A Vox reader wrote: “Why are car dealers so shady? How do consumers avoid them? Is it frustrating for everyone?”
Americans are long hatred D buy a car experience. It’s not uncommon to spend hours (or even an entire day) at a dealership, finally reach a deal, and walk away feeling vaguely cheated.
“It’s a process that usually stinks and it’s designed that way,” says Tom McParland Automech ConsultingA service that helps car buyers find the best price for the car they want
A lot of frustration comes down to the uncertainty of what you will end up paying. In an age when you can buy almost anything online without ever interacting with another human being, where you can easily shop around for the best deal, cars remain one of the few purchases where your personal negotiating skills — as well as, sometimes, your race, Gender, and income – can determine value.
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Sometimes, the tactics used by car salesmen go beyond the hard sell to outright scammers. A common trap Bait and switch Price, where a car is initially advertised as a price (usually achieved by factoring in discounts you may not be eligible for). When you rush to the dealership to snag the deal, you’re told the car is already sold but there’s a similar one that’s more expensive. or take I- I go outIn which you drive your new car home only to be told the financing is closed so you have to accept a higher interest rate or make a larger down payment. A dealer may try to do unnecessary sneaking add-on — such as extended warranties or protective covers — on the total value of the vehicle.
Last year, the Federal Trade Commission received more than that 184,000 It became the third most common category of auto-related consumer complaints, after complaints from credit bureaus, as well as banks and lenders.
While there are some fair dealers, the auto marketplace has “a lot of shady and unethical business practices, and consumers are hurt by that,” said Chuck Bell, program director of advocacy at Consumer Reports. “When the consumer walks out the door, they feel like they’re fighting a war.”
Why is car shopping done this way?
The first indication that you’re on unequal footing with a car dealer is when they worry about giving price quotes over the phone, let alone in writing. McParland said the dealers he calls on for clients often tell him he needs to come to the dealership for a price. “They’re basically telling us to go pound sand,” he says.
Sellers want you to come because it’s much easier to upsell you that way. You’ve invested some effort in the process, and the salesperson can get a better read on how impatient you are to buy a car, how inexperienced you are with car shopping, and many other factors to their advantage. On the other hand, if they offer you an out-the-door price — which includes all the extras and fees — before you ever meet in person, you can easily take the price to a competing dealer and ask if they can do better. Online used car dealers like CarMax and Carvana make “no haggle” car prices more popular, as they often come at a premium, according to McParland. Some traditional car dealers now offer fixed prices as well, but it’s probably to your advantage to try to negotiate.
How did the system get to be like this?
The common practice of negotiating a car price rather than paying a fixed price can actually be horse tradingWhere sellers and buyers also transact, and buyers will even trade in their old horses to offset the price of new ones, as we do with cars today.
The model has survived for so long, though, thanks in part to state franchise laws that ensure these middle-of-the-road car dealerships can’t be easily cut out. Most states prohibit car manufacturers from selling directly to consumers. Tesla is the rare exception of a car company that sells directly and has fought with car dealer For the right to do so. There are enough car dealer trade groups political powerAnd they are sufficiently organized and deep-pocketed to lobby against reforms that would threaten the status quo, such as changing franchise laws that give them a monopoly on selling a particular car brand in a particular region. The National Automobile Dealers Association (NADA), for its part, argues that The Voting Rights Act Increases competitiveness and benefits consumers while actually creating local jobs.
“They’re a very powerful lobby,” Bell said.
See how the industry has pushed back against enforcement by reducing auto loan disparity. Car dealers often arrange financing for customers, but they add a mark-up to the interest rate offered by banks because they can pocket that extra money for themselves. How much mark-up is applied is at the dealer’s discretion, and unlike mortgage lenders, they are not required to collect information on the race of their customers, making it more difficult to see if they are complying with fair lending laws. . Research shows that car dealers often overcharge High interest rates from people of color. When the Consumer Finance Protection Bureau began cracking down on the practice in 2013, the industry fight back and won.
Is there any hope for making the car buying process better?
Still, there are reasons to be optimistic about the future of car buying. The FTC announced late last year new rules which targets the most widespread fraudulent practices used by car dealers. For one, dealers must disclose the full, out-of-the-door price of a vehicle, including all add-ons, before a customer walks into the dealership. The price and other terms related to the purchase of the vehicle should also be expressed in plain language. Dealers will not be allowed to charge customers for useless add-ons. The FTC will rule on assumptions Save customers $3.4 billion and cut 72 million hours of car shopping time.
The rule was supposed to go into effect this summer but was delayed after two auto dealer trade groups, including NADA. filed a challenge. The association told Vox that the rule would make the car-buying experience worse. “Consumers will have to spend an additional 60-80 minutes at dealerships, fill out five new, untested forms and will lose at least $1.3 billion annually as a result of this rule,” a spokesperson wrote in an email. .
But Bell is confident that the rule will eventually take effect, and if you’re looking for a car, you should act as if these protections already apply. McParland recommends emailing dealers an “itemized out-the-door price” of the vehicle you’re interested in. If they refuse, “that’s usually a red flag, so go to someone else,” he said.
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