Auto Dealer Interest Rate Fraud

Car dealers can make qualifying for a new or used car purchase seem effortless. Putting no money down or paying off whatever you owe is tempting. However, you should be aware of interest rate fraud when you go to the dealership. Shady dealers can inflate the interest rate on a car loan beyond what you qualify for without your knowledge.

If a dealership misrepresents the financing terms or changes the interest rate without your approval, contact a vehicle fraud lawyer about your legal options.

What Is Interest Rate Fraud?

When you finance a new or used car purchase through a dealership, you’ll need approval from a lender. The car dealership will work with lenders or act as the lender for a vehicle purchase. The dealership makes more money with higher-interest loans.

Interest rate fraud involves changing the interest rate or tricking buyers into signing a contract without including all the terms and conditions. Agreeing to a high interest rate isn’t illegal. But deceptive business practices and false advertising are types of fraud. Auto fraud is against federal and state consumer protection laws.

Interest rates are generally based on your credit score and manufacturer incentives. If you have a high credit rating, lenders typically will approve lower-cost loans. If you have a low credit score, you will have worse lending terms. Banks and credit unions consider them a greater risk.

Before any auto loan agreement, understand the down payment, interest rate, and payoff terms. Read the fine print. Get the agreement in writing before you hand over your trade-in or take the new vehicle. Ask an auto fraud lawyer for legal advice if you think the auto dealer ripped you off.

Is There a Limit on Auto Loan Interest Rates?

Federal law doesn’t limit the interest rates on auto financing interest rates, except for military members. However, states have their own usury financing laws. These laws put a cap or limit on loan financing terms. Borrowers can agree to waive interest rate protections. This language may be hidden in the contract’s fine print.

A few states place no limit on interest rates, and a dealership could charge you 30% or more to finance a used vehicle. To put that into perspective, a 5-year loan with 30% interest on a $30,000 car will cost you almost $60,000. At 12%, you will pay $20,000 less for the same vehicle.

Can the Car Dealership Change the Interest Rate After You Buy the Vehicle?

Changing the interest rate after giving you the vehicle is a common dealership scam. With yo-yo financing, a dealer gives you the vehicle without final approval for your financing agreement. The dealer calls up a few days later and says the financing fell through. You have to return the vehicle to the used car dealership. The salesperson tries to get you to sign a new agreement with worse terms (higher interest rates or a larger down payment).

Generally, you don’t have to accept the new terms of the changed contract. However, many drivers get attached to their old cars. The dealership might have already sold your trade-in vehicle. This puts you in a difficult position, and many agree to the new contract because they think they don’t have a choice.

Spot financing without final approval isn’t against the law. However, deceptive business practices and false advertising violate consumer protection laws. The Federal Trade Commission (FTC) enforces auto fraud consumer protection laws.

If a dealership lied about your used or new car purchase, a dealership fraud attorney can help you get your money back. You can also contact your state attorney general or consumer protection agency.

How Can I Protect Against Interest Rate Fraud?

Changing the interest rate is one of many types of deceptive practices by dealerships. Other scams involve bait-and-switch advertising, extended warranties, or service contracts. You can protect yourself by being aware of common dealership scams. Do your due diligence, take time to read the contract, and walk away if you think the salesperson is trying to rip you off.

One of the simplest ways to protect against deceptive loan terms is to get financing from your bank or credit union. You can get loan preapproval before you go to the dealership. This will give the dealership less room to trick you with loan agreements or yo-yo scams.

If you get financing through the auto dealership, you can shop around to other dealers before signing a contract. Shopping around allows you to negotiate the interest rate with the dealer.

The Consumer Financial Protection Bureau (CFPB) has other tools to help you avoid interest rate fraud and other car-buying scams.

How Can a Dealer Fraud Lawyer Help?

Lawyers with experience in auto dealer fraud are familiar with the dealership tricks and tactics. They can review your case and explain your legal options. A lawyer can negotiate with the dealership to help you get a refund or change the deceptive loan terms. Your lawyer can also file a fraud claim against the dealership to help you get your money back. Contact a dealership fraud lawyer to find out how a dealer fraud lawyer can help.