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Car Dealer Finance Scams

By: Garry Crystal - Updated: 19 Nov 2017 | comments*Discuss
 
Car Dealers Finance Scam Terms And

Financing a car involves credit contracts and there can be some less than apparent terms and conditions involved. Finding the best car finance deal means undertaking some research and not falling for the common car dealer finance scams.

Car Dealer Finance Scam or Perfectly Legal?

A car finance deal, basically buying a car on credit, is one of the most popular ways to purchase a car. There are many reputable dealers who will try to achieve the best deal for the customer. But there are some who will try to achieve a sale no matter what, even if doesn’t mean the best deal for the customer. Problems occur when customers are not fully informed of the terms and conditions of the finance contract. Customers should be completely aware of the terms and conditions of a car finance contract as a safeguard against dealers who ‘omit’ certain facts.

Be Aware of Your Credit History before Agreeing to Finance

Car dealers will advertise their credit deals and like most lenders will usually advertise the lowest rates they offer. Unfortunately, these low annual percentage rates (APR) will not be applicable to everyone. In most cases the lowest APR will be for those customers with an excellent credit record. A dealer may agree to offer credit but for those with a poor credit record this will mean high interest rates. Car buyers looking for credit should be fully aware of how their credit rating will affect the interest rates that will be applied.

Don’t Be Pressured into Taking a Car Warranty

Taking a car warranty is not compulsory but some car dealers make it appear as if the financing won’t go through unless a warranty is taken. This is a similar scam used by loan lenders in the past who made it appear as if loans wouldn’t be granted unless payment protection insurance was taken. Taking car warranty can be beneficial but there may be cheaper options available than the one offered by a dealer. Shop around online for quotes and see who can provide the best warranties for the price.

Make Sure the Car Dealer is Legitimate

Many people have been duped by sellers who are posing as legitimate dealers. This has been occurring online where scammers have simply copied and pasted other dealer’s online advertisements into their adverts. Customers can end up buying stolen cars or cars that still have finance to be paid. The unwary buyer can end up having the car repossessed by the previous owner's finance company. Buyers should always run a vehicle history check to ensure that they do not buy one of the thousands of cars that still have outstanding finance.

Look Out for Early Settlement Penalties

Many people decide to pay off their car financing earlier than the actual settlement date. But there can be early settlement penalties applied to a car finance contract. This condition is usually applied to ensure that the lender does not lose out on interest payments. Early settlement penalties can be hefty depending on the lender’s conditions. Always check terms and conditions for these penalty clauses to ensure that a couple of month’s worth of repayments are not required as an early settlement fee.

Beware of the Paying off Existing Finance Scam

Another finance scam undertaken by disreputable car dealers is the offer to clear off the existing finance that is left on the owner's vehicle. This can occur when part exchanging a car during a sale with finance still remaining . The dealer will offer to pay the remaining finance and add this to the price of the car to be bought. A month later the buyer will find out that payments have not been made when their original finance company asks why payments have not been maintained. The dealer has simply not made the finance payments on the exchanged car and nothing was signed to verify that the dealer would do so.

Buying a car is a major financial outlay and most car dealers will offer some form of finance on their vehicles. Buyers should never simply place their faith in the honesty of car dealers. There are many reputable car dealers but many people have been duped by dealers who simply bend or break the rules. Make sure to ask as many questions as possible if in doubt over car financing terms and conditions.

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Share Your Story, Join the Discussion or Seek Advice..
[Add a Comment]
Ian - Your Question:
I bought a BMW X6, via a company they placed the finance with BMW finance.After looking to sell the vehicle and clear the finance the figures didn't add up so I went to the finance company.I was the told that I paid a Advance payment (deposit) of £2000. this is not the case.I then made a complaint to BMW finance they have then after 8/10 weeks of being unable to talk to the car dealer who has now ceased trading, decided that the payment was a dealer contribution nothing on any paperwork says a dealer contribution.I feel this finance has been set up fraudulently, do you have any thoughts or options

Our Response:
Try contacting the FCA? Alternatively seek to recover any amount lost via the small claims court.
MotoringOnABudget - 20-Nov-17 @ 10:20 AM
I bought a BMW X6, via a company they placed the finance with BMW finance. After looking to sell the vehicle and clear the finance the figures didn't add up so I went to the finance company. I was the told that I paid a Advance payment (deposit) of £2000. this is not the case. I then made a complaint to BMW finance they have then after 8/10 weeks of being unable to talk to the car dealer who has now ceased trading, decided that the payment was a dealer contribution nothing on any paperwork says a dealer contribution. I feel this finance has been set up fraudulently, do you have any thoughts or options
Ian - 19-Nov-17 @ 4:46 AM
Katwilliams59 - Your Question:
My partner has car finance with rci which he stopped paying for various reasons. However the letters they are sending have the wrong car registration and a finance check on his actual car shows as no finance outstanding. Can they reclaim the car?

Our Response:
If he has stopped payments, then yes they can. If there is an error in paperwork, they can simply re-issue the papers with the correct details in order to claim it back.
MotoringOnABudget - 23-Feb-17 @ 12:49 PM
My partner has car finance with rci which he stopped paying for various reasons. However the letters they are sending have the wrong car registration and a finance check on his actual car shows as no finance outstanding. Can they reclaim the car?
Katwilliams59 - 22-Feb-17 @ 4:57 PM
Kellynelly - Your Question:
Hi I have car finance I only had the car for 7 months. Since day 1 I had problems with it so I'm trying to claim for my money back. The finance company nows this. The question here is do I stop using the car an stop paying for it or will I lose my money all together.

Our Response:
You've not really given us enough information about the nauture of the problem and how the dealer has handled it so we really can't give you any advice.
MotoringOnABudget - 22-Jan-16 @ 11:10 AM
Hi I have car finance I only had the car for 7 months. Since day 1 I had problems with it so I'm trying to claim for my money back. The finance company nows this. The question here is do I stop using the car an stop paying for it or will I lose my money all together.
Kellynelly - 21-Jan-16 @ 9:55 AM
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