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Games Dealers Play: Come Back in Six Months

Some car dealerships routinely make promises that they know cannot be kept. "Come back in six months" they say, "Your credit will be better and we can get you a lower payment."

This tactic of auto dealer fraud can help a dealership close the deal when it is overcharging a consumer. When potential buyers protest that they cannot afford the payments, dishonest dealers often claim that the payments are high because they have bad credit. They claim that after a few payments, the credit will improve and they can be refinanced at lower rates and with lower payments.

While it is true that a consumer's credit score can improve significantly if payments on a car loan are paid on time, the vast majority of consumers in this situation will not be able to refinance the loan.  The problem is that most subprime borrowers pay higher prices for cars, and the amount of the loan is much higher than the car's value, particularly after dealerships add on sales tax, conveyance fees, service contracts, or GAP (which we do NOT recommend).

Most of the monthly payments on a higher interest car loan are applied to interest at the beginning of the loan period. So the loan amount does not go down much in the first six months. But, the car depreciates every month. When a consumer tries to refinance, he finds out that banks and finance companies will not want to do the deal; the loan amount is more than the value of the collateral. Car dealers refer to cars that are worth less than the debt as being "upside down" or "underwater."  

Sometimes, a dealer will play the "come back in six months" trick when it is trying to "Pass the Trash" by steering a buyer to a vehicle that has problems or that the consumer does not want.  In this version, the consumer is told that she can come back in six months and trade in the unwanted vehicle for the car that she really wants. Sometimes, the dealership will even promise that the consumer can trade in the car and get a better one for lower payments.  When consumers try to trade the car in, they find out that they are underwater, and they are stuck with the car for years.

Many consumers have a real problem when they cannot unload the unaffordable or unwanted car. Frequently, cars sold in this manner are of questionable history or quality, and many will not last until the loan is paid down enough for the consumer to unload it. These situations frequently lead to repossessions, causing further harm to consumers who are struggling to improve their credit.

The Connecticut Unfair Trade Practices Act (CUTPA) prohibits car dealerships from lying to consumers when selling cars. Car dealerships violate CUTPA when they lie to consumers about being able to refinance or trade-in a vehicle. Consumers who prove that a dealership committed this fraud can sue for actual damages, punitive damages, and attorney's fees.

How to Protect Yourself: The best way for consumers to avoid this scam is to simply not believe any promise that a dealership makes about refinancing or trading in a vehicle. Ask the dealership to put the promise into writing. If they refuse, then you can be pretty certain that this is a scam.

The best protection is to make certain that you are buying a quality car at a fair price and that you are paying a fair rate of interest. Check out our webinar on how to buy a used car to avoid becoming a victim.

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