There are car dealers who may promise that they will allow you to drive away in a new car with very few dollars even if you have bad credit or no credit. However, when you enter the dealership and “take the bait” the dealer may inform you it will cost $1000 to drive away in a new car.
The “churn” begins when the dealer tells you that you don’t qualify for a loan amount on the car you want and may suggest that you double the amount of income you say you earn when filling out the loan application. This is illegal if you sign off on it but if you do sign the deal it is not the car dealer that may end up getting in trouble with the law, it is you!
Remember, that if the cars get re-possessed for non-payment you will be the one that gets hit with all kinds of “repo-fees” at up to 40% interest. So a $500 car can actually end up costing you thousands. Most car dealers are able to re-sell and repossess the same car numerous times, thus making tens of thousands of dollars of profits.
How to avoid this scam: Never buy a car that will cost you more than 20% of your total income. Car dealers have been accused of suggesting that you can spend up to 40% to 60% of your total income on a car. In fact they don’t care if you can’t afford the car.
Another thing to do to avoid this scam is consider getting gap liability insurance especially if you lease a vehicle even though it may cost you an extra $100 to $200 a year for the coverage because if the vehicle gets stolen or totaled in an accident, you still have to pay-off what you owe on the car loan plus whatever the vehicle would have been worth at the end of the lease before it was stolen or totaled.
We purchased gap insurance, and they did not pay the entire amount of the difference between the totaled vehicle and the loan amount. The gap insurance company called SafeGuard, claimed that the vehicle was worth a different amount than the primary insurance company; therefore, they said that was all they would pay.
Sounds like you have an insurance bad faith claim. Give me a call if you are in California, otherwise find a local attorney. The insurance companies and the dealership who sold you the policy could all be liable for the difference. This really needs to be investigated.
I purchased a a 2004 Ford Explorer in Oct 2004. I subsequently had an accident an totaled it in Sep 2007. I was under the impression that I had GAP but the lender said that I didn’t. I was in the process of moving at that time and was unable to find my paperwork. I ended up finding it and the GAP insurance carrier said that about 3 months after purchasing the car, someone from the dealership cancelled it. I called the dealership for an explanation but they always seem to tall me that they will look into it and get back with me. That still has not happenend. Do I have legal recourse?
Darrin
I believe we have already discussed your dealer fraud case over the phone. You definitely have a legal recourse – the dealership will need to pay the gap plus attorney’s fees if we prove that their conduct was intentional, ie fraudulent. The fact that they canceled it months after the purchase strongly favors the position that the act was intentional.
I would be glad to handle this matter for you at no up front charge to you. Call my office if still interested in pursuing this matter. Thank you.
Hovanes Margarian
Attorney At Law