While December is a popular time for consumers to obtain discounted deals on car purchases as dealers offer lucrative deals to reach their year-end quotas, to avoid paying inventory tax and to make room for new models, shoppers should obtain financing beforehand to avoid fraud.
While purchasing a car can be thrilling, consumers need to be aware of financing scams and do their research beforehand since once they sign a contract to buy one, there is no turning back or getting a refund.
"There is no 'grace period' or 'three-day return period' for car purchases, with the exception of California where you will pay a fee," said Chris Basso, a used car expert for Carfax, the Centreville, Va.-based company which provides vehicle history reports.
Buyers have been caught up in schemes where they obtained financing from a dealership and after they drove the car off the lot, they were told the original financing failed to go through. Instead, their option was to either lose their down payment or sign a new deal. This type of fraud is a "yo-yo" financing tactic, and dealers swindling unsuspecting car buyers are being targeted by the Federal Trade Commission.
Charges have been brought against Sage Auto Group, which is a group of nine Los Angeles-based auto dealerships and the three brothers who controlled them, wrote Colleen Tressler, a consumer education specialist at the FTC. The FTC alleges the company took part in many yo-yo financing tactics: in one such scam, the dealer would allegedly tell customers a contract was cancelled, but the dealer would not return the customer's down payments or trade-ins if the consumers refused to sign a new deal.