Stealerships
The average American consumer’s perception of the car dealership industry is, well, less than favorable. Roughly three-quarters of Americans do not trust car dealers to be honest about pricing, according to the KPA Dealership Trust Survey conducted by Harris Poll. About one-third have experienced things like deceptive selling, hidden fees, or dishonest salespeople.
Thirty-four percent said they have felt pressured to purchase add-ons while at dealerships, while 30% said they found hidden fees in the paperwork after agreeing upon a price with the dealer. This experience is so pervasive that some call these outlets "stealerships."
“Car dealers are one of the biggest cartels in America,” personal finance expert Ramit Sethi said in a TikTok video. “They actually have a huge amount of political power and they use it not to help consumers but to screw consumers over.”
Nathan’s plan to offload his 24% interest rate auto loan to someone in desperate need of a car will not help his industry’s reputation. Even if he doesn’t sell, he’s the victim of an excessively high auto loan payment.
As of October 2024, the average interest rate on a used car is 12.01%, according to MarketWatch Guides. Even for someone with bad credit — a FICO score between 300 and 500 — the average rate is 21.55%. Nathan’s rate is higher than that which indicates a very bad deal.
For potential car shoppers, here’s how you can find a better deal.
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Read MoreFinding a good deal
If you’re looking to buy a new car, remember some automakers like Tesla, Rivian, and Lucid let you buy from them directly and avoid the dealership networks.
If the car you’re looking for isn’t available directly from the manufacturer, you could take some time to review the tips and tricks offered on the American Bankruptcy Institute's website. They have a list of the most common auto dealer scams from Public Counsel, a nonprofit public interest law firm.
"A good starting point is calling the dealerships like we did and ask if they mark up their prices," wrote Devin Pratt of Consumer Reports. "Some dealers will even show the markup as a line item when you spec the car you want online. When you are ready to buy, make sure you get a purchase order, not just a deposit receipt. Putting a deposit on a vehicle at a dealer doesn’t necessarily guarantee the price."
On his website, Ramit Sethi also offers some additional tips. He recommends buyers create a fixed budget before they head to the dealership, don’t be pressured into buying quickly, do your due diligence and research, and don’t take the financing offered by the car dealer, shop around for better rates with banks and other lenders.
"The best time to buy a car is at the end of the year or the end of the quarter when the sales staff is trying to meet their quota," says the website. "Buying a car on New Year’s Eve could get you an 8% discount alone."
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