Detecting Dealership Rip-Offs when Buying a Used Car
Buying a used car can definitely be a stressful process for a customer as it’s one of the most expensive decision he makes. Some unethical dealers aren’t satisfied with their profit and are trying to increase it ripping off the customers.
Packing the contract
Dealers categorize customers which are buying a used car as «payment buyers» or «price buyers». The first category is preferable as when a customer is focused on monthly payment the dealer will try to earn extra money «packing» the contract with expensive products. If the customer says that he can afford only $300 dealer will keep him focused on this amount and won’t disclose that monthly payment for the car he wants to buy is only $2200. The rest $800 the customer will be entitled to pay for add-ons (extended warranty, GAP insurance, service contracts etc. ) which the dealer has wrapped into the contract. The add-on, products are usually of high cost and little value to tho customer and a source of extra profit to the dealer.
Financing through dealership
When a customer applies for dealership financing the interest rate of a car loan often includes so-called “kickback” which finance companies (including those which are owned by automakers) pay to dealers for bringing new customers. Dealer reserve constitutes 2-4 interest points added to the interest rate; as a result, the customer ends up paying the higher interest rate. This is how this trick works. Let’s assume that credit company offers the customers to finance his car purchase for 14%. But the dealer doesn’t disclose actual interest rate telling the customer that he the lowest interest rate he can qualify for is 17%. In the meantime, the credit union sends the dealership commission equal to 3%. In addition, the customer is entitled to pay off the 3% dealer reserve without realizing that he is actually ripped-off.
When buying used car consumers are likely to encounter a large number of car dealer scams. If you’ve been scammed or ripped off by a dealer, contact dealer fraud attorney to protect your rights.