Straw Purchase Scam and Car Financing Trick
When you enter a dealership, do not hope to see Mr. Honesty coming up to you. Though there are good dealers in the automotive industry, there are bad ones, too. These are people who are working out plans of ripping off unsuspecting buyers all the time. One common type of fraud designed by such dealers is the so called straw purchase scam. This is a common car finance trick practised by many of them.
The word combination “straw purchase” may remind you something quite different from the automobile sphere. The term was once used to denote the act of buying a gun for someone that did not have the right to possess it. “Straw purchase” is now metaphorically used to denote the process of helping someone to buy a car by signing the paperwork together with him/her.
Let’s now look at the scenario of the straw purchase scam in more detail. Imagine you are planning to buy a vehicle from a dealership, but at the same time you know you have problems with your credit score, as it is too low to qualify for a loan. However, your desire to get a new car is so strong that you decide to just enter the dealership and give it a try.
You are welcomed with warm greetings of the dealer and you are logically shown several vehicles you would not even dare dream about. At the end, you decide to take the risk of getting the car. Consequently, the dealer tells you that with your present credit score you will not be able to get the financing for the vehicle.
One common car finance trick the dealers practice in such cases is offering the potential buyer to pay an extraordinarily high interest rate of up to 22%. And this is not the end; they will suggest you to pay a huge monthly payment, too, which will definitely leave you without a penny in the pocket. By doing this, they try to urge you to bring a co-signer to buy the car for you at lower interest rates (though this is illegal in some states).
Another common car finance trick may involve offering you to bring a co-signer with a higher credit score with you. Here, you should be extremely careful to go to the dealership together with the co-signer, as the sales manager will do everything to separate you or to make a hassle around you so that to confuse the paperwork. This is done to make only the co-singer sign the documents, thus appearing to be the only paying party for the car.
The whole essence of the straw purchase scam is trying not to lose potential car buyers even if they do not qualify for the loan. There is only a way out of such a situation; if you know you cannot qualify for the car financing, then maybe you had better put off you plans for car buying. However, if you have already entered the showroom and have undergone this all, then make sure to sign in the right place and under the right name in the paperwork.