Dealerships are also a source of auto financing. Although getting an auto loan through a dealership can be more convenient than with other providers, abusive ones can rip you off. Here are some of the common ploys used by unscrupulous dealers to get more money from your business. Be familiar with the schemes to learn how to avoid them.
Stuffed Monthly Payment
Most car buyers focus on the monthly payment rather than on the car price. This is a common blunder by car buyers because shopping by monthly payments can cause them to spend more for their cars. An example is the packed payments scam.
When a dealer pulls this trick, your monthly payments will slightly go up. This increase is not really much that’s why you wouldn’t mind. But it actually translates to thousands of dollars in additional cost—the cost of add-ons the dealer wittingly stuffed to your payments. You wouldn’t notice because you are focused the monthly payment.
To avoid being a victim of this scam, arrange financing before stepping into a dealership. Do not also focus on the monthly payment. Instead, negotiate the car price down first. Do not also sign the contract unless you have finished reviewing all the terms written in it. This is to make sure that all terms are accurate and consistent with what you agreed to during the negotiation.
It is part of the dealership’s job to find you a good auto loan. In other words, they arrange financing for their buyers. But unscrupulous dealers would try to make you a victim of spot delivery scam. And you will be a victim for sure if you drive the car home with the financing yet to be finalized.
In spot delivery scam, the dealer will call you after a couple of weeks since the purchase to break the bad news: The financing fell through and you have to see them again. You will also need to bring the car back. Once you set foot at the dealership, they will pressure you to sign another loan contract—a true and final one this time but with a higher interest rate or a higher down payment or both. In short, the loan will be more costly.
Financing can fall through in rare cases. However, legitimate lenders would not let you take the car home unless financing is settled. You can try getting an auto loan from a bank or credit union first before resorting to dealership financing. There are a lot of legitimate lenders here in Indy.
False Credit Score
You would think it’s too nice of the dealership to get a copy of your credit report for you. But don’t be too quick to appreciate the little effort until you realize what they’re really up to.
Fraudulent dealers can lie about your credit score, and you tend to just accept whatever they tell you about your credit. But these dealers would announce a credit score lower than the true one so they can charge a higher interest rate.
You don’t want this to happen to you because you don’t want to be charged an interest rate that you don’t actually deserve. Thus, get a copy of your credit report before visiting any dealership. You have no excuse not to do so. By law, you can get a free copy from TransUnion, Experian and Equifax through AnnualCreditReport.com. You can also purchase your FICO score at a reasonable price.