The 3 Types of Car DealershipsNot all car dealers are the same - you have your good apples and bad apples, just like any other industry.
Most people would rather visit a dentist than a car dealer, with good reason. Historically, car dealers have used under-handed tactics to rip consumers off.
While things have changed for the better in recent years, there are still a large number of dealers that use sleazy tricks.
Right now, there are three types of car dealers: High-Pressure, Bad Credit, and Community Dealers.
Not all dealers fit nicely into one category and you'll get many that overlap, but in general, these are the three types of dealers you will encounter while shopping for a vehicle.
High Pressure Dealership
A high pressure dealership is still one of the most common types of dealerships.
They may not be as bad as they once were before the internet brought about price transparency, but they still rely on tricks and under-handed sales tactics to try to sell vehicles.
The primary goal of a high-pressure dealer is to get customers into the showroom floor. They will do or say nearly anything as long as it convinces you to physically stop by the dealership.
Once you're in the showroom, they will pressure and try to wear you down until you agree to buy a car.
Common tactics used at a high pressure dealership include:
- Bait and Switch
- Four-square Method
- High Turnover - several salesmen will try to negotiate with you, one after the other
- Deposit Requests
- Balloons, Huge Banners, Gimmicks to get you in the showroom
Bad Credit Dealerships
The "Bad Credit" Dealerships target car buyers with bad credit, or ones that think they have bad credit.
They make most of their profits by arranging high-interest financing and selling unnecessary add-on products and accessories.
These types of dealers love the credit-challenged buyers because they are easily manipulated and offer little resistance when it comes to price negotiation.
Credit-challenged buyers tend to focus on monthly payments, which sets them up to be ripped off to the max.
You can spot a "Bad Credit" dealership by the type of advertising they do. You know the ads - the ones that say things like "Bad Credit? No Credit? No Problem", or "We can get you financed - guaranteed!"
The "Community" dealer is the best type of dealership, but watch out because you can still get ripped off here.
The Community dealer actually cares about their reputation and character within the community and they try to build their business with repeat buyers.
So far so good.
The main problem with these dealers is that customers tend to put their guard down and are less resistant when it comes to negotiating.
Many of these types of dealerships offer "no-haggle" pricing. That's generally a good thing, but remember, no-haggle doesn't necessarily mean you'll get the best price.
Where these dealers make their profit is in the trade-in, financing, and other add-ons they sell along with the cars.
If a customer trusts a dealership, they let their guard down and are ripped-off in other areas.
The point is - you should never trust any dealership to look out for your best interest. All of them are out to make money, which is fine.
Some just do it in a nicer way.
Each week, I'll keep you up-to-date on the latest car deals and news that might affect your purchase. This includes...
- Best Rebates, Incentives, and Lease Deals
- Latest Car Buying Scams and Tricks
- The Best & Worst Time to Buy a Car
- Which Cars You Should Avoid