Guaranteed Credit Approval Dealer Scam
Car dealers will advertise "Guaranteed Credit Approval" targeting a specific group of car shoppers with bad credit or no credit at all. These people have most likely been been denied an auto loan from one or more dealerships previously while attempting to finance a car.
The goal of the guaranteed credit approval scam is to get a high volume of bad credit customers to the dealership and then weed out the people that can actually buy a car.
People with extremely bad credit and no hope of financing a car, will normally be offered a specific or undesirable vehicle and/or an unrealistic deal. The terms of the deal may require a very large down payment, high interest rate, short term, expensive monthly payments or a combination of all. If the buyer doesn't agree to the deal, they'll be sent on their way.
This kind of dealer tactic can be very frustrating for car buyers in real need of purchasing an automobile. Read more about this scam below.
What you'll find in this section:
Definition of the Guaranteed Credit Approval Scam
This dealer advertising scam is very similar to the All Credit Applications Approved Scam. It's used in a dealers advertising to drive high volumes of bad to poor credit customers to a dealership in the hopes of being approved to finance a vehicle.
The customers that fall for this type of scam have been turned down by other dealers when trying to buy a car. They see or hear the ad claiming "Guaranteed Credit Approval" and believe the dealer can get them approved to finance a vehicle.
Since this statement can be so misleading to consumers, dealers are not allowed to legally advertise the term "Guaranteed Credit Approval" in some states.
There is a handful of lenders out there that will approve just about anyone no matter how bad their credit history is. These lenders base their loan decision off "risk" more than actual payment history. Very high interests rates, large amounts of cash down, poor quality high mileage vehicles, and very short loan terms accompany these types of auto loan approvals.
Before going with one of these companies it's best to first try and go through a bank, credit union or for the best rates an online lender. Visit my section on how to get free, no-obligation car loan quotes online.
How the Guaranteed Credit Approval Scam Works
You're in desperate need of a new car. You've been to a few dealerships and up to this point they've all told you the same thing, your credit history is not good enough to finance a car.
Sitting in front of the television you see this loud colorful advertisement offering guaranteed credit approval. You decide to take a chance and go to the dealership. Once you arrive you see signs and banners everywhere that say Guaranteed Credit Approval. You think to yourself, this can't be a scam.
The dealership is packed with people trying to buy cars. The car salesman has you fill out a credit application and then runs off to check your credit. He returns shortly and tells you there is no way you can be approved for a car loan with your bad credit history.
Now that you feel that you've been lied too, you decide to call the dealer out on the their deception. You state, "your ad says Credit Approval Guaranteed! I suggest you get me approved or I'm going to file a complaint."
The salesman may excuse himself for a minute to speak with his manager. He will return shortly after and let you know they made a mistake, apologize, and explain to you that you are approved for a car loan. Of course the approval you're going to hear from the salesman is going to be outrageous.
Common approvals to get a customer to leave a car dealership.
- Congratulations you're approved with $7,000 down at $500 a month. (you only have $500 down and can only afford $350/mo)
- You're approved for $0 down as advertised, however we can only approve you for a 24 month loan and 18% interest with your credit history. (Your payments are only $1,987/mo)
- You're approved for the used 2 door, 5 speed Geo Metro with no air, not to mention it has 185,000 miles on the odometer. (Not going to work for your family of six)
- You are approved with $10,000 down on a $12,000 car for a 12 month term. (Don't laugh, I've seen it happen)
Car dealers can make up anything to "broom" you out the door. It's not right, but that's how the game is played. The salesman may not say those exact words above, but you get the point. I've heard finance managers tell customers they're approved to pay cash for the car.
Truth is, about 1 out of 500 people might bring up the Guaranteed Credit Approval banners hanging in the showroom once they've been turned down for a car loan. Most people just want to get out of the dealership as quick as possible. Dealer's know this and keep using this technique over and over again.
Use this handy Car Payment Calculator to estimate the payment on any vehicle.
Guaranteed Credit Approval Car Dealerships
In some states it's legal to advertise Guaranteed Credit Approval. These dealerships will blanket advertise they can get anyone approved. These dealers have a partnership with a lender that will approve just about anyone no matter how bad their credit is.
The process at one of these guaranteed approval dealerships is they determine you have bad credit, they'll want to get all of your information up front before showing you any vehicles.
Once they get all your information, they will put it into their system. The software program will then look at how "risky" you are as a borrower. The system will also match you up with the vehicle's on the dealer's lot that will make them the most money.
The salesman will come back out and present the numbers to you. Some dealerships have a nice printout that says "YOU'RE APPROVED" across the top of it to play on your emotions.
The car salesman may present the numbers to you by saying something like this:
Congratulations, you're approved with only $2000 down at $385 a month for only 48 months on this 2010 Chevy Trailblazer. Sign right here and I'll get the paperwork started.
Approvals from these types of companies usually require very large down payments and they limit you to only one or two high profit vehicles. The vehicles a dealer acquires for these types of programs are normally of poor quality and have high mileage.
There are many avenues a dealer can take when attempting to sell you a specific car you really don't want to buy, here's a few examples:
- The car doesn't matter, you're not buying a car, you're buying an opportunity to re-establish your credit.
- I only have one car I can approve you for, but it's a nice one!
- I know it's not the car you want, just make payments for 6 months, come back, and you can trade it for a vehicle you want.
- You won't be able to get approved for a car anywhere else. We got you approved on this car and you can drive it home today.
Don't let the dealer talk you into something you don't want to buy or you can't afford. Take someone with you to the dealership for support. If you don't like the deal, don't do it!
Before contacting a guaranteed credit approval dealership get pre-approved with your local bank, credit union, or for the best interest rates apply with an online lenders.
Online lenders are more lenient when approving individuals for a bad credit loans. Read my article on how to get a pre-approved bad credit loan online.
How to avoid the Guaranteed Credit Approval Scam
- Always read the "fine print" in a car dealers advertising. You will find specific requirements needed to take advantage of the offers or programs in the advertisement.
- Don't let a car salesman talk you into something you don't want to buy or cannot afford.
- Don't let a dealer know more about your credit history than you do. Always get your credit reports and scores before applying for car loan with a lender or dealership. Read my section on how to get your credit report online and why you need them to learn more.
- Get pre-approved online. These companies will allow you to submit your information securely and send you free, no-obligation auto loan quotes to your inbox. The companies we recommend are InstantCarLoan.com, 1-800-FreshStart, and Auto Credit Express. These companies will not play games with you and you can use these quotes to determine what interest rates you actually qualify for.
- If you're not currently employed, in bankruptcy, in foreclosure, or have bad credit and not been on your job for over 6 months. Your chances are dramatically decreased of being approved for a car loan from any type of lender. If you don't have a phone in your name, there's an old saying in the car business, "No Phone - No Loan!"
- Visit our section on bad credit auto loan tips to learn what to expect and how to increase your chances on being approved for a car loan.
- Only use a dealerships financing as a last resort. Check current finance programs and apply with your bank, local credit union and familiarize yourself with how a car dealer's finance process works in a dealership to avoid any dealer finance scams.
If You're a Victim of the Guaranteed Approval Scam
If you believe you're a victim of the guaranteed credit approval car dealer scam. File a complaint against the dealer with your local Better Business Bureau and the appropriate State's Attorney General's Office so others will be warned about the car dealerships unethical practices.
If a dealership gets enough complaints filed against them for the same type of incident. There will be an investigation into the company by the State.
Read about more car buying scams and dealer tricks committed in dealerships nationwide.
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