Car Buying Scams
What is the "financing fell through" scam?
The 'financing fell through' scam is when the dealer calls you up after you've taken delivery of the vehicle and tells you that the credit company has gotten back to the dealer, and that you actually didn't qualify for the rate that you originally assumed. They will tell you that you need to come back into the dealership and rewrite the contract. That will be only to their advantage, not yours. Never, ever be drawn into the 'financing fell through' scam. Tell the car dealership that you're happy with the deal that you got.
What is the "forgot to pay off your trade-in" scam?
At times you'll bring in a trade-in that maybe you still owe money on. The dealer will very graciously say, "Oh, I'll pay that off for you, and here's your trade-in value, and we can use it towards a down payment on a new car." You think, "Wow! That's nice and clean, very easy for me."But the problem comes is if the dealer doesn't actually pay that off for you-- you're still responsible for that. So, two months later, the company that you financed the first car with is comes knocking, looking for money. Your credit score is being damaged, and it turns out that you still owe money on the first car. Now, if the dealer does go ahead and pay off the first car, know that there is no free lunch; that money that was owed is now being put into your new car financing. So it's better to have the car completely paid off, free and clear before you ever go into the dealership.
What is the "lie to the customer about their credit score" scam?
This scam is very common when people don't know what their credit score is and then do not know what sort of interest rate they can get for that particular score. Depending on the state, there is a certain percentage that a dealer is allowed to charge over the customer's approved rate. As an example, if you receive a 7.9% financing the dealer is allowed to maybe charge 8.9% or 9.9% because that's profit margin, if you will, for their time and effort to do the financing paperwork for you. To a degree, state by state, that's allowed. When it becomes over the top, if you're approved for 8.9% and they come back at 18.9% then something's wrong.
What is the "your online lender bounces checks" scam?
The 'your online lender bounces checks' scam is absolutely pointless. It really highlights the fact that car dealers want you to do your financing with them at their location, because that is a big profit center for them. They'll come up with any reason or excuse as to why you should finance with them as opposed to another bank. Ignore it, pick up your things and go find a more reputable car dealer.
What is the "forced warranty" scam and how do I avoid it?
The forced warranty scam is very common. This scam involves the dealer insisting that you buy an extended warranty in order to be approved for the financing. These are two absolutely independent functions, and the extended warranty programs are big profit centers for the dealer. He's just trying to add profit to profit using a forced warranty scam. Do not accept it.
What is the "dealer prep" scam and how do I avoid it?
When you're getting ready to sign your documentation, look at the dealer prep line. The dealer prep line is an easy place for a dealer to slide in a couple extra digits and get you to pay an excessive charge for washing the vehicle, preparing it for sale and putting a tank of gas in it. There is a fair amount the dealer can pass through, but if it seems excessive it probably is. Ask for it to be deleted.
What is the "we'll pay off your loan or lease" scam?
The 'We'll pay off your loan or lease' scam is very common, because a lot of people have put themselves in long-term leases, or long-term sales contracts, and realized two or three years in that the vehicle doesn't meet their needs any longer, so they'd like to get out of the deal. A dealer would offer to help you pay for that. A dealer's only going to help themselves, they're going to take the vehicle and, in paying off that lease or that financing, you're going to incur extra charges. That balance is going to get shifted into your new financing anyway. It's always better to handle those two transactions, those two vehicles independently. Don't bring the new dealer into your old dealer process.
What is the "wrecked used car as is" scam?
Another scam is to sell a vehicle that's previously been in a wreck, brought back up to spec and then sold 'as is'. It may look good on the outside, but none of us are mechanics, none of us know if it's really been put together right. If you're buying a wrecked used car as is, it's just ripe for problems going forward.
What is the "fake vehicle escrow service" scam?
The 'fake vehicle escrow service' is a scam where people will take images from a used-car site, represent that they have those vehicles for sale themselves and then sell a car to you sight unseen. You send off a check as a deposit or payment on the vehicle, expecting them to ship it to you but - oh my goodness! - the vehicle doesn't even exist. This is a terrible car scam, and avoid it at all costs.
What is the "we lowered your payments" scam?
The 'we lowered you payments' scam is very simple. Never go back into the car dealer to rewrite a contract that you've already done, unless you're not happy with it - and then take it in on your own accord. If the car dealer calls you up and asks you to redocument and put together a new contract, the only answer is it's going to help him and not you. Don't do it.
What is the "bait and switch" scam?
The bait and switch scam is something that's been used in just about every industry. This scam involves providing a vehicle for advertisement or promotion which is probably a very base model, not very desirable for some reason, but attaching it to a very low price to get you in the door. Once you are in the car dealership, the salesman will point out the frailties or the letdown of that vehicle while shifting to another vehicle that has a higher profit margin and is probably more desirable. The bait and switch scam is one of the oldest games in the book. It could be okay if you find out that the vehicle's not going to meet your needs, but don't go in expecting that every vehicle's going to be priced as aggressively.
What is the "deposit scam" and how do I avoid it?
The deposit scam is often used when vehicles are in really high demand or have a very low inventory situation. If you need to hold a vehicle, make sure that the deposit is refundable. Be very clear about that when you do the contract. Otherwise, do not do it; it's just a way of having that deposit money eventually stolen when they don't deliver that vehicle to you.
What is the "we can't find your keys" scam?
When you go into a car dealership to start the negotiations, you're going have to give them your car keys. This is so the dealer can drive your trade-in vehicle and analyze it for what it might be worth, to give you that money for your down payment. An old scam is to tell you, after you decided that the negotiations aren't panning out and you've decided against the vehicle for whatever reason, that they can't find your car keys when you ask for them back. We've heard of stories of car dealers actually throwing keys onto roof of the dealership to make sure you never find them until you sign on the dotted line for your new vehicle. The point is you do have to give your keys, they do need to spend some time with the vehicle to test it and identify the resale value, but ask for the car keys as soon as they're done with that process so you can't be caught up in that hours later. The worst case scenario is that you'll end up buying a vehicle which doesn't meet your needs, is too expensive and you don't want in the first place, from people that are very unscrupulous to begin with.
What is the "bump" scam and how do I avoid it?
The 'bump' scam is allowed to a certain degree. What I mean by that is when you are approved for a certain percentage of interest on your loan, the dealer is allowed, state by state, to add a few percentage points to cover their costs for doing all the financing for you. Where this can get ugly is if they're bumping that percentage five, six, seven, eight or more points over the term of a loan, that can mean thousands of dollars out of your pocket and into the car dealer's hands.
What is the "lowballing" scam?
The lowballing scam is typical in many different industries but very prevalent in the car business. This scam is where you agree a price with the salesperson, only for them to come back to you after you've started the negotiation process to say that it hasn't been approved and we have to re-write everything. That's not correct at all and the only reason they get away with this lowballing scam more often than not is because you've already made that emotional investment to the vehicle, you've already pictured yourself driving away with it that day. Stand up, collect your things and go to find the same vehicle from a more reputable dealer nearby.
What is the "turnover and the closer" scam?
The "turnover and the closer" scam is just another way to really wear the person down. This scam involves continuing to ask the customer to invest time and develop a new relationship with one salesperson to the next, eventually leading up to the "sales manager". This is just an old tactic allowing a person to be exposed to more people who all have different styles and ways of holding up a higher price on the vehicle. One or two people is acceptable, but if you feel like this car dealership is wasting your time, and that every person you speak to has less responsibility than the person just prior, something's up. Pack up your things and leave the dealership.
What is the "four square" scam and how do I avoid it?
The four square scam is very common, very prevalent in today's marketplace. The four square scam is simply drawing four squares on a piece of paper, and in those squares putting all the factors of the car purchase. Your trade-in price, your refinancing rate, your monthly payment that you're comfortable with (and that's something you never want to share) and what the final transaction price is for the vehicle. What it does is allow you to keep focused on one of those factors while the car salesmen fiddle and play with the other factors, while you're not paying attention. It's almost like a magician's sleight-of-hand. The point of the game is don't get caught up in a four square scam, because they're just going to be showing you one number you like while adjusting other numbers that you won't like. Always negotiate to the transaction price the vehicle. Don't get caught up in giving additional $5 for your trade-in or getting a $5 less per month. That's not the game. The game is what the final price of the car is out the door.
