Car loan scams. A guide.

Car loan scams. A guide. Nobody likes to fall for a scam, especially when it’s with something as necessary and expensive as a car loan. This article does not mean to scare or give car dealers and car loan lenders a bad name, but to warn borrowers of some of the tactics of the bad apples in the industry. The nature of car loan finance is ideal for scamming. It’s a product most people don’t buy often. It involves sophisticated financial products that can be hard to understand. The contracts that regulate the car loan can include fine print the borrower is not aware of. Thankfully there is a solution. You can protect yourself with knowledge. Knowing about these scams will help you guard yourself from being tricked by them. This series of articles will aim to bring out some of the most “popular” scams and how to see them before you fall for them.

Scam 1. “The finance fell through” scam.

This scam consists of including a small phrase in your contract, namely “subject to loan approval”. This might seem quite harmless. What it really is saying is that signing the sale of the car and the car loan paperwork does not mean you actually own the car. Now comes the scam. The car dealer will wait for two weeks to go buy (or whatever is the maximum time you have to cancel the deal) and tell you that unfortunately your finance provider has fallen through. However they have this other lender that will be happy to provide a loan, although at a higher interest rate and a “small” fee. Many borrowers will simply accept the new loan and pay dearly for it. How can you protect yourself? Make sure the financial side of the sale is final. Or what is even better arrange your own finance online or at a bank and challenge the car dealer to improve the deal. What can you do if you have fallen prey to the scam? Instead of accepting the new loan, find your own finance. If your credit score is above 680 you are likely to be able to get a quick loan online. If your credit is very bad try to get out of the deal and find other ways to improve your credit before you buy a car.

Scam 2. Forgot to pay your the loan on your trade in car.

This scam is brilliant in its simplicity. You trade in your car for your new car. Your old car still has a loan that needs to be paid off. The car dealer says “no problem” we’ll pay the loan for you. Two months down the line your bank calls you to ask you why you haven’t been making your payments on the old loan. You sue the car dealer, it goes to court. The judge then asks you what proof you have that the dealer promised to pay for the loan. There is of course none. This scam allows the car dealer to pay less for your old car. The solution is to pay your old car loan first or if this is impossible to include the agreement in the contract.