Dealer Scam Alert
Auto dealers are urging frantically to leak from the jurisdiction of the new consumer finance protection agency in the financial reform legislation. Dealers argue they already are regulated by state agencies and that the new regulation would stiffen credit for shoppers. The entire debate made the guys at MoneyWatch rise a question: Are they trying to sneak something out of the regulators?
If you are thinking to buy or lease a new car, it is a question you should ask and be ready for. “Car dealers buy and sell money for profit,” says Linda Goldberg, owner of auto brokerage firm CarQ.
One of the most alarming scams this broker has run across is the so-called “yo-yo finance deal.” In this situation, the consumer gets financing over the dealer and thinks he has engaged a deal for payments of, say, $500 monthly. You take the car home. A week later, you get a call from the dealership that says in order to get financing approved; the payment must be $650 a month. Pay up or the car will be repossessed. To protect yourself from the yo-yo scam, don’t get into any contracts that take account of language like “subject to loan approval.” Also, every genuine loan or lease agreement has an endorsement number. Ask the dealership for that number.
Other tactics that you should take into practice are:
Get financing approved in advance. Have your Credit Score on Hand. In another dealer scam, you’re told your credit score does not qualify you for the car company’s low-rate financing when you really could qualify. If your FICO score is 700 or above, you should be qualified for nearly any special promotional financing.
Keep things separated. Dealerships love “payment buyers” who focus only on the monthly payment. That lets the seller wrap all together the trade-in, if any, the price of the new car and financing which makes you unable to see if you’re overpaying. Instead, negotiate based on the new car price after comparing 3 or 4 price quotes from a web site. Then make sure the dealer and finance specialist translate the trade-in allowance, the new-car loan’s interest rate and its term.
Don’t buy any add-ons. Many auto brands now habitually include warranties on the expensive parts such as the engine, transmission and axles-lasting five years or more. That’s generally enough warranty.
