13 Reasons To Avoid Buying a Car From a Dealership

More than a decade after the Ford Model T revolutionized the automobile into an accessible acquisition everyone with a job and a salary can afford, they remain a relative luxury many can’t pay for without months-long saving and careful planning. Where we make the purchase should be an important part of the plan.

We have several avenues besides dealerships, including private sellers, auctions, online marketplaces, rental companies, certified pre-owned programs, car supermarkets like CarMax, direct from the manufacturer, and even social media. Dealerships sell new and used cars, usually under a franchise agreement with one or multiple manufacturers.

The heart of the matter is that cars do not go for one standard price there.  This is the primary reason many will buy anywhere but from a dealership — to avoid paying more for the same car that someone else bought for less at the same dealership. Along with price discrimination, here are 13 reasons to avoid buying cars from dealerships.

Higher Prices

Dealership cars often have higher prices to cover their overhead costs. Staffing costs alone can take up a pretty chunk of a dealership’s running costs. AMOnline notes that “factors like learning and development, the apprenticeship levy, rising inflation, and national minimum wage contribute to these costs.”

Besides staffing, dealerships have a showroom to pay for and maintain, specialized auto technicians on their hourly labor rosters, and increasing regulatory requirements that often come with additional costs.

Hidden Fees

Hidden fees associated with documentation, dealer preparation, and advertising fees can significantly impact the overall cost of buying a car from the dealership. These are often legitimate fees that leave you with no choice but to pay or try to negotiate.

CarEdge notes that dealers often reduce a vehicle’s selling price by the same amount as the paperwork processing fee. We may consider hidden costs such as advertising fees as nonsensical, but dealers have to cover the expense even if they do not charge for them specifically.

Pressure Tactics

Have you heard of the “Four-Square” Technique? It involves dividing negotiations into trade-in value, purchase price, down payment, and monthly payments. Car dealerships manipulate these variables to make deals seem favorable while keeping the overall cost high.

While high-pressure tactics to get people to commit to a purchase aren’t exclusive to dealerships, they’re notorious for emotional manipulations, appealing to buyers’ desires, fears, or insecurities. After all, many salespeople work on commission and have sales targets.

Limited Negotiation

In many people’s experiences, the negotiation room is tighter at dealerships than when dealing with private sellers. That’s because dealers know the market better than anyone and set their prices accordingly, factoring in competitor pricing.

A private seller may be more motivated to negotiate and close a deal, whereas dealerships have fewer incentives.

This is especially the case when the specific model is in high demand and if they have sales targets and quotas to meet. Additionally, the lack of flexibility in pricing seems justified by the transparency associated with shopping at dealerships, such as history reports, warranties, etc.

Complex Financing

Shoppers who need financing in their car acquisition journey have two main options: dealership financing and bank loans, the first of which is often complex and more expensive than bank loans. While the customer is more likely to enjoy seamless financing with a same-day application process, they often come with higher interest rates.

You’d get better interest rates by getting a bank loan, credit union, or online lender. The main advantage of dealership financing is the variety of credit profiles they’re willing to work with, as well as the manufacturer specials and rebates they offer. Even so, some offer expensive subprime financing with strict requirements.

Extended Warranties

It’s almost guaranteed the finance and insurance (F&I) representative at your local dealership will tempt you with extended warranties you do not need and a high likelihood you’ll fall for it. You don’t need warranties already covered by the car manufacturer.

Extended warranties do come with secondary benefits, such as roadside assistance and rental car reimbursement, depending on the provider and specific plan.

Their main attraction is shielding you from unexpected repair bills and giving people the peace of mind of more predictable car ownership costs. However, extended warranties might be unnecessary when you weigh the costs against the benefits based on your specific needs and driving habits.

Limited Inventory

Have you noticed dealership inventories seem to have standard colors — white, black, silver, and gray? Those are ‘safer bets’ due to their broader appeal. If you have no wish to have fewer choices in terms of models, colors, and features, you may want to look beyond car dealerships towards online marketplaces and car supermarkets.

The business climate demands dealerships to focus on what’s selling, let alone the constraints of space in their facilities, as well as the ethics of brand affiliations requiring them to have a limited selection of car models. If you have your eyes on a specific trim or configuration, dealerships will offer to place special orders at a cost.

Misleading Advertisements

The primary reason savvy shoppers tend to call ahead to confirm the advertised vehicle is actually available on the lot before visiting the dealership is that some dealerships run misleading ads about prices and terms. You’ll do well to request the “out-the-door” price, with all fees, in writing.

As the Consumer Advice Department of the Federal Trade Commission (FTC) warns, “Some dishonest dealers will advertise for a particular listing, lure you to the dealership, claim the vehicle is unavailable, and then try to sell you on a different vehicle at a different (usually higher) price.” If the ad mentions low-rate financing, ask about the specifics.

Sales Tactics

With their aggressive, high-pressure sales tactics, some dealerships can make your car shopping experience far less pleasant than you thought. It’s common to hear people talk about how they felt rushed to make quick decisions by pushy salespeople trying to upsell unnecessary features or services.

Many steer clear of dealerships altogether to avoid this. GM dealership Vannyork advices shoppers not to “feel obligated to succumb to their pressure; it’s perfectly acceptable to explore other options.” It’s easier for unscrupulous dealerships to get away with making exaggerated claims about a car’s performance and features because people are more trusting.

Trade-in Values

Trade-in value is another reason you’re better off not patronizing dealerships; they are often lower than if you sold your car privately. This is particularly effective with older vehicles. The dealership may not think they’re worth what a private buyer is willing and happy to pay.

Rarely is your private buyer looking to resell for profit, so you’re more likely to get top dollar for your car than trading in at the dealership. A private sale lets you field multiple offers and go for the highest one. The upside with dealerships is that they’re faster and often involve a simpler process.

Service Packages

Dealers are pretty good at bundling expensive service packages you don’t need in your car purchases, including extended warranties, maintenance plans, or protection packages you wouldn’t otherwise need or have asked for separately. While these can provide peace of mind, they’re not always necessary.

Take VIN etching, for example. Etching them onto the car windows is supposed to deter thefts (that may never happen), but you’re not required to take or pay for such a service. Another useless add-on to get more money out of you is “rustproofing.” Modern cars are built to last without extra protection.

Interest Rates

We mentioned this earlier when we focused on the complexities of financing through the dealership versus banks. In the same vein, the interest rates from dealership financing are typically higher than what you get from a bank or credit union. It’s not news that dealerships mark up interest rates offered to customers.

Bankrate.com explained that “if a bank would approve you for a loan at 7%, the dealer might present you an offer at 9%. The logic is that the customer compensates the dealer for handling their finances. In other words, you pay a commission for them to arrange the loan.

Time-Consuming

Last but not least, buying a car from a dealership can be a more time-consuming process with all the paperwork and negotiations. Haggling over the cost, trade-in value (if applicable), and financing terms can take painfully longer than it took Cap’n Jack Sparrow to strike a deal of one hundred souls in exchange for his with Davy Jones.

Many of us can relate to the exhausting experience of haggling over the price of a new car with slick, commission-seeking salespeople. Waiting for the finance and insurance (F&I) office, especially during busy hours, can further prolong the process more than it would if you patronized a private seller or bought directly from the manufacturer.