How to Avoid Car Dealer Scams
Car buyers are always concerned about being caught in a car buying scam. In fact, car scams used by dishonest car dealers are typical and easy to identify. If you obtain knowledge of the types of scams, you can avoid them with ease. This article contains description of 6 types of typical car scams and ways to deal with them.
Scam No.1: The straw purchase scam.
A straw purchase here means someone purchases an automobile for other people who, due to poor credit, cannot purchase it themselves.
In order to trick you into buying the car without any hesitation, the car dealer will tell you that you can get a car loan even when your credit record is not very good. In addition, they will tell you that by using this car loan you can build your credit. The way to do this is to find a co-signer for your contract. But they are actually lying to you. The truth is that they will make you sign the contract separately. And later on you will find out that the co-signer is not the primary borrower of this loan but the only borrower-your name is not even on the contract. The fact that you have been paying for the monthly payments on time has nothing to do with your credit building.
Even though this straw purchase scam is hard to detect, you can avoid it in advance. When signing the contract, make sure that you can the co-signer both sign your names on the same contract. Remember, never sign contracts separately. This would give the car dealers chance to perform the straw purchase scam on you.
Scam No.2: The check bounce scam.
This scam happens when you are using a credit union or an online car finance site. In order to get the commission of selling you the car dealer’s financing, the car dealer will refuse your bank draft first and then lie to you using the reason that the online lender always bounces check. So you have to accept their offer of financing your car purchase even though that car dealer financing comes with a higher ARP.
After identifying this scam, simply talk to the car dealer and tell them that you are sure that the online lender does not bounce back checks. If they insist on not accepting your check, let them know that you are aware of this typical scam and you are sure about the online lender. This way you will get the online financing you originally intend to use.
Scam No.3: The spot delivery scam.
A few weeks after your car purchase, the car dealer calls you, saying that your credit score is too low to have the low ARP you signed on the contract. But the fact is that there is absolutely no problem with your credit score for the low interest as long as your score is above 680. This is just a spot delivery scam. For people with not so perfect credit record, this is extremely believable and they end up paying more to the dealer.
The best way to avoid this kind of scam is to use your own financing instead of using the financing that the car dealer offers you. Don’t give the car dealer any chance to trick you. If you insist on using car dealer financing, wait for a few weeks until the loan is approved and then take the car.
Scam No.4: The pay off loan or lease scam.
The car dealer’s advertisement on newspaper is always saying that they will pay off your entire remaining loan or lease. This is true literally, but the ad is not telling you the consequences of breaking the loan or lease contract. In fact, the penalty for breaking the contract for your current car is usually thousands of dollars. Yes, the car dealer pays you off the remaining loan or lease, but the penalty of thousands of dollars is subject to you. The ads are just trying to mislead you into buying their car so that they can profit more.
The way to avoid this pay off loan or lease scam is easy: just don’t believe in these misleading ads. Stay in your current loan contract and do not even think about breaking the contract because if you do, it will cost you thousands of dollars.
Scam No. 5: The forced warranty scam.
This scam is easy to detect. Just after you have made an agreement with the car dealer and right before you sign the contract, the sales manager will tell you that you cannot get the loan unless you buy the “required” warranty. They would say that the warranty is a necessity for the loan because the bank won’t allow it if you don’t have it. Why on earth are banks interested in warranty? Under no circumstance do warranties have anything to do with interest rates.
Again, the easiest way to avoid this forced warranty scam is not to finance your car from car dealers. If you really are interested in car dealer financing, ask them to write what they just said, such as warranty is prerequisite for loan and tell them that you are showing this document to your attorney. Then will immediately tell you that they have made a mistake and a warranty is not required anymore.
Scam No.6: The forget trade in scam.
This is always found after several months of car purchase. The car dealer tells you that they would pay off your remaining loan for your old car that has been traded in, but they never do. The dealer is not responsible for your loan responsibility but you are. The bank does not know the agreement between you and the dealer and they hold you responsible for the late payments.
The best way to avoid this scam is to pay off your current liabilities on your old car before you go on and buy a new car. This way you can get the title from the bank after you eliminate the debt, sell your old car and then buy a new car without falling for the scam.
In fact, if you know these various types of car scams well, it is not difficult to avoid them. Just remember the solutions to these car dealer scams and you can relax and enjoy your new car.
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