Top Dealership Scams and Fraud Alerts | Auto Buying Experience Guide

We are here to make sure that you are aware of the situations – so that you don’t become a victim to them.

The Financing Fell Through Scam (Spot Delivery Scam):

This is not necessarily a scam but some dealerships do it intentionally which then becomes a scam.

Basically you sign the paperwork, the dealership hands you the keys and the deal is done right? Wrong, in most cases the dealership is taking a gamble as to what lender they will be utilizing and what APR interest rate they can get you. If they can’t get you the APR that was promised, they are then calling you back 2 weeks later to tell you that the deal fell through. You either take the vehicle back or take a higher interest rate based on the approval that they did get you.

How to avoid this: Get your own financing lined up. It’s easier and better to walk into a dealership with your own fianancing for many reasons but most importantly, you’ll know what you are approved for and you will have the upperhand. If you cannot get your own fianancing then leave a deposit on your credit card, and do not take delivery of the car until the loan has been approved in writing a few days later. Then you can call the lender and verify that your loan has been approved.

The Straw Purchase Scam:

This usually happens when interest rates go up and it is harder to obtain financing. Basically the dealership knows that even though you have a co-signer with good credit, they cannot obtain financing in both of your names so they will put the loan under your co-signers name only. State laws are vague, but I hear some states like Texas have laws against Straw Purchases on cars.

How to avoid this: Have both signers there at the same time. You should have both signatures on the same contract, NEVER sign separate contracts. Call the Lender and make sure that both signers are on the loan.

The “Forget To Pay Off Your Trade In” Scam:

You trade your vehicle in and the dealership promises to pay off the loan. 2 months later, the lender which you had your trade-in financed through is calling you because the vehicle has not been paid off. Now you have late charges and the late payments have been reported to your credit bureau.

How to avoid this: When buying a vehicle, if you trade in a used car which you still owe money on, make the dealer put in writing that he will pay off your car loan in 10 days, or no deal. If they refuse, take your business to a more reputable dealership.

The “Lie To The Customer About Their Credit Score” Scam:

This happens when the dealership tells you that your credit score is lower than what it is. This happens to many people, even people with good credit since most people do not pull their own credit bureaus before visiting the dealership.

How to avoid this: Get familiar with your credit history by pulling your free credit report and learning what your options are. Click here to learn more about your credit report. The dealership should never know more about your credit history than yourself. Be prepared so this doesn’t happen to you.

The “Forced Warranty” Scam:

You’re ready to sign your paperwork and the finance manager tell you that you have to purchase an Extended Warranty because the bank requires it in case something happens and you can’t afford to make your monthly payment and pay for any repairs.

How avoid this: Have the dealer put it in writing. You will see how far they back off. Plus, let them know that you want to call the lender yourself and ask them about this situation. Another way to avoid this is to get your financing line up.

“We’ll Payoff Your Loan No Matter How Much You Still Owe!!!”:

Basically, there are dealers that claim “We’ll pay off your loan or lease no matter how much you still owe. They make you think that you are no longer obligated to pay off your loan. But if you are upside down $10,000 and owe more than what your vehicle is worth they add that amount to your new $15,000 loan and now you owe $25,000. They extend your loan to 60 or 72 months and in some cases get you a lower payment than what you currently have to trick you into thinking that you are saving money, but in the long run you are paying more!

How to avoid this: If you are upside down on your current loan or still owe money on your lease, then don’t trade it in. You will loose a lot of money by doing so. Keep paying your loan until you owe less money than what it is worth or at least are even.

The Previously Wrecked Used Car, Sold “As Is” Scam:

The dealership sells you a vehicle that was previously wrecked. In some cases, the dealership doesn’t even know about it. Then you find out that the vehicle has been wrecked by pulling a Carfax Vehicle History Report and when you try to take it back to the dealership they tell you that you signed the “As Is” document.

How to avoid this: Never purchase a vehicle with running a Carfax Vehicle History Report period. It’s also a good idea to have the vehicle inspected by a proffessional who can tell you if the vehicle has been wrecked.