subject: Top 5 Car Dealer Scam Alerts [print this page] Top 5 Car Dealer scam alerts Top 5 Car Dealer scam alerts
This Top 5 list is about dishonest car dealers.
# Scam 1: The financing fell through scam
How the scam works: You buy a new car, the "LieNance" manager says you got a low APR, hands you the keys, and you drive home. Two weeks and 500 miles later, the dealer calls you saying "Sorry, you didn't qualify for that low interest". This is where "subject to financing" clauses on contracts bite you in the butt. They knew your credit score. If it's above 680, you'll get a low APR. If it's below 680, expect a higher APR. Your credit union will print your credit history and approve you in 10 minutes. They pull this scam on people with bad credit, because it's believable.
How to avoid the scam: DON'T FINANCE AT THE DEALER if you have bad credit. Line up your own financing and compare to dealer's financing. But if you do finance through a car dealer, leave a deposit on your credit card, and do not take delivery of the car until the loan has been approved in writing a few days later. Then you know the lender has approved your loan.
# Scam 2: Forget to pay off your trade in scam
How the scam works: You trade in your old car which you still owe money on, and the dealer is supposed to obtain a payoff figure and payoff the loan for you and add that payoff amount to your new car purchase. Two months later your are shocked to hear the new car dealer did not pay off your old car loan as promised. With this scam dealers effectively pay you less for your trade than they promised or steal it altogether. When the bank calls, YOU are responsible for the loan, not the dealer. The car loan is still in your name, until the dealer pays it off. As far as the bank is concerned, they have a loan with YOU, not a dealer and it's in your name until paid off. Now your credit gets dinged with late payment alerts from your bank. Sue the dealer, the judge will ask to see your contract with the dealer obligating them to pay off your old car loan. Of course there is none.
How to avoid the scam: I recommend against buying a new car when you still owe money on your current car. Pay it off yourself first then get your title from the bank, THEN trade it in or sell it privately, paying off your loan with sales proceeds.
# Scam 3: The Lie to the customer about their credit score Scam
How the scam works: Telling you it was really low, so you now have to pay a much higher car loan interest rate than you thought. This scam is pulled on people with good credit too, as it works well because most people do not know their own credit score.
How to avoid the scam: No salesperson should know more about your credit history than you. If they pull this scam, pull out your credit score and put a stop to it. This is why we stress that you should have your financing 100% lined up before you buy your new car. Give them a chance to beat your car loan quote.
# Scam 4: The Excessive Fee Scam
How the scam works: A better definition here is "Excessive Charge", since this is not really a fraud, nor is it illegal. Most dealers do adequately disclose this fee on their paperwork. Many dealers even admit that its a way for them to recover some of their "losses" when discounting the car off MSRP retail price.
How to avoid the scam: Often it's permanently printed on the buyer's order to make you think it's mandatory, but many people make the dealer remove it by adding a credit on the next line. So if you see a $600 dealer prep on the form, have them add a 400 credit. If they won't budge you need to decide how bad you want that car. I have no problem walking out of a dealer over a 400 fee. Go to the next dealer on your list, and tell them "Here's the deal. Drop the dealer prep, and the deal is yours". Remember, Dealer Prep is not illegal, but it gives you zero intrinsic value. Either you agree with the fee, or you don't
# Scam 5: Well pay off your loan or lease no matter how much you still owe
How the scam works: By breaking the contract, penalties are stiff, in the thousands. They do get you out of your current lease, but these payoff penalties must be paid to your leasing company to end the contract. The dealer is not doing any favours at all for you, they just want your trade in so they can give you far below market value for it, while selling you a new car at a high profit. Then they resell your trade in for a high price, while you are stuck paying off the debt load of 2 cars.
How to avoid the scam: If you are in a lease now, it's best to stay in it until the end. If you are upside down on a loan, now is not the time to trade in the car. You need to wait until the car is worth more than what you still owe on it. Try selling it privately. By mixing a trade-in with a new car purchase, you will lose the maximum amount of money possible. Don't ever think you walked away ahead on a trade in even if it was on new BMW z4 in Cardiff. No one ever has. No one ever will.
