Predatory Auto Financing
If you are considering purchasing a car, it is important to educate yourself on smart car purchasing before you buy. At The Batista Law Group we meet many clients who have been defrauded by car dealers, banks, and lending companies. If you do your homework before purchasing a car, it can prevent you from becoming the victim of fraud later.
Our Puerto Rico debt solutions attorneys can help you if you have a problem with an auto financing plan. We have represented countless clients in situations similar to yours and are adamant about holding those responsible accountable. Buying a car should be an exciting milestone, not a complicated legal mess. Unfair auto financing can affect your finances and your future, so consult with our team as soon as you become aware of the illegal activity.
What is a Predatory Auto Loan
In the auto industry, the practice of hooking people into auto loans that can cause financial injury is far too common. This is particularly the case in cases where the borrower has no credit, bad credit, or does not have enough cash on hand for a down payment. The result is often a predatory auto loan that deceives the borrower and imposes unfair loan terms. Once the borrower has agreed to these unfair and predatory terms, the lender uses the borrower’s inability to pay it back over time for their own profit.
What are Some Examples of Predatory Auto Financing Schemes
``Payment Packing``
It is when a car dealer quotes you an inflated monthly payment with the sole purpose of adding other unnecessary products and services.
Example: If your actual payment on a loan is $300 per month for 60 months, the dealer might get you to agree to pay $350 per month. After you agree to the inflated payment, the finance and warranty salesperson will tell you that he can add a warranty, insurance, or other products, and keep your payment the same. Your real payment should be much lower, but you end up paying the higher monthly payment as a result of the warranty, insurance and other unnecessary products “packaged” into the transaction.
“Over-Charging Fees”
It is when a car dealer charges a set amount for License, Registration, and Title rather than the amount actually due. In many instances, the fees and charges of the dealer exceed the actual amount due to state agency.
“Pricing Scams”
A dealer cannot legally raise the price of a vehicle because you have bad credit. A dealer must charge you the same price for a vehicle, whether you pay with cash, a check, or finance the vehicle. If the dealer raises the price because you are financing, it is considered a finance charge, and is illegal.
``Insurance Scams``
It is when a dealer tells you – incorrectly – that “the bank requires” GAP insurance or a service contract, or that you must purchase liability or credit insurance as part of the transaction.
What are some of the “hooks” of Used by Dealers in Predatory auto loans
• Convincing borrowers that they can pay more than they can afford
• Convincing borrowers to accept a high interest rate
• Including terms, insurances, and other products in the transaction that are unfair to the borrower
How Do I avoid a Predatory Auto Loan
Do Your Homework before the Purchase
Before visiting the dealership to buy a new car, you should always prepare yourself properly. Determine what the monthly payment should be for the price range and interest rate you want ahead of time. Negotiate a good price for the car before you discuss financing terms. You may want to consider obtaining financing on your own, such as from a bank or credit union – you can often get a better deal that way.
You should also research what the going price is for the new or used car you want, what the interest rate should be for someone with your credit score, or what your trade-in is worth. We recommend that you try to get price quotes from dealers before you even go to the dealership.
Protect Yourself from Unfair Financing Practices
When you decide to purchase a car from a dealer, use a calculator to determine if you are actually getting the price you negotiated before you sign the documents. Make sure the dealer documents every promise they make to you in writing. In the alternative, take a picture with your telephone camara of any documents or terms you are presented by the dealer.
Carefully review every document you sign before you sign it – especially the financing documents (retail installment contract). Do not sign blank documents or inconsistent documents and be on the lookout for changes in the agreed-upon price, add-ons you did not request, hidden charges, etc.
When financing a car purchase, you are entitled to a copy of the financing document. Do not leave the dealership without it. All financing terms should be disclosed in writing.
The key financing terms should include:
• The Price of the Vehicle;
• Amount being financed;
• Interest rate;
• Number of payments;
• Monthly instalments amounts;
Often, car dealers make a transaction dependent on finding financing. If they cannot do so or if your credit is not approved, you have a right to get your down payment and trade-in back.
Car dealers and lenders also often charge usurious interest rates (rates that are ridiculously high). Many parties also think they can get away with imposing unfair and abusive loan terms on car buyers because they know how desperately buyers need their car. Unfair and abusive terms you should be on the lookout for include:
• Excessively High Interest Rates;
• Low-Ball Trade In Offers;
• High Costs Liability and Credit Insurance;
• High Cost Warranty Expenses;
If you believe you have been the victim of unfair financing practices by a car dealer, our Puerto Rico debt solutions attorneys may be able to help. We fight tirelessly to ensure that innocent buyers like you are not unfairly treated by dealers and lenders. Dealers and lending companies must be held accountable for these illegal practices – at The Batista Law Group, we do just that.