Dealer car loan scams, how to spot them.

Dealer car loan scams, how to spot them.

It is easy to pull of car loan scams on most people. Why? Because most people don’t know anything about car loans. Let’s illustrate this, just after the fall of the iron curtain advertising began in an Eastern European country. One of the adverts depicted a mop that would mop by itself if a certain washing liquid. The viewers actually wrote to complain that the mop did not perform as advertised. They were actually duped into believing that what the advert said would really happen! How naive! Unfortunately that’s exactly what most of us do when we see car loan adverts. This is not to say that we are implying that all car loan adverts are lies, far from it. Most banks will do their best to represent facts correctly while still putting the offer in the best light. The point I am trying to make is that when you know how a system works you know what you are supposed to believe and what is meant to be taken with a pinch of salt. For instance when mops start cleaning the house by themselves that is a figure that really means the liquid is really good. And everybody knows this, so nobody is really duped, if they know the system.

Something similar happens with car loans, and any kind of financial product for that matter. If you understand how the system works it is quite safe. If you don’t understand the language then it is easy to make mistakes. This article will visit just a couple of the scams dealers and loan providers might use.

How to spot them?

It is hard to provide a fit all rule but a good rule of thumb is: If it sounds too good to be true then it probably is. Statements like: Bad credit, no problem,  90% of applications approved or we will buy your car no matter the condition, are at least to be taken with a measure of suspicion. This does not mean that all of these statements are untrue all the time or are not correct at some level. It just means you have to be careful you really understand what it means. Just like you understand that when a person drink an energy drink they don’t really grow wings, but that they have a little more energy.

Bad credit, no problem.

Some statements have to be viewed with even a little more distrust. “Bad credit, no problem” is a good illustration. It might be true they will offer credit to people with bad credit, but it certainly won’t be cheap. The worse your credit the more expensive the loan will be.

Confusing interest rates.

This is a part of car loans that is worth understanding in detail before buying a car loan. There are many ways of calculating interest, monthly, daily, yearly, it can be expressed as an index rate of the going rate. This makes fair comparison difficult as you don’t know what you are comparing and which is really cheaper.