"We'll Payoff Your Loan OR Lease No Matter How Much You Still Owe!"
Have you seen this ad? John Cole Gayle, Jr. discusses this new fraudulent tactic car dealers are using to reel in consumers with Gray Hall on NBC12.
The Scam: These are common ads. They rely on you believing what you WANT to believe, i.e. that the obligations of your current lease or loan just magically vanishes. You can't just get out of a car loan or lease, it's a contract. By breaking the contract, you pay penalties which are very expensive. The car dealers do get you out of your current lease or loan, they pay the penalties for you, but they then roll them back into your new car loan, which also contains the amount they paid off for you. The dealer is not doing any favors for you, they just want your trade in so they can give you far below market value for it, while selling you a new car at a high profit. Then they resell your trade in for a high price, while you are stuck paying off the debt load of 2 cars.
For example, you owe $10,000 on your current loan, the dealer pays off your loan, you now owe $10,000 plus penalties and fees to the dealer. Then you buy a car from them for $15,000. You now are financing 2 cars for $25,000 plus fees and penalties!
Your payments are spread out over 60 or 72 months so you don't notice what happened. The more months they add to the loan, the lower the payments, so you don't notice. In fact, it's possible that the payments are less than you current loan, so you think you're saving money when you just got scammed. Their ad make you think that trading in a car relieves you of your obligation to that car. IT DOES NOT. You are actually taking on double your current debt, when you thought you were dropping one debt for another and buying a new car. Sure they got you out of the lease or loan with your old car, but you now have a much larger loan or lease with your new car. Very clever trick! Here is how the ad should read if it was being truthful: "We'll Get You Out of Your Current Lease, then we'll roll what you still owe plus penalties into your new purchase so you can payoff 2 cars!"
If this has happened to you, you may have legal claims that you should talk to an attorney about!
Equifax (800) 685-1111
Trans Union (800) 888-4213
Experian (800) 583-4080
CSC Credit Services (800) 759-5979