With the possible exception of setting up a new cell phone account, obtaining financing for a car is one of the most confusing and frustrating transactions most of us do in our lives.
While there are plenty of reputable and caring auto dealers and lenders out there, there are also plenty that have no problem making a quick buck at the customer’s expense. Their tactics, while not necessarily illegal, can be downright shady and end up costing you a lot of money.
Let’s take a look at some of the most common auto financing scams:
Payment Packing – This is when a dealer adds high-margin products such as extended warranties, upholstery protection or credit life insurance to your loan, which increase your monthly payment without you realizing you’re being charged.
Most car shoppers focus on what their payment will be on the car they like and assume the monthly payment only covers the cost of the vehicle. However, most lenders will allow additional items to be included in the loan. Dealers often take advantage of this. For example, depending on the interest rate, $2000 for the extras could add $30-$40 per month to your payment.
Before signing anything, you need to be provided, in writing, the exact sale price of the car, the total amount financed, the length of the loan, and the interest rate. By knowing these figures, you’ll know if anything has been “packed to your payment.”
Yo-Yo Financing – This type of scam normally targets those with less-than-perfect…
