BUY CAR DISTRIC OF COLUMBIA - TIMING IS EVERYTHING — DRIVER-START.COM
When you have little or poor credit, WHEN you try and buy a car can be a big issue. If you are thinking about purchasing a new car with bad credit, timing is important.
Sadly, millions of people are living with bad credit.
Unfortunately, it takes time to improve or boost credit rating. Still, if you need to buy a new car, there are options. Before buying a car, carefully consider whether now is the right time.
If you are hoping to quickly improve your credit score, buying a car with bad credit is a wise move. Rebuilding or re-establishing credit is challenging. However, if you obtain an auto loan, and make regular payments, your credit will improve in as little as six months. Increasing your credit score opens the door for lower rates on future auto loans and credit account.
Because bad credit auto loans have higher interest rates, you must be in a position to afford higher monthly payments. If possible, finance a low amount. You may choose to buy an inexpensive car, or purchase the car with a sizeable down payment.
AVOID SCAMS
When you’re working so hard to get the car you want, you need to be sure you are not being taken advantage of by unscrupulous car dealers. Unfortunately, there are many people out there all too ready to sell you a lemon with high car payments.
There are many ways a dealer can try to scam you.
Thanks to a great website, driver-start.com/district-of-columbia, will help you. There are high-quality content, free practice tests available for all US states.
“The Financing Fell Through”
This is the oldest trick in the scam book, increasing in 2005. How it works is you buy a new car, the finance manager says you got a low APR, hands you the keys, and you drive home. Some time later after you’ve been driving the car happy about your great interest rate, the dealer calls you saying “Sorry, you didn’t qualify for that low interest”.
This is where “subject to financing” clauses on contracts bite you in the butt. Everyone thinks that you sign papers it’s a done deal. The dealer knew exactly what you qualified for before you signed, unless you lied about your income. They knew your credit score when you applied.
There is a phrase on most sales contracts stating “subject to loan approval”. This means that 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. They pull this scam on people with bad credit, because it’s believable and they figure you’ll just pay up somehow so you can keep your car.
To avoid this scam, DON’T FINANCE AT THE DEALER if you have bad credit. Line up your own financing and compare to dealer’s financing. By using your own financing, you won’t endure monthly payment scams, and the deal will be based on the selling price of the car, not monthly payments.
If they start negotiating the car by monthly payment, it’s time to leave. If they keep trying to shift your APR up or down depending on whether you buy a warranty or VIN etching, it’s time to leave. 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 a few days later. Then you know the lender has approved your loan.
If this scam happens to you, you’ll have to decide whether or not you feel you got a good enough deal on the selling price of the car. If you got a good price on the car, your best solution is to preserve your deal and get your own instant financing online.
If the dealer refuses your online check, you should try to get out of that deal. File a complaint with the Better Business Bureau at BBB.com, and file a complaint through your state’s Attorney General web site. They are all aware of Spot Delivery Scams.
“The Straw Purchase”
This type of scam has increased in recent years.
Incidences of this typically increase when interest rates go up, and fewer people qualify for loans as lenders tighten their belts. Even though we touched on this scam earlier under the section on co-signers, it bears repeating because this type of scam can happen before you know it has.
A straw purchase traditionally refers to handgun sales.
When one person buys a handgun for a person who is ineligible to own one, it’s called a Straw Purchase, carrying stiff penalties. That’s how the Columbine High School student shooters got their guns.
With car buying, the dealer tells you that with your horrible credit score, you can’t qualify for a car loan so you need to get a co-signer, plus they tell you that it will help build your credit again. The dealer knows your horrific credit score could not possible ever qualify for a loan, even with a co-signer.
So you find a co-signer who is duped by the dealer during the paperwork shuffle, and is tricked into signing as the primary borrower. Later, you find the dealer did not process a co-sign loan, the entire loan is in your co-signer’s name!
Obviously, this does not help your credit, even though you are paying the monthly payments, because the loan is in someone else’s name, and the car dealer lied to you.
State laws are vague but some states like Texas have laws against Straw Purchases on cars.
You can avoid this scam by having both signers there at the same time when the papers are being presented. Both signatures should be on the same contract. NEVER sign separate contracts. There should be a separate line item for co-signer.
A notice to the cosigner is required by the Federal Trade Commission’s Trade Regulation Rule on Credit Practices. The cosigner should ask for a copy of that before they sign it.
“We Forgot To Pay Off Your Trade-In”
You trade in your old car which you still owe money on, and the dealer is supposed to obtain a payoff figure and payoff the loan for you and add that payoff amount to your new car purchase. But something horrible happens. Some time later, you are shocked to hear the new car dealer did not pay off your old car loan as promised.
With this scam, dealers effectively pay you less for your trade than they promised or steal it altogether. When the bank calls, YOU are responsible for the loan, not the dealer. The car loan is still in your name, until the dealer pays it off. As far as the bank is concerned, they have a loan with YOU, not a dealer and it’s in your name until paid off.
Then, your credit gets dinged with late payment alerts from your bank. If you try to sue the dealer, the judge will ask to see your contract with the dealer obligating them to pay off your old car loan. Of course there will be no contract and you are making twice the payments or ruining your credit.
To avoid the scam, it is recommended first that you not buy a new car when you still owe money on your current car. If you pay it off yourself first, you can get your title from the bank, and then trade it in or sell it privately. Then you can pay off your loan with sales proceeds.
When you trade in a used car on which you still owe money in order to buy a new car, make the dealer put in writing that he will pay off your car loan in 10 days, or there’s no deal. Then the dealer is liable in court for that payoff. You don’t want to end up in court without proof that the dealer was supposed to payoff your trade-in.
If the dealer refuses to put these promises in writing, it means they will probably pull this scam on you, and you need to leave immediately, taking your business to a more reputable dealer. It’s the same with houses and cars, if you call for a payoff figure, you typically have 10 days to pay off that loan or interest will accrue. Most dealers are good, but a dealer who pulls this scam should know better.
“Lying To You About Your Credit Score”
This scam begins with the finance 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, as it works well because most people do not know their own credit score.
Avoiding this scam is actually quite easy. No salesperson should know more about your credit history than you. You need to obtain a copy of your credit report and bring it with you to the dealership. If they try to pull this scam, pull out your credit score and put a stop to it.
Oh yes, and enjoy the look on the face of that finance guy when you pull out that credit report and show him you know he’s trying to scam you. Then walk out of the dealership with a grand flair!
“Your Financing Check Bounced”
This scam is pulled on people who have taken the time to obtain their own financing and are able to go to the dealer with a check in hand from their financing company. The dealer sees your bank draft from a credit union, or online car finance sites. Not wanting to lose the extra gravy of selling you the car dealer’s own financing, they refuse your bank draft, lying to you that “online lenders bounce checks.”
They will say “their checks always bounce, so we don’t take them”. But by golly, the dealer is more than willing to provide you financing, at higher APR. Some financing companies are almost household names and many car buyers would immediately doubt the salesperson’s lies. So the dealer may also tell you “well, they take too long to pay us”.
Some salespeople stop at nothing. If your lender was bouncing checks, you’d certainly hear about it. There’s nothing wrong with dealer financing if they can beat your best APR. If not, use your online financing.
Unless you qualify for a manufacturer’s 2.9% financing, online banks will beat the local banks used by dealers most of the time, and online lenders often beat credit union rates.
If a dealer spews out this scam and refuses your online financing, you the customer need to retain control and refuse to buy from that unethical and slanderous dealer.
There are plenty of ethical dealers who eagerly accept online loans without the lies.
Tell the finance manager you’re onto their scam, and that online lenders have been in business for years and fund loans without bouncing checks. Then get up to leave.
You should also file a complaint with your state Attorney General’s office because this scam needs to be made illegal for dealers who force you into higher APR financing. if the state attorneys do not know this is going on, they can’t help consumers.
“Forced Warranty Scam”
This scam has been around for awhile and unfortunately, it’s still in use. You’re ready to sign papers when the finance manager says you MUST buy a $2000 extended warranty “because the bank requires it, or you won’t get the loan”.
OK, first let’s take a look at this a little closer. The lender is worried about your ability to pay back a $25,000 car loan, so they want you to add another $2000 to the loan to qualify? Doesn’t quite make sense, does it? Many people will fall for this scam.
Some dealers who quote monthly payments don’t even tell you that you’re buying a warranty. They tell you “it’s included” to make it sound like it’s free. The warranty is included, but you’re paying for it. It’s amazing how many people don’t see it on the paperwork until they got home!
This scam often accompanies the Spot Delivery Scam. Some finance managers start playing games with the APR if you buy the extended warranty, some claim the APR goes
up if you don’t buy the warranty. Since when does the interest rate have anything to do with a warranty? They lie to you about this because they know that you know nothing about it. The only thing that determines the APR you will pay is your very own personal FICO credit score — nothing else whatsoever, not the cost of the car, and certainly not buying a warranty.
To try and counteract this 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, and the Better Business Bureau. Then watch how quick they back off.
This scam works on people with bad credit and they also “require” you to buy credit life insurance, or “your APR will go up”. If they refuse to remove the extended warranty, remove yourself from that dealership immediately.
Many dealers sell you mechanical breakdown warranties, which are lame compared to some of the wear and tear warranties offered online. Also, dealers typically charge $500-$700 for gap Insurance. What is gap insurance?
Basically, gap insurance will pay the difference between what you owe on the loan and what the car is actually worth in the event that the car is stolen or destroyed. In general, gap insurance can be beneficial for you if you are unable to put 20 percent down on your car or if you roll the balance from your old car loan onto your new car loan.
You absolutely DO NOT have to purchase gap insurance from the dealer. It will be much higher than what you can find on your own. In fact, you can get gap insurance online for half the price that car dealers sell it for. So if the dealer tells you the bank requires gap insurance, tell them you will go get it yourself.
Another way to avoid the scam is to not FINANCE AT THE DEALER if you have bad credit. Finance your car online or at a credit union. Then they can’t force you to buy a warranty, you eliminate their excuse to force a warranty down your throat, and you have control over your car loan instead of them.
Credit unions and online lenders don’t force a warranty or credit life on you, so why would a car dealer? Why does APR go up if you don’t buy the dealer’s warranty? Because of cash flow shell games. Remove their shells, and there are no more games!
“Dealer Prep or Excessive Fee” Scam
A better definition here might be “Excessive Charge”, since this is not really a fraud, nor is it illegal. Most dealers do adequately disclose this fee on their paperwork. Many dealers even admit that it’s a way for them to recover some of their “losses” when discounting the car off MSRP retail price.
However, this fee can be too excessive, and since it is printed permanently on their buyers form, what about the case when you pay full price on the car, and you have to pay
$600 more in fees?
Salespeople try to convince you that a team of NASA experts performed a 3 day 15,000 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.
If a dealer charges a $600 dealer prep charge, you’re paying them $300 an hour to make your car ready to go! Who in the world besides perhaps Bill Gates gets paid $300 and hour?
Don’t fall for this. You see, the factory pays the dealer for pre-delivery service and it is already included in the MSRP. This is just a way for dealers to get extra money out of you.
Often, this fee is permanently printed on the buyer’s order form 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 $600 dealer prep on the form, have them add a $600 credit.
If they won’t budge you need to decide how bad you want that car. You should have no problem walking out of a dealer over a $600 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, but it gives you zero intrinsic value. Either you agree with the fee, or you don’t.
“We’ll Pay Off Your Loan No Matter What You Owe”
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 or loan, it’s a contract. By breaking the contract, penalties are stiff, in the thousands.
When a dealer offers this to you, they do get you out of your current lease or loan, but payoff penalties must be paid to your leasing company to end the contract. The dealer is not doing any favors 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, while you are stuck paying off the debt load of 2 cars.
With this scam, if you are upside down on your car loan and you still owe $10,000 for it, the dealer pays off your loan, and 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! 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 deeper into financial 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 misled you.
Sure they did get you out of the lease or loan and into a new car, 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.
If you are in a lease or a loan now, it’s best to stay in it until the end. 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. If you really need to get out of your lease, shift your strategy from terminating a lease early to a strategy of transferring your lease to another buyer via an auto lease trade. You can find reputable companies online willing to do this.
“Previously Wrecked Car Being Sold As Is”
In this scam, the dealer tries to sell you a car that has previously been wrecked, only they tell you it’s in great shape, they 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 used 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.
Many people believe the dealer when they are told the car was never wrecked, and then they find out a few weeks later when they bring it in for service, or they run a CARFAX vehicle history report showing that it was wrecked.
When the scammed customers 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.
You really should never ever buy a used car from a dealer “AS IS” with no warranty. When you buy a used car from a private person you have no choice, it’s “As Is”. But from car dealers, 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, otherwise they are just blowing smoke.
You should always run a Carfax report on any used car before you buy, and get it inspected by a mechanic. That’s the best way to find out complete information about your car.
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!
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