total amount of money the loan is actually for. If the dealer adds extra charges and puts them into the loan, you’ll pay interest on that extra amount too.
The actual selling price is the real price of the car you’re buying. Some sales tactics try to avoid talking about it so you can’t easily tell what you’re really paying.
Some dealers focus on what you pay each month instead of the full price of the car. That can make the deal feel cheaper, even if you end up paying more overall.
The loan term is the length of time you’ll be paying off the car. Longer terms can make the monthly payment look cheaper, but you often end up paying more overall.
Negative equity rollover means you still owe money on your old car, but it’s worth less than what you owe. That leftover debt gets added to your new car loan, so you’re paying for it in the new deal.
The interest rate is what the lender charges you for borrowing the money to buy the car. A higher interest rate usually means you pay more each month and overall.
Rolling it into the new loan means the leftover debt from your old car becomes part of what you finance for the new one. That can make your new loan bigger and cost more.
An extended warranty is extra coverage you buy after the original warranty ends. It can be helpful, but dealers sometimes sell it even when it’s not a great deal, so you should check what’s covered and what it costs.
Packing the payment means the dealer adds extra stuff to the financing and you only look at the monthly number. That can make it hard to see what the add-ons really cost.
GAP coverage helps if your car gets totaled or stolen and the insurance payout doesn’t cover what you still owe. It can protect you from having to pay the leftover balance out of pocket.
Paint protection is an add-on meant to help keep your car’s paint from getting damaged. Whether it’s worth it depends on what exactly you’re getting and how well it’s installed.
Term
theft systems
This means anti-theft add-ons the dealer tries to sell you. Sometimes they’re overpriced and don’t help much compared to the cost.
This is when a dealer pays to mark your car’s VIN number on the windows. They claim it helps recovery after theft, but many people don’t see real benefits for the price they’re charged.
Some dealers offer to fill your tires with nitrogen instead of normal air. It’s supposed to help keep tire pressure steadier, but it often costs way more than it’s worth.
This is when the dealer gives you too little for your old car. They may do it so the final deal costs you more, even if the trade-in number sounds good.
An addendum is extra paperwork that can add costs or change the deal after you think you’re done negotiating. It can be used to hide the real price increase.
Trade value is the price the dealer gives you for your old car. It matters because it’s one part of the deal, separate from what they charge for the new car.
The window sticker is the official sheet on a new car that shows what it includes and what it costs. Taking a photo helps you compare two cars that look similar but aren’t the same.
A package is a bundle of options that comes together on a car. Two cars can look the same, but if one has a different options package, it can cost more.
MSRP is the price the manufacturer lists as the starting point for that car. Dealers can sell for more or less than it, so it helps you see whether you’re being marked up.
The finance office is the part of the dealership where they handle the loan paperwork. It’s also where they may try to add extras or push financing terms that benefit the dealer.
Being “approved for” means the lender agreed to loan you money under certain terms. You should confirm the exact interest rate you were approved for, not just what the dealer tells you.
Rate markups mean the dealer charges you a higher interest rate than the lender’s actual rate. Some dealers do it transparently, but others use it to quietly make you pay more.
Yo-yo financing is when a dealer says you’re approved, gets you to sign and drive off, and then later changes the loan terms. Usually it means you end up paying more per month or putting more money down.
Sometimes dealers advertise one price, then add extra “fees” later. A processing/dock fee is one of those add-ons, and the point here is that the advertised price should already include it if the dealer is required to include it.
The FTC is a U.S. government agency that helps protect consumers from unfair or misleading business practices. Here, it’s being used as the authority for how dealers must handle advertised pricing and fees.
“Road back” odometers refers to odometer rollback—tampering to make a car show fewer miles than it actually has. This matters because mileage affects wear, maintenance needs, and the car’s value, and it can hide a vehicle’s true history.
Frame damage means the car’s structural “frame” has been bent, cracked, or otherwise compromised, usually from a serious crash. Even if repaired, it can affect safety and alignment, and it’s a key disclosure item.
Ignored warning lights refers to continuing to sell or operate a vehicle while dashboard alerts are present, without addressing the underlying problem. Warning lights can indicate safety or emissions issues, and ignoring them can be a sign of a scam or poor maintenance.
Sometimes a car comes from an auction, but the seller makes it sound like something else to avoid questions. The risk is you might miss important history about the car.
A rental car is a car that many different people drive. If a seller doesn’t clearly say it was a rental, you might not realize it could have more wear or hidden issues.
An inspection is a careful check of a used car to find problems you might not notice right away. It’s especially important when you’re worried about scams or hidden damage.
Vehicle history reports compile records from sources like insurance, auctions, and title/registration data to show events such as accidents, title issues, and sometimes odometer readings. The host emphasizes not relying on a salesperson’s claim of a “clean history” and instead reading the report yourself.
A buyback is a car the company took back from the first owner because it had serious problems. Even if it’s been “fixed,” it can still come with a history you should know about before buying.
Lemon law is a rule that protects buyers when a brand-new car keeps having the same problem and the company can’t fix it. If it qualifies, the company may have to take the car back.
A service advisor is the person at the dealership you talk to when you bring your car in for repairs. They look at your car’s situation and help coordinate what gets fixed.
The episode describes common dealership “psychological tactics,” including wearing buyers down with long waits, repeated transfers between staff, and pressure to act quickly. These tactics can reduce careful decision-making, leading buyers to skip reading paperwork or ask fewer questions.
False urgency is when a salesperson pushes you to buy right now by claiming there’s a deadline. The goal is to stop you from thinking it through or shopping around.
The out-the-door price is the final total you pay to get the car. It includes the car price plus things like taxes and fees, so it’s the real number to compare between dealers.
Loan terms are the fine print of your car financing. Even if the monthly payment looks similar, the total cost can change a lot based on the loan details.
Aftermarket items are extra add-ons the dealer sells that weren’t originally part of the car. Ask what each one costs so you don’t pay for stuff you don’t want.
Financing separately means you shop for the loan on your own first, like through your bank or a credit union. That way you’re not stuck with whatever financing the dealer tries to push.
“Payment games” are tricks dealers use to make the deal sound better than it really is. They might focus on a low monthly payment while the total cost is higher.
LIVE
Well hello folks, are you ready for another episodic adventure into a, what I would call
a vehicular certitude, a life, a car life, a better life?
Hi, this is Lenny Lawson, the car guru.
That was highly formal, the complete opposite of me.
Today is important to those of you who are, I guess, well, a lot of people are timid when it
comes to certain things. I'm timid when it comes to certain things, like cooking,
picking up things around the house. I have to be prompted sometimes, and believe me, I am.
But when it comes to automobiles in your car life, this is where I have a certain degree of
expertise, and I'm going to talk to you today about the scams that go on in the car business,
and the ones that you need to be aware of. If you are, especially if you are elderly,
no offense, I'm elderly too. If you are new to, let's say, any type of business transaction,
big ones, you know, not like getting buying a house, and well, buying a house is a big one,
but going to get your power turned on or something like that, those are transactional things.
Buying a car is more of a negotiation, unfortunately, and it's not like going to Walmart,
or any kind of big box store, like going to Lowe's and buying a refrigerator.
Well, they negotiate, yeah, all you have to do is ask, store manager will come over and say,
can I help you folks? So yeah, I just wondered if you could do a little bit better on this price.
Yeah, I'll get you a $50 coupon, you know, something like that, if you don't ask, you don't
receive. But yeah, we're going to talk about these scams, pricing and payment scams,
trade-in scams, finance office abuses, addendum and fee tricks, and use car specific issues,
some psychological tactics, and really how can you protect yourself from all of the above?
So let's dive in. Now over the last 500 or 600 episodes that I've done, I have covered all of
these things, but not consolidated them into one presentation. So that's what I'm doing right now.
Let's talk about the pricing and payment scams. The most common is focusing on only the monthly
payment instead of discussing the actual selling price, the interest rate, the total amount financed,
the loan length, and so forth. It's typically exposed or presented in this way. Can you afford
$4.99 a month? You know, when all they're doing is talking about the monthly payment, look out.
Okay, because in the payment, they can hide inflated prices. They can hide the loan term.
You know, let's say you're talking to a salesperson and you say, well, I can't afford that
monthly payment. He disappears, comes back, said, good news. I found a way to save you
an extra $100 a month. Oh, good. Let me sign up. Well, what they did is they extended it a year.
They didn't bother to tell you that. They just did it because they know you probably wouldn't ask.
Okay, inflated prices, extremely long loan terms, high interest rates, and negative equity rollovers.
You know what that is? That's when you owe more money on your car than it's worth.
Somebody just went into my house. That's my little alarm. My ring doorbell.
Instead of actually buying cameras and stuff like you're supposed to, I'm going to mute that.
I just bought a bunch of ring doorbells and put them all over the house, or all over the outside
of the house. So I know when people are coming, I just have to keep all those batteries charged
because they're not wired in. That wasn't really a smooth move, but it did save me a lot of money.
I was able to buy those things for $49 a piece. No, wait a minute. They were on sale for $19 a
piece. It was a crazy event that Lowe's was having. So anyway, back online here, back on track.
See how negative equity, that's when you owe more on your car than it's worth.
And a lot of people just think it goes away. Now, that negative equity is rolled into your
new loan. And so, you know, theoretically, well, not theoretically, realistically,
you're paying for your new car and part of your old car. And that's what happens when you trade
too soon or you pay too much for a vehicle. You know, this is extremely difficult for an elderly
customer on a fixed income because they're so trusting and they just go in there and,
well, this guy's a sweetheart, you know, that type of thing. And they just can't imagine somebody
trying to pull the wool over their eyes, but they do. They are wolves in sheep's clothing.
Packing the payment is another thing they do with extended warranties, gap, paint protection,
tire and wheel coverage, theft systems, maintenance plans. This is a good one. Ven etching on the
glass, that is really valuable. So what they do is they etch your Ven number on your glass,
all the glass in the car. What's that do? Nothing. I mean, if your car gets stolen
and they happen to recover it by identifying the Ven number on the glass, you know, because
it's been cut into a million pieces, then you might get an extra $2,500 in insurance money.
It is a rip off. And then nitrogen in your tires. What should that cost? Maybe five,
10 bucks a tire. Maybe. I'm not a big fan anymore. I just like breathable air. The argument for
nitrogen was that the molecules are bigger. And if you have pure nitrogen in your tires,
then the air won't leak out as fast. And maybe that works. But I mean, I've seen people pay
$100 for nitrogen to be put in the tires on their vehicle. That's too much.
So another type of scam is a trade in scam. That's where they undervalue your trade. They give you
less for your trade than it's worth. The only way to combat this is to know within a few hundred
dollars what your trade in is worth. It's very common with elderly people. They're the ones that
are most vulnerable because they're the most trusting in many cases. Most people haven't
followed values. Maybe you do a little research when you are thinking about trading cars,
but you don't have the resources, the information that is accessible to the average dealer. So
that's why you need to send me your VIN number to 423-552-2020, which is my cell phone number.
And I'll do the homework for you. I'll tell you what you should get for your vehicle. And then
if they offer you less than that, then you've got some ammunition. I think that's important.
The dealership may also overprice the new vehicle. They may have an addendum or something like that.
And it looks like you're getting more for your trade in than you thought it was worth,
but you're really not because they've just jacked up the price of the new one or the
used vehicle that you're looking at. They've jacked the price up on it so that they can show
you more trade value for yours. But folks, the most important number when you're trading cars
is really not the selling price or the trade value. It's the difference that you have to pay
because that's the number after you subtract the selling price from the trade value.
Now, I mean, it's hard to judge a deal just by the difference, but if you go to one dealer
and they offer you a whole bunch more money for your trade in
than the dealer that you had just visited, just don't assume that it's that much better of a deal
until you check out, well, what's the trading difference between the two? Because they may
have jacked up the price on the new one. That's how they hide it. So, you know, you wonder about
the negative equity. Where does it go? You get to keep it. It's yours. Okay, let's talk about
some finance abuses right after this break. Okay, before I get into the finance abuses,
let me clarify something. You still negotiate the four targets. That is the selling price of the
vehicle. Don't even talk about your trade value until you have negotiated a goods sales price.
And how do you know if it's good or not? You do the research before. You find out what other
dealers are asking for that particular vehicle. Maybe you shop around, submit multiple leads
to different dealers to see who offers you the best price on the same exact vehicle.
And that's where you have to see the Windows sticker. If you're trying to buy a new vehicle,
have the dealers either email you a copy or mail you a copy or hand it to you when
you're in the dealership, a copy of the Windows sticker. I know it's hanging in the vehicle
itself. Take a picture of it. But if you're not there, then the only way to get it is either off
their website, like we post the Windows sticker on every vehicle that we sell. And it's accessible
so that you can do a comparison. Isn't that nice? We want to make sure you know what you're getting
for your money. I mean, I've got two armadas sitting out there side by side. Both of them look,
they're identical. But one of them is $5,000 more than the other. Why? Because it has a different
package on it. We don't use addendum stickers, a sticker beside the sticker to jack up the price.
We just used the factory window label, which shows the standard features and the optional
features. It's called the MSRP, the manufacturer's suggested retail price. That's our starting
point. That should be the starting point for every dealer. But unfortunately, it's not.
I mean, you go to one of my closest competitors, you're going to see an addendum,
a sticker beside the sticker that jacks up the price by approximately $4,000.
Now, if I walked into a dealership and I saw that, I wouldn't even bother to say hi to anybody.
I'd just get back in my car and I would leave and I'd go someplace where they don't do that.
Because that is, that's just like waving a huge sign. We cheat people. We abuse our customers
and they don't realize it. That's exactly what that is. And you're just, and so many people
are falling for it. Finance office abuses, abuses, abuses. Well, dealers can mark up the interest
rate. Dealers don't loan money, banks loan money, but dealers facilitate the loans through their
finance offices. Many banks will give them the ability or the right to increase the interest
rate that the customer was approved for. Let's say that the lender approved you based on your credit
at 6%, but they give the dealer up to 2 percentage points or 200 basis points, as bankers like to
say. And so they, they can actually charge you 9% and they get to keep the difference between the
two and the, I mean, between the nine and the seven, which is a lot of money more than you
could imagine. And, well, no, you could imagine it. It's just more than you think it would be.
It depends on the amount financed. So you need to know what you are approved for. Here's how you
do that. You're sitting in a finance office and the finance manager says, yes, we got you approved
and you say, well, what was the interest rate that I was approved for? And they say, we got you
approved at 9%. That sounds a little high. If you don't mind, I ask him what was the buy rate
and his head will jerk around so fast. I mean, you'll just be a man. You didn't know human head
could move that fast. He looks like an owl and he's looking at you and his eyes are real wide and
he doesn't really know what to say fumbles for a few words. And he said, I don't know, I have to
ask my manager and then he leaves, comes back and said, Oh, I made a mistake. You were approved at
7%, not 9%. You caught him. Now, sometimes they'll come back and said that was the buy rate because
a lot of financial institutions pay a flat fee to dealers for facilitating loans. Doesn't cost you
any money. That's the way you want to go. That's the way most credit unions work, by the way.
And let's see what else is on here. Rate markups are legal, by the way. And in many situations,
but unethical dealers exaggerate them heavily with inexperienced buyers. So remember this.
Yeah, okay. But what's the buy rate? What rate was I actually approved at by the bank?
That's what I want to know. And then you'll see the head snap. Okay, so yo-yo financing. That's
another finance office abuse. That's where, well, you were not approved, but they tell you that,
well, we think we got everything worked out. We're going to go ahead and contract you.
They're going to get it on paper. They're going to put it on a contract. You're going to ride home,
but the dealer is not finalized because they don't have it approved yet. You've got credit
issues and, you know, the bank calls back and said, yeah, we got to really look at this. We want
more money down and, or we want a lesser term. We want something. Put them on a lower, less
expensive car. You know, the bank can request all kinds of different things. But the dealership,
it's late in the afternoon or evening. You've been there for many hours. They don't want you to go
home without a vehicle. So they sign you up and then you come back the next day and say, well,
you want the good news or the bad news? And they said, well, give me the good news. We got you
approved. Well, what's the bad news? Well, it's going to cost you $120 extra a month
because they, they had to reduce the term. They had to do something. Oh, and yes,
we need an extra $2,500 now. Now here's a little hint though. If you signed a contract and they
signed the contract and you left with it and you have a copy of it, you can hold their feet to the
fire. A lot of people don't know that. That'll get the general manager out of his office. If you do
that, he'll come begging, you know, and he'll, he'll talk you out of doing, he'll give something up.
But yo, yo financing is, is a finance office scheme usually facilitated by the sales manager
because he wants the deal to happen. Finance manager doesn't think he can get it done.
So they let you ride anyway, and then they have to get you back and break the bad news.
Okay. The other tricks that are very common are addendum tricks. This is where the online price
is actually different from the price when you get to the dealership. It's because people don't scroll
all the way down to the bottom to read the disclaimer on any advertised price. And quite
frankly, many disclaimers are unclear. And according to the Federal Trade Commission,
their rules state that whatever price is quoted on a vehicle, whether it's online or in a television
ad, radio ad, whatever, that has to include a processing or dock fee if the dealership has one.
And there can be no other extra charges other than state and federal, well, I don't know what
federal fees, but state sales tax and registration fees, any government fees. The dock fee has to
be included. You know, if somebody, if you go to a dealership and they quote you a price,
and then they come out and say, oh, but you got a pair of dock fee. It's $9.95. No, I don't. Federal
Trade Commission said your advertised price has to include the dock fee. Yeah, but we forgot. No,
that's not an excuse. And they'll probably try to run you off because they don't want to include it.
Well, you could make a little call to the Federal Trade Commission. See the guys on the front lines,
the salespeople, the finance manager, they don't really know these rules. That guy that sits in
the big office general manager, he knows them. The guy that owns the dealership, he certainly knows
them. He's the one who's really on the hook. They don't typically typically go to jail, though.
It's usually the finance managers and the sales managers that go to jail.
So they need to remember that. Okay, I'm going to take my last break. I'll be back in just one minute.
Okay, we're having fun talking car dealer scams. Let's get into another one. Use car specific
problems. You know, selling an unsafe or a problem vehicle without clear disclosure,
flood damage, frame damage, road back odometers. It's not as big of a problem as it used to be.
Disguised auction cars, disguised rental cars, ignored warning lights is another one.
But this is particularly dangerous for inexperienced buyers who don't get inspections of
especially used vehicles. You don't need to get an inspection of a new vehicle, but a used vehicle.
They don't understand vehicle history reports. Don't just assume that just because the sales
person says, oh, yeah, this thing has a clean history. You want to read the report. You want to
see it. They're not that hard to read. I mean, it's just a list of all the different ownership
and repair events in chronological order. So you can see how many owners it's had.
You can see how many times it was in the shop and that actually reported to the two car facts
or auto check. And, you know, this is just something that you have to be able to do
in order to make sure that you're not buying a problem car. I know or I've heard of a lot of
dealers who go to the factory and they buy these buybacks. So somebody was very dissatisfied
with the vehicle. It qualified under the lemon law. The dealers or the manufacturer,
Ford or Chevrolet or Toyota bought the vehicle back from the customer, made them whole,
took the vehicle to some repair shop someplace, fixed it. At least they think they fixed it
and then took it to the auction and sold it to dealers as a buyback. And the dealership
legally is supposed to disclose that it was a buyback. But because there are a lot of crooks
out there, they don't bother to disclose it. And the only problem is if they get caught
and then, you know, you don't really care. You've got this car, it's running fine. All
of a sudden you start having problems with it. Then you take it to the dealership and the
service advisors searches the history on it and said, oh, this little puppy was a buyback.
What's that mean? And then it all starts. You don't want to buy a buyback. And you deserve
to know if you did. Okay, as far as other tactics, how about those psychological tactics? Like,
just wearing people down. I mean, some people, I mean, that's the strategy in a lot of dealerships.
Let's just sit over there and it's keeping for a couple hours. No give in. And some people do.
So you have these long waits, you have repeated transfers between salespeople and managers.
And these pressure tactics tend to work on people who are tired.
They've been there all day. They just wanted to buy a car. They didn't want to spend the night.
So they wear people down. And when you get tired, you're going to have, you're going to
scrutinize the DLS. You're not going to read the paperwork. You're just going to sign it to get
out of there. And then they also create false urgency. You know, someone else might be in
to buy this today. Or this incentive ends today. Well, if you don't buy it today, then the price
will be different tomorrow. That kind of crap. So watch out for that. Just make sure to protect
yourself. Bring an independent advisor that knows what they're doing. Focus on a total out-the-door
price and the four targets, the sale price of the car, the trade value, the terms of the loan,
and the aftermarket items. And negotiate those separately. If you do, you'll know what you're
paying for the car and all those other things. You'll know what the term is. I know that the
monthly payment is important, but it's not what you focus on. It's the result of focusing on all
the right things. If you just focus on the end, which is the monthly payment, then you have no
clue what you bought. So read every line before you sign it. Ask for every fee. Know what it is.
Compare financing separately with the bank or credit union before you walk into the dealership.
And never feel embarrassed to leave and think about it overnight. If more people would do that,
more people would get better deals on cars because the salespeople will start scrambling when you
say you want to go home and think about it. And then the manager comes up, we won't think about,
well, that's none of your beeswax. I'm just, I want to go home and think about it. It's a big
purchase. Leave me alone. I'll be back in the morning or I'll call you, but I'm not buying it
tonight. Where are my car keys? Get out of there. You know, ethical dealers do just the opposite.
They explain the numbers clearly. They encourage questions. They disclose optional products honestly.
They avoid confusing payment games. They respect older customers. They're more concerned about
building long-term trust than a one-time profit. And that is a sustainable model. We've proved it
for 55 years in my business, at my dealership. My family has just, that's the way we've always
operated. We're not crossing that other line ever. And that's all I have to say about that.
Well, thanks for listening to this edition of My Car Guru. If you have any questions,
call me 423-552-2020 or send me a text. That's better. I would appreciate that.
And then we'll solve your problem. We'll find out what your trade's worth. We can do just about
anything. Well, thanks for listening. I'll see you next time.
About this episode
The host breaks down how dealers can disguise the real cost of a car by steering shoppers toward the monthly payment, stretching loan terms, or padding the deal with add-ons. It also covers trade-in math, addendum stickers, rate markups, yo-yo financing, and used-car disclosure issues. The practical takeaway is to focus on the full out-the-door deal, verify paperwork, and read history reports instead of trusting sales talk.
