Dealer Fraud

The Market Adjustment Fee

The car dealer tells you that your car is a really popular vehicle, and to sell it to you they have to add “Market Adjustment Fees” of several thousand dollars. This amount is normally indicated on an orange sticker next to manufacturer’s MSRP sticker. A car may be popular, but if it is in stock, it is not worth paying extra for it. Many buyers, particularly trade-in buyers, have been ripped off before. They focus only on what they get for their old car, and so they don’t see the big picture. They may get an extra few thousand dollars for their car, but they don’t notice that they are charged a much higher Market Adjustment Fee.

The Extended Warranty Scam

The Extended Warranty scam is rather old but it is still in use. Basically, when you take a loan on your car, the dealer will say that you have to purchase an extended warranty because the bank requires it for the loan. Avoiding this car dealer scam is very simple actually. Tell the dealer to write down that the extended warranty is required for the loan and they’ll most probably find some excuse to remove the extended warranty. If they refuse to do so, then please do not buy from that dealership.

The Dealer Preparation Fee

The dealer charges you a preparation fee for preparing your car. Most MSRP stickers display that preparation costs have already been covered by the manufacturer. In fact, some fraudulent car dealers permanently print it on the buyer’s order to make it seem mandatory, but one way you can get it removed is by telling the dealer to add a credit (of the same amount as the dealer preparation fees) on the next line. If they refuse to do so, you should simply walk out of the dealership.

Many of you have probably received postcards in the mail or phone calls urging them to buy auto warranties, but many of these unscrupulous companies simply take money from consumers and leave them with little help when repairs are needed. Read our blog to avoid these car scams.

1.   Step 1
Avoid companies with little history in the auto business. If the company goes out of business, you will have to pay for your own car repairs.

2.  Step 2
Stay away from any dealership that claims that you must buy a warranty in order for your financing to be approved. This is a common  car scam.

3.    Step 3
Say “no” whenever your car salesman tries to pressure you into buying an extended warranty or tells you that you will not be able to buy an extended warranty later.

4.    Step 4
Avoid scams by keeping your personal information private. Don’t give out bank-account details or Social Security numbers over the phone. Never give credit-card numbers to warranty companies unless you’ve contacted the company and are positive of whom you are speaking to.

5.    Step 5
Never make a down payment before you see the full written warranty and its terms.

6.    Step 6
Be particularly wary if you are a senior citizen. Some companies target seniors with scams involving high-pressure sales calls and mailings.

7.    Step 7
File a report with the Federal Trade Commission or the Better Business Bureau if you feel you have been ripped off or targeted by a scam. Also, you should report the scam to the United States Postal Service if it involved mail.

The Forced Warranty Scam is when the finance manager tells you that you are not eligible for the loan by the bank unless you pay an extra $2000 for a 2-3 year extended warranty. It”s hard to believe they even try this. Why would the bank trust you to pay a $22,000 loan for the car, but they will not trust you to pay for a $20,000 loan? That’s just insane.

You can avoid this scam by forcing them to put it in writing that you “have” to pay the extended warranty in order to get the loan. Just let them know you”d like to check with the contract your local State’s Attorney’s office for validity and they”ll drop the extended warranty in a heartbeat.

The Dealer Preparation Scam is a legal and very much common practice. I still refer to it as a scam because it is just another way to get more money from you for nothing. The dealer will tell you that you have to pay an extra $500 to cover the labor costs of the dealership’s 5-point inspection.

This alleged check up that you are paying so much money for, is for the dealership to remove plastic from the seats, vacuum the car, maybe, and make sure all of the fuses and fluids are ready to go. When new cars are delivered to the dealerships the cost of delivery and preparation is already covered, so basically you are paying the dealership for work that they haven’t really done.

This scam can be avoided by simply asking the dealership to add an extra $500 credit to the deal to make sure you do not have to pay the money. If they refuse, the choice is yours. If you think it”s fine buy the car, if not; try another dealer that will remove the dealer preparation costs.

There’s nothing like scams to bring your blood to a boil. The car industry is the one that is hit a lot by scams.

New car dealers scams are a dime a dozen. You will surely find yourself as the next victim of these unscrupulous individuals, in case you are not vigilant enough. What you must know though is that there are several ways for protecting yourself from new car dealer scams and some the best methods to do so are discussed in this article. So if you are planning to buy a car and you want to protect yourself from scams, read on.

You must be aware of the common  these dealers try to fool customers from spending more money than they should on a new car, in order to protect yourself from new car dealers scams. The most common scam is concerned with a new car set monthly payments. The practice of many dealers is seting the monthly payment at the lowest possible cost to make it seem that the customer is getting the best deal. A closer look at the total price though will reveal that the car is overpriced. Do not fall for this scheme. The overall price of the car must always be checked before agreeing on the terms of payment.

Some dealers will also try to scam you by saying that you cannot negotiate or haggle at the prices of the cars. If there is one thing you should know about buying a car is that everything is negotiable. When you are confronted by dealers who claime that prices of the cars are non-negotiable the best thing that you can do is to return to that same dealer during off-peak times which is usually during weekdays. Car dealers, during this time, are more open to negotiating with customers.

You should also stand guard on unnecessary extended warranty deals.  The bottom line is you always have the last say. Be aware of new car dealers scams when buying a new car.

Car dealer scams happen more than you think it does. However, you can avoid them by being more careful and being more aware of the most common dealer tricks and secrets.

Keep in mind that dealers pretend that they are acting in your best interest, but, in fact, all they are concerned is making as much profit from the transaction as possible. They will try to add extra items and other product that you don’t need. Sometimes dealers will scam you into paying more than necessary. For example your car dealer may offer you a windshield etching to protect your car from theft. You can get this for only $25, but the dealer will charge you a lot more.

Do not get into the trick of affordable payment. This is another way to confuse you, does not matter how much the car’s cost is and how many fees they add, so long as you can make a certain monthly payment. The dealer will add certain fees to so called dealer prep cost. Do not sign any document if you haven’t negotiated the price and reviewed the paperwork. Scams like these happen almost every day.

The extended warranty is not mandatory and you need to decide if you need it or not. Also, make sure to be careful about the APR trick. This happens when the dealer calls you the next day and says that you were not approved. However, the dealer offers you another lender that will approve you. What the dealer does not tell you is that your interest rate has gone up. It would be better if you get financing before looking for a car.

Buying a car with a bad credit is not leaving car buyers with a lot of options. Sometimes their only choice for finding finance for their new purchase is a car dealer loan.

Car dealer loan deals are not that bad as many people think. However it is true that they may hide a lot of surprises so if you are planning to use a car dealer loan you should be extra careful.

The first thing to watch out for is if the interest rate is fixed. By fixed we mean clearly stated in your contract and that all is written in a way that wouldn’t allow the car dealer to change it later. What many car dealers do is to approve your car loan application, make you sign the documents and give you the car. Later they just give you a call to say that in fact you do not qualify for this loan because you are with a bad credit (which you already know anyway) and that you will have to pay higher interest rates. If you fall into this situation either try to find financing from another place or report this scam and fight back.

Another very popular dealer scam is to make you find a co-signer for your loan dumming you that this is the only way to get finance since you have a horrible credit history. It will not be difficult to convince you – first of all it sounds reasonable and second of all the car dealer will make you believe that this will in fact repair your bad credit. Later you will discover that your name is not included in the loan documents and that the loan in the name of the “co-signer” although you are repaying it. Not only that this is in fact illegal and may lead to serious penalties but it is not helping your bad credit at all. If a car dealer offers such thing to you must refuse.

If you are a bad credit customer and have difficulties finding a loan, it is quite obvious that you should not overstretch. This means to buy a reasonably priced car and not to buy any extras such as extended warranty. However many car dealers will try to trick you by making you believe you must buy a warranty that will increase your loan in order to qualify. Since you are desperate in getting the car you would say OK. However if you think for a second you will easily see that this is simple dealer  trick to increase your loan.

Following are some of the common scams and how to avoid them:

Terminate your lease early for a low penalty
This is an all-time leasing scam. This is how it occurs. You ask your dealer how much you will pay if you want to terminate your lease and he tells you: “You want to get out early? Sure thing, you only pay an early termination fee of $300”. What he is quoting is only the small administrative penalty of early termination, there is a much stiffer penalty called early termination fee and this runs into thousands of dollars.
Do not confuse the early termination administrative penalty with the termination fee. Read the small print carefully and know exactly how much you will get charged should you terminate your lease before its scheduled end.

Artificially low interest rates
Some dealers quote a lower interest rate when in reality it’s much higher. They do this by either purposefully quoting the money factor as the interest rate or calculating the loan without amortizing some closing fees, like the security deposit, into the loan lease. Take the money factor for example: this is typically expressed as a four decimal digit, something like 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.

No security deposit
Any dealer who advertises a $0 security deposit is not telling you the whole story. A security deposit is always factored in the lease under the provision for disposition fees.

Pay for an extended warranty you don’t need
This is another shell game to inflate the dealer’s profit at your expense. The dealer slides an extended-warranty into the deal whilst it’s already factored into the monthly payments, or he tricks you into buying a 36-month warranty on a 24-month lease.
You do not have to pay extra money for a warranty already built into your payments or for one that goes well beyond your lease term. They might slip an extended warranty in. Don’t be fooled, the warranty is already factored in.

It is a common scene to see a lot of added fees on the car of your choice even if a price has already been agreed upon by both parties.

Extended Warranty: You are the one who have to decide whether or not a warranty will be added an extra year. No dealer maneuvering should be making that decision.

Dealer Preps: Try to not pay more than what is listed on the car site or the sticker price. Some dealers try to add dealer prep costs when the price is already in plain sight.

The Big APR Switch: This may be the most disappointing and frustrating scam a buyer may encounter. What is worse is that it could happen after you have taken your dream car home and drove it for a week. After that time, you suddenly get a phone call from your dealer informing you that they are increasing your interest rate and subsequently your monthly fees. According to the dealer, this is because there was a problem that was overlooked in your loan application, which is supposed to be thoroughly reviewed. Make sure that you have studied all your financing options even before you step into the car dealership. Communicate with your bank or online financing sites to provide you information in order to avoid getting scammed by this nasty tactic.

The forced warranty scam happens when the finance manager at the dealership informs you that you are not eligible for the loan by the bank unless you pay an extra $2000 for a 2-3 year extended warranty.
Actually, this scam doesn’t make any sense. Basically, the finance manager is telling you that the bank won’t trust you to pay the $20,000 loan for the car; however they will trust you if you pay even more money.
If you believe that the finance manager at the dealership tries to scam you force them to put in writing that you “have” to pay the extended warranty in order to get the loan. Avoid this scam by telling the finance manager that you first have to bring a copy of the contract to your local State’s Attorney’s office and verify that the deal is valid.