Car Dealer Scam Costs Consumers Billion$
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Buying a new or used car? Don't get cheated
by "Phony Financing"
It's the auto industry's dirty little
secret.
It happens to millions of car buyers every year. Even to the most sophisticated, savvy consumers. And you don't even realize you've been cheated.
Phony Financing
The secret? Auto dealers commonly bump up the interest rate you pay to finance your car, truck, or SUV. Over the life of the loan, the extra hidden interest you pay costs you hundreds or even thousands of dollars in added financing costs. These are costs you should not have to pay.
For example, if your credit is good, you may qualify for a loan with a 4% interest rate. But the dealership charges you 8%. Or 12%. Or sometimes 21% or more.
The dealer gets a hidden "kickback" or fee from the lender based on the amount of interest you pay. The more you pay in interest, the more profit the dealer makes. Typically, the dealer and lender split the extra interest you pay 60-40, with the dealer pocketing the lion's share.
The dealership finance manager may seem friendly and tell you, "Don't worry. I'll get you the best possible rate." But instead, he will charge you the highest rate he can. He may even mislead you into thinking your credit is worse than it really is.
This scam affects almost everyone who finances through a car dealer. But studies show that the added costs are likely to be even higher if you are African American or Latino.
How can you avoid Phony Financing?
BEFORE you go to buy a car
Whenever possible, buy an affordable vehicle without getting a loan. But whether you pay cash or get a loan, you can save thousands of dollars if you do your homework. Check out prices and models BEFORE you visit a dealership.
