| Look out for Car Scams |
With all aspects of buying and selling a vehicle there are all kinds of scams people will try to pull, the best thing to do is have a quick read through our list of things to watch out for so that you are prepared. A quick five minute read could save you hours of your time and a lot of money.
Below are some car dealer scams you should look out for, most car dealers are genuine and you will be very happy with the service they provide, however there are without a doubt many less than trustworthy businesses looking for their next victim.
Remember if it sounds to good to be true it probably is so you should read through the car scams to avoid being a victim of auto fraud.
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Avoid being scammed by checking these important points.
- Always get a mechanic to look at the used car, have them put it on a lift and check for previous accidents.
- Get a vehicle history report to check all details of its past.
- Get a warranty on a used car from dealers if your going to sign an "as is".
- Know your credit rating if you are going to get a loan from dealer and have your own financing quotes done before you go to look at cars.
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Common car sales scams
The fake dealer scam : A scam artist poses as a dealer on a classified used cars website and has cars for sale at a cheap price as bait to hook you in, you send money via their preferred method and lose your money. More...
Let us payoff your loan scam : This scam is most commonly seen or heard in ads on radio and newspapers with a promise to payoff your loan regardless of the amount still owed. More...
Co-signer purchase Scam : You have bad credit and need a co-signer. This scam tends to appear when interest rates are up. More...
The Credit Score Lie : This scam happens when the finance department tell you that you have a bad credit score and as a result give you a high interest rate on your car loan. More...
Loan approval scam : After the car purchase you are told the low APR loan was declined. This scam has been around for a long time and appears only to be on the increase. More...
Remaining loan Scam : This scam takes place when you still owe money on your vehicle and want to trade it in and buy another. More...
The sold AS IS wreck scam : The car has sustained serious damage and is sold "as is" but the dealer tells you it has never had a bad accident. More...
Lower payments scam : You got a new car and get offered a better monthly repayment price by the dealership. More...
Extended warranty scam : Finance people say that you must take out an extended warranty or you won't get the loan. More...
Bad bankers draft / check : Your dealer refuses to take your bankers draft and offers you their own financing at a higher interest rate. More...
Excess charges applied scam : The dealer charges you large fees to prepare your new car for you. More...
Gap insurance scam : The car dealer charges you double the price for gap insurance More...
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The fake dealer scam
Scenario: You're searching online for a used car and come across a car for sale that is a very good price, you contact the seller and they tell you the car is a fair distance away but they will pay for the cost to ship it to you, they ask you to pay via a wire service they use many times and you never see the money dealer or the cars for sale again.
The scam is clever here because the money wire website they have you use looks just like one you would expect to see, sometimes they look better than the real money wire websites they use the popular brand names on their site to make it look official and make a minor change to the web address which normally goes unnoticed. The money is wired and picked up in minutes never to be seen again. The car pictures and details are normally copied from local dealers websites and the scam artist poses as one of the dealers.
Avoid this scam: The first warning signal is them offering to ship the car for free, not only I the car cheaper than normal but they are willing to foot the bill for shipping which is normally many hundreds for long distances. Never use someone else's recommendation and never use a money wire service for online payments as they are just not secure enough.
Let us payoff your loan scam
Scenario: A radio advert comes and on and states the fact that they will payoff your loan no matter how much money you still have outstanding, this sounds great as you already owe a substantial figure on your vehicle currently. You go down to the dealer and they offer you a new car and the payments are less than what you are paying for your current car. What a bargain! But Wait! What is really happening here? The dealer is actually combining your current loan and the new loan together and spreading the payments over a longer period of time making it seem like you are paying less but really you have increased your loan quite substantially.
There are fees normally applied to terminating a loan agreement as well and the chances are those have also been added to your new loan.
Old loan + Cancellation fee + New loan divided by many more months than previous loan repayment time gives the impression of a smaller loan.
Avoid this scam: The best thing to do in this situation is not buy another car! You already owe lots of money don't get yourself into more debt. If you want to get your car sod and alleviate yourself from the loan then try to transfer your lease to another buyer who will purchase the car with its existing payments to be paid.
The buyer needs a co-signer Scam
Scenario: You go to purchase a car and the dealership tells you that you are unable to get finance because you have bad credit but if you can get a co-signer with good credit you can proceed with the deal. You may also be told this will help build your own credit.
The Scam: The co-signer signs a separate piece of paperwork and the loan goes completely in their name, all you end up doing is paying the co-signer back the money on whatever basis you decide with them and you receive no credit benefit whatsoever.
Avoid this scam: Make sure that both signatures of the co-signer and yourself are on the same contract, there should be a separate line for the co-signer.
The Credit Score Lie
Scenario: Your ready to make a car purchase and sit down for the all important credit check with the finance department. They spend a few minutes looking things up on their computer, make a few calls and maybe go in and out of the room to speak to people. When they are done they tell you there is no problem with doing a deal, but your credit score doesn't look good. As a result of bad credit the interest rate on your loan is hiked up to a large percentage. As most of us have no idea about our credit scores we accept what people say so the scam works perfectly. Don't be fooled by them suggesting the get a more accurate credit rating, that is also a lie.
Avoid this scam: The best thing to do here is get a loan agreement from a bank or other finance company, keep this with you just in case you find a car you like and ask the finance department at the dealership to beat your current offer. Another good thing to do is go to Equifax or Experian and get your credit score and have this with you. If they lie to you, then you have the proof right away to show to them.
Subject to finance or loan approval scam
Scenario: You purchase a new vehicle from the dealer of your choice and arrange a finance package with a low APR. All seems well and you drive away with your vehicle, a few weeks later you receive a call from the dealership explaining that they have received word from the finance company and they have declined the low APR you requested which was subject to finance or loan approval in your contract. The most misunderstood aspect of this whole ordeal is that people believe when they sign the financial contract that the APR arranged is a done deal. The only done deal here is the scam, when you supplied your financial information to the dealer they are able to determine exactly what APR you are eligible for depending on your income, so if you don't misrepresent your income they should know immediately what your credit score is and what you are able to receive.
Most people that get fooled by this scam are people with bad credit and they think they have nowhere else to go.
In fact you can go online and get approved instantly with many finance companies.
Avoid this scam: So if you are going to get finance through a dealership you should find out what your credit score is and what APR you are eligible for then you will know if you are being told the truth from the start. Leave a deposit with the dealership on your credit card and don't accept delivery of the car until the loan has been approved in writing, this should only take a few days. Don't take the car that day even if they say it's ok.
The other option is much safer and that is, don't finance your car at a dealership especially if you have bad credit. With a well know financial company you will be able to avoid and payment scams
Already been scammed: If you are unfortunate enough to have already been scammed, don't worry there are a few things that you can do. First of all see if you can get finance from an alternate source, such as an online finance company. You may also try to talk to the dealer and get out of the deal. If all else fails try filling complaints on major websites and see if you can stir up some controversy, the bad press will not be worth the dealerships time and also try to contact any governing bodies such as an ombudsman or attorney general.
Remaining Loan Scam
Scenario: You go to a dealership and find the perfect new car but the problem is you are still paying off for the vehicle you already have, the dealer says no problem we will just work out how much money you still have outstanding on your current loan and add that amount to the new car purchase. At this point the dealer is supposed to payoff your current loan for you, the car scam is when you find out the dealer didn't pay the loan off at all and you still owe the finance on the previous vehicle and now owe more than you were willing to pay for the new vehicle. You have no contract and no proof this was what was agreed with the dealer if you need to take them to court and are left with two car loans which will probably affect your credit especially if you now miss payments.
Avoid this scam: The best way to avoid this car scam is to pay the current loan off yourself. If this is not possible then you must get a contract signed by the dealer stating the fact that the dealer will pay the outstanding loan off within 10 days, this way if you do need to go to court you will have proof of the dealers intentions. If the dealer is unwilling to make a contract then they are likely to be pulling this scam.
The sold AS IS wreck scam
Scenario: You find the car you like and enquire about its history, the car dealer tells you that its never been in any accidents, you buy the car and a few weeks later you get it checked only to find out that its been in serious accident and was previously a wreck. You go back to the dealer to complain and they explain to you that the car was sold "as is" and there is nothing they can do for you.
Avoid this scam: To avoid getting burnt in this situation, you should always have the vehicle checked out before you buy it, especially if it's an "as is" purchase. This can be done with a simple Autocheck for a small fee. Always ask for a few months warranty from a dealer as this will secure you if anything goes wrong, there should be no reason why the dealer would say no to this unless they know it's a bad purchase. If you are buying from a private seller then you have no warranty option from them so always get the car checked by a mechanic first.
Lower payments scam
Scenario: You just bought a new car and have had it a week, you get a courtesy call from the dealer and they mention that they have just got a better deal for you on your finance loan that you took out. You go back to the dealer sign some new paperwork showing lower monthly payments and later on you notice that the payments have been extended by a long period of time.
What has happened here is the dealer has extended the monthly payments by many more months making it look like the repayments have dropped and by increasing the months it increases the APR interest rates.
Avoid this scam: If you get a call like this just simply tell them you are happy with you current loan and don't wish to change.
You must take an extended warranty scam
Scenario: Your about to sign the paper work and the finance people tell you that your loan wont go through or your Interest rate will go up unless you take out an extended warranty. The crazy thing about this is your loan is determined on your credit score and has nothing to do with the car. If you add an extended warranty its likely to add thousands to the loan making the request more difficult, not more successful.
Many of the finance people also pull a scam where they tell you the warranty is included in the price making it free, but what they really mean is that they have simply added it to your final price.
Avoid this scam: Simply ask the dealer to put it in writing for you that the warranty is required to get approval on the loan and they will run a mile! You are never required to purchase anything in order to get approved for a loan. If you go elsewhere for a loan you will not be required to purchase extra items.
Dealer won't accept your bankers draft / check
Scenario: You find the car you are interested in buying and have pre-arranged a banker's check with a reputable online lender or credit union. When you go to pay the dealer explains that they cannot accept the bankers check as they have had trouble with them cancelling the checks in the past or they always seem to bounce. The dealer then offers you a loan to sort this problem out as you are eager to buy your new car but the interest rate on the finance is higher than what you had previously arranged.
If your bankers check was with a well known company then there should never be such issues as the car dealer is explaining as if would be well known news.
If the dealer offers you a better rate of interest then there is nothing wrong here.
Avoid this scam: The bets thing to do here is wok out if the loan has a higher interest rate than you are currently paying and if not then tell them you are on to their scam and walk out the door.
Excess charges applied to the price scam
Scenario: The dealer convinces you that lots of work must go into checking the new car you are purchasing. A fee is applied to your total price in the high hundreds for a simple few hours of work to prepare your car for sale. The work carried out usually includes a valet service inside and out, removing all plastic covering from the manufacturer, fluid is added for oil, water etc.. Fuses are installed and checked and a quick test drive to make sure everything is running well. This should no cost anything as it is already paid for by the manufacturer to the dealer but there is no law saying the dealer cant charge you such a fee.
Avoid this scam: Simply tell the dealer to drop the fee or you will go to the next dealer closet to you and ask for the same deal without this fee.
Gap Insurance Scam
Scenario: You go to trade in your car and find out its worth less than the money you have outstanding in payment and the car dealer sells you gap insurance at double the price it should cost.
Avoid this scam: If your car is worth less than the money you currently owe on a loan then you should purchase Gap Coverage, if your car gets wrecked or stolen you will only get the money its worth not the money you owe and this could end up with you having no car and a large loan still to pay not to mention any excess fees that may also apply. Gap Coverage will protect you in this instance, which can be purchased from many online sources.
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