From financing swindles to botched repairs, rogue car scam sellers can cost you a fortune -- or even your life: Internet ScamBusters #324
Every day there is another car scam in the news, and with the economy in turmoil, the risk of getting caught out is on the rise.
In previous Scambusters issues we have outlined many of the scammers' best-known tricks. In this article, we recap those and bring you another 10 car scams to think about.
Time to get going...
Wondering About a Car Scam? 10 More Tricks and Tips You Need to Know About
Over the years, we've tackled many of the issues associated with car scams, but as the economy worsens, the risk of getting caught out in a car scam goes up -- just at a time when you can least afford it.
So this week, to make sure you don't get caught out by a car scam, we've put together a list of the key tricks to watch out for, with some tips of what to do or where you can go for help.
Along with many of the familiar tricks that seem to have been around forever (probably since people started selling cars!), we've uncovered some new and nasty variations as crooks and shady dealers take advantage both of online trading and the increased difficulty in getting loans.
Car Finance Scams
Let's start with finance. By far the biggest source of car scams is in the auto-financing business, both lending and pricing.
You can check out the excellent auto financing articles by "insider" Peter Humleker that we published here at Scambusters some time ago -- Peter is an expert at revealing how car financing scams work.
Between these two articles, we've got you covered on:
- "Packed payments," where the dealer increases your monthly repayments with all sorts of optional add-ons, then somehow makes it sound like he's done you a favor.
- Inflated interest rates and charges, where the dealer charges you a higher percentage than he's actually being charged by the bank or a higher extended warranty fee than he actually has to pay.
Today, we want to alert you to five more finance-related car scams:
- Refusing bank drafts. As mentioned above, dealers can make big money out of arranging your financing, so they may be unhappy when you come along with your own money.
Unscrupulous operators may claim either that bankers' checks bounce or that banks/credit unions take too long to pay up. Neither is true.
If a dealer refuses a draft, you should refuse the deal. If that makes him change his mind, you should still be wary about his lack of integrity.
- Failing to pay off your trade-in. In these hard-pressed times, it's not unusual for car sellers to offer to pay off outstanding loans on the car you're trading in. If they don't -- and that's starting to happen quite a bit these days -- you're still liable to the lender.Even if you have assigned the debt in writing, it could turn out to be costly trying to legally enforce the arrangement. Don't take this risk, especialy with a company that already has a dubious reputation.
- Phony or overpriced extras. Some firms load their final sale prices by charging for preparing/servicing your auto. If the car is new, this should really be included in the manufacturer's price (and printed on the sales statement). Check this out before buying.The used car dealer's favorite trick is to charge a couple hundred bucks -- often a lot more -- to etch the Vehicle Identification Number (VIN) on the windows, sometimes claiming insurers insist on this. Don't buy this story. If you want, you can do it yourself for $30.
- "We got you a lower repayment." This one is particularly attractive in the current financial climate. You buy a car and agree on financing. A few days later the dealer phones to say he can get you a lower repayment rate; just come by and sign a new form.And it's true, the payment is lower. What he doesn't tell you is that the period of the repayment is way longer and that you're actually paying a higher rate of interest.If you are offered a lower repayment, read all the terms, including the fine print on both your current agreement and the new one that's being proposed.
- The co-signatory scam. So your credit rating is too low to get financing? Just get a friend or relative to co-sign the agreement. That'll lift your credit score, they promise.In fact, through a bit of paperwork shifting, your friend/relative ends up as the sole signatory. It does nothing for your credit score and potentially ruins the relationship by saddling them with the debt.If you're involved in a co-signing, make sure both of you sign at the same time and check out the document in detail.
More Car Scams
OK, now let's put another bunch of car scams in the spotlight. Again, we encourage you to check out some of our earlier articles like this one covering used car VIN forgery scams, and this car dealer scam on signing loaded agreements waiving arbitration in case of a dispute.
Peter Humleker also wrote a fascinating car sales scam article for us.
- Super sales -- where selling specialists run a multi-day special event for dealers and often actually increase prices while convincing buyers they're getting a bargain.
- Pre-approval sales -- aimed at people with poor credit. Mail shots to bankrupts and low credit scorers include a "check" for, say, $20,000, which can be "spent" with the auto-seller, in return for high-interest financing and an overpriced car.
- The free gift certificate scam -- an incentive deal where a buyer gets a $1,000 free gift certificate to spend at a specific website. Items there are actually overpriced, bringing true value down to about $250; then you must spend way more than that on shipping costs!
Now, watch out for these other car scam tricks that we're adding to today's list:
- Auto transport scams. Firms that deliver cars -- whether newly purchased or part of a house move -- have their share of rogues. The industry has been deregulated and the number of people calling themselves auto transporters has shot up from 400 to 5,000.
Tricks include charging a prepaid deposit then pulling out of the deal but failing to return the payment, and loading the charges after a deal has been agreed to with things like tolls, insurance and fuel surcharges.
Sometimes, the firms themselves are uninsured and you find you've signed a waiver that absolves them of responsibility if your car is damaged in transit.
Cut your risk by using a long-established transporter and checking them out carefully. Read the fine print on the contract and insist on seeing (and checking out) a copy of their insurance certificate.
- Fake escrow deals. These are used for all sorts of buy-sell deals. In the case of autos, people who are buying a vehicle sight-unseen are reassured when the seller asks them to pay their money into an escrow company that will only release the cash when the buyer is happy with the car.Trouble is that it's a phony escrow company, set up by the scammer. And there's no car. Escrow can be a good idea, but only if you can choose the money-holder yourself. Then find a reputable one like Escrow.com.
- Botched repairs -- no airbag. We've highlighted the risk before: when you buy a used vehicle, you must check out its history using one of the online VIN checking services. Also, visit the Department of Justice's National Motor Vehicle Title Information System Resource Center.That way, you can tell if a vehicle has been in a crash. But it doesn't say if it has been properly repaired. For instance, a recent study by the National Highway Traffic Safety Administration showed that in 1,446 fatal auto crashes, airbags had not been replaced after a previous accident in 255 of those cases.So, if you know or suspect a car you're buying has been in a crash, get a qualified expert to check it out. It'll not only save you money in the long term, it could save your life.
Finally, we want to alert you to a couple more car scam issues that you need to be on your guard for:
- Fake auto insurance cards. In these hard-pressed times, it's tempting to take up a ridiculously low bid on insuring your car. Scammers may pass themselves off as legit agents of well-known firms or just claim to be brokers on their own account.
You can check out their licenses with your state insurance services department. Better to buy through an established agency by visiting their office. Remember that in many places, if you're not insured (even if it's not your fault), you're breaking the law.
In other cases, illegal immigrants, youngsters and, frankly, people who are just flat broke, buy cards knowing or at least suspecting they're fakes. Don't. It's often illegal, crazy and potentially very costly.
- Auto warranties. When you buy a car, you want some kind of assurance that it'll be fixed or taken back by the seller at no cost to you if things go wrong.You may not get a warranty from a private seller but you must get one from a dealer. The minimum should be 30 days on a used vehicle but look for 90 days or longer -- and it should be included in the price. Read the fine print so you know what you're getting.Extended warranties are a different matter. Most new car dealers sell them and many people buy them for the peace of mind they offer. But remember, dealers only sell extended warranties for one reason -- they make a profit on them. So who's the loser? Check it out carefully, and make sure it makes sense for you.
We hope these extra car scam tips will help you make a better deal next time you're buying a car. The fact is that, as with buying a house, most of us have only limited experience in this type of deal. Taking your time, reading the fine print and doing the research will almost certainly save you money.
That's a wrap for this issue. Wishing you a great week!