if you do anything at a car dealership there is a very high probability that
you're gonna get ripped off but with a little bit of understanding and a little
bit of knowledge you can leave the dealership with a lot more money in your
wallet so in this video I'm going over the five ways that car dealerships will
totally rip you off but I am gonna go over all the ways that you can avoid
these so you can actually leave the dealership with a lot more cash now if
you just found this channel I'm Jason with honest finance and I make a lot of
videos on different topics that will give your life and your finances more
value so if you guys are interested in that type of content definitely
subscribe but now let's start talking about how car dealers rip you off so
I'll start off with a quick story about my first car purchase when I was 21
years old and I got so ripped off at the dealership because of my total ignorance
at the time I had a really good sales job and I could have actually paid for
the car with cash but I was told that you're supposed to finance the car in
order to build your credit and so that's what I did because that's what I
believed and it is true that financing a car will help build your credit but I
shouldn't have financed the entire car I should have just financed a tiny bit of
it because that would have done the exact same thing so what ended up
happening is I almost paid full retail for the stupid car and then on top of
that I got a 17 percent interest rate and then I bought every single warranty
that they offered me because I thought that was in my best interest but I could
not have been more wrong I mean seriously the car itself was only 18
thousand bucks but by the end of everything I had a loan that was over
twenty four thousand dollars and then on top of that when I looked back at the
contract I paid every single fee that the dealer had as well so overall I got
totally ripped off but I did learn a big lesson the lesson I learned is that you
cannot be ignorant when it comes to car buying because if you are ignorant the
dealer's gonna walk all over you and you have to know exactly where they're
making all their money so that you don't make the same mistake I did
now obviously just like any business car dealers do need to make a profit and
they have a lot of expenses as well but just keep in mind that you do not have
to pay full retail for anything that they offer
I mean honestly there's profit when it comes to just about every department at
the car dealer so what you've got to be is the squeaky wheel and what this means
is it's just an old saying that goes this
we key wheel gets the grease and this works for just about everything in life
including the car dealer I mean this is your hard-earned money we're talking
about here so I don't want you just spending your money just because they
asked you to I want you to be a squeaky wheel so that you can get the grease now
you don't have to be a jerk about everything but just confidently ask for
what you want and negotiate and then you're gonna end up getting what you
want in the end car dealers surprisingly make most of their profits from the
financing department and the service center which isn't something that most
of us would think about but that is where they make most of their money and
then you've got their new car sales which are actually the smallest margins
when it comes to making money at the dealer but then used cars those can
actually make them quite a bit of money but it all depends on how much they paid
for the car in the first place so based on all the information that I just gave
you the first way that you can actually get ripped off at the car dealer is in
the service and parts department which I want you guys to pay attention to
so obviously servicing your car is something that you have to do to keep it
running properly but just keep in mind that the service department at the
dealer is actually another sales team and their job is to try to get as many
commissions as they can off of all the repairs that they're trying to do I mean
seriously if you walked into the back room of the service centre you'd
actually see a giant whiteboard with all the different sales stuff that they're
trying to do and all the goals that they're trying to hit because they are
another sales - but to be honest with you guys they're usually just gonna
recommend early service which isn't bad to do if you want to but the real big
problem here is how much they charge in the service department and that is a big
deal because they're way too expensive because you'll find if you go to a bunch
of different mechanics they'll actually have way better hourly rates than the
dealers do and then on top of that the dealers also sell OAM parts which isn't
a big deal but the problem is is that they're always going to charge them at
full retail because they can so the bottom line here is if you don't want to
get ripped off in the service and parts department then there's a couple things
you can do that I'm gonna mention right here now the first thing you can do is
call other dealerships and other mechanics in your local area and get a
quote for the same service because often times you'll find that your dealer will
actually price match and that's a good thing because then you can get
everything at a lower price and the other good thing about getting a few
quotes from other people because if your dealer won't price match
then you can obviously take their business elsewhere
because there's always going to be plenty of authorized dealers and
mechanics that can work on your exact brand of car and you can get the same
type of service for less money plus if you're not even sure you need to work
done then I would definitely get a second opinion on stuff like that
especially when it's expensive because it's always a good idea to get a second
opinion because it can change with price or maybe the fact that you don't even
need the work done now the other thing you can do to save some money is to just
buy the parts that you need on your own and then have them do the labor if you
can't do it yourself Amazon eBay and a whole bunch of other
websites sell o am car parts so definitely check them out and find lower
prices and then just have your mechanic do the work for you if you can't do it
and then you can also check if the dealer will price match on those parts
too because if they do price match then definitely go that route because then
you're never gonna have to wait for them and shipping and you can just get the
parts right now and it's easier and then just keep in mind that a lot of the
simple repairs are actually all over YouTube so if you want to do something
yourself then definitely check there as a resource and you can save a ton of
money going that route I put in new spark plugs and it did take me about
three hours because I'm not the brightest but I did learn a lot about
the process and it did save me about two hundred and fifty bucks as well so just
be aware that you can negotiate car parts and service at the dealer and you
don't have to pay full price for anything because in my opinion that is a
total ripoff and then there's one more thing I want to mention about the
service department but this is actually a good thing in your favor if your car
is still under warranty have them look at every single problem that you can
possibly think of because you'd be surprised how many of those things
actually qualify for warranty work dealers get reimbursed really well for
warranty work so it's obviously in their best interest to help you with those
claims so just find out everything you can that's wrong with your car have them
find out if it qualifies and then get the work done while your car still under
warranty while you can now the next two ways that you can get
ripped off at the dealer have to do with the price of the car and also your
trade-in value so definitely pay attention here everybody knows that
you're supposed to negotiate the price of the car but the thing is is if you
have a trade-in you also have to negotiate that as well or you will
easily get ripped off because if you buy a car for only 10 grand that was listed
at 12 you might actually think you got a good deal but you're not
get the whole picture if you have a trade-in because let's say that you got
five grand for your trade and and you really could have got sixty five hundred
bucks well obviously you just lost fifteen hundred dollars just because you
didn't negotiate that price as well dealers are always going to give you a
good price on the car or the trade just to make you feel like you won the
negotiation process but the thing is is you have to pay attention to both of
those otherwise you're just gonna get ripped off because if you're the type of
person that's only paying attention to the price of the car then you're totally
going to get ripped off on your trade and then you're probably going to end up
getting ripped off in the financing department as well now I do have a ton
of other car videos that go over financing and negotiation and all
different stuff like that so if you guys want more in depth detail then
definitely watch those videos and I'll have a playlist linked up over here and
in the description and then if this video is making sense for you guys will
you please comment down below and just say I got it that way I know that you're
following along with what I'm saying Thanks now the last ways that you can
get ripped off at the dealer all happened in the financing department and
this is actually where they can make most of their profits so definitely pay
attention to what I'm talking about because this is very good information to
understand most of us tend to think that the negotiation process is completely
over once we get to the financing department but we could not be more
wrong about that now if you're financing your car through a dealer that's totally
fine but you just need to make sure that they are not collecting what's called a
finance reserve this is actually the gap of the interest rate the dealers can
collect and it's usually going to be about one to three percent that they get
from your interest rate and that is a total ripoff for you so my example would
be if you finance a car for $20,000 at five percent interest for 60 months then
you're gonna pay about twenty six hundred bucks an interest for the entire
loan but if you did the same loan at only three percent then you'd pay
fifteen hundred dollars in interest and your payment would be lower too so just
that two percent difference with the exact same loan can actually make the
dealer about eleven hundred dollars more just because of the gap from the finance
reserve and that's only based on a twenty thousand dollar loan with a two
percent gap so definitely pay attention to the finance reserve and do not let
them get a cut of your interest rate
instead of relying on the dealer to do your financing I would actually go to
your local credit union and get pre-approved for the financing that way
you have it all ready when you go to the dealer the best thing you can do is to
actually get pre-approved from your credit union and then have the dealer
try to price match and if they can get you a better rate then that's just a
win-win for both of you and then just keep in mind that when you do get
pre-approved to make sure that you get pre-approved for an amount that's quite
a bit higher than what you're actually planning on paying that will you don't
end up short and have to call your bank for more money so for instance if I knew
that the car I was buying was probably gonna be about 25 grand out the door
then I would just get pre-approved for 30 grand that way I have that buffer and
I don't have to worry about a thing and honestly if you don't want to go through
your credit union and you just want a specific recommendation from me then I
would recommend checking out light Stream auto loans because they have very
competitive rates other than they're really good rates I really like them
because they don't care about down payments and they also don't care about
the make or the model which is kind of a big deal when you're financing a car now
keep in mind that you've got to have good credit if you want to get an auto
loan with lights dream but if you are in that situation then I would definitely
check them out if you have any interest I'll leave an affiliate link in the
description below which means I may be compensated if you click through it but
just keep in mind that I am never gonna recommend a company that I don't think
gives you guys the best value and if you are gonna pay cash for your car try
using your credit card at the dealership because a lot of the time they're gonna
let you use up to five thousand dollars as a down payment on your credit card
with no fee and then you can actually keep all those reward points for
yourself because you've obviously got the money to cover it now I want to move
into your monthly payment because I want you guys to understand that you cannot
let that determine everything about your car because your monthly payment is just
a big fat lie if you're not taking care of everything else first because if you
had a budget of about four hundred bucks a month for a car payment and I was the
salesman all I would have to do is just extend the loan on just about any car
that you wanted and I could get you within that $400 a month payment even
though you'd be totally getting ripped off for instance if you have a $20,000
loan at 5% interest for three years then you're gonna have a payment of six
hundred bucks a month which might be kind of high for most people
if you did the same loan for seven years then you'll actually have a payment of
282 bucks which is a lot cheaper but you are gonna pay way more an interest and
that's the point that I'm trying to get across here because if you do the math
on the 7-year loan you'll actually find that you're gonna pay about 2200 bucks
more in interest which in my opinion is just way too much wasted money dealers
just want to get the sale so if all they have to do is just extend your loan to
get you to a monthly payment that you're comfortable with and you're not
realizing what's happening then they're gonna end up winning and you're totally
going to end up losing and getting ripped off just be smart about your
financing and do your homework before you actually go in and buy your car so
that you know what's happening with your monthly payment and then you're gonna
end up in a much better situation and I'll say it again that way too many of
us only care about the monthly payment but you have to change that mindset or
you are going to get ripped off for the rest of your life now the last ways you
can get ripped off in the financing department all have to do with the
extended warranties the service contracts and then the stupid fees that
the dealers are going to charge you on your paperwork and what you've got to
realize with all these add-ons is that every single one of them is negotiable
so do not pay full price for any of them I mean if you want to get an extended
warranty then go ahead and do that but just don't pay full price for it because
you don't have to you can totally negotiate it and get it for a better
deal and then if you do go with the warranty or anything like that just make
sure to look over the contract as close as you can because a lot of the time the
contracts totally suck and you need to pay attention to this so that you do not
get ripped off and then there's other service contracts that you can buy as
well like carpet protection and paint protection which in my opinion I don't
think those are very good but if you do want to buy them just make sure to
negotiate because you don't have to pay full price and then the last thing I
want to talk about here are the fees and these are just additional charges that
the dealer is gonna put on your paperwork that you're expected to pay
but the problem is is that most people don't even pay attention to them and the
dealer just ends up making huge profits because of these stupid fees that you
can get out of so basically if you've got any fees on your paperwork that are
mandatory by the state or the government then definitely get out of them but you
don't have to be a jerk here just confidently tell the dealer that you
don't want to pay them and get out because it's gonna save you a lot of
money so usually they'll end up working with you and they'll just drop the fees
but if they don't just make them compensate in a different area
that you can get your money back in a different way because if you have a $400
dock fee and they have to charge that to every single customer then just get out
of it by having them take off $400 on your car or give you $400 more on your
trade to compensate for the difference and then they can still charge you the
fee so that it's fair for everyone and then if you see any dealer prep fees or
anything on there to get your car cleaned up or filled up with gas in
order to sell it to you do not pay any of these fees because you don't have to
pay a single one of them like I said earlier if they're not mandatory by the
state or the government then totally wiggle your way out of them and you will
save a lot of money now just imagine for a second how bad you can actually get
ripped off at the dealer if you don't follow this process because there's a
lot of different areas that they can make money but you need to avoid these
at all costs so that you don't get ripped off car dealers make a killing
off of certain types of customers so just make sure that you're the type of
customer that doesn't get ripped off and that's totally what you want to do here
because you're gonna save all that money now once again I'm Jason with honest
finance and I make a lot of videos on different topics that will give your
life and your finances more value so definitely subscribe if you guys want to
and then I will leave some other car videos over here that you can check out
so you can be more informed but that's all for now