Planet Antares Scam Tip | How to Avoid Car Financing Scams
Buying a car, whether new or used, can be a trying experience. Dealers usually offer “captive financing” plans through the vehicle manufacturer. Used car dealers may also use captive financing if they sell new and used cars, or they may have another financing option for walk-in customers.
Financers may tell you that your credit score is lower than it is, meaning that you are not eligible for their premiere interest rates. They may also tell you that your credit limit is lower than what’s needed for you to buy the car you want, hoping you’ll take a less desirable car off of their lot.
Dealers are also coping with a relatively new phenomenon – the “under water” buyer. This occurs when you owe more on your car than the car is worth as a trade-in. When this happens, some dealers tack on the difference between your car’s trade in value and its actual value to your new car loan. When they do this, they are merely allowing you to finance the out-of-pocket costs you’d have to pay to make the car purchase. This reduces your immediate cost, but increases your monthly payment, perhaps beyond what you can really afford.
Some dealers will let you “buy” a car on a “preliminary credit approval.” You may trade your old car in and buy a newer vehicle. A week later, the dealer calls and says your vehicle loan was not approved or was approved only at a higher interest rate. The dealer may tell you that you need to return the car or make a higher monthly payment to accommodate the new, higher interest rate. If you don’t return the vehicle, they will report it stolen.
They may also tell you that they can lower your monthly payment by increasing the length of the car loan from 48 months to 60 or even 72 months. When you opt to return the car to the dealer, you may be told that your old car has already been sold or that you must pay a higher rate for the miles you’ve put on the newer car.
Here are some tips to avoid car-financing scams.
Before you go into a dealer, know exactly what your credit score is and what you’ve been approved for. Your bank or credit union can help you with this. Often, these institutions offer better rates than captive financers do and they are more realistic about what you can afford.
Know exactly what you can afford to spend on a monthly car payment. If the payments for a vehicle are too high, keep looking or something that won’t break your budget.
Do not buy a car with only a “preliminary credit approval.” Financers can provide instant credit decisions while you wait in the dealership. If you decide to take a “preliminary approval” deal, do not take delivery of the vehicle until you receive a final financing approval. A disreputable dealer will pressure you to sign over your old car immediately, before the financing for your new vehicle is “complete”. Do not sign over the title to your old car until the financing is set for your new car.
Bait-and-switch financing is illegal. If the dealer attempts to force you to take a vehicle at a higher interest rate than what was initially agreed upon, return the vehicle and file a complaint with your state Attorney General’s office.
