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Page Sections -
The "VIN# Window Etching" Scam
|The
Financing Fell Through Scam
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The "Lie To The Customer About Their Credit Score"
Scam
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The "Forced Warranty" Scam
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The "Dealer Prep" Scam
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The "Additional Dealer Markup (ADM)" Scam
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The "We'll Payoff Your Loan OR Lease No Matter How
Much You Still Owe!" Scam
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The Previously Wrecked Used Car, Sold "As Is"
Scam
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The "Your Bank Bounces Checks" Scam
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The Forced Credit Application Scam
The "VIN# Window
Etching" Scam
How the scam works: Dealers slip
in a $300-$900 fee for window etching, saying that you won't get the
loan without it, as "the bank requires it". You can order the same
do it yourself kit used by car dealers online from
CarEtch.com for $29. Some dealers may tell you the VIN etch
was free, yet they still padded your monthly payment with the fee.
Some dealers claim it will pay your deductible if the car is
stolen. So why do you have to pay $400 to avoid paying a $500
deductible? What a scam!
Ever since dealers sold the first
chariot in Roman times, they have come up with ways to sell you the
most overpriced option. In the 80's it was Scotch Guard for $400
that you can do with 2 cans of Scotch Guard for $10 at Kmart. Then
there was the $800 "AutoArmor" that claimed you never have to wax
your car again. They still do the $1800 alarm that they paid $100
for, including installation. They sell you these options at maximum
rip-off prices, and it often costs them next to nothing to farm out
the work. Let's analyze the stupidity factor on this Window Etching
scam. Dealers lie and tell you of huge savings on your car
insurance. Most people email us to say their insurance company has
no idea what they are talking about, so no discount. The buyers who
do get discounts get a $6 savings off the theft portion of their car
insurance. It's a legitimate product, but it's not worth more than
$40.
How to
avoid the scam: Have it removed from your papers. If
they say it's free, tell them to put it in writing. If they say
it's already on the car and can't be removed, don't buy the car, and
save yourself $300-$900. You can get your own VIN etching kit
cheaper online. The
VINetcher Do-It-Yourself VIN Etching Kit
is only $19.95. Remember, lenders don't require you to
buy useless extras. The only thing a lender requires you to do is
pay back the loan. Some police departments will do VIN
etching for you for free as a community service.
The Financing Fell
Through Scam (Spot Delivery Scam)
How the scam works: Also, known as
the "Yo-Yo". Lots of people email us about this scam. You trade in
your old car, and the "LieNance" manager says you got a good APR,
hands you the keys, and you drive home. Two weeks and 500 miles
later, they call you saying "Sorry, you didn't qualify for the
interest rate we signed you up for". This is where "subject to
financing" clauses on contracts bite you in the butt. Everyone
thinks that you sign papers and drive off and the deal is done. But
it's far from done. They knew what you qualified for before you
signed, unless you lied about your income. Otherwise they'd never
let you drive off with the car.
They knew your credit
score. If it's above 680, you'll get a low APR. If it's below 680,
expect a higher APR. Your credit union will print your credit
history and approve you in 10 minutes. So why the problems with the
dealer's lender? There usually is no problem, it's a scam. There
is a phrase on most buyers orders stating "subject to loan
approval". This Jedi mind trick means: "The deal is not final, even
though you signed this contract." They'll tell you that you must
produce an additional $1000 AND your payments would go up
$50/month. They pull this scam on people with bad credit, because
it's believable. They get the least resistance from this crowd. If
they pull this scam on smart people like you and me, they'd get
nowhere with it. So why would they tell someone with bad credit that
they got them 6% APR when they knew the buyer would not qualify for
under 18% APR? To sell the car!
How to avoid the scam: This one is
very simple to avoid. DON'T FINANCE AT THE DEALER if you have bad
credit. Try to arrange your own financing then see what the dealer
has to offer. If you have good credit, they usually don't pull this
scam. By
bringing in your own financing, you won't have to endure all the
monthly payment quotes and scams, and the deal will be conducted the
way it's supposed to be: based on the selling price of the car, not
based on the monthly payment. The minute they start negotiating the
car by monthly payment, it's time to leave, as fast as your little
feet can move you. They are trying to condition to you as a monthly
payment, while shielding you from the actual selling price. But if
you do finance through a car dealer, leave a deposit on your credit
card, and do not take delivery of the car until the loan has been
approved in writing. Once that happens, you know the lender has
accepted your loan and processed it. Sure they hand you the keys
and say it's all right to drive off right now with the car, but
don't do it. For other buyers the dealer will tell them on a lease,
that the dealer made a mistake and you need to come back in and
resign a new contract. And gosh golly, your new monthly payment
will be higher. If your purchase was a lease, then it's a contract,
and the dealer cannot make you undo a contract. Just think, if you
tried to get out of lease, they would come after you in court right?
What to do if this
scam happens to you: If you are sure that you at least got a
decent price on the car based on what you learn on this site, then
your best solution is to preserve your deal, by doing what you
should have done in the first place; get your own instant financing
online. If you have a credit score over 650, go online right now to
Capital One Auto Finance or
E-LOAN
and apply
online, and get approved within the hour. They will FedEx you a
check, which you'll have the next day and take that to the dealer to
pay for your car, now you have a guaranteed car loan and the lender
will not call you 2 weeks later to say it financing fell through!
If your score is below 650, then apply through
AutoCreditFinders instead.
If the dealer says
they won't take the checks because "the checks from online lenders
bounce" they are lying, and just trying to railroad you into their
profitable financing. You should then get out of that deal.
The "Lie To The Customer About Their Credit Score" Scam
How the scam works:
This is one of my favorite Jedi Mind Tricks. The Lie-nance manager
lies to you about your credit score, telling you it was really low,
so you now have to pay a much higher car loan interest rate than you
thought. This scam is pulled on people with good credit too. It's
funny, most people know their own cholesterol levels, but they don't
know their own credit score.
One buyer told us
his score was 780 (Excellent) from 3 credit bureaus. At the car
dealer he filled out a credit application. Four finance people came
out with "concerned looks" and a paper that said "credit score" on
it with the number 580 circled in red. They stated they could only
get him financed at 10.9% APR, not the special 0% interest rate. He
pulled out his own credit score with 780 and asked why the dealer
was different from his
Equifax
credit report.
Three sales guys scattered, the last guy lied, saying that "credit
agencies display better credit scores to consumers than to
businesses". Our friend bought his car elsewhere with the low 0%
advertised APR. Quite often car buyers are suckered into paying a
much higher APR by dealers.
How To Avoid The Scam:
No salesperson
should know more about your credit history than you. If they pull
this scam, pull out your credit score and put a stop to it. This is
why we stress that you should have your financing 100% lined up
before you buy your car. Then give the dealer a chance to beat your
best car loan quote. If they pull any funny business, pull out
your bank draft from your previously lined up car finance
institution, or just leave.
The "Forced Warranty"
Scam
How the scam works: An old one
that's still in use. You're in the business office of the "AutoMaul",
ready to sign the papers when the LieNance
manager says you MUST buy a $2000 extended warranty "because the
bank requires it, or you won't get the loan". Let's analyze
the stupidity factor of this one, shall we? The lender is worried
about your ability to pay back a loan on a $25,000 car, so they want
you to add another $2000 to the loan to qualify? Please! Many
suckers fall for this and the credit life scam. Some dealers don't
even tell you that you're buying a warranty. They may lie and say
it's a buy down fee "to lower your APR", like points on a mortgage.
Car loans don't work this way. Just think, if you paid cash for the
car or came in with your own financing, they could not pull this
scam on you could they? It's amazing how many people complain to me
that they did not see it on the paperwork until they got home! I
guess during the 20 minute drive from the car dealer to their house
is when they mastered reading. If I live to be 100 I'll still never
figure out why they don't look before they sign. People will spend
more time analyzing a $2.00 watermelon in the grocery store than
they do for a $20,000 car!
How to avoid the scam: Have them to put it in writing
that the warranty "is required to be approved for your loan", so you
can show it to your State Attorney to get their opinion of its
validity. Watch how quick they back off.This scam works on
people with bad credit and may also "require" you to buy credit life
insurance, or "your APR will go up". One of our visitors sent us
her Ford paperwork with extended warranty, credit life, and
disability for $3385! Do they want to sell you a car or insurance?
If they refuse to remove the extended warranty, remove yourself from
that devilship immediately. (Oops, I meant to say dealership). Many
dealers sell you mechanical breakdown warranties, which are lame
compared to the superior wear and tear warranties offered online.
Also, dealers typically charge $500-$700 for Gap Coverage, which you
can get from your own insurance agent for less.
Another way to avoid the scam:
DON'T FINANCE AT THE DEALER with bad credit.They won't
force you to buy a warranty. Now you just eliminated the dealer's
excuse to force a warranty down your throat. If you get a loan from
a bank, credit union or online lender, they don't force a warranty
or credit life on you, so why would a dealer? Why does APR matter
whether you buy a warranty or not? It's all cash flow shell games
folks, remove their shells, and no more games.
The "Dealer Prep" Scam
(Excessive Fee)
About This Fee:
A better definition here is "Excessive Charge", since this is not
really a fraud, nor is it illegal per the literal definition of
"scam". Most dealers do adequately disclose this fee on their
paperwork. Many dealers even admit that its a way for them to
recover some of their "losses" when discounting the car off MSRP
retail price. But our position is that it is too excessive, and
since it is printed permanently on their buyers form, what about the
case when you pay full price on the car, now you have to pay up to
$500 more in fees? Why don't you get to charge dealers a shopping
around fee for all your labor hours? Car dealers convince you that a
team of NASA experts performed a 3 day 15000 point check of your
car. Dealer prep "covers their cost" of removing plastic from the
seats, vacuuming, adding fluids, and preparing it for sale. Total
time: 2 hours max. I've been
there when picking up my new cars and know how long it really takes.
Tons of our visitors report back that they convinced their dealer to
drop this fee. But most MSRP stickers show these costs are covered
by the car maker, so why does the dealer still charge you?
The factory pays the dealer for
this pre delivery service. The day my Lexus SC300 arrived, I waited
as it took the dealer 2 hours to peel film and cardboard, install
fuses, check the liquids, perform a 10 mile test drive, and hand me
the keys. I got out of paying it. If a dealer charges a $500 dealer
prep, you're paying them $250/hour for just 2 hours of work! Do YOU
get paid $250 per hour? Are you boiling mad yet? If they charge
dealer prep, they may be double collecting.
How to
avoid the fee: Often it's permanently printed on the
buyer's order to make you think it's mandatory, but many people make
the dealer remove it by adding a credit on the next line. So if you
see a $500 dealer prep on the form, have them add a -$500 credit.
If they won't budge you need to decide how bad you want that car. I
have no problem walking out of a dealer over a $500 fee. Go to the
next dealer on your list, and tell them "Here's the deal. Drop the
dealer prep, and the deal is yours". Remember, Dealer Prep is not
illegal, either you agree with it, or you don't.
The "Additional Dealer
Markup (ADM)" Scam
How the scam
works: These are bogus charges added by greedy dealers.
It means "Additional Dealer Markup" or "Additional Dealer Profit",
and usually appears on an orange sticker next to manufacturer's MSRP
sticker. I call it Arrogant Dealer Markup.
ADM gives them an artificial buffer to bargain down the price, or
worst case, it gives them more icing on the cake when they are
already selling you a hot car. In 2001 when Honda Odysseys were in
such hot demand, car buyers were paying $2000 over MSRP, thanks to
bogus ADM fees. Honda dealers also had the audacity to charge
people dealer prep, ad fees, and throw in overpriced extras like
$350 Window Etching, and $300 Scotch Guard. The
VINetcher Do-It-Yourself VIN Etching Kit
is only $19.95! If you bought a new Odyssey or PT Cruiser in
2000 or 2001, you really had the screws put to you. If ADM is $2000
and you talk them down $800, you still paid $1200 too much! One
reader bought a Honda Civic and the dealer tacked on a $1995 ADM!
Luckily she got them to drop it. "Trade in buyers", who only care
about what they are getting for their trade in, fall for this one a
lot, because they don't concentrate on the entire deal. The dealer
gave them an extra $1000 for their car, an now they are so euphoric
they don't see the $2000 ADM. The dealer just sold them a new car
for MSRP, got their $1000 back, and made another $1000 off the
buyer. In April 2002, our local Mercedes dealer had an ADM sticker
of $20,000 on the 500 SL Convertible, when there was an 8 month back
log.
How to avoid the scam: If you see
this toxic waste, have them nix it. You must realize that when you
sell the car later, the market value is based only on a depreciated
value from MSRP, not MSRP + ADM. A future buyer of your car could
care less that you paid $2000 over MSRP, because vehicle
depreciation pricing only accounts for the MSRP.
The
"We'll Payoff
Your Loan OR Lease No Matter How Much You Still Owe!" Scam
How the scam
works: These are common ads on the radio and newspaper
all the time. They rely on your brain to trick you, as if the
obligations of your current lease or loan just magically vanish.
You can't just dump a lease, it's a contract. By breaking the
contract, penalties are stiff, in the thousands. They do get
you out of your current lease, but these payoff penalties must be
paid to your leasing company to end the contract. They are not
doing anything at all for you, they just want your trade in so they
can give you far below market value for it, while selling you a new
car at a high profit. Then they resell your trade in for a high
price. Here’s how the scam works: If you are upside down on your car
loan and you still owe $10,000 for it, the dealer pays off your
loan, then you owe that $10,000 to the dealer. This gets financed
along with the $15,000 car you are buying, now you are financing 2
cars for $25,000! Did you know that?
Your payments are spread out over 60 or 72 months so you don’t
notice what just happened. The more months they add to the loan,
the lower the payments so you don’t notice. In fact, it's possible
that the payments could be less than your current loan, so you think
you're saving money when you just got shafted! Their ad made you
think that trading in a car relieves you of your obligation to that
car. It does not! This gets many, many, many people into trouble.
You are actually taking on double your current debt, when you
thought you were dropping one debt for another and buying a new car.
They lied to you in their ad. Sure they did get you out of the
lease or loan, but you are not really out of it. They dipped you
out of it and then dipped you right back into it under their
umbrella of debt. Very clever trick, but now you're onto them.
Next time you hear those ads, you'll know what they're up to. Here's
how ads would be worded if they were truthful:
"We'll Get You Out Of Your Current Lease,
then we'll
roll what you still owe plus penalties into your new purchase,
so you can
payoff 2 cars!"
How to avoid the scam: If you are
in a lease now, it's best to stay in it until the end. Ride it out
baby, you slaughtered the cow, now you have to eat it. If you are
upside down on a loan, now is not the time to trade in the car. You
need to wait until the car is worth more than what you still owe on
it. Try selling it privately. By mixing a trade-in with a new car
purchase, you will lose the maximum amount of money possible. Don't
ever think you walked away ahead on a trade in. No one ever has.
No one ever will.
The Previously Wrecked
Used Car, Sold "As Is" Scam
How the scam works:
The dealer tries to sell you a car that has previously been wrecked,
only they tell you it's in great shape, or lie about the wreck, or
in some cases, they were honestly unaware the car was wrecked. The
car has the federally required Buyers Guide sticker with the words
"As Is, No Warranty" on it, which means you are buying this car and
assuming all risks, and cannot return the car, because you agreed to
all accept any damages that accompany your "As Is, No Warranty".
Even "Certified
Used Cars" can be previous wrecks, as we were surprised to find once
after running the VIN on a certified used Lexus. We get emails all
the time from people who believe the dealer when they are told the
car was never wrecked, then they find out a few weeks later when
they bring it in for service that it was wrecked. When they
confront the dealer, they are reminded that they signed an "AS IS"
paper, and have no recourse, because they can't prove anything. The
As Is paper is the best alibi the dealer has to fall back on. You
however, have nothing to fall back on.
How to avoid the scam: Never ever
buy a used car from a dealer "AS IS" with no warranty. Always try
to get at least a 30 day warranty. If the car really is the cream
puff they make it out to be, let them back that up with a 3 month
warranty. You should always run a
CARFAX
report on any used
car before you buy, no exceptions. That's how we found that a Lexus
dealer's Certified Used Lexus had been in a wreck. Always have a
mechanic put the car on a lift BEFORE you buy. They can tell you in
30 seconds if the car was wrecked. Many people fail to perform
these crucial 2 steps. If you don't do these steps, then DO NOT buy
that car.
The "Your Bank Bounces
Checks" Scam
How
the scam works:
The dealer sees that you brought a bank draft from your credit
union, or one of the finer online car finance sites such as
Capital One Auto Finance, or E-LOAN
Not wanting to miss out on the extra gravy provided by selling you
on the car dealer's financing, they refuse to take your bank draft,
lying to you that your "bank bounces checks." They will say
"we no longer take checks from them, their checks always bounce".
But gee, the dealer is willing to provide you financing, though at
higher APR.
Some salespeople stop at
nothing. If your bank really bounce checks, we'd hear about it via
federal investigations, like the morons from Worldcom, Adelphia, and
Global Crossing. I get daily emails from people who financed with
E-LOAN
and
Capital One Auto Finance
with no problem. My friend financed 2 used cars with
Capital One Auto Finance.
Another financed his house through E-LOAN. Besides, E-LOAN wires
the money directly to the dealer's bank account, so it's impossible
to "bounce a check". There's nothing wrong with dealer financing if
they can beat your best APR. If not, you should use your
financing. Unless you qualify for a manufacturer's 2.9% financing,
your online banks will beat the local banks used by dealers most of
the time, and online lenders often beat your credit union rates
too. Regardless of their reasoning, if they refuse to take your
online financing, you can just refuse to buy the dealer's
financing... and the car too!
How
to avoid the scam:
Ask the lie-nance manager what bank they use for car loans. When
they tell you, say that you refuse to do a loan with them, you heard
they bounce checks. Then point out to the finance manager that
you're onto their scam, online banks have been in business for years
and are in the business of writing loans and not bouncing checks.
Then get up to leave. There is no reason for you to pay a higher
APR, when you are already approved at a lower APR. You should also
file a complaint with your state
Attorney General's Office, because we need to make this scam
illegal for dealers who force you into higher APR financing. I get
emails on this scam daily, and if the state attorneys do not know
this is going on, they can't help us consumers. The federal
government should wrap this into the Truth In Lending Act.
The Forced Credit
Application Scam
How
the scam works:
You decide not to finance your new car, or you bring your own bank
draft from a major car finance company. You're in the finance office
with your bank draft or money order, and paying in full. The
LieNance manager tells you that you must still sign a credit
application. They usually will tell you one of the following Jedi
Mind Tricks:
1) "State law
requires you to fill out a credit application."
2) "Everyone that buys a car through this dealer fills out a credit
application."
3) "It's company policy."
Somebody find me a state statute
that requires a cash buyer to fill out a car loan credit
application. Won't happen. If you are paying in full, there cannot
possibly be any legitimate reason for the dealer to make you fill
out a credit application, which drags down your credit score about 5
points each time someone other than you runs your credit report. If
your FICO score was 680 and they run your credit report, they just
caused you to drop from a prime borrower to a sub-prime borrower.
Why do they do it? Who knows, maybe they think they can convince
you to finance through them.
How
to avoid the scam:
You are in control of the deal, not them. You can just get up and
walk out. They have to stay there and mop up the mess they
created. Anytime a dealer tries to force you into financing that
you don't want, without any regard to the damage they are doing to
your credit history, you should leave immediately, because they
don't deserve your money. |
Is it a loan or not a loan?