Shady Dealer Tactic: The Interest Rate “Bait-and-Switch”
For long-time readers of my blog, you know that the Honest Car Dealer has several years’ experience in the Finance and Insurance (F&I) department of auto dealerships, both as an owner and a manager. Although the F&I team has the admirable job of enabling drivers to own a vehicle they otherwise may not be able to purchase through financing, some dealerships take advantage of this delicate situation. Specifically, subprime borrowers can fall prey to what is now commonly called “spot delivery” or “yo-yo” lending scams. The Honest Car Dealer can help you educate yourself on how to avoid this advanced bait-and-switch tactic.
Subprime Borrowers Need to Change Their Tactics in the F&I Department
Having a poor credit history, but striving towards a normal life, means that when you need to borrow for essentials like an automobile you may be in a weaker negotiating position than most. Unfortunately, some dealers prey on this mindset and your dire need for a car. One increasingly common tactic is the “spot delivery” scam. What happens is that once you have gone through the trouble of shopping for and arranging a new loan on a vehicle at the dealership, they let you take the car home for up to a month and then will force you to bring the car back in once your loan application falls through. Their goal? They want to put you on the spot to sign a new loan agreement at a higher rate, even if that rate would have prevented you from financing the vehicle in the first place. This strategy is often perfectly legal, and even if you walk away from the car they might try to hit you with “wear and tear” fees.
To avoid this scam, I recommend, first and foremost, skipping the dealer’s F&I department when searching for a loan with subprime credit. They make money in the margins there anyway, and you can usually find a bank or an alternative lending institution in your area. If you are from Chicago, I highly recommend Car Loans Chicago. Otherwise, be on the lookout for provisional language in your loan agreement, and don’t get too attached to your car for the first thirty days if you think you might fall into this category
Trust HonestCarDealer for Financing Advice
To keep up to date on all the current dealer practices and new and used car buying tips and tricks, keep checking in with me, the Honest Car Dealer. I’ve got the expertise to make your next purchase as painless as it should be. Visit me online every month for new information!
August 6, 2012 by Jamie Rettig