Unless the dealer is financing the vehicle you’re buying, you are under no obligation to let him or her run a credit report. It's important to safeguard your private information at all costs.
Scam: Financing Falls Through
Unscrupulous car dealers might fiddle with your financing as a way to jack up their profits. It can happen several ways. One that CarBuyingTips.com's Ostroff hears about a lot involves car buyers getting called back into the dealership a week or so after purchasing a car, or so they thought, under the premise that the financing fell through. Once you're back, the dealer tries to renegotiate the interest rate based on whether you buy extra services, warranties or accessories. They might also try to focus on the amount of the monthly payment to divert attention from the fact that the total amount being financed has gone up. Another variation on this scam involves dealers letting you drive off the lot without finalizing the loan papers, promising that they'll work it out. But when they call after several days, the terms of the loan have changed or the monthly payments are more than the buyer can afford, which opens the door for the dealer to "refinance" the vehicle and increase his or her profits.
Warning Signs: Dealers who offer to let you take a car home but don't finalize the loan terms might not have your best interests at heart, especially if you've already agreed to leave your trade-in with them. If you get a call about a problem with a loan several days after signing an agreement, be suspicious. Also, a dealer shouldn't increase or lower the loan interest rate based on whether you'll buy extra warranties or dealer services.
How to Protect Yourself: Line up your own financing before going to a dealership. Compare the interest rate of the loan you already have with what the dealer offers and go with whichever one is better. When negotiating with dealers, experts recommend focusing on the total cost of the car, not the monthly payment. Dealers can sometimes monkey around with the total amount being financed if you're too focused on the monthly payment.
Scam: Credit/Identity Theft
Some dealers might want to run your credit report even if you have your own financing. They might tell you that it's required, perhaps because of the Patriot Act. You are under no obligation to let a dealer run a credit report for this reason. Reeves, of the Indiana secretary of state's office, has seen cases where a dealer secured multiple loans under a consumer's name for the same vehicle, without the consumer's knowledge.
Warning Signs: If you already have a loan to purchase a vehicle and the dealer insists that you need to fill out a credit application, something is wrong.
How to Protect Yourself: It's important to safeguard your private information. "It would be a good idea for consumers to run a credit check a couple of months after purchasing a vehicle, just to make sure that there aren't any other loans that they don't know about," says Reeves.
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Scam: Misleading Advertising
Of all the scams on this list, misleading ads are perhaps the most innocuous. We've all seen deals listed in the paper that seem too good to be true, only to read the fine print that says only one model is available at that fantastic sale price.
Warning Signs: "Be very cautious of any ad where there is only one vehicle listed at a given price," says Chris Denove, vice president at J.D. Power and Associates, "because if that's the case, you may go in and find a similar vehicle in a different color that is not available at that price."
How to Protect Yourself: Read the fine print, and call the dealer ahead of time. If you are going to respond to a 'too good to be true' ad, call to verify the availability and the price of the vehicle you want to look at. "And do it immediately before you go into the dealership to minimize the chance that it's sold when you get there," Denove says.
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Matthew de Paula wanted to be an automotive journalist ever since reading his first car magazine in grade school. After a brief stint writing about finance, he helped launch ForbesAutos.com and became the site's editor in 2006. Matthew now freelances for various outlets.
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