Dealerships and car manufacturers are already less than honest (if we’re generous) and wading through misinformation just makes it exponentially worse. We can help, though. Here are some of the most misleading, dishonest or outright false things you’ll hear when buying a car, and the truth behind them.
That “Limited Time” Deal Will Probably Be Back Later
“This deal won’t last forever!” Dealerships like to claim that whatever promotion they’re running is going to end soon, so you just have to run in today if you want to save big! This is especially true towards the end of the model year — which is not the same as the calendar year — when dealerships like to say things like “All 2015 models must go to make room for our new 2016s!”
While these claims can be technically true, they’re also functionally meaningless. Car dealerships have to move vehicles with just as much urgency all year round. Dealership inventory is a massive and complex process, but as a general guideline, most dealerships don’t want to keep more than about two months worth of inventory on their lot. So, when a dealership tells you they have to get rid of last year’s model, it’s not quite a lie — they do have to get rid of those cars — but that’s not a special condition. Four months ago, they were equally eager to get rid of last month’s cars to make room for next month’s cars. Every car that stays on their lot racks up storage fees and interest for the dealership.
Because of this, you can almost always find some kind of promotion or in-store discount. Even if the dealership you were looking at isn’t running one, then the lot next door or across town probably is. Contrary to conventional wisdom, there’s rarely one specific time that’s the best time to buy. In fact, the best month to buy may vary wildly depending on what type of car you plan to buy.
You might see see an ad from an August ad from a Nissan dealership that insists it has to clear out all of its 2015 inventory to make room for the 2016s, and then a different dealership’s ad featuring a New Year’s event (meaning calendar, not model year) that also insists it needs to clear the lot of 2015 Nissan vehicles. Obviously different dealerships have different inventory needs, but all deals don’t come on one special month.
You Don’t Have to Finance Through the Dealership
If you only learned about financing from car commercials, you’d be forgiven for thinking that the only way to buy a car is to finance through the dealership. Maybe at best, someone told you that you’ll get a better deal paying cash (and we’ll come back to that). However, you have a third option: you can just finance the car yourself.
Banks exist outside of car dealerships, and they love to loan you money. Especially if you have a long history with a bank, you can negotiate for a car loan before you even walk onto the lot. Based on your credit history, the bank can cut you a cheque for up to a certain amount. You can then walk on a lot and pay with that cheque, same as cash. You’ll then make payments to the bank directly.
Here’s where things get complicated. You may have been told that paying cash can get you a better deal, but that isn’t always the case. Dealerships that offer financing often mark up the interest on the loan. This means that where a bank might approve you for a 5 per cent interest rate, the dealership will charge you 7 per cent. The 2 per cent extra goes straight to the dealer. Since they’re making money on the loan, they will be more motivated to take money off the sticker price, especially if you don’t pay attention to how much you’re paying in interest. Some of those promotions that dealers run may also require that you finance through the dealership for this very reason.
Without discussing the details of the deal with the dealership directly, it’s hard to know which will really save you money in the long run (and in many cases, this is by design). However, by drawing up a loan agreement through your bank or credit union before you step onto the lot, you can know exactly what kind of interest rates you qualify for (though you don’t have to spend this much, and you should obviously budget according to what you can afford, not just what a bank is willing to lend you).
You should also check your own credit first. Keep in mind that car dealerships and banks may use different methods of determining your creditworthiness than the credit reports you pull yourself, but knowing at least what ballpark you’re in will put you in a better negotiating position right off the bat.
Advertised Financing Deals Are Frequently Misleading
So, I just told you that you can finance through a bank to get a lower interest rate, but that disqualifies you from some of the promotions that dealerships run. Kind of a bummer, right? Well, don’t worry, because most of them aren’t as good as they sound, anyway. At least, that’s what the US FTC has to say about it.
Dealers like to throw nice-sounding numbers into their ads to make you feel like you’re getting a deal. $5000 off! Only $199 a month! Zero per cent interest! Of course, to find out how much those deals really help, you’d need to know a variety of other factors, most of which the advertisement conveniently leaves out.
As the FTC points out, when a dealership focuses on one number, they’re often drawing attention away from another detail. You might get a couple thousand off, but you have to buy the Super Deluxe XL package to get that discount. A low monthly price may hide the fact that your monthly payments will balloon later on. The zero per cent financing may only apply to a portion of your car loan. Or all of those advertised deals may only apply to one particular model on the lot. Like with most things, the devil is in the details.
Unfortunately, you can’t just focus on one single number and hope that you’ll be OK. Before you get excited about any financing deal, there are a few key questions to ask yourself:
- What’s the out-the-door price? Zero money down doesn’t mean that you won’t have to drop a lot of money today. Taxes and fees can hose you at the last minute if you’re not careful. The first big number you want to know is what you have to pay before you drive the car off the lot.
- How much are you paying — including interest — over the life of the car? Interest is complicated, but if you look at the total you’ll pay over your entire loan term, it’s hard to screw it up. You can use this calculator to find out how much interest you’ll end up paying by the time you’re done paying off the car. Paying attention to this number can save you big over the long run.
- How much are your monthly payments over the entire loan term? You absolutely cannot judge your ability to buy a car based solely on the monthly payments, but you should pay attention to what you’re going to pay. Some promotions will have your monthly payment increase over time. Dealers may even focus on raising your monthly payment to sneak you into a higher priced car.
There are a ton of factors to consider, so don’t take this is an all-inclusive list, but those are some of the biggest bottom lines you need to pay attention to. Your out-the-door costs, your long-term total and monthly payments are going to have the biggest effect on your budget both now and for the life of your loan. If a dealership claims it can reduce one of these numbers, keep a close eye on the others.
Those Awards Aren’t As Important As They Sound
You’ve probably seen a car ad that mentions some kind of award that a car has received. Ever wonder where those come from? There are several organisations that give out awards for cars, based on a variety of criteria. For example, in the US they include Motor Trend, JD Power and Associates, Consumers Digest and Consumer Reports. However, they’re not always altruistic reviews done in a vacuum.
As the Wall Street Journal points out, when a car company uses an award in their ads, they usually had to pay a hefty sum for the right to do so. Consumers Digest, for example, charges $US35,000 for the first award, and $US25,000 for each subsequent award just to be featured in ads. JD Power runs awards, but also (separately) sells an expensive survey service to car manufacturers to provide user feedback. Consumer Reports comes the closest to having completely no connection to manufacturers, as they buy all the cars they review themselves and do not allow their awards to be used in ads at all.
None of this necessarily implies that awards are corrupt or bad, but they also don’t exist in a vacuum. For example, Consumers Digest tells the WSJ that its fees don’t influence its decision, but only manufacturers that pay the licensing fee get their full review on Consumer Digest’s website. The information you receive about why a car was given an award may be held back unless a company pays a licensing fee.
It’s also not immediately obvious what awards are actually rating. Many car ads like to tout the JD Power Initial Quality award. If you’re not familiar with the process, this might sound like JD Power found that the winner of this award was the “Car of the Year”. What it really measures is owner-reported problems during the first 90 days of ownership. Now, obviously a car breaking down or having a major problem in the first 90 days isn’t great, but arguably most car problems don’t crop up until long afterward. JD Powers’ other awards include an award specifically for things consumers liked after 90 days (not reported problems after 90 days), and a dependability award that measures the last 12 months of problems for owners of a three-year-old car.
It’s easy to think that a car’s awards assume an independent body is vouching for its quality, but that’s not necessarily the case. Like most things, finding a good car comes down to research. It’s OK to consider awards, but learn what the award actually means and measures. Then read some reviews, and most importantly, try it out for yourself. You can also check out our sister-site Jalopnik’s Buyers Guide for a ton of info on how to buy cars.
Estimated Mileage Can Be Misleading, Even Without Intending To Be
You probably already pay attention to the mileage a car gets. Aside from interest, taxes, fees, insurance, repairs and basic maintenance (you know, just those small things), the petrol you put in your car is going to eat up a decent chunk of your money over the life of your car. The kilometres per litre figure is essential to keeping that number low, but you might not know where it comes from.
In the United States, the Environmental Protection Agency (EPA) has been responsible for regulating fuel economy since the 1970s. However, as Car and Driver revealed in 2009, around 85 per cent of MPG ratings come directly from manufacturer tests and are not tested by the EPA directly, unless an issue is revealed (which sometimes happens).
Now, manufacturers obviously have a vested interest in making their cars look as fuel efficient as possible. The simplest way to do this is to highlight the best-looking number. Cars are rated by city driving, highway driving and a combined score that incorporates both. A car manufacturer may choose to emphasise the highway number in its ads. Or they may simply elect not to highlight it at all.
For example, the above Ford Fusion invokes the word “MPG” twice, while the car leaves a trail of the word “MPG” over and over, but the announcer never actually states the mileage the car gets. Instead, they claim that the car is the “most fuel-efficient mid-sized sedan”. If you squint at the bottom of the screen (assuming you watch this ad on a TV that’s close enough to see the fine print), you can see that the actual mileage is 23 mpg city/34 highway with a combined mileage of 27 mpg. That’s 9.7m/L in the city, 14.4km/L on the highway, and 11.4km/L combined. But only if you buy the Fusion S, I-4 automatic. Whichever one that is.
Of course, fudging the mileage numbers is nothing new. However, even when a manufacturer isn’t trying to subtly manipulate how mileage is presented, the very nature of how mileage is measured can also be confusing.
As NBC points out, whether tests are done by manufacturers or the EPA directly, they’re aimed at passing the EPA’s requirements — which, as a side note, is what landed Volkswagen in hot water when it programmed its cars to alter its emissions in a testing environment. However, the EPA doesn’t always consider every factor. For example, Ford was reluctant to add a start-stop feature that would shut off the engine at stop lights to conserve fuel, because EPA tests don’t take it into account. That doesn’t necessarily mean that the tests are entirely unreliable, or that you’re definitely getting better results than you think (in fact, more often than not, mileage claims are overstated by manufacturers, because it’s in their interest to do so), but it’s rarely as clean cut as we’d like.
There are a lot of factors that go into buying a car, and it’s impractical to expect that you’ll make the absolute perfect, optimised choice. However, the flood of numbers, information, and different perspectives can make it hard to tell which way is up. Not every dealer or manufacturer is out to lie their way to a bigger paycheck, but it never hurts to do your own research.
Comments
15 responses to “The Biggest Lies Car Manufacturers And Dealerships Tell To Sell You A Car”
Cheque not check.
And for the love of god, do NOT let them sucker you into buying their exterior / interior protection.
Agree, nor window tinting.
Someone I know in car sales admitted (though no surprise at all) that these after-market products are just a profit-making exercise for the dealer. Mainly since they don’t make that much profit on the vehicle itself.
The other shady deal going around is the “cashback”. Adverts trump some money off. But the small print requires the customer to go through a whole load of hoops and jumps (usually with a short time window) in order to get this money.
Why doesn’t the dealer give that cheque at the time of sale or just take it off the ticket price? Classical exploitation of laziness. Everyone intends to claim the cashback but many don’t.
Yep. It’s not that paint protection itself isn’t worthwhile, it’s just that when you get it done at the dealer they tend to use a sh*t product (e.g. X-Pack) and just get it slapped on by some apprentice from the service department who doesn’t know what the hell he’s doing, and charge you an arm and a leg for it.
When I bought my car new a few years ago, the dealer quoted me something like $1800 to do interior / exterior protection. I said no to that then took my car to a professional detailer who did a full cut and polish on it (car had been in the dealer’s yard for several months so needed a little TLC) then applied opti coat exterior protection (has been excellent so far) and interior protection (I forget what product he used for that, but no complaints from me) for a little under half of what the dealer quoted. And even at double the price, the dealer wasn’t going to do the cut and polish before the protection, which kind of defeats the purpose because you want the paintwork in as good nick as you possibly can before you put the protection on.
Perhaps for an older car or one that has been exposed to the elements (as yours was). But certainly not for a brand-new car.
When I bought our car (new), the typically upselling of “protection” began and how the manufacturer’s paint job wasn’t enough. But the dealer had no answer when I posed the following logic:
“Why are you selling a car that hasn’t been properly painted?”
“If the protection is so essential, why wasn’t it done in the factory?”
It’s certainly not essential, but I do think it’s worthwhile in terms of keeping the car clean (so it doesn’t need washing so often), and making it easier to clean. Especially for a black car! But yeah, that’s based on the assumption that you get it done properly, which is not what happens at the dealer.
I think it depends on where you live and what the roads are like and if you get proper seasons with all of the weather associated. If you live near the ocean or somewhere that salts the roads in winter, you will have different needs than someone who lives in a dry climate that doesn’t get snow and is a million miles from the ocean. Cars aren’t manufactured to those different standards, that’s not to say that you should spend a fortune on what the dealer is trying to sell you, but you do have to consider that the factory paint is the basic thing for the easiest climate/area to maintain.
mileage or kilometerage?
In SI you’re supposed to say things like _distance_
km/100L is the standard unit, not km/L.
End of year run out is more significant than June sellout, it affects the resale price unless you keep the car for many years.
I like to use mm^2.
See https://what-if.xkcd.com/11/
A lot of the things you bring up regarding finance are incorrect, as in Australia we have the Consumer Credit Act, Australian Consumer Law, Motor Traders Act and another umpteen regulators watching over both the car industry and the finance industry (ACCC, ASIC etc).
Also, Braaains, the value of those products is directly related to your need for the product and how you use the vehicle – like anything in life, the value an individual receives from any product varies based on their usage of it.
Both Skinja and Woofwoof are wrong, too – fuel consumption in Australia is measured in litres per 100kms (eg 8L/100km), and a fuel consumption sticker must be displayed showing urban, extra-urban and average consumption.
Get a loan from your bank.
Get one of those new credit cards from a new bank with 0% interest on existing debt. Pay it off before that runs out then close account. Never paid a cent of interest on our car loan.
Obviously cut the credit card in half and never use it.
Or just buy the thing outright. We’ve done that several times, all but once had a loan.
Alloy wheels for no extra cost. They should be no extra cost all the time. Some manufacturers only ship the cars with alloys. Costing the dealer money to put standard metal rims back on.
Telling the buyer they must have the car serviced at the dealer or void the factory warranty.
Everybody is out to get the best for themselves and unfortunately it looks like that means lying and tricks from salespeople at the dealership offices. The only thing that you can do to make sure you don’t get sold a lemon or get swindled into paying more than you should be paying for a new or used car is to do your research. On everything. From the car, to the options, reading reviews and getting quotes for car finance rates too! Good luck!