What Is Straw Purchase Car Scam?
The straw purchase car scam is a widespread car scam nowadays. This fraud occurs when a car buyer heads to the dealership hoping to purchase their dream car. Thus, you made up your mind that the best option for you is taking a car loan. The ‘’game’’ begins when the dealer lets you know that you aren’t eligible for the car loan because of your bad credit. At this moment, you get very upset and are about to lose your hope of driving your dream vehicle. However, ‘’helpful’’ car dealers are here to find a way out of any situation.
They inform you that there is a very effective way of solving the problem. To be more concrete, you should ask someone with a positive credit history to co-sign for you. In most cases, unethical dealers fail to tell the co-signer about an essential piece of information. In other words, sometimes the co-signer has no idea that they are responsible for making payments if the car buyer doesn’t do it. Another typical scenario is that they change the contract and make a co-signer the real buyer of the vehicle. The worst thing is that the co-signer has no idea about it. Do you want to have a clear idea of the straw purchase car scam and learn how to avoid it? Keep on reading the article and you will find the answers to these questions.
Vehicle straw purchase explained
It is worth to point out that the straw purchase usually deals with the purchase of the firearm. Thus, the straw purchase occurs, when a consumer wants to purchase a firearm, but it turns out that the buyer isn’t allowed to own one. At this situation, someone else purchases the firearm for the ineligible buyer. However, this term is also widely used in the world of the auto sales. What are the characteristic features of the straw purchase in the auto world? Everything is very simple. Sometimes a car shopper is unable to finance the car loan because of the bad credit history. Thus, another person (a friend, relative, etc.) who has a positive credit history agrees to co-sign. As a result, dealers mislead the co-signer to sign another contract, making this person the actual buyer of the vehicle. Actually, the straw purchase is illegal in some states.
Avoiding the straw purchase car scam
If you want to avoid becoming the victim of the straw purchase car scam, you need to take certain precautions.
- To begin with, you should have a clear idea of your credit history before walking into the dealership. So, review your credit reports prior to applying for a car loan.
- Don’t hesitate to request the approval letter from the lender. Ensure that this document contains both names. If you see only one name, it is a red flag. It means that only one person in on the loan.
- It’s a good idea to use the services of reputable online financing companies for getting pre-approved.
- Before signing any contract, take your time to explore it in a proper way. You can sign it only after you ensure that you agree to any point mentioned in the contract.
- Most importantly, you should be aware of The Federal Trade Commission’s Trade Regulation Rule on Credit Practices. The main requirement of this regulation rule is that any motor vehicle lease or retail installment contract must contain a Notice to Co-signer form. This is true about the contracts that include both a signer and a co-signer.
- Did you ask someone to become your co-signer? Make sure that both of you are at the dealership at the same time. Furthermore, warn the co-signer not to sign any document until both of you are together.
In conclusion, putting into practice the above-mentioned steps can help you avoid a lot of headaches. However, regardless of efforts that you make to prevent this scam, sometimes you simply fall for it. If this describes your situation, you have the option of filing a complaint with the Better Business Bureau. If you seek a legal assistance, the wisest decision is consulting with a good attorney who will evaluate your case.