You want a car and need financing, but your credit isn’t so great. Most dealerships have a Finance and Insurance (F&I) Department that will tell you about their financing options. To get the process started, the F&I Department will ask you to complete a credit application, which includes your monthly income and information on current credit accounts, including debt you owe.
At least that is how it’s supposed to work. But there have been reports that some dealers inflate your income information for the financing without your knowledge. That can cause you serious financial harm. You could be saddled with car financing that you can’t afford to repay. That means your car could be repossessed and your credit score could take a hit.
The Federal Trade Commission has a few tips to help you avoid unscrupulous finance deals:
- Consider your options for financing. You might be able to arrange financing directly with a credit union or finance company before you pick a car.
- Research the dealer before visiting the sales lot. Check the dealer’s reputation online by searching for the company’s name with words like “scam,” “rip-off,”or “complaint.”
- If a dealer encourages you to overstate your income, take it as a sign that the dealer is not reputable, and leave the dealership.
- Ask to see the credit application, completely filled out, before you sign it. Make sure your income and other personal information is correctly listed.
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- Why is it important to consider other sources of financing before visiting an auto dealer?
- What might be the consequences if an auto dealer inflates your income?
- Have students visit an auto dealership to gain additional insight into this high-cost financing service.
- Have students make a short presentation with a summary of their findings.