Scammed at a Bad Credit Car Dealership: The Signs

Not all bad credit car dealerships are out to get you, but some of them are. This means you need to understand a few of the tricks they use to get more money out of you. Sadly, this is an unregulated field when it comes to the sales contract. There are only a few laws in place to protect consumers from these scams, so you need to pay attention and be alert while cutting a deal, especially if you have bad credit. These scams can be used by any type of dealership, so you could be paying much more than you actually need to; regardless of your credit score.

Here are a few of the more common scams the dealers use; along with some signs too watch out for.

Yo-Yo Scam

This is probably one of the most common scams used by dealerships, and happens even more for those shopping with bad credit. The worst part; you don’t even know it’s happening until after the sale has been “finalized.” 

What happens: the dealer shows you the car you can afford, and tells you how much it will cost. You agree, and decide to get financing through them. Great! They find you a loan and spin up the contract, and after glazing over while reading it you sign the contract, leaving with your new car. The next day (or week/month) later the dealer calls you and says your financing fell through and you need to come back. You go back to the dealership and they say you are unable to afford the car. If you want to keep it, you’ll need to put a bigger down payment on it or pay a higher interest rate, or both. It’s either that, or you need too return the car; and if you don’t they will simply repossess it.

Don't sign the contract until you have read through it thoroughly
Don’t sign the contract until you have read through it thoroughly

While this can happen in an honest sale, it’s a very rare occurrence. Where did you go wrong? The answer to that is the contract. Because you glazed over it, you missed the part where the contract said the sale is “conditional.” This means the dealer has the right to take the car back if your financing actually does fall through. Sadly, there is a loophole here that can be abused if you don’t pay attention enough.

If you read over the contract and see anything that says the sale is “conditional,” either walk away from the dealership or get them to change “conditional” to “final.” This makes it so this yo-yo scam won’t happen to you. By saying the sale is final, the only way they can take your car back is by repossessing it. If they decide to do that, they now need a legitimate reason besides your “financing falling through.”

Bait and Switch

Similar to the yo-yo scam is the bait and switch tactic. This is another very common scam that is used by auto dealers, especially when they are dealing with people who have bad credit. If you have bad credit, the dealer will do the financial work for you, and then tell you the type of car you can afford. This can be good or bad depending on if they are honest or not. If they are dishonest, you could end up paying a lot more than you were originally told.

The interest rate on your loan could go up if this scam is successful, causing you too pay much more over a longer period of time.
The interest rate on your loan could go up if this scam is successful, causing you too pay much more over a longer period of time.

The salesman will give you a price on the car you are interested in; but it won’t line up with the one in the contract. If you don’t read the contract thoroughly, this is something that will slip by you. A sign that you are about to be ripped off is if the salesman tells you one price, then the dealership doesn’t let you finance the car on the agreed price. This is because in your contract, the total cash price is higher than the one the salesman told you. Meaning, if you want that car you are now contractually obligated to pay that price. But, nothing is binding until you sign that contract. With that being said, the best thing to do in this situation is just walk away, because this is considered fraud.

Add-On Fees

Some dealers will also add on unnecessary packages that bump up the price, allowing them another way too make a buck. If you have bad credit, you aren’t interested in a rust-proof protection package; you just need a car. Packages like this are all “add-ons” to your contract that the dealer can include in the total cash price. If you read the contract and see that the price is higher than what was originally agreed on, read it carefully. If you see any “packages” added that are bumping up the price, tell them you don’t want them.

If you don’t want them, make sure it’s physically changed on the contract. If not, you will sign it and still end up paying for those packages. A verbal agreement that it will be removed from the price is not enough. A dealership might try and strong-arm you into taking these packages by saying it’s the only way for you to get the car. If they do this, just walk away. This is not only rude, pushy, and a bad sales pitch; it’s also illegal.

Credit Score Scam

This one is far more financially detrimental for somebody with good credit, but it can still hurt if you have bad credit. If you go to a dealership with bad credit, you are putting your faith in their hands. They will find you a lender, get you a loan, tell you what car you can drive, and even tell you your credit score. This might be good if you need some help with the financing process, but it can also be very bad. If you have good credit, they will trick you into thinking you have bad credit. If you have bad credit, they will trick you into thinking your credit is even worse. Regardless of credit, this results in a much higher interest rate you will need to pay on a loan. The idea behind this strategy being to convince you that the high interest rate is a good deal.

Having your credit score before you go into the dealership gives you the upper-hand.
Having your credit score before you go into the dealership gives you the upper-hand.

There’s really no way for you to know it’s happening, but there is a preventative measure. Finding out your own credit score is simple, there are plenty of websites that give you a free credit report once a year and you can utilize these sites to your advantage. Walk into that dealership like you own the place, and slap your credit score down on the table. Now, there is no way for them to use your credit score against you, because you know it.

Moral of the Story? Read, Read, Read

There are a few other behind the scenes scams that can happen. A brief example being the dealership giving you the worst deal on a loan that makes them the most money. You won’t see any signs that set off red flags, these scams can only be prevented. At the very least, go into the dealership with your credit score already figured out, and commit yourself too reading the contract; thoroughly. Most of the situations mentioned can be avoided simply by making sure everything on the contract is in order, and matches up with what the salesman told you. 

Bottomline: if you ever feel uncomfortable with a deal, chances are there is a reason for that. Trust your gut, and go with your instincts.

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