Unless you don’t pay attention to any advertising, you see car dealers blasting low APR (annual percentage rate) financing rates all over your TV and Newspapers.
So when it comes time to buy your next car, you’re going to look for the best deal possible… but looks sure can be deceiving.
A number of car dealers will run a scam that is based around taking advantage of people with low credit scores. We call this the “sorry but we thought you look like a sucker” scam.
Here’s how the scam works:
You’re at the dealer and you see the car that you want. It sparkles, it shines and you’re in love with it. And even more amazing, but the dealer says you can get that kick ass 0.1% APR financing rate on this beauty… that’s the best deal you’ve seen!
So you setup the paperwork, you SIGN the paperwork, you grab the keys and drive that brand new beast home with a huge grin on your face.
The first week or two go by, and you’re still loving your new ride. But the phone rings… it’s the dealer who sold you the car. He says that the financing fell through and that you need to come in for some more paperwork.
“What do you mean the financing fell through?!? You said it was a done deal… we even SIGNED the paperwork!”
“Sorry, but the deal was dependent on credit approval and you did not qualify.”
Usually, you’ll have to pay a further down payment and your finance rates will go up.
How does this scam work:
The car dealer can find out your FICO score pretty easily. In fact, nowadays your credit score can be brought up instantly… and the thing is, if it’s below a certain level, you’re never going to get approved for that amazing APR rate.
The dealer knew you wouldn’t get approved, but it’s much easier to get you in that car with the false hope that you will get the better rate, than to sell you on the same car that will cost you even more. Plus, after you’ve driven it for a week or two, you’re pretty much best friends with your new shiny wheels so you’re less likely to put up a stink.
The car dealers prey on people with low credit scores, so it’s always a good idea to go in prepared.
How to avoid this scam:
The first thing you can do is not get car financing from a dealer. You can get some pretty great deals either online, or from your credit union or bank.
Getting a pre-approval from your bank or credit union for a car loan before going to the dealer can save you a lot of grief, but knowing your credit score will also prepare you.