Dealer Fraud

There are many types of auto insurance scams - some involving car insurance companies and others involving individuals trying to scam the system.

1. Being lowballed. This is where you do your research and hunt around for the best car insurance deal you can find. One company comes in way cheaper than the rest so you decide to go with them. Then 2 months later, once you’ve signed up and paid your money, you get a letter saying that there was a ‘company rate error’ and your premium is actually a couple of hundred dollars higher than the price you were quoted.

2. Buying from a Phony Agent. Just because an agent has a storefront doesn’t automatically mean that they are a real agent representing a real insurance company. A proof-of-insurance card can be forged just as easily as letterhead, business cards and signage can. One clue that things may not be as they seem is if the agent issues their own insurance. They can’t legitimately do that because they are ‘agents’ which means that they represent an insurance company and aren’t an auto insurance company in their own right.

3. Going through a middleman who represents a Phony Company. While the agent may seem legitimate, you need to do your homework on the company they claim to represent.

4. Alliance between an auto insurance company and repairer that benefits them but not the insurer. For example, a car insurance company may recommend a repairer that inflates the worth of the car and then charges a high amount to repair the car. In this instance, the car should probably be written off as totalled but the repairer doesn’t do this because it will lose business and the insurance company will lose on deductibles.

5. Car insurance quote in exchange for personal information. If you receive a phone call from an insurance agent offering a free quote on car insurance in return for you providing personal information, don’t be fooled. Providing information in this instance leaves you vulnerable to having your identity stolen. The only information required for a car insurance quote should be information about the car.

Deposit scam takes place when the finance manager insists on a deposit before you have signed the purchase contract.

You will be told that the finance manager has to bring in a copy of the contract offer to his boss and he needs a deposit from you just to ensure that the boss will sign off on it.

It’s just a dealer trick to make sure that you are “serious” about getting the car.

Avoid this car fraud by refusing to give a deposit before the contract is finished a signed by both parties.

Dealers run this scam so that they can keep you there. Tell them that the fact that you made an offer on the car shows that you are serious.

Dealerships depend on a buyer’s ignorance so that they can mark up your prices. Holdback is money paid to the dealer for about 2-3% of MSRP.

It is money that is given to the dealer from the factory when the car is sold. This is profit for the dealer for buying the car.

This scam occures when dealers will tell you that it costs them money so that they can charge you for it later. Basically, they can get the money twice.

Avoid this delaer trick by letting the dealer know that you know better and will not pay it.

This dealer fraud happens when the dealer tells you that they will beat anyone else’s prices or give you $500.

They simply ask you to get the price from another dealer and they’ll beat it. The hard part is that other dealers will not just hand over their information for you to take to someone else.

This deal is almost impossible to get because most dealers sell different makes and models anyway.

Avoid this scam by not buying into it in the first place.

This dealer scam happens when the finance manager insists on a deposit before you have signed the purchase contract. You will be told that the finance manager has to bring in a copy of the contract offer to his boss and he needs a deposit from you just to ensure that the boss will sign off on it. It’s just to make sure that you are “serious” about getting the car. Avoid this dealer fraud by refusing to give a deposit before the contract is finished a signed by both parties. Dealers run this scam so that they can keep you there. Tell them that the fact that you made an offer on the car shows that you are serious.

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.

This scam happens when you have successfully negotiated a car, and the salesman suddenly gets a phone call with an offer for the car that is lower than the price you agreed on. Then he casually lets you hear him state that he will call the man on the phone right back if you opt out of the deal. Next, he tries to talk you down from your set upon price to compete with the guy on the phone’s offer. Avoid this dealer fraud by telling the salesman that you will understand if he chooses to take the better offer.

In this scam, the dealer tells you that your car is a really popular vehicle, and so to sell you the vehicle they have to add “Market Adjustment Fees” of several thousand dollars. This amount is usually 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, especially trade-in buyers, have been scammed 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 for their car, but they don’t notice that they are charged a much higher Market Adjustment Fee. The dealer sells the car, gets the trade-in, and makes an extra off the buyer. Never pay more than the manufacturer’s MSRP.

How it works: You buy a new car, the finance manager says you got a low APR, and hands you the keys. About two weeks after you buy the car, the dealer calls you saying “Sorry, you didn’t qualify for that low interest”. This is where “subject to financing” clauses on contracts comes back to bite you. Obviously, everyone thinks that you sign papers it’s a done deal. The dealer knew exactly what you qualified for before you signed, unless you lied about your income.

The credit union can print your credit history and approve you within 10 minutes. So why are there problems at the dealer? There usually is no problem, it’s a scam. Have you every heard the phase “subject to loan approval”? This dealer trick means: “The deal is not final, even though you signed the contract.” They’ll tell you that you need an additional $500-$1,000 and your payments would go up a little.

How to avoid it: DON’T FINANCE AT THE DEALER if you have bad credit. Go online to get your own financing or your credit union and compare to dealer’s financing. By using your own financing, you won’t be subject to monthly payment scams, and the deal will be based on the selling price of the car, not monthly payments. If you do finance through a car dealer, pay the deposit on your credit card, and do not take the car until the loan has been approved in writing a few days later.

If this scam happens to you: If you got a good price on the car, you need to preserve your deal to get your own instant financing online. They will FedEx your check the next day, you’ll take it to the dealer to pay for your car, now you have a car loan, and no “financing fell through!” If the dealer refuses your online check, get out of that deal. File a complaint with the Better Business Bureau at BBB.com, and file a complaint through the state’s attorney general.

There are a lot of great dealerships scattered abound the countryside, but you have to be on the look out for the ones that are trying to scam your pocketbook.

What you should be on the lookout for are the dealers that make their money from the manufacturer, when they buy the vehicle-and not when they sell it. Often, a large car dealership can purchase vehicles on fairly standard pre-determined prices. They can then offer rebates, incentives, and discounts the dealer can pass on to the consumer.

An independent dealer may not have the luxury of being able to pass on the ’sweet’ deals to is or her client. And, you can bet the sales pressure to get you in a car seat will be a lot less polished.

HERE ARE SOME CAR DEALER TRICKS USED TO GET YOUR SIGNATURE ON THE CONTRACT

1. Burn up the Buyer’s Time
The average consumer only has about three hours a week of free time to look for a car. The job of the car salesperson is to make you do less comparative shopping. That will induce you to buy when on their car lot.

2. Feed on the Buyer’s Emotions
Don’t allow yourself to get sucked in! Leave the emotions associated with car buying at home. A car salesperson can be like a shark. They smell “blood” when they know you’re hot to buy a car.

3. Place the Buyer in a Comfort Zone
Don’t forget, he or she might have the smile of a saint, but they’re out to make a sale! You’re the only person that can watch out for you.

4. Pile Options on the Buyer
Be aware of vehicle options you didn’t ask for, or don’t need. This is a smooth way of jacking up the price and making you think you’re getting a bargain.

5. Play-down the trade-in Value
Make sure you know the market value of your trade-in, and then make sure the price of the vehicle you have in mind isn’t jacked up to compensate for the amount your car is worth. Otherwise, it’s just like giving your trade-in away for free.

While you shouldn’t think this will be the experience every time you buy a car, it just makes common sense to keep your eyes pealed for anyone who might be out to take advantage of you.