Scam #1: 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". Some dealers may 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.

Scam #2: 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 profiablr financing. You should then get out of that deal.

Scam #3: 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.

Scam #4: 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. 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. Finance your car online or at a credit union. 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.

Don't fall into the gap!
If you owe more on your car than it is worth, if you lease, or if you put down less than 20%, you should get Gap Coverage from your insurance agent. Most people refer to it commonly as gap insurance". Don't even bother buying it from dealers, they charge $500-$700 when you can get it online directly from the source for less than 1/2 the car dealers. If you owe $20,000 on your car, but it's only worth $16,000, you're upside down. You total the car, or it's stolen, your insurance company gives you $16,000. You must still come up with $4000 to pay off the bank, plus your $500 deductible! Gap coverage protects you against this. The better ones cover up to $500 of your deductible.

Scam #5: 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. 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.

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.

Scam #6: 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. 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.

Scam #7: "We'll Payoff Your Loan OR Lease No Matter How Much You Still Owe!"

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.

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.

Scam #8: 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.

Scam #9: 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, E-LOAN, or Lending Tree. 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.

Scam #10: 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:

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.

-carbuyingtips.com