Scam 6 : Explanation
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Burning Brakes
Joined: Oct 2005
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Scam 6 : Explanation
Scam #6: The "Forced Warranty" Scam
How the scam works: An old one that's still in use. You're ready to sign papers when the LieNance manager says you MUST buy a $2000 extended warranty "because the bank requires it, or you won't get the loan". Let's analyze the stupidity factor. The lender is worried about your ability to pay back a $25,000 car loan, so they want you to add another $2000 to the loan to qualify? Please! Many suckers fall for this and the credit life scam. Some dealers who quote monthly payments don't even tell you that you're buying a warranty. We get complaints that they tell you "it's included" to make it sound like it's free. The warranty is included, but you're paying for it. It's amazing how many people tell me they did not see it on the paperwork until they got home! I guess during the 20 minute drive from the car dealer to their house is when they mastered reading. If I live to be 100 I'll never figure out why they don't look before they sign. People will spend more time analyzing a $2.00 watermelon in the grocery store than contracts for a $20,000 car! This scam often accompanies the Spot Delivery Scam. Some finance managers start playing games with the APR if you buy the extended warranty, some claim the APR goes up if you don't buy the warranty. Since when does the interest rate have anything to do with a stupid warranty? They lie to you about this because they know that you know nothing about it. The only thing that determines the APR you will pay is your very own personal FICO credit score. Nothing else whatsoever, not the cost of the car, not buying a warranty.
How to avoid the scam: Have them to put it in writing that the warranty "is required to be approved for your loan", so you can show it to your State Attorney, and the Better Business Bureau. Watch how quick they back off. This scam works on people with bad credit and they also "require" you to buy credit life insurance, or "your APR will go up". One of our visitors sent us her Ford paperwork with extended warranty, credit life, and disability for $3385! Do they want to sell you a car or insurance? If they refuse to remove the extended warranty, remove yourself from that devilship immediately. (Oops, I meant to say dealership). Many dealers sell you mechanical breakdown warranties, which are lame compared to some of the wear and tear warranties offered online. Also, dealers typically charge $500-$700 for Gap Insurance, which you can get online directly from companies like Gapinsurancequotes.com for half the price that car dealers sell it for. So if the dealer tells you the bank requires gap insurance, tell them you will go get it yourself. Most states have laws giving you a Warranty refund in 30 days if you have not used it.
Another way to avoid the scam: DON'T FINANCE AT THE DEALER if you have bad credit. Finance your car online or at a credit union. Now they can't force you to buy a warranty, you eliminated their excuse to force a warranty down your throat. Credit unions and online lenders don't force a warranty or credit life on you, so why would a car dealer? Why does APR go up if you don't buy the dealer's warranty? Cash flow shell games folks, remove their shells, and no more games.
How the scam works: An old one that's still in use. You're ready to sign papers when the LieNance manager says you MUST buy a $2000 extended warranty "because the bank requires it, or you won't get the loan". Let's analyze the stupidity factor. The lender is worried about your ability to pay back a $25,000 car loan, so they want you to add another $2000 to the loan to qualify? Please! Many suckers fall for this and the credit life scam. Some dealers who quote monthly payments don't even tell you that you're buying a warranty. We get complaints that they tell you "it's included" to make it sound like it's free. The warranty is included, but you're paying for it. It's amazing how many people tell me they did not see it on the paperwork until they got home! I guess during the 20 minute drive from the car dealer to their house is when they mastered reading. If I live to be 100 I'll never figure out why they don't look before they sign. People will spend more time analyzing a $2.00 watermelon in the grocery store than contracts for a $20,000 car! This scam often accompanies the Spot Delivery Scam. Some finance managers start playing games with the APR if you buy the extended warranty, some claim the APR goes up if you don't buy the warranty. Since when does the interest rate have anything to do with a stupid warranty? They lie to you about this because they know that you know nothing about it. The only thing that determines the APR you will pay is your very own personal FICO credit score. Nothing else whatsoever, not the cost of the car, not buying a warranty.
How to avoid the scam: Have them to put it in writing that the warranty "is required to be approved for your loan", so you can show it to your State Attorney, and the Better Business Bureau. Watch how quick they back off. This scam works on people with bad credit and they also "require" you to buy credit life insurance, or "your APR will go up". One of our visitors sent us her Ford paperwork with extended warranty, credit life, and disability for $3385! Do they want to sell you a car or insurance? If they refuse to remove the extended warranty, remove yourself from that devilship immediately. (Oops, I meant to say dealership). Many dealers sell you mechanical breakdown warranties, which are lame compared to some of the wear and tear warranties offered online. Also, dealers typically charge $500-$700 for Gap Insurance, which you can get online directly from companies like Gapinsurancequotes.com for half the price that car dealers sell it for. So if the dealer tells you the bank requires gap insurance, tell them you will go get it yourself. Most states have laws giving you a Warranty refund in 30 days if you have not used it.
Another way to avoid the scam: DON'T FINANCE AT THE DEALER if you have bad credit. Finance your car online or at a credit union. Now they can't force you to buy a warranty, you eliminated their excuse to force a warranty down your throat. Credit unions and online lenders don't force a warranty or credit life on you, so why would a car dealer? Why does APR go up if you don't buy the dealer's warranty? Cash flow shell games folks, remove their shells, and no more games.
