Straw Purchase Car Dealer Scam

straw purchase car scam

There are a seemingly innumerable number of ways that an auto dealer can get the best of one in an automobile purchase scam.

A new scam that is becoming more common is known as the straw purchase car dealer fraud. It occurs, like most car dealer scams, when it comes time to sign the car loan paperwork. The straw purchase is perpetrated upon potential car buyers that have poor credit. They are so set upon buying a car that they decide to go through with applying for a car loan anyway.

At which time they are informed by the car salesperson that because of their low credit score they cannot qualify for the car loan. Then the would-be car buyer is offered one possible alternative that can save their dream of an auto purchase. They can buy the car if they can get a cosigner with acceptable credit that is willing to assist by basically carrying the car loan for the car buyer with poor credit.

Here’s where the straws come in

Through mixing up their loan paperwork or other such claims, what happens is that the cosigner winds up as the sole purchaser of the loan. The vehicle is officially sold in the cosigner’s name with the original car buyer with poor credit’s name also appearing on the paperwork.

The poor credit car buyer drives away with the new car. Several days or weeks pass when the car dealer calls the likely new car owner to tell them that their loan has fallen through. Now they must return the car and pay exorbitant fees for the time plus mileage that the car was in their possession.

Then the car dealer proposes and encourages that only the cosigner with the good credit attaches their name as the buyer. That the cosigner then let the attempted buyer with poor credit pay off the loan but not be placed on the paperwork. There are various variations of these types of Straw purchase car dealer scams. They all end with the cosigner holding the loan and the car’s ownership.

Such schemes are difficult to prove in court. So if you have poor credit, don’t try to buy a car you can’t afford.