The Inside Story about Car Sales: Internet ScamBusters #119
Today’s issue is a bit different. It’s about 3 kinds of special “sale” events at auto dealers.
In order to tell you about the biggest scams related to so called “sales” at auto dealers, we asked Peter Humleker, consumer advocate, consultant and author of the excellent book “Car Buying Scams, Auto Dealer Executive ‘Breaks Code of Silence’!” to write an exclusive article for us on the topic.
We think you’ll be surprised to read what Peter has to say…
“Sales” at Car Dealerships — The Inside Story
There are many different kinds of “sales” that auto dealers offer. A few of the different types are the Super Sale, Credit Union Sale, Slasher Sale, Push, Pull & Drag Sale, $29 Acquisition Sale, the Pre-Approved Sale, Recent Bankruptcy Sale, Give Away a Gift Sale — and the list could go on.
You would think if you went to one of these sales, you would save money.
However, when it comes to auto dealers, nothing could be further from the truth.
Let me give you a brief description of how three of these sales work, and you will see why you won’t save any money at them.
1. The Super Sale: This is a relatively new kind of sale — it’s only a few years old.
Usually what happens is an auto dealer will hire an outside group sales team to come to the dealership and conduct the entire sale.
The company hired to perform and conduct the Super Sale will come to the dealership with extra sales people: a finance manager, two or three closers, and of course a desk manager.
The sales plan will include the dealership spending about $10,000 in advertising, which mostly consists of a flyer that will be inserted into all the surrounding local newspapers, as well as radio ads and a newspaper ad (that looks like an editorial) in the local newspaper.
Here’s how it works: The outside company will typically add $5,000 to the cost of each vehicle and then figure payments based on the longest possible term, with only a $29 down payment.
They will then put the payments in each vehicle on the lot. The amount will hang from the mirror on a hang tag advertising “pick a payment, pick a vehicle.”
As you can see, there is no discount.
Consumers think there is a sale and that they are going to get a great deal. But in reality, if they fall for the “payment only thinking,” they will end up paying much too much for any vehicle they buy.
The real price of the vehicle is never displayed at these kinds of sales… only the payment.
During these Super Sales, dealerships will make from 50% to 100% of what they normally would make in a month… in a four-day sale period!
Needless to say, it is one of the most profitable sales for an auto dealership to conduct.
People who buy during this type of sale grossly overpay and give the dealership a huge profit… but they are often the happiest people on earth because the dealership did a great job of making them think they got a great deal!
These are the kind of customers car dealers love. These people focus on the payment only, and are oblivious to anything else. They don’t pay attention to how much they actually paid for the car — or how much they received for their trade-in car.
2. The Pre-Approval Sale: The Pre-Approval Sale is geared towards people with poor credit.
The dealership hires an outside marketing company that sends thousands of letters to people according to their FICO score, which is a person’s credit rating.
Usually, the dealership will mail letters to people with FICO scores between 500 and 650 (which is quite low).
The letter will come to the consumer and will have a check attached to it saying the customer is pre-approved for a loan amount of $19,995 for example, and they need to call ABC Motors immediately to lock in their loan approval.
Sometimes there will be a hook involved in the letter, such as a free gift for coming into the dealership.
These sales are also very profitable because the dealership personnel will totally control the customer, and basically tell them what kind of car they can buy.
They will “stuff” the customer in whatever car provides the dealer with the most profit, as well as con the customer into thinking they have to buy the back end products — like an extended service contract, life, accident and health insurance, etc.
This sale works the same way for fresh bankruptcy customers.
Since bankruptcy is a matter of public record, dealerships love to target fresh bankruptcy customers. These people just went through a bankruptcy, so they are most likely embarrassed, depressed, and are desperate to start over and re-establish their credit.
Again, the dealership controls the sales process and sells high-profit cars at full price or more — with lots of back end products.
3. The Website $1,000 Free Gift Certificate Scam: This is one of the newest sales out there.
In the Website $1,000 Free Gift Certificate Scam, consumers receive a postcard or letter from the local car dealership that invites them to the dealership to look at cars. The dealership will give the consumer a gift certificate worth $1,000 in free merchandise — just for coming in.
After coming in (and often buying a car at inflated prices), the customer gets the $1000 gift certificate.
The consumer then simply goes to the website that is on the certificate and can choose from many different types of merchandise, such as electronics, camping equipment, kitchen, sporting goods, etc.
The scam is that the equipment is grossly overpriced, and there are outrageous shipping charges. The shipping charges actually cost more than the product — and that is how the website makes its profit!
Of course, the consumer thinks the products are free, but they know they still have to pay the shipping charges.
If you picked out $1000 worth of products from the website, it would cost you about $300 in shipping charges — and the products are really only worth about $150-$200!
This scam brings a lot of people into the dealership. However, the fact is that most of the people who come in have bad or challenged credit — and of course, if they buy a vehicle, they get taken advantage of the most.
Summary: Getting customers into auto dealerships has become an art form in trickery, deceit and the latest techniques in psychological button-pushing.
It plays on people wanting to get something for free. Auto dealers use televisions, bicycles, sporting goods, gift certificates — and anything else they can think of that will get people into their showroom floor.
Whatever they are giving away, you can be sure that you are ultimately paying for it in the car deal.
The bottom line is you don’t need to go to a special sale in order to get a good car deal. Car “sales” are designed to rip you off, NOT give you a great deal.
Action: Never waste your time going to a sale at an auto dealer.
This article was written by Peter Humleker, consumer advocate, consultant and author of the excellent book “Car Buying Scams, Auto Dealer Executive ‘Breaks Code of Silence’!”– exclusively for Internet ScamBusters.
Copyright Peter M. Humleker Jr.
Printed (exclusively) with permission.
That’s all for today. We’ll see you next week…