Money from tax returns sometimes provides an opportunity to buy a new or used car for people who might not otherwise be able to afford one. The Better Business Bureau warns individuals who have bruised or bad credit that their enthusiasm for buying a car needs to be tempered so they are not taken advantage of.
“The average tax return for Illinois consumers in 2014 was just over $2,800,” explains Steve J. Bernas, president and CEO of the Better Business Bureau serving Chicago and Northern Illinois. “This can be a windfall for many people living on tight budgets. But to avoid disappointment and problems, they should take time to gather information and get the best deal.”
With tax return money in hand, individuals who may not qualify for conventional financing become the targets of “Buy Here – Pay Here” lots. These dealers offer older, high-mileage cars, often with steep markups and loans that carry interest rates that can exceed 20 percent. The costs are so high that many borrowers fall behind on the loans, allowing the dealerships to repossess the cars and sell them again. Repossession rates are around 30 percent, according to the nonprofit Center for Responsible Lending, which says collections and repossessions are a part of this type of dealer’s business model.
In the past 12 months the Chicago BBB processed 1,205 complaints filed against 484 used car dealers across Chicago and northern Illinois.
“Our volume of complaints indicates consumers need to research the dealerships they plan to do business with before they sign on the dotted line,” says Bernas. “Consumers find themselves in trouble most often when they are dealing with ‘Buy Here – Pay Here’ car lots.
“We receive complaints and calls from consumers weekly who have purchased cars at lots that self-finance,” notes Bernas. “And consumers complain that the cars they purchase often prove to be unreliable, sometimes breaking down only hours after the purchase.”
To avoid becoming a victim, the BBB recommends:
Know your dealer. Personal references are very important in this area, get as much information in advance before visiting the dealership and check its Better Business Bureau Business Review.
Know exactly what you can afford. Don’t go for a higher level of car than you can afford. Assess your finances and calculate how much you can afford to pay monthly on a car.
Shop around for the best deal possible. Compare the dealer’s loan offers with other businesses first, and be wary of ads targeting consumers with bad credit or that promise financing.
Get an inspection. It’s perfectly OK to request an inspection, you’ll just have to pay for it yourself. However, it can prevent huge out of pocket expenses down the road.
Never accept the upfront price. Do some research use the Internet to get
comparative prices to find out the car’s value. Use sites with free car value calculators like Edmunds.com and Kellybluebook.com to get a sense of how much you should pay for a used car.
Run the numbers. Ahead of time, calculate your payments at various rates of interest so you’ll have an idea of what the exact dollar figure is before you sit down to negotiate a loan contract with your dealer.
Get everything in writing. No matter what a dealer tells you, it only counts if it’s in the contract. Never rely on spoken promises. Dealers are on the lookout for vulnerable consumers who may be ignorant of their rights as a buyer and they know how to spot them.
Remember, you do have options. You may not be able to get conventional financing but you still have options. The dealer is in business to sell cars so tell them you’ve looked at the prices and done some comparisons, and you’re willing to pay the finance cost, but only if it’s at a rate you can handle. If you don’t get the price, then go somewhere else.
If in default, try to come to an agreement. If you find yourself in default don’t visit the lot with the car. Whether it’s a legitimate dealer or a fly-by-night predatory dealers, they may want to get you on the lot so they can immediately repossess the car. Try to come to an agreement without having to surrender the car.
For more consumer information, visit www.bbb.org/chicago, and like us on Facebook, follow us on Twitter or add us on Pinterest.
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ABOUT BBB: For more than 100 years, Better Business Bureau has been helping people find businesses, brands and charities they can trust. In 2014, people turned to BBB more than 165 million times for BBB Business Reviews on more than 4.7 million businesses and Charity Reports on 11,000 charities, all available for free at bbb.org. The Council of Better Business Bureaus is the umbrella organization for 113 local, independent BBBs in the United States, Canada and Mexico, as well as home to its national programs on dispute resolution, advertising review, and industry self-regulation.
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