Dealer Fraud

This leasing fraud happens when the car dealer sells the customer an over-priced extended warranty on a lease vehicle. Unsuspecting consumers purchase there warranties not knowing that the vehicle is already under warranty during the entire period of the lease. According to the research conducted the extended warranties are high-profit items for most car dealers, that is why they try to add it to every contract- even when they are not needed.

The car dealer will, most likely, try to get you into the deal by telling that he offers a special price on the warranty and that it won’t be available later during the lease or at the end of the lease when you decide to buy the vehicle.

Another dealer trick used is when the dealer tells the customer that the warranty is refundable if you turn in the vehicle at the end of lease. This is simply not true, so when the dealer offers you this option just refuse.

The best way to avoid the extended warranty scam when leasing a vehicle is to sign a lease for no longer than the manufacturer’s warranty period. Always remember that you lease the car and don’t own it.

There are car companies that offer a so-called “single-payment lease” for those consumers who don’t want to make monthly payments, but do want to lease a vehicle. In this type of leases the entire lease is paid in one sum at the time of signing. Typically, a single-payment lease is the same as any other lease, but the cap reduction payment is large enough to drive the monthly payment to zero. As all of the depreciation and interest is paid at the time of signing, single payment leases save the consumer finance charges. On the other hand single payment leases represent less risk for the leasing company, so they offer a much lower lease rate.

Single payment leases are OK if the car dealer calculates the single payment correctly. However, car dealers sometimes scam consumers by charging the consumer interest on the single payment for the entire lease period. Basically the dealer may calculate a monthly payment based on zero cash down then multiply it by the number of months in the lease. The dealer then collects this amount as the “single-payment”. Thus the consumer has to pay interest on the full amount of the lease including the single payment. It turns out that by simply calculating the single payment incorrectly the dealer cheats the consumer out of his/her savings and makes a profit of thousands of dollars.

You can avoid this dealer fraud if you calculate the single payment yourself and make sure that you are not being overcharged.

In some cases car dealers quote a lower interest rate when in reality it’s much higher. Sometimes they do this on purpose quoting the money factor as the interest rate. In other cases they simply calculate the loan without adding to the price some closing fees, such as the security deposit, into the loan lease. Take the money factor for example: as a rule, this is expressed as a four decimal digit, such as 0.004. Some dealers quote this as a 4% interest rate when in fact you need to multiply it by 24 to get a rough idea of the interest rate on your loan. In this example, the interest rate is a much higher 9.6% than the “quoted” rate of 4%.

Make sure you crunch the numbers and understand the formula they use to calculate their interest rate. Look out for any fees not factored into the calculation. If you are not satisfied, do not enter into the lease agreement to avoid leasing scams.

You’ve probably already heard about the C.A.R.S (Car Allowance Rebate System) Act, otherwise known as the Cash for Clunkers program. Pursuant to the act, the government will give a used car owner a credit of $3500-$4500 toward the purchase of a new car when the old clunker is traded in at an automobile dealer. The system encourages individuals to get rid of their old cars in favor of more fuel-efficient vehicles.

There are a few requirements that must be met in order to be eligible for a rebate on your trade in. The basic rules of the Cash for Clunkers program are as follows:

• The vehicle being turned in must be less than 25 years old on the trade-in date.
• The trade-in vehicle must get 18 miles per gallon or less according to revised EPA standards.
• The trade-in vehicle must be drivable.
• The fuel efficient automobile must have a MSRP of $45,000 or less.
• Trade-in vehicles must be registered and insured continuously for the full year preceding the trade-in date.
• Rebate money can only be applied to the purchase or lease of new vehicles that qualify. The money cannot be applied to used vehicles.
• A qualifying lease means a lease of an automobile of not less than 5 years.
• Car rebates must be $3500 if the new car gets at least 4 mpg more than the trade-in, or $4500 rebate if the car gets at least 10 mpg or more than trade-in.
• For SUV’s, pick-ups, or minivans, a rebate of $3500 will be given if the new vehicle gets at least 2 mpg more than the trade-in, or $4500 if it gets at least 5 mpg more than the trade-in.

Participating in the program is very simple. All the customer needs to do is bring the required information to a local dealer. The dealer then prepares the necessary paperwork and submits it to the appropriate agency. The National Highway Traffic Safety Administration makes sure that all requirements have been properly met and sends a finance credit voucher to the dealership.

However, consumers should be aware that there are scammers who will try to take advantage of uninformed consumers. There are websites offering pre-registration for the CARS program and offer to register the consumer with local dealers. Buyers should be aware that they don’t need any pre-registration.

Another type of fraud perpetrated by car dealers through the Cash for Clunkers program is charging the consumer a specific fee (usually $250) for administering the CARS program. Please remember that the dealer cannot charge you this fee when you purchase or lease a new vehicle.

The CARS program can be a great opportunity for you, the car dealer, and the economy if you know the rules.

There are a lot of car dealers out there who try to use trade-in scams to make much profit. Being aware of the commonly used car scams is the best way to protect you from becoming a victim.

Some dealers will scam you by telling that they will pay off your current lease or loan, no matter how much you owe. Remember that a lease or a loan is a financial contract, and you are not able to eliminate one when buying a new car. Through this trade-in scam the dealer will most likely try to make you pay higher monthly payments on your new car. Avoid this scam by simply waiting until your current lease is expired or paid off.

Beware of car dealers who forget to pay off your trade-in after the deal is complete. A lot of car buyers receive notices for a collection agency a few months after they trade-in their car and are surprised to learn that the dealer never made any payments. You can avoid this trade-in scam if you get all pay-off documentation in writing.

Always have your trade-in inspected by a mechanic in order to avoid car dealers who report “all sorts of problems” with the vehicle.

Never sign any documents if you feel that the dealer is trying to trick you. Simply walk away, and find a reputable dealer who will offer a good deal.

This lease fraud happens when the car dealer promises the consumer to pay the remaining lease payments on the existing lease if the consumer signs a new lease contract with them. Remember that the offer may be the reason for a number of potential problems.

Most consumers think that the dealer is taking over responsibility for the entire lease when he makes this offer. That’s not what happens. The truth is, they simply take over the rest of the payments and when completed, will return the car to the company that originally leased it to you.

In case you have any problem with the car (i.e. damages, excessive mileage, etc…) the leasing company won’t send the bill to the dealer; they’ll send it to you. Moreover, if the dealer doesn’t pay the remaining payments, or doesn’t return the car, the leasing company will contact you, not the dealer.

Car leasing is a method when you can have the use of a vehicle by financing it. Leasing, typically, differs from buying and the consumer never actually owns the vehicle, but uses it over a set period of time. The length of car leasing contracts can be 12 months, and can last up to 24 months or 36 months.

The person who leases the vehicle is making monthly payments to the owner or the dealership. Car leasing may often be cheaper than car loan repayments. However, the person who leases the vehicle should remember that at the end of the lease the customer will not have over a set period of time. Be aware because there are some car dealers will try to scam you by telling that you will own the vehicle at the end of the lease term. However, at the end of the lease you will be required to pay additional sum.

There are a number of advantages that leasing gives. One of them is that car leasing payments usually work out less per month than car loan repayments. At the end of the lease contract the leaser returns the vehicle to the owner and do not have to worry about the value of the vehicle or the hassle of having to advertise and negotiate a sale. When leasing you don’t need to pay down payments like when you purchase the vehicle. You will also afford vehicles that would ordinarily be out of their price range.

Leasing may be beneficial for both the consumer the dealership, however, there are a lot of dealer tricks and car leasing fraud that will make you pay more and make your leasing contract complicated. So, if you have decided to lease a vehicle then carefully read your lease agreement before signing.

Curbstoners are car dealers, who sell their cars on the street by pretending to be private sellers. Buyers of used vehicles should be very careful to be able to detect scams of curbstoners. These are some tips to be used:

• Remember, that if it sounds too good to be true, it probably is. If you think that the price of a used car is too good for what you are getting, then the dealer or the seller is probably trying to scam you.

• Always check and make sure that the name on the driver license of the seller is consistent with that of the title of the car. If the names do not match, do NOT buy the car!

• Take the car to a qualified mechanic that you know and have it inspected. The car inspection can spot any problems of the vehicle you intend to buy.

• Get a vehicle history report, which will be able to will identify any flooded vehicles, salvaged vehicles, prior major accidents, rolled-back odometers, etc.. Reports will also show title transfers. There are a number of services online that allow you to run a vehicle history report.

• Try to purchase a vehicle from a reputable car dealer, rather than from a curbstoner.

• Avoid buying a car on the internet.

There are a number of things you can do to minimize the possibility to become a victim of a dealer fraud. The key to avoiding auto dealer scams is this: knowledge is power. We offer you a few tips to use:

- know your credit history and your credit score
- know the vehicle you want and research it’s fair value on the internet
- research the loan rates that a credit union or bank would give for a qualifying borrower (for reference)
- be prepared to pay for a 3rd party mechanical inspection/report on the vehicle before you commit to it
- be patient and be willing to simply walk away if you feel pressured or ’smell a rat’
- invest in good advice: study a good buying guide, from insiders who can teach you the dirty tricks to expect

Once on the lot:
- be patient and confident
- ask questions and pay strict attention to financing rates and terms
- if a warranty is offered or promises made, insist that they commit them to writing — it’s the law
- ask about grace periods and repossession policies, if you think this might become an issue (or not)

There are several things you should know and consider before you decide to trade in your car. Learn the most common scams and dealer tricks the car dealers may try to use when you trade in your car.

Generally, used car dealers make 2 to 3 times more in profit from the sale of used car trade ins than they do from selling new cars. When you trade in your car the dealer offers you much less than what your old car is worth, because he knows that most consumers have no idea what is the value of their car.

In case the car dealer pays what your used car is worth, he will later raise the selling price of your new car. The dealer will try to add a lot of add-ons and extra fees to the price of the car you’re buying.

Some consumers think that they you will save some time when you trade in your car at the dealership. However, the truth is it’s better to spent just a little bit more time to sell your car yourself and get an easy $300 to $1000 more for it. Beside you will be able to avoid the trade-in vehicle scams of the dealer.