Dealer Fraud

It would be a good idea if you decide to never finance a vehicle through the dealership because when you meet the finance manager whatever payments, interest rate, etc. you had may get tossed out. This is when the dealer fraud may begin. For example the dealership may try to “stuff” your contract with extras like unnecessary warranties, costly etching, glazing, environmental packages, etc., and the dealer may try adding it to your contract. These extras are where the dealership makes most of their profit.

Moreover, finance managers may ask you or even ask you to ask your employer to lie about your income. If you agree you could possibly end up getting charged with a felony, not the dealer, for knowingly defrauding the lender. New car dealerships have even been accused by former employees of forging car buyers’ signatures to lenders.

There are car dealers who are ready to do anything to get your monthly payments as high as possible and make more profit. It is common for car dealers to misquote and inflate monthly payments. For example, they may say a $400 a month car payment for 5 years is a 9% interest rate. In fact, it is not and probably is higher than 9%! It would be a good idea not to trust the car dealers finance manager to calculate the interest rate and monthly payments for you. Also make sure you see everything in writing, including the down payment, the correct amount of money you are borrowing and so forth. On the other hand, it is still safer to get an independent third party, like your bank, to correctly calculate your car dealer’s proposal before you sign on the dotted line.

Moremore, beware of overpriced, costly options. They may significantly inflate your monthly car payments. If a salesperson says a particular option if free, odds are you cannot believe it.

Large volume car dealers claim they save you more money compared to other dealers because they sell more cars than their competitors. They supposedly get cars at a lower cost then pass the savings on to you, the customer. However, the so-called large volume dealers may have larger overhead expenses including higher rent and marketing expenses, higher phone bills, a larger payroll for more employees and so on compared to their smaller volume competitors.

Consequently, the so-called large volume dealer may not be able to sell you a car at a lower cost afterall. Moreover, if a lower cost car is sold to you by a dealer that promotes itself as a large volume dealer you may end up getting charged more once you see the dealer’s finance manager. It is this manager whose job is to get every time they can out of you after you agree on a car’s price and agree to buy a car today!

Off the record, many car dealers admit their advertisements may be essentially nothing more than “come-ons” just to try and get you on the car lot. Your knowledge of how car deals are done and your negotiating skills can make or break any deal no matter where you shop for a new or used car.

The finance manager will come across as the friendliest guy or gal on the car lot but watch out. Some have been accused of double-charging you for things you have already paid for like insurance coverage and other extras. Remember, it is their job to get your monthly payment as high as your credit limit can possibly handle then the finance manager will ask you to sign on the dotted line. Once you sign it is too late to do much about it either even in a court of law! Always be suspicious if you agree on a monthly payment plan then return later to sign-off on the deal and find out your monthly payment cost has significantly increased due to some real or imagined problem with your credit! Always be willing to walk away from a deal.

There are car dealers who may promise that they will allow you to drive away in a new car with very few dollars even if you have bad credit or no credit. However, when you enter the dealership and “take the bait” the dealer may inform you it will cost $1000 to drive away in a new car.

The “churn” begins when the dealer tells you that you don’t qualify for a loan amount on the car you want and may suggest that you double the amount of income you say you earn when filling out the loan application. This is illegal if you sign off on it but if you do sign the deal it is not the car dealer that may end up getting in trouble with the law, it is you!

Remember, that if the cars get re-possessed for non-payment you will be the one that gets hit with all kinds of “repo-fees” at up to 40% interest. So a $500 car can actually end up costing you thousands. Most car dealers are able to re-sell and repossess the same car numerous times, thus making tens of thousands of dollars of profits.

How to avoid this scam: Never buy a car that will cost you more than 20% of your total income. Car dealers have been accused of suggesting that you can spend up to 40% to 60% of your total income on a car. In fact they don’t care if you can’t afford the car.

Another thing to do to avoid this scam is consider getting gap liability insurance especially if you lease a vehicle even though it may cost you an extra $100 to $200 a year for the coverage because if the vehicle gets stolen or totaled in an accident, you still have to pay-off what you owe on the car loan plus whatever the vehicle would have been worth at the end of the lease before it was stolen or totaled.

Beware of those car dealers who tell you that you have to sign an arbitration clause. This actually means that in case you have any future problem you must agree to arbitrate with the dealer that warrants legal action. Sometimes the dealer would not even discuss it with you. This clause may be hidden in fine print on the back of the contract you are asked to sign.

First of all the arbitrator is supposed to be neutral in any disputes with the car dealer but never always count on this! Simply don’t sign any documents that include arbitration clause. If the dealer tells you that the clause is mandatory don’t not even do business with that particular dealer and simply walk away!

Do not trust car dealers who will tell you that a credit check is mandatory even if you plan on getting financing elsewhere. Never let the dealer do this because the more times your credit is checked out by anyone it potentially lowers your credit score. If you are not planning to have your vehicle financing arranged at the dealership, don’t give the dealer your social security number and do not let dealership make a copy of your drivers license before you take the test drive. Of course, you will have to show your drivers license but do not let it out of your sight. Always inform the dealer that you do not authorize them to run a credit check on you. Before signing any documents make sure there is no credit-check authorization clause included.

Very often used cars may be wrecked, re-built and then legally re-sold to unsuspecting car buyers. The used car seller can even get a clean title and bill of health and the used car buyer may never know the car had been wrecked and/or “totaled” in an accident!

However, you can still find out the car’s true condition if before the purchase you have it inspected by an independent mechanic.

The car that has been caught in a flood and later salvaged and cleaned up for re-sale to unsuspecting car buyers is known as a flood car. According to the law the title of a flood car is supposed to state that the car has been under water, but you can’t be sure that the title held by the used car dealer is legitimate.

The used car dealer may not know the car has been flooded so the only thing you can do to make sure is to inspect used vehicles thoroughly yourself or have a good mechanic do it. It is a good idea to check under the hood for corrosion and look for water lines indicating how high the water level may have reached during a flood. Also, check under the dashboard, seats and floor mats for signs of dirt and/or sand.

Usually car buying services advertise they search nationwide to find you the best price available on a vehicle and promise to charge you only a small finder’s fee. It is a good idea to first compare the broker’s price to local dealers in your area.

A broker claims to save you money but the most common complaint against brokers is they may help find the best price but this doesn’t mean they can get you the best deal. It is common for brokers to try and add on a service fee on top of the finder’s fee.

If you use an auto broker to buy a vehicle you should make sure the contract comes from the dealership the vehicle is purchased from. Also make sure that car payments go directly to the same car dealership. Never make payments to or through the car buying service broker. Illegitimate brokers or those all of a sudden having financial problems could possibly take your car payments and run!

Car buyers should beware of dealers adding dubious fees like “protection packages” or “dealer prep” especially if they did not even discuss them with the customer when negotiating the vehicle price! Very often customers are paying fees for things that are not necessary. Some of these fees include etching the VIN (vehicle identification number) on the car window, rust proofing, fabric protection and others. The dealer makes profit by offering you services for $1000 or more, while he only pays only $90 for all these services together. You do not need battery and tire protection because they are already built-in to your existing new car warranty and “dealer prep” is just getting the vehicle cleaned up so you can drive it off the lot.
Avoid this scam by simply refusing to pay for anything that was not originally negotiated when determining the price of the vehicle.

There are new car dealers selling so-called “certified” used cars who say that there is no way to make absolutely sure that the used cars they sell have not be involved in major collisions and have been re-built to be re-sold to unsuspecting car buyers. However, this is not the truth because if independent car mechanics can easily spot re-built wrecks then so can car dealers!

Hundreds of thousands of totaled or completely wrecked vehicles get re-built for re-sale and end up being bought and driven by unsuspecting car buyers. One reason for this is only around half of the motor vehicle departments in all 50 states in United States supply local governments with enough information to determine if a used car has been completely wrecked then re-built for re-sale to the public. This makes the so-called “used car search and information” internet services or independent services being sold to consumers for a fee not very practical and essentially unable to really know if a used car has ever been wrecked or not.

There are cases when these cars end up getting involved in collisions again. This may kill the driver and passengers because the re-built wrecks were not re-built for safety but were re-built just to “look” good to prospective buyers. Re-built wrecks usually don’t have proper functioning airbags and other safety equipment put back into them and few, if any, proper repairs may be made to ensure the re-built wrecks are even safe to drive again!

To avoid buying a wrecked vehicle you should have the car you intend to buy inspected by an mechanic independent from the dealer and determine if the car has been wrecked then re-built.