Avoiding Common Auto Dealer Scams
Although most auto dealers aren’t out to rip you off, they are known for their aggressive and sometimes less than honest sales tactics. If you plan on purchasing a vehicle or getting an auto loan any time soon, you need to be aware of these 5 auto dealer scams:
- Recently, we’ve heard a lot about a devious scam that several major dealerships have been pulling. You find the car you want, fill out a loan application, and the dealer processes all of the paperwork. They tell you that you aren’t officially approved yet, but you can take your car home today while it gets sorted out. The next day you get a call from the dealership explaining that you’ve been approved, but at a higher interest rate. Since you’ve already signed your name on the papers, getting out of the loan can be tricky, if not impossible. One of the easiest ways to avoid this scam is to simply not use a dealership for financing. There are dozens of different lenders out there that can help you, such as a credit union or online provider.
- When you apply for an auto loan through a dealership, you’re basically at their mercy. Some dealers have been known to run a consumer’s credit score, and then lie about the results. They explain that your credit score is lower than you expected and that you only qualify for a less than desirable interest rate. Do yourself a favor and bring a copy of your credit report with you if you plan on getting an auto loan from a dealership.
- With so many people struggling with credit and many lenders tightening their policies, there’s been a resurgence in the so-called “straw purchase” scam. In this scenario, the auto dealer knows you don’t have the credit to qualify for a financing, so they tell you to come back with a co-signer. Your co-signer comes in to sign the papers, but the dealer pulls the old switcheroo and tricks them into being the primary name on the loan. You can avoid this by making sure you’re there with your co-signer to sign paperwork.
- One of the most common tricks that dealers like to pull on new car buyers involves them promising that you can purchase a new vehicle with surprisingly low monthly payments. For instance, they’ll claim that you can get the car you really want at just $350 a month. While they may be telling the truth, getting those low payments probably means stretching the life of your loan out past 60 months. With auto loans longer than 60 months, you really put yourself at risk for going upside down.
- If you’ve ever heard a dealership advertisement on the radio or television, you’re probably already familiar with their claims that they can help you get out of your current loan or lease. They make it sound as if you can just trade in your vehicle and then purchase a new one, magically erasing your current loan. In reality, you still end up paying the difference between the value of your trade-in and the remaining balance of your current loan. The dealer just tacks it on to your new financing loan, which may or may not be at a lower interest rate.