How the scam works:
You are buying a new car and cannot wait to drive it. After filling out the paperwork, the financing manager checks out your credit and comes back with "good news". According to your credit score, it seems like you can get a low rate of interest.
You are handed the keys and told that although the loan hasn't officially been approved yet, you can pick up the car right away. You get in the car and drive off, ready to show it to your family and friends.
A week later, the dealership calls to tell you that indeed you qualified, but unfortunately not for the low interest rate discussed.
Justifying this with the contract's fine print where it says "subject to loan approval", they tell you that you now have to pay the higher rate. In the fine print, they have a "client agrees to pay a higher interest rate if not qualified" clause, threatening to sue you if you don't agree.
How to avoid:
Don't ever think you can have a "gentleman's agreement" with a car dealer. The dealer knows exactly what you can qualify for the moment they come back in the room. Giving you the keys is an assurance that you won't back out of the deal. This scam usually works on people with bad credit because they know it is not perfect and will not even challenge the decision. This scam is also known as the Spot Delivery Scam or the Yo-Yo Scam.
As well, if you did a trade-in transaction and got scammed this way, they will tell you that your old car has already been sold so there is no chance of re-negotiating the deal. Never drive off with a car until all the details of the contract are finalized.
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