Car Dealer Co-signer Scam: How to avoid it.
Dealer co-signer scam, also known as “straw purchase scam” is among the trickiest scams practiced by some automobile dealers. The scam is very easily pulled on car buyers with bad credits. When a buyer realizes his credit score is not enough to be approved for financing, he/she gets into panic. The dealers know what to do in such cases. Here comes their old beloved co-signer scam.
The scenarios for the scam are several, but the main idea is to make the buyer find a co-signer with a high credit score and a better credit history for the loan application. Then the dealer will manage the job in a way that only the co-signer’s signature can be found in the documents which means that only the co-signer will be going to pay for the vehicle.
There are quite many tactics the dealer can use to influence the car buyer’s and the co-signer’s final decisions. Let’s see an example of such a case.
The dealer, who is well aware of the fact that you have a very low credit score, starts his actions with the so-called spot delivery scam. This is when the car buyer is allowed to take the car home at the spot, immediately even if the financing has not been approved yet. A few days later, when you have made an attachment to the car, the dealer would give you a ring informing the financing fell through and that you must either return the vehicle or come with a co-signer to rearrange the documents for the loan approval. In the dealership, the sales manager would create a situation in which you and the co-signer sign under different papers.
Only, after some time you will learn that the loan was arranged under the co-signer’s name. Usually, a co-signer is a friend or a family member who will not let you down, so they will agree to pay for the loan (even though it is illegal in some states).
So, this is how the co-signer scam works. But you can avoid it by following some guidelines;
- If you know you have a low credit score, you had better put some money aside and wait until you can pay cash for the car purchase.
- In any case, do not trust the dealership. Do your financing by yourself. Turn to a local bank or a credit union.
- Check and collect all the documents you have signed, ask for the copies of all of them.
- If you have decided to take a co-signer with you, make it sure you sign under the same papers.
The Law Offices of Hovanes Margarian deals with dealer fraud and the co-signer scam, too. So, if you feel you are in a desperate situation, turn to us for legal help or at least for a free phone consultation.