Top 5 New Car Buying Scams
Not all car dealers try to scam people. But most of them are experienced and aggressive salespeople. So if you're planning to buy a new car, you'll want to make sure that you're an informed consumer. We have put together some new car buying advice on how to avoid 5 of the most common dealer scams:
1. Your Financing Fell Through
With this scam, the dealer calls the customer days or weeks after they signed a purchase agreement to tell them that the financing fell through. This can't really happen. The dealer can check your financing in 15 minutes, they knew exactly what you qualified for when you signed. Their goal is to try to put you into a more expensive car or to increase your payments. They pull this scam more on people with bad credit, because it's more believable. To avoid this scam, you should have financing in hand before going to the dealership, especially if you have bad credit. By using your own financing, you won't be at risk for payment scams and the deal will be based on the selling price of the car.
2. Your Credit Score is Bad
Some dealers will lie about your credit score, telling you it is worse than it is so that you think you'll have to pay a higher interest rate, down payment, etc. This scam is pulled on people with good credit too, because most people do not know their own credit score. To avoid being misled, know your credit score before you start shopping for a car. A salesperson shouldn't know more about your credit history than you do. This is another reason that you should have your financing lined up before you buy your new car.
3. They Forgot to Pay Off Your Trade In
The dealer agreed to accept your trade in and pay off the remainder of the loan for you and add that payoff amount to your new car purchase. Months later you're shocked to hear the new car dealer did not pay off your old car as promised. With this scam dealers effectively pay you less for your trade than they promised or nothing at all. 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. Now your credit can get dinged with late payment alerts from your bank. Avoid this scam by paying off your old car yourself first, then trade it in or sell it privately. If you do want to trade in a used car which you still owe money on, make the dealer put in writing that he will pay off your car loan in 10 days or no deal.
4. We'll Pay Off Your Old Lease
You can't just dump a lease early, it's a contract. By breaking the contract, you will be charged penalties. Although they do get you out of your current lease, these penalties must be paid to your leasing company to end the contract. The dealer just wants your trade in so they can give you far below market value for it, while selling you a new car at a profit. Then you are stuck paying off the debt load of 2 cars. Your payments are spread out over a long period so you don't notice what just happened. The more months they add to the loan, the lower the payments so you don't notice. This gets many people deeper into financial trouble. If you are in a lease now, it's best to stay in it until the end. If you really need to get out of your lease, transfer your lease to someone else through a lease takeover service, instead of terminating the lease early through a dealer.
5. The Required Warranty
You're ready to sign the papers when the manager says you must buy an extended warranty because the bank requires it, or you won't get the loan. This is not true. Banks never require extended warranties for loans. Some dealers who quote monthly payments don't even tell you that you're buying a warranty. They may tell you that "it's included" to make it sound like it's free. The warranty is included, but you're paying for it. They lie to you about this because they assume that you don't know any better.
Published on Thursday, December 18, 2008 - Email to a friend
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