Car Scams Revealed… Part II

• The Scam: Jeff had his eyes on getting a sporty new car this summer to impress the girls. However, he was told his credit score wouldn't allow him to finance the car. So he was told by the salesman to find a co-signer and maybe then he can possibly get financed. Jeff returned later with a co-signer but weeks later he found out that his name wasn't anywhere written on the loan agreement...

This happens when interest rates rise when fewer people become eligible to qualify for loans. Car salesmen enjoy doing their job simply because it pays them good money. They also enjoy doing their jobs because of the hunt the sales process involves. Similar to hunting for ducks, they will send out pleading messages, hoping you'll trap yourself by responding in the way they want you to.

In this case, Jeff was told by his salesman to find someone who had good credit to co-sign with him. He was also told this will help build up his credit score. The salesman failed to mention to Jeff that with his credit score being not so good, he would be better off purchasing a used vehicle. When Jeff returned with a co-signer, the willing person he brought in was tricked into signing alone for the loan. How did this happen you may ask?

Since the salesman already knew Jeff would be denied for a loan, the only person he had to really sell to was the co-signer. He might come up with great lines such as "This will help Jeff's credit as well as yours," or "There's no other way we can get this brand new car into Jeff's possession without your kind help." So when it comes time to sign the agreement, the co-signer's name will appear solo because that's the only way the car can be financed to Jeff. Jeff loses because he'll be making the payments and it won't even reflect on his credit report that he's the one making the payments. How sad is that!

To avoid this happening to you, if your credit is that bad where you're not able to get a new car loan, then start small and work your way up. Buy a good, reliable used car, pay it off to build credit, and then see what you can do. If your credit is not so bad, but you'll still need a co-signer, insist that both signatures be placed on the SAME contract. Never let the salesman try to separate the signatures. The Federal Trade Commission's Trade Regulation Rule on Credit Practices require that a notice shall be given to the co-signer. Make sure the co-signer gets a copy before signing anything!

• The Scam: "Negotiations have been completed and the contract papers are close be being done. The last thing left to do is sign an agreement. This agreement is something we normally ask for all our customers to sign. It merely states that you agree to settle through arbitration and to not send us to court. Fair enough?"...

Car dealers who have been taken to court in the past mainly do this situation. While not a scam, it's something to look for. Sometimes it's referred to as a Dispute Resolution, Mandatory Arbitration, or Conflict Resolution agreement. It's designed to make sure you don't send them to court for any issues. However, there are some fine prints you must read before signing anything.

There are some car dealers who know that they run shady practices and will do whatever it takes to keep them from the eyesight of judges and the state. This includes having their customers sign one of these agreements. Although not all of these agreements are bad, there are a few that will sneak a few things past you. Here are a few examples of how you can become bamboozled into signing these agreements:

• Signing an agreement where you must pay the entire arbitration fee no matter who wins. This means that even if the arbiter has found the car dealer of negligence or shady practice, you will still have to pay the fee.
• Signing an agreement where the car dealer chooses who will be the arbiter. How do you know the person the car dealer pick is competent enough to know the laws, give open opinions, and show no favoritism? Chances are you won't know.
• Signing an agreement where you cannot appeal the decision made by the arbiter but the car dealer can. Would it be fair if you spent you hard earned money, didn't feel it was up to par so you went the arbitrator route, only to be denied and can't appeal?
• Signing an agreement where you can't participate in any class action lawsuits against the dealership. This means no matter what happens or what they did, there isn't any way you can get compensation if others decided to sue them.

This is why it's so important to read over the ENTIRE agreement before signing anything. Better yet, have your attorney read over the agreement. You can even ask the car dealer whether or not they require such an agreement in order to sell a car, before even test-driving one of their vehicles. In the end, it's always best to read over the agreement before anything else. This will help keep your options open later on down the road should a problem arise.

• The Scam: Everyone remarks on how great your new automobile looks. You got a full detail and have driven the family in it. The whole family eventually falls in love with it. Suddenly, the shrill from the phone clangs against your eardrum. It's the car dealer who sold you the car. They want you to return back to the dealership because of recent developments in your financing...

One of the oldest car dealer scams around, this has been gaining more complaints in recent years. Basically, you purchase a vehicle, sign paperwork, receive the keys and drive home. Then out of nowhere in a few days, you receive a call from the car dealer telling you one of two things:

• You haven't been qualified to receive a low interest rate and they must restructure the contract
• You've suddenly been approved for a lower interest rate and must come in to restructure the contract.

Both cases clearly illustrate how car dealers know beforehand what they could get you financed for. It really a question of how high is your credit score is. For example, if your credit score is sitting around 650 to 680 and above, there shouldn't be any problems finding sources to finance your loan. The main issue here is the "subject to financing" clause.

If the car dealer calls to tell you didn't qualify for a low interest rate, they will tell you to come in to restructure the contract. However, you will have to pay more money than you first started out with. There's another way you can get approved. You can go online to find a company willing to finance the car. If you are approved, then take the check to the dealer. This way, you can still keep the car under your own financing and not worry anymore about the car dealer's tricks and scams.

The second way car dealers use this technique is when they call to say they found a lower interest rate. This is usually a way where the car dealer will increase the length of the contract. For instance, if you first agreed upon paying the car of in 48 months, the car dealer may say that the APR is lower. In reality, all they did was extend the life of the contract from the original 48 months to say 60 or 72 months. This way will also have you spending more money than what you intended to do.

To keep from this happening, it's best to have your financing already approved before heading to the car dealer's lot. This way, the salesman will have no choice but to find the car you want. Then you can escape all the mumbo-jumbo period. By using your own financing, you won't be subject to long monthly payment scams.