Am I Responsible for the Vehicle?
The cosigner loan scam is similar to a vehicle straw purchase. It can present itself when attempting to buy a new car from a dealership or buying a used car also. The cosigner loan scam not only affects the cosigner it also affects the actual buyer of the vehicle.
All Car Dealer Scams
This is when a customer tries to qualify for a car loan but does not have the credit history to do so. The salesperson will ask the customer if they have a family member or friend, with good credit, help them buy the car, or cosign.
When the cosigner gets to the dealership, the salesperson may tell them they’re only signing with the buyer as a reference, only to help the signer to establish their credit. This is not true.
The person cosigning believes they’re helping out a close friend or family member buy a car while helping them build and re-establish positive credit history. The actual buyer is unknowingly removed from the loan and the cosigner becomes the sole buyer. The cosigner is now left with all the responsibility of repaying the loan and the actual buyer ends up not building any credit history or gaining anything from the transaction.
If you cosign on a loan you’re taking on the exact responsibility as the signer.
The actual scam is when the original buyer is unknowingly removed from the loan and the cosigner is the only one on the car deal.
This car buying scam is very common and occurs frequently in car dealerships across the nation. It has a lot of the same characteristics and is very similar to a straw purchase and it usually starts with the spot delivery car dealer scam.
Just like most car buying scams there are several different variations of how the cosigner loan scam is committed on unsuspecting car buyers.
Here are a few of the most common ways this scam may be implemented within a dealership.
The most common is when a car dealer knows upfront your credit history is so bad, there’s no way you’ll qualify for a car loan on your own. The dealer will lead you to believe you’ve been approved and everything is great. They’ll have you sign the contract and paperwork and let you take delivery of your new car. This is also as a spot delivery in the retail car sales industry.
You’ll leave the dealership believing you bought a car and go about your life. After a few days, you’re called back by the dealer and told your financing fell through. You either need to bring the car back or find a cosigner with great credit to go on the loan with you..
If you find a cosigner, you’ll have to go back to the dealership and resign the paperwork. This is where you will be susceptible to the next two scenarios.
If you can’t produce a cosigner. The dealer will either try to switch you to a cheaper car you can qualify for on your own, or you will be sent home on the “hush puppy express” (walking).
This technique also works when the car dealer knows, upfront, there’s no way the actual buyer can be on the car loan no matter how good the cosigners credit is.
The dealer will deliver the car with both the you and your cosigner on the contract. The dealer will allow the car to be driven by you for a few days, or longer, in hopes that you will not want to give the vehicle back.
After a week or so the dealer calls and explains to you they were unable to get the car loan approved with you on the loan. However, they were able to get the car loan approved using only the cosigners information and credit history.
The dealer is hoping enough time has passed and you’ve “fallen in love” with the vehicle. The dealer is also hoping you will pull on your cosigners “heart-strings” to sign for the car on their own so the dealer won’t take the car away from you.
Last but not least is having you and your cosigner sign multiple sets of paperwork. The finance manager will have you sign a contract and a set of paperwork by yourself and then have the cosigner sign their own contract and paperwork also.
The finance manager may have both parties sign the title application or other fake forms for show and effect. Signing the title app will make it appear you’re on the title and registration and your legit. However you will not get any positive credit, just parking violations.
To keep you or the cosigner from complaining or threatening a lawsuit because you’re not on the car loan at a later date. The finance manager will not give any copies to you, the buyer, and run any documents signed by you through the shredder as soon as you take delivery of the car.
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