When it comes to purchasing a new or used car, one of the most crucial factors influencing your decision is the price. However, if you’ve ever visited a car dealership, you might have noticed that the advertised price on the car doesn’t always reflect the actual amount you end up paying. This discrepancy is often due to dealership advertised pricing tactics, which are used to attract customers and influence their purchasing decisions. In this article, we’ll explore some of the common pricing tactics used by car dealerships, how they impact consumers, and tips for navigating these strategies when shopping for a car.
Understanding Dealership Advertised Pricing
What is Advertised Pricing?
Advertised pricing refers to the price a dealership displays for a vehicle, whether online, in print, or on the dealership lot. These prices are often presented as the “deal” for customers and are meant to attract attention and encourage people to visit the dealership. However, the advertised price rarely reflects the final price a customer pays, which can be influenced by various tactics that dealerships employ.
While the advertised price is the starting point for negotiations, dealerships may add additional costs or introduce price adjustments based on different factors. To better understand these tactics, it’s essential to recognize the most common strategies used by dealerships.
Common Dealership Pricing Tactics
The “Lowball” Price
One of the most common tactics used by dealerships is advertising a car at a price that seems too good to be true. This tactic, known as “lowball pricing,” is designed to draw customers into the dealership. The catch, however, is that the car’s final price may end up being much higher due to added fees and conditions.
How It Works:
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A dealership advertises a vehicle at an unusually low price that is often below the market value or the actual cost of the car.
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When the customer arrives, they are told that the low price only applies under certain conditions (e.g., a down payment, financing through the dealership, or a special trade-in deal).
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The dealership might also offer a more expensive model or add-ons to make up for the “discounted” price.
Example:
A dealership might advertise a new sedan for $18,000, but when you get there, they inform you that the price applies only if you finance through their partner bank, have a trade-in car, and pay for additional services, like extended warranties.
Incentives and Rebates
Dealerships often advertise special rebates or incentives that seem like a great deal, but these can come with a lot of fine print. These offers can make the price appear lower than it really is, and the customer may need to jump through several hoops to qualify for them.
How It Works:
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The dealership may advertise “factory rebates” or “loyalty incentives” that lower the price, but only if you meet specific criteria.
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These rebates could apply to a limited selection of vehicles, and they may be contingent on financing through the dealership or trade-in requirements.
Example:
A dealership might advertise $3,000 in “rebates,” but you can only access the rebate if you qualify for specific credit scores, financing terms, or if you agree to trade in your current vehicle.
“Add-Ons” and “Extra Packages”
Many dealerships will add extra packages to the price of the car after you’ve settled on the advertised price. These additional costs are often bundled into the deal and can significantly increase the final price of the car.
How It Works:
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The dealership may claim that additional add-ons, like paint protection, undercoating, or even a dealer-installed alarm system, are necessary or part of the standard package.
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These extras can be tacked onto the price of the car without your consent, raising the overall cost of the purchase.
Example:
A dealership might advertise a car at $25,000, but after negotiating the sale, the final price might rise to $27,000 due to optional add-ons like paint protection, nitrogen tire inflation, and a “dealer prep fee.”
The “One Payment, Two Payments” Strategy
In some cases, dealerships will use financing terms to make the advertised price appear more affordable. The tactic is often referred to as the “one payment, two payments” strategy, where dealerships highlight a low monthly payment option that stretches the loan term to an unreasonable length, leading to higher total costs.
How It Works:
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The dealership may offer a car with an attractive monthly payment but fail to clarify that the loan term is extended for 72 or 84 months, which increases the total interest paid over time.
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This tactic focuses on the short-term monthly payment rather than the overall cost of the vehicle.
Example:
A dealership may advertise a car for $250 per month, but after reviewing the details, you realize that the term is 84 months (7 years), and the total amount you’ll pay is far higher than the advertised price.
The “Dealer Fee” Trap
One of the most frustrating tactics in dealership pricing is the “dealer fee.” This fee is often tacked onto the final price and is not disclosed in the advertised price, leading to an unpleasant surprise for customers.
How It Works:
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Dealerships will often include a “dealer processing fee,” “documentation fee,” or “administrative fee” that could range from $500 to $1,000 or more.
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These fees are added after the advertised price and are often not negotiable, although in some cases, the fees can be reduced or waived during negotiations.
Example:
You may see a car advertised for $22,000, but after you agree to purchase, the dealer adds a $900 processing fee, which raises the price to $22,900.
How to Avoid Falling for Pricing Tactics
Research Before You Go
One of the most effective ways to avoid dealership pricing tactics is to research the car you want to buy before heading to the dealership. Use online resources like Edmunds, Kelley Blue Book, and TrueCar to get an accurate sense of the fair market value of the vehicle. This will help you recognize whether the dealership’s advertised price is a good deal or simply a marketing tactic.
Ask for a Breakdown of All Costs
Before agreeing to any price, always ask the dealership to provide a full breakdown of the costs. This should include the base price of the car, any dealer fees, taxes, and additional costs for add-ons. Don’t forget to ask whether any rebates or incentives apply and if they come with any specific conditions.
Negotiate the Total Price, Not the Monthly Payment
Dealerships often focus on monthly payments to draw customers in. However, you should focus on negotiating the total price of the car. The monthly payment can be manipulated with long-term financing or additional add-ons. By negotiating the overall price first, you will have a clearer picture of the true cost of the vehicle.
Be Wary of “Limited Time Offers”
Dealerships often advertise limited-time offers or flash sales to create urgency. While these offers may sound enticing, it’s important to remember that such discounts are typically part of a sales strategy. Take the time to evaluate whether the deal is really as good as it seems or if it’s part of a larger marketing push.
Don’t Be Afraid to Walk Away
If a dealership isn’t transparent about their pricing tactics or you feel uncomfortable with the deal, don’t hesitate to walk away. There are always other dealerships with similar cars, and sometimes, walking out can lead to a better offer. Always trust your instincts and take your time to make an informed decision.
Conclusion
While dealership advertised pricing tactics can often seem like a “game” designed to get you into the showroom, understanding these strategies can help you make smarter and more informed decisions. By recognizing common tactics like lowball pricing, add-ons, rebates, and dealer fees, you can avoid being misled and ensure you’re getting the best deal possible.
Do your homework, ask the right questions, and always negotiate the total price of the vehicle. With these strategies in mind, you’ll be better equipped to handle dealership pricing tactics and make a car purchase that suits both your budget and your needs.
