Common Car Dealer Scams and How to Avoid Them

Read Time: 5 minutes

Purchasing a vehicle is often a significant investment. In the last four years, auto prices have skyrocketed. The Consumer Price Index for Used Cars and Trucks (CPI-U), a key inflation indicator, measures average price changes for used vehicles in urban U.S. areas. As of October 2023, the CPI-U stands at 187.253, a massive increase from pre-pandemic levels ranging from the 130s to the 140s.

For example, one of the most popular selling vehicles in the U.S. is the Ford F-150. A 2019 Ford F-150 XLT 4WD Crew Cab V8 had an MSRP of $46,765. Today, that same truck has an MSRP of $55,630, and used prices follow suit.

With the increase in vehicle prices, consumers should be even more vigilant to save as much as possible. One way of saving is understanding and being aware of the tactics some dealerships may employ. From misleading advertising and financing scams to high-pressure sales techniques and hidden fees, these practices can turn a dream purchase into a financial nightmare. 

Here, we shed light on the most common auto dealership scams, empowering consumers with the knowledge to navigate the car buying process with confidence and caution.

Advertising Scams

Bait and Switch

This tactic involves advertising a specific car model at an attractive price only to inform potential buyers that the vehicle is no longer available upon arrival. Instead, the dealer aggressively promotes a more expensive model. The Federal Trade Commission (FTC) has strict guidelines against such practices, considering them deceptive. Consumers should walk away and report such incidents to the FTC or state consumer protection agencies.

Misleading Ads

Dealerships may use ambiguous terms, misleading imagery, or omit critical information in advertisements. For example, a car may be advertised at a “reduced” price that only applies under specific, unattainable conditions. The FTC’s Truth in Advertising rules mandate clear, honest, and substantiated claims in advertisements. Consumers should be wary of deals that seem too good to be true and should always read the fine print.

Financing Scams

Kickbacks and High-Interest Loans

Dealerships may have arrangements with lenders to secure higher interest rates for customers, earning the dealership a kickback. This practice can result in buyers paying significantly more over the life of the loan. The Consumer Financial Protection Bureau (CFPB) oversees such practices and can take action against unfair lending practices.

Hidden Fees and Markups

Many dealers add extraneous fees and markups to the loan agreement, like unnecessary insurance policies or extended warranties. These can inflate the loan amount without providing tangible benefits to the buyer. The CFPB advises consumers to thoroughly review all paperwork and question any charges that are not explicitly explained.

We interviewed John Delaray, a recent Hyundai buyer, who ran into a similar issue. Delaray purchased a vehicle, only to find his payment over $40 more per month than provided in the financing office. The dealer inserted an extended warranty without notice. Delaray was able to get out of the extended warranty due to the financing office using the wrong VIN on the paperwork.

Yo-Yo Financing

This scam occurs when the dealer allows a customer to take possession of a vehicle on the premise that the financing terms are finalized, only to later claim that the financing fell through and a higher interest rate is required. This practice, often targeting consumers with weaker credit, can be reported to state consumer protection agencies.

Pricing Scams

Packing the Contract

Dealers sometimes insert additional, often unnecessary, services into the contract, like fabric protection or paint sealant, significantly raising the final price. The National Automobile Dealers Association advises consumers to carefully review the bill of sale and decline services they deem unnecessary.

Misleading Trade-In Values

Dealers may undervalue trade-ins, boosting their profit margins on the new sale. Websites like Kelley Blue Book or Edmunds can give consumers a reasonable estimate of their car’s value, helping them negotiate better.

Price Increases After Negotiation

After a price has been agreed upon, unscrupulous dealers might tack on extra charges, claiming they were not included initially. The FTC warns buyers to get all terms in writing and to refuse any late additions to the deal.

Vehicle Condition Scams

Odometer Rollback

While increasingly less common, tampering with the odometer is another way unscrupulous dealers may try to increase the vehicle’s perceived value. This practice is illegal under federal law. The National Highway Traffic Safety Administration (NHTSA) recommends checking vehicle history reports for mileage discrepancies.

Hiding Mechanical Defects

Some dealers sell cars with undisclosed mechanical issues, using temporary fixes to mask problems. The Lemon Law, varying by state, offers protection against such practices, allowing consumers to seek recourse for vehicles with severe, undisclosed issues.

Aftermarket Add-Ons

Dealers may install unnecessary accessories or upgrades, charging inflated prices. Add-ons became more and more common as vehicle inventories diminished. To increase profit, dealers would add high-profit accessories to improve their bottom line. Buyers should insist on a detailed list of all add-ons and costs and feel empowered to decline these options – though they may not always be able to.

Sales Tactics and Pressure

High-Pressure Sales Techniques

Salespeople might use urgency or scarcity tactics to pressure buyers into making a hasty decision. The Better Business Bureau advises customers to take their time, do their research, and not succumb to pressure.

Emotional Appeals

Dealers may exploit buyers’ emotions, such as excitement or fear of missing out. The American Psychological Association suggests that buyers remain objective and focused on their needs and budget rather than getting swayed by emotions.

Lack of Transparency

Dealers might withhold information or avoid answering questions directly. The FTC recommends that buyers ask for complete information, including all terms of sale and financing, and to walk away from deals that lack transparency.

Final Thoughts

Navigating the auto dealership landscape requires vigilance, knowledge, and a clear understanding of consumer rights. While many dealers are honest and conduct business ethically, being aware of the potential for scams and underhanded tactics is crucial. 

By educating themselves on the common scams detailed here, car buyers can take proactive steps to protect themselves. Remember, protecting yourself involves thorough research, understanding financing terms, knowing the true value of their trade-ins, and recognizing high-pressure sales tactics. 

In the journey to purchasing a vehicle, knowledge truly is power – the power to make informed decisions, negotiate better deals, and drive away not just with a new car but with peace of mind.

Kara Johnson

Kara is a Rye, New York-based author and contributing writer for She is a graduate of Hampshire College.

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