The Guaranteed Credit Approval Car Dealer Scam

The guaranteed credit approval scam is used to drive traffic to the dealership.

Car dealers will advertise “Guaranteed Credit Approval,” targeting a specific group of car shoppers with bad credit or no credit.

These people have most likely been previously denied an auto loan from one or more dealerships while attempting to finance a car.

What is the Guaranteed Credit Approval Scam?

This dealer advertising scam is very similar to the all credit applications approved scam. It’s used in dealer advertising to drive high volumes of bad to poor credit customers to a dealership in the hopes of being approved for financing 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.

The guaranteed credit approval scam aims to get a high volume of bad credit customers to the dealership and weed out the people who can buy a car.

People with terrible credit and no hope of financing a car are offered a specific or undesirable vehicle or an unrealistic deal. The terms of the agreement may require a substantial 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’re sent on their way.

Since this statement can be misleading to consumers, dealers are not allowed to legally advertise the term “guaranteed credit approval” in some states.

A handful of lenders will approve just about anyone, no matter how bad their credit history is. These lenders base their loan decision on “risk” more than actual payment history. Very high-interest rates, large amounts of cash down, poor quality high mileage vehicles, and very short loan terms accompany these auto loan approvals.

Guaranteed Credit Approval 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 once 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 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 vehicles 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 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 companies usually require substantial down payments, and they limit you to only one or two high-profit vehicles. The vehicles a dealer acquires for these programs are generally of poor quality and have high mileage.

There are many avenues a dealer can take when attempting to sell you a specific car you don’t want to buy; here are 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; make payments for six 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 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 or credit union. Apply for a bad credit car loan with an online lender for the best interest rates.

Applying with an online auto loan platform will help you realize how much money you can borrow and what interest rate you qualify for before contacting a dealership. When dealing with a dealership’s finance department, you can use this information to leverage your position with a dealership.

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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 they’ve lied to you, you decide to call the dealer out on their deception. You state, “your ad says credit approval guaranteed! I suggest you get me approved, or I will 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 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.

Standard Guaranteed Approvals to Get a Customer to Leave

  1. Congratulations, you’re approved with $7,000 down at $500 a month. (you only have $500 down and can only afford $350/mo)
  2. You’re approved for $0 down as advertised. However, with your credit history, we can only approve you for a 24-month loan and 18% interest. (Your payments are only $1,987/mo)
  3. You’re approved for the used 2-door, five-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)
  4. 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 many times.)

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.

The 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 want to get out of the dealership as quickly as possible. Dealers know this and will continue to keep using this technique over and over again.

How to Avoid the Guaranteed Credit Approval Scam

  • Always read the “fine print” in a car dealer’s 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 a car loan with a lender or dealership.
  • Get pre-approved for a bad credit car loan online to know what you’re approved for before visiting a dealership. These companies will not play games with you, and you can use these quotes to determine what interest rates you qualify for.
  • If you’re not currently employed, in bankruptcy, in foreclosure, or have bad credit and have not been on your job for over six months. Your chances of being approved for a car loan from any lender are dramatically decreased. If you don’t have a phone in your name, there’s an old saying in the car business, “No Phone – No Loan!”
  • Only use a dealership’s financing as a last resort. Check current finance programs, apply with your bank or local credit union, and learn about recent auto finance tips to save yourself money and avoid any dealer finance scams.

If You Believe 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.

Suppose a dealership gets enough complaints filed against them for the same incident. There will be an investigation into the company by the state.

Further Tips and Advice

Further tips and advice about the guaranteed credit approval car dealer scam:

  • Don’t get caught up in the emotions of buying a car.
  • If something sounds too good to be true, it probably is.
  • Do not let a dealer talk you into something you can’t afford or do not want to drive.
  • Buy a less expensive car to help you reestablish your credit.  Once you improve your credit,  you can finance the vehicle you want at a much cheaper interest rate.

About the author
Carlton Wolf is the author and founder of Auto Cheat Sheet.My name is Carlton Wolf, and I’ve been in the car business since 1994, both retail and wholesale. I created the Auto Cheat Sheet to better educate buyers about the deceptive sales practices many dealerships use nationwide. Please understand that not all car dealers are dishonest. However, you never know who you’ll be dealing with, though. I’m willing to share my knowledge and experience with anyone who listens. Keep in mind that I’m a car guy, not a writer.