Top ten lists are great!  They’re funny, entertaining, and take our minds off the daily humdrum.  Here’s an unusual top ten list because it will leave you feeling knowledgeable and empowered if you’re considering walking into a car dealer – the Top Ten Things a Dealer Absolutely Won’t Tell You.

1.       “I buy my inventory for a lot less than you think.”

• Haggling over price has always been difficult, but with the Internet, things have become a lot easier: Car buying sites like CarsDirect.com will tell you a car’s invoice; the web site Edmunds.com even lists the invoice price of options. At last, we can know what dealers really pay for vehicles. Or so we think.  In reality, a practice called “holdback” allows dealers to pay 1% to 3% below invoice for vehicles. Dealers buy cars at the invoice price and after the car is sold, the dealer gets a reimbursement for holding the car in inventory for 90 days. When a dealer sells the car faster than that, part of the holdback payment becomes pure profit, even if the car is sold at invoice price. “You’ll never get holdback money back from a dealer,” says Burke Leon, author of “The Insider’s Guide to Buying a New or Used Car,” but just knowing about it can help when a dealer whines about meeting your price.

2.       “Our lenders aren’t as tough as I make them seem.”

• Car dealers will sometimes do anything to pass the buck regarding pricing and sales. One common trick? Blame everything on the lender. For example, some dealers will say that the leasing company requires deals to be based on the sticker price, says Mark Eskeldson, a consumer advocate who runs the watchdog Web site CarInfo.com. This probably isn’t the case, since lenders can’t control a car’s price. Likewise, some dealers will claim the lender requires an extended warranty. Don’t be fooled, warns the Federal Trade Commission in its online FTC Facts for Consumers report on auto-service contracts, adding that you should contact the lender to check this out yourself.

3.       “State lawmakers are in my back pocket.”

• Since auto dealers deliver huge sums in sales taxes to state coffers, they have powerful local and state lobbies and have succeeded in pushing through a lot of legislation to protect their interests. One of their biggest targets is direct sales over the Internet. Most states’ franchise laws make it illegal to sell cars in a particular state without a bricks-and-mortar dealership there, and the dealer lobby has been particularly effective at suppressing auto makers’ attempts to sell over the Web. In 1998 Ford began a program in which car buyers could choose from used Fords online at no-haggle prices, then complete the purchase at a local dealership. A year later, Texas regulators filed a complaint against Ford for acting as a dealer without a franchisee’s license. Ford sued, claiming that Texas law favors local dealerships, discriminating against interstate commerce. A district judge ruled against it.

4.       “The bait-and-switch is alive and well.”

• You walk onto the car lot set on a certain model, but immediately the dealer starts ticking off all the reasons why that car simply isn’t good enough for you. Before you know it, you’ve signed on for a car that’s bigger, better, and more expensive. When you show up armed with all sorts of information you’ve gotten online, the dealer’s best defense is steering you into unfamiliar territory, says Phil Reed, a car-buying consultant at Edmunds.com. That’s exactly what happened to Christine Kemp, a junior high school teacher who got sucked into leasing a $40,690 Toyota 4Runner Limited, despite researching lower priced models for over a year. The salesperson focused on the better towing capabilities of the more expensive model. The dealer steered Kemp toward the Limited for a test-drive, and talked up its perks (to great effect) even though the four-cylinder base model was strong enough to tow Kemp’s jet skis.

5.        ”I’ll give you a great price – and then lowball your trade-in…”

• If you’re trading in an old car, explains Leon, the dealer’s greatest potential for profit is in giving you a low value on your trade-in. How come? Most people have no idea what their car is worth, and besides, you’re less likely to play hardball on this point when that new car is much more interesting. Leon recommends always settling on a trade-in price before even considering a new or used car. Last year, Reed went undercover as a salesman and then wrote about it for Edmunds.com. One day, he met a man that had gotten $5,000 for his used Chevy Cavalier, but a week later it was on the lot with an asking price of $12,000.

6.        ”…and you won’t know, since the Blue Book favors me.”

• To help prevent a trade-in disaster, some consumers try to learn their old car’s worth by looking at the Kelley Blue Book (KBB), long held as the gold standard for used-car prices. But both Leon and Spinella warn that those numbers aren’t gospel. Here’s why: KBB publishes two different guides, one for dealers, which prints wholesale prices, and one for consumers, which has retail prices (and is therefore of little help in determining what your car is worth to the dealer). Plus, at KBB’s Web site, you can look up trade-in figures that, even for a car in excellent shape, are below the dealer’s lowest figure (the wholesale price). So even if the dealer gives you the best KBB value for a trade-in, there’s a built-in profit if he turns around and sells the car for wholesale.

7.        ”The car you’re buying was totaled last month.”

• The advocacy group Consumers for Auto Reliability and Safety estimates that one in nine used cars sold has hidden damage, including more than a million cars each year that are totaled, rebuilt and often sold as if free of damage. How do some dealers get away with it? Titling laws vary enough from state to state that a totaled car can be “cleansed” of its salvage brand by being retitled in a new state. Such cars are often shuffled around the country through auctions, and while the final dealer may make a legal claim that he didn’t know about any damage, Brown says that it’s a case of see-no-evil. “Dealers know what they’re buying at these auctions,” he says. One common way to check if there has been any major damage to a car is get a car history report from a service like CARFAX or AutoCheck.

8.       “Your loan puts cash in my pocket.”

• Ever wonder why that dealer is so keen on finding you an auto loan, even when you offer cash? When dealers set up loans, they commonly take the rate offered by the lender, then tack up to two percentage points on top. All or part of that so-called dealer markup is given to the dealer. And dealers aren’t required by law to disclose the practice. The National Automobile Dealers Association (NADA), says that dealers are entitled to a markup for arranging financing. “Because dealers buy credit in bulk and provide the retail infrastructure for serving individual customers, they get lower rates than a consumer,” says a NADA spokesman in a written statement. The problem says attorney Aurora Dawn Harris is that they, “pretend that they’re providing you a free service. And sometimes they’re making most of their profit on it.”

9.       “Our ‘new and improved’ customer service is a farce.”

• After years of having the worst of all possible raps, car dealers now insist that they’ve cleaned up their act. In a speech last year, NADA Chairman Harold Wells proudly cited a 1998 Gallup poll showing that 76% of Americans who bought cars were satisfied with their experience. Too bad he left out the rest of the picture. For one, franchised auto dealers still top the Better Business Bureau’s list of businesses receiving the most complaints – by a long shot. In 1999 auto dealers were the source of 17,686 complaints compared with 9,538 complaints for the No. 2 business, computer dealers.

10.   “A lease is a great deal…for me.”

• You may have noticed that many dealers would rather you lease than buy. The reason is simple: Leases generally bring dealerships more profit than sales, even for the exact same car. Why? Well, consumers tend to know less about leasing than buying. So, while 80% of car buyers haggle over the car’s purchase price, only 10% of leasing customers do, according to Spinella. Plus, lease customers tend to choose more expensive cars. So be extra wary if your dealer does whatever possible to steer you into a lease. One common tactic, says Eskeldson, is to give customers an “apples-to-oranges” chart comparing payments on a lease vs. a loan – quoting a low interest rate on the lease and a high one on the sale. Says Eskeldson, “If the consumer doesn’t know how to calculate his own lease payment, he is ripe for a rip-off.”

This list is primarily from an original article written for SmartMoney.  Write a comment and share your own inside information about the things that dealers won’t tell you!