Dealer Fraud

Yes, if your car dealer is the middleman for another finance company. The reason is that the points the dealers lose on low or no interest loans they will make up for by raising the price of your car to MSRP and or adding all kinds of lame fee’s, etc. If your zero interest auto loan is offered by the car manufacturer then it won’t cost you any extra points. Obviously that rule only applies to zero interest car loans. Anything else and you’re fair game.

Of course that doesn’t mean the salesperson won’t try and squeeze you for more money somewhere else during the deal!

Here are car buying tips for what you must do to avoid auto fraud when you buy a car, especially from a car dealer.

• Read through this entire section on car buying tips before you even consider “just shopping”.
• If you go in with the attitude that you’re “just shopping” then you will probably end up buying that day only to find out later that you spent way more money on buying your car then you needed to.
• Go through all your price quotes and figure out who you can get your best deal from. If your online research has shown that you can buy your new car through Edmunds, Ford Direct and Cars Direct for less - then by all means go ahead and do it! That’s a huge car buying tip that will not only save you money, but also hours of time and energy.
• Even if you choose to “pound the pavement” and buy a car from a local dealer, you can use these new car price quotes as an extremely powerful tool when negotiating with a car salesperson.
• Make a few photocopies of your driver’s license. You’ll need this later when the dealer asks for it when you go to test drive your new car. Scratch out your driver’s license number on it though. In some states they can get your credit report with your D.L. without your permission!
• Prepare to spend from four to six hours at the car dealer.
• Get your car loan online. Apply with DriversLoans and 1800AutoYes and get approved the same day!
• Show up at your car dealer well fed! I’m serious here! This is also one of the biggest car buying tips. If you show up starving and with low blood sugar then you can expect to be fleeced. You just won’t be able to keep up with all the tricks that can be pulled on you. You’re going into battle man! So bring snacks and water too.
• Get a free no obligation quote for an extended car warranty from an outside source instead of from the car dealer. You can save hundreds of dollars from what a car dealer will charge and get a far superior car warranty.
• Take your purchase quotes, credit reports, warranty notes and copies of your driver’s license, etc with you and watch the sales persons jaw drop in shock as you whip them out. This is a powerful negotiating technique when you buy cars from a dealer.

Car dealers may promise that with very few, if any, dollars can allow you to drive away in a new car even if you have bad credit or no credit. However, when you get on the car lot and “take the bait” the salesperson may tell you it will cost $1000 to drive away in a new car.

The “churn” begins when you may not qualify for a loan amount on the car you want so the car dealer 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!

Salespeople may not mind selling cars to those who cannot afford them because even if the cars get re-possessed for non-payment it is the car buyer 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!

Car dealers have been known to be able to re-sell and repossess the same car numerous times, thus earning tens of thousands of dollars on just one car!

How to avoid this scam: You should 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! What do they care if you cannot really afford the payments?

In addition, always 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.

In some cases, where a customer’s income or credit history is not sufficient to finance a vehicle purchase, finance companies will accept the contract if there is a second individual – a “co-buyer” or “co-signer” – who also signs the contract. The abuse occurs, however, when co-signers are misled about the responsibilities they are accepting. Some customers are told that the co-signer is merely being used as a “reference” and has nothing to do with the car.

Statements like these are false. In the event that payments are not made, the co-signer’s credit can be affected, debt collection efforts can be made against the co-signer, and the co-signer can be sued for the payments that are owed. In short, the co-signer is equally responsible for making the payments on the vehicle. Only sign a contract as a co-signer if you are prepared to accept these responsibilities.

If you are a co-signer and were misled about your responsibilities, consider taking the following steps:

· Get a copy of your credit report to make sure that there are no negative references on your credit as a result of the loan;

· Contact the finance company, explain the fraud that has occurred, and try to get your name off the loan;

· If this doesn’t work, talk to the buyer and see if the loan can be refinanced to take your name off the financing;

· If you find that your credit has been negatively affected, get legal help.

A common complaint among auto fraud victims is that the dealership charged them for a service contract that they did not want or authorize. Sometimes, the salesperson will imply that the warranty is part of the deal, even though the customer is actually being charged for the service contract.

To avoid this auto fraud, read every line of the contract carefully. Make sure you closely examine the SERVICE CONTRACT line of the contract.

If you find that you have unknowingly purchased a service contract, immediately contact the service provider (there should be some documents referring to the service contract included with the sales contract). You can usually cancel such contracts and be refunded the unused portion of the contract. File a complaint with the Better Business Bureau and make a complaint with the Department of Consumer Affairs.

Extras like car alarms, appearance packages, and service contracts (extended warranties) are significant profitmakers for auto dealerships. Given this fact, some unscrupulous dealerships trick customers by telling them that they must purchase one or two accessories to obtain the price quoted by a salesperson or advertisement.

Customers need to know that accessories are optional. Reputable dealerships have strict policies against requiring the purchase of any extras. If you hear this sales tactic, insist on the quoted price WITHOUT the accessories. Consider contacting the Better Business Bureau and the Department of Consumer Affairs.

You may not realize that the salesperson usually tells you that your trade-in vehicle is worth less than it really is and a lot less than you think it is. They may even tell you that it’s got what they call “negative equity“.
That’s a term car dealers invented when they had to come up with some way of explaining why your car wasn’t worth what you owed on it when you wanted to trade it in, but they didn’t think there was enough profit in it for them to take it off your hands. “Upside down” or “in the bucket” are similar terms.
These terms can be used to play games with the buyer in order to literally steal the trade-in vehicle, by taking it in for trade but taking the payoff amount and tacking it onto the price of the car that the customer is buying.
Tip: Defend yourself by knowing for sure what your trade-in is worth and finding out what your loan payoff really is. Don’t take the dealer’s word for it. Know before you go. Check trade-in values online. Look in newspapers to see what dealers are selling your kind of trade-in vehicle for. The more you know, the better prepared you are to keep from getting ripped off. And above all, be careful thru each step of the process.
Remember: the dealer’s objective is to get the money out of your pocket and into their’s. Your objective is to keep as much of your money as you can!

This is one of the oldest tricks in the book. When a dealer “loads” your payment you are literally being ripped off. Here’s how it works: You ask how much the monthly payment will be on a certain automobile and the salesperson will quote you either a slighly higher APR or loan amount. It might not be much but if the actual loan payment should be $325 a month and their mathematical shenanigans push it up to $365.00 that could end up costing you an additional $2300 on a typical 60 month car loan. It doesn’t seem like a small amount anymore does it? It’s a very difficult scam to detect unless you go into the dealership with your homework completed. Before you go into a dealership, gather all of the pricing information on the cars you’re interested in so you know what the payments should be. An informed consumer is a lot harder to fool than an uninformed car buyer. This is no guarantee you won’t be ripped off but your odds will be a lot better.

On the other hand, if you agree to this packed loan payment without comment the dealer will attempt to boost the final price again and again and again. If you’re not prepared for what can happen at each step of the car buying process a salesperson will use every trick in the book to separatate you from your money. As you work your way towards a final deal you’ll be offered high price items like extened warranties, undercoating and clear coat paint layers. If you’re not careful you’ll end up paying extra for items added to the car at the factory!

There are a number of different dealer frauds that fall under the general heading of increasing the “leg“ or “legroom” that a dealer has when negotiating a monthly payment. The scan usually starts with the question “How much of a monthly payment are you looking for?” Once the salesperson knows that, they can pack various options and unnecessary features into a base model until they magically come up with a car payment that matches what you wanted to pay.

Avoiding the Scam

Don’t talk monthly payments. Simply tell the salesperson that you prefer to remain focused on the final price of the car and the payments are not an issue for him or her to worry about.

One of the favorite tricks of salesmen and dealerships is the old "bait-and-switch" which is still as effective as ever. Typically a salesperson will tell you all the things wrong with a model that you had carefully researched and were intent on buying or leasing. Do not be dissuaded by such attempts to "educate" you. The only purpose for a salesman to provide such disparaging information is to induce you to trade up to something which is more expensive and which provides more profit to the dealer.

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[ To Learn more our services and areas of practice, please visit our website at www.DealerFraud.org]