How To Buy A Car With No Credit Or Bad Credit

“Forced Warranty Scam”

This scam has been around for awhile and unfortunately, it’s still in use. You're ready to sign papers when the finance manager says you MUST buy a $2000 extended warranty "because the bank requires it, or you won't get the loan".

OK, first let’s take a look at this a little closer.  The lender is worried about your ability to pay back a $25,000 car loan, so they want you to add another $2000 to the loan to qualify? Doesn’t quite make sense, does it?  Many people will fall for this scam.

Some dealers who quote monthly payments don't even tell you that you're buying a warranty. They tell you "it's included" to make it sound like it's free. The warranty is included, but you're paying for it. It's amazing how many people don’t see it on the paperwork until they got home!

This scam often accompanies the Spot Delivery Scam. Some finance managers start playing games with the APR if you buy the extended warranty, some claim the APR goes up if you don't buy the warranty. Since when does the interest rate have anything to do with a warranty? They lie to you about this because they know that you know nothing about it. The only thing that determines the APR you will pay is your very own personal FICO credit score - nothing else whatsoever, not the cost of the car, and certainly not buying a warranty.

To try and counteract this scam, have them to put it in writing that the warranty "is required to be approved for your loan", so you can show it to your State Attorney, and the Better Business Bureau. Then watch how quick they back off.

This scam works on people with bad credit and they also "require" you to buy credit life insurance, or "your APR will go up". If they refuse to remove the extended warranty, remove yourself from that dealership immediately.

Many dealers sell you mechanical breakdown warranties, which are lame compared to some of the wear and tear warranties offered online. Also, dealers typically charge $500-$700 for gap Insurance.  What is gap insurance?

Basically, gap insurance will pay the difference between what you owe on the loan and what the car is actually worth in the event that the car is stolen or destroyed.  In general, gap insurance can be beneficial for you if you are unable to put 20 percent down on your car or if you roll the balance from your old car loan onto your new car loan.

You absolutely DO NOT have to purchase gap insurance from the dealer.  It will be much higher than what you can find on your own.  In fact, you can get gap insurance online for half the price that car dealers sell it for. So if the dealer tells you the bank requires gap insurance, tell them you will go get it yourself.

Another way to avoid the scam is to not FINANCE AT THE DEALER if you have bad credit. Finance your car online or at a credit union. Then they can't force you to buy a warranty, you eliminate their excuse to force a warranty down your throat, and you have control over your car loan instead of them.

Credit unions and online lenders don't force a warranty or credit life on you, so why would a car dealer? Why does APR go up if you don't buy the dealer's warranty?  Because of cash flow shell games.  Remove their shells, and there are no more games!

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