Trading in your old car to help pay for a new one at the dealership may seem like a good way to shave off the cost of a new car. However, not all trade-in transactions are handled in an honest manner, and this can lead to unfortunate results for consumers.
Unfortunately, trade-in auto fraud is happening more than you may realize. As a consumer, you may have seen auto dealers advertise that they will give you more for your trade-in than other dealers. You may have also heard ads with promotional offers that promise to give you the best trade-in price for your used vehicle.
For many consumers, trading in a vehicle is a good way to finance a portion of the new car’s purchase price. Consumers also find trading in a vehicle is less time consuming than trying to sell it out right as a private seller. Trading in a car definitely has its benefits and some of the offers you see advertised are legitimate; however as a consumer you have to be cautious when trading in a used vehicle to purchase a new one to ensure that you are not the victim of fraud.
What is Trade-In Auto Fraud?
Trade-in auto fraud occurs when a dealer is not honest with the consumer about how the trade-in value they are offering will impact the actual purchase price of the new vehicle. For example, when a consumer trades in a vehicle to buy a new one, the dealer will typically provide a quote on what they will give the consumer for the car. Many times, dealers will offer buyers a value for their car that is higher than what it would normally be worth in an effort to entice the buyer to commit. While an offer like this may appear beneficial at first glance, trade-in auto fraud can occur if the dealer tacks on the increased trade-in value to the total cost of the new car. In this scenario, the buyer will end up paying more for the new car even though they got more for their trade.
Trade-in auto fraud can also occur when a buyer trades in a car that is not paid in full. If a buyer comes in with a trade-in and there is a loan attached to that vehicle, a dealer may offer the buyer a trade-in and tack the balance of the loan on to the cost of the new car. While this practice is technically not fraudulent, it becomes so when the dealer does not tell the buyer what they are doing. When this happens the buyer could end up paying more in interest over time.
How to Avoid Being the Victim of a Trade-In Scam
The key to avoiding a trade-in scam is to be an educated buyer. Go into a dealer knowing what the trade-in value is of your car and do some research on pricing for the type of car you are considering buying. Being prepared with this information will help you be more aware if there is a big difference in pricing. Kelly Bluebook is a great resource to help you learn more about the value of your trade-in. Also, don’t hesitate to ask the dealer to give you a quote on the value of your car without taking the sale of a new vehicle into consideration.
In most states, it is illegal for a dealer to conduct business in the ways I’ve described here. If you have recently purchased a vehicle and believe you may have been the victim of trade-in auto fraud, check with an attorney and learn more about the laws in your state. You may find you have a case against the dealer.
