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List of Dealer Tricks to watch
out for.
All of the tricks below have been
highlighted in different parts of Car Buying help
online. The list below is just a reminder of things
to watch for when buying a car.
The Subject
to Financing clause scam.
This is a very common tactic finance
salespeople use. If you see this on the contract
do not sign and above all, do not drive the car home.
What usually happens here is several days after
you drive home with your car, you receive a phone
call from the salesperson that your loan fell through
and you need to come back in and resign through
another lender for more money. They may say we have
great news, we got you a lower payment, and all
they have done is increased the length of your loan.
They do this more often with bad credit or sub prime
buyers who are usually more cooperative.
If they
don't have your loan approved, stand up and tell
him that you will come back and sign when you have
an approved loan with a payment book. Never sign
a contract without knowing your lender, interest
rate, length of loan and monthly payment. Once
you sign and drive home with your new car you are
at their mercy and you will end up paying more.
The You need a Co-signer scam.
This happens all the time. They
tell you your credit is bad or you do not have enough
credit to qualify on your own. They will ask you
to see if someone (usually a relative) with strong
credit would be willing to co-sign the loan to get
it done. This puts the liability on the Co-signer
in the event you do not make the payments. The scam
ocurrs when the co-signer signs separate papers
and finds out later the loan is entirely in their
name. Make sure you are both there to sign the paperwork
and it states on the contract that you are a co-signer.
Do not sign separate contracts.
The Interest rate Bump scam.
If you are not securing your own financing,
than you are relying on the Finance salesperson
to shop for the best rate for you. Unfortunately,
he is shopping for the most profitable loan for
the dealership. The most common trick is to get
you approved at the lowest rate and then bump a
couple extra points on it. They will get you 6%
and tell you the best rate they can find is 8%.
They pocket the profit.
You must know your credit
score and the current interest rates or you will never
know what interest rate is right for you. If he
is too high tell him he needs to do better. If he
tells you he can't, tell him you will come back
tomorrow with your own financing. He will quickly
rerun the numbers and you will win. Be careful that
he does not increase the length of the loan to keep
your payment lower.
You Credit Score is low scam.
If you do not have your recent credit
report in your hand the dealer can run your credit
and tell you it is lower than it really is. This
will greatly affect your interest rate and loan
terms. This happens all the time.
Trade In Scams.
There are several ways they get
you here. The first is to tell you they are giving
you a great price on your trade in and then on the
contract it is much lower. This happens a lot when
you owe money on you trade in and have equity in
it. They will put in the contract the pay off which
is added to your loan amount but somehow forget
to credit you with the additional equity you are
using for a down payment. Check your contract carefully
and make sure they give you the equity you were
promised.
Another common scam is to not pay off
your trade in right away. You are still responsible
for the payments until the car is paid off. If the
dealer takes months to pay it off, the lender will
come after you for the back payments. This could
hurt your credit. Make sure you have it in writing
that they will pay off your trade in no more then
10 days. Call your lender the following week to
verify it was paid.
The Add On Requirement scam.
Most common here is you must buy
an Extended Warranty or the lender will not approve
the loan. If a dealer tells you that you must have
something to get the loan approved don't sign. It
is a lie and they will profit from it. Another add
on to watch out for is the so called Dealer Prep
fee. The Dealer does have a few hours work getting
the car unwrapped and ready for sale, but for $300-600.
Many dealers will not budge from this charge so
you have to really push the issue. You can have
it removed but you will have to threaten to unwind
the deal to get them to credit you.
Advertise that they will pay off your current car loan no matter what you owe.
You hear the ads all the time. Your first impression is that you will buy a car from them and your old loan will be paid off. They will pay off your old loan but then the balance will be rolled into your new loan. First of all they will low ball your trade and resell your old car at a fat profit. Then they will take the balance you owe, add it to your new car loan and in the end you will be financing 2 cars on one big loan. If you owe more on your current car then it
is worth you should consider hanging on to it until you have equity. If you have equity in your old car make sure it is included in the contract as your down payment and subtracted from the selling price before you sign.
Bad Deal. You owe 10,000 on your old car and the dealer gives you $5,000 for your trade. If you buy the new car for $15,000, your new loan will be for $20,000 because they will simply add the additional $5,000 to your new loan. Now you are seriously upside down in your new car.
Good Deal. You owe $5,000 on your old car and the dealer gives you $7,000 for your trade in. If you buy the new car for $15,000 your new loan should be $13,000. They should pay off your old loan for $5,000 and credit an additional $2,000 for your down payment. Make sure they include the $2,000 equity in your contract. Many Dealers will conveniently forget to include this and you will end up financing $15,000 giving the dealer an extra $2,000 in the deal.
Do not think that any car dealer is doing you a favor by offering to pay off your old loan no matter what you owe. They will simply roll the loan balance into your new loan and stretch the monthly payment out to give you a low monthly payment.
Will not accept your online lender financing.
Dealers want to get you financed in-house because they stand to make a good profit from your loan. Some Finance salespeople will lie to you and say that they do not accept checks from that lender. They may tell you that their checks bounce all the time or that they simply do not accept financing from that lender. Do not fall for it! The only time you should forgo your online lender approval is if the Dealer can legitimately beat your rate and loan term. If a
finance salesperson tells you he won't accept your online loan, get up and leave.
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