What if there was a quick and easy way to tell if a car dealer was shady before you even set foot on their lot?
Well, there is. Just look at the windows of the vehicles and see if there are any prices listed. Or you can look at the dealer’s website and see if prices are listed there. If it is a good dealer, they’ll have prices listed somewhere. If their website says “Call for price” look somewhere else. If you go to the dealership and there is no price written anywhere on the vehicle, then leave.
Why? Because an automobile dealer that won’t list a price wants to leave that most crucial contract term open until the deal is done. This allows them to promise you one price, interest rate, or monthly payment, and then deliver another in the paperwork.
Here’s how it works.
Say you go to a dealership. You find a car you like. You ask about the price. The salesman tells you some bullshit about how great of a car it is and then says they’ll “give it to you for $8,000.” And the payment will be $300/month. So you agree. You sit in their office for 4 hours while they “draw up the paperwork” (which literally takes about 30 seconds because all they do is print a form from their computer program that fills it out for them). Then your salesman walks out with a big smile on his face and says “congratulations, you’re approved” as if you’re the new father of a healthy baby. You sit down to sign the mountain of paperwork that they’ve printed out, and lo and behold, the “CASH PRICE” listed on the Truth in Lending Disclosures is $9,500 – way more than the $8000 they’d promised. What happened?
After they got you to verbally agree on a deal, they prepared your contract terms and sent the proposed contract (and your credit report) to several finance companies hoping to sell your contract to someone else. Dealers want to get paid up front, so they sell the contract and its massive APR to a finance company, who then pays them a discounted lump sum for the right to receive the rest of your monthly payments. If they don’t get offered as much money as they want, they’ll jack up the price of the car to make the loan more attractive to the finance companies. So if the dealer honored his commitment to sell you that car for $8,000 at 15% APR, that finance company may pay him $7,000. But by jacking up the price to $9,500 at 18% APR, the dealer gets $8,000 from the finance company. And you get screwed. This is a violation of the Truth in Lending Act and most false advertising laws. This whole scheme requires that you never have any evidence that the original price was higher.
Note that just because a dealership has prices listed doesn’t mean they’re guaranteed honest. There are plenty of ways to defraud a customer without price switching, and dealers with clearly written prices screw people all the time. But