A car is necessary, as it is the object that provides individuals and families with the ability to get and keep a job and the ability to access healthcare, child care, groceries and numerous other facets of daily life. However, acquiring a car is a chore, even for savvy, middle-to-upper class, well-qualified consumers frequenting reputable car dealerships. Yet, low-income and credit-challenged individuals are often subject to abusive practices by shady used car dealerships. These dealers often employ unscrupulous lending practices, designed to bring in money, not assist the consumer in getting the best deal. Fraud, high-pressure sales tactics, “yo-yo deals”, and “bait and switch” financing are employed against consumers and end up them with unreliable or unsafe cars with high payments and negative equity.
Yo-yo deals are a practice where third-party financing falls through and, rather than handle the financing themselves or returning the consumer’s down payment, dealerships use deception and pressure the consumer into a different, less-advantageous terms. Consumers who fight back are threatened with having their down payment or trade-in not returned or having the car reported as stolen.
Bait and switch financing are false statements about a car’s price tag. This happens when a consumer is given a price quote. Then, when the deal is being finalized, the contract price is not the same price that was quoted. Sometimes mysterious fees are added into the total price of the car (known as “packing the contract”).
There are ways to protect yourself. The most important, overarching rule is to always be willing to walk away from a car. Don’t get too attached. Here are some other ways to protect yourself:
- Always make sure the total cash price of the car on the written contract matches the price you were given. This is a great way to avoid the bait and switch scheme. If the dealership refuses to match the deal you discussed with your salesperson, do not sign a thing and walk away.
- Make sure to look carefully through the contract to make sure anything you were promised as “free” is actually free.
- Look for any mysterious fees, warranties, options etc. that you don’t know or don’t recall discussing with your salesperson. You can line through this contract so if you see anything you don’t want, cross it out!
- Before you walk in the door to a dealership, know two things: (1) what your credit score is—dishonest dealerships have been known to tell consumers their credit score is lower than it is to pressure them into loans with exorbitant interest rates and (2) if you have a trade-in, know what it is worth.
Knowledge is power. You can visit the National Consumer Law Center and the Northwest Consumer Law Center websites for additional sources.