Look before you leap when buying a car
Clark Howard, WSB-TV consumer adviser
You buy a new car, you drive it home. Then days later, the dealer calls and wants it back. It's called car spotting, and it could cost you thousands.
Two Atlanta women, Erin Whitney-Mosley and Vanessa Echols, were shopping for a new car. They both found what they were looking for in brand-new Kias. The women bought at different dealerships, but they encountered the same problem.
"I was told everything would be okay, and that my papers would be in the mail for the car," says Erin. "I received a call 10 days later at my job. They needed to recontract the deal." Vanessa Echols can relate. "He said they couldn't get us financed, so, you know, bring the car back in," says Vanessa.
What happened to Erin and Vanessa is called car spotting. You sign a contract for the car, take it home, and the dealer works on the financing. If the financing fails, you get a call to bring the car back. Vanessa wonders, "Why get a person's hopes up? That doesn't make any sense."
When you bring the car back, the dealer can and will hold you to the contract you've signed. Vanessa was lucky -- she was able to walk away. In Erin's case, she lost her $1000 deposit. "They told me they would keep it all as liquidated damages," says Erin.
The Governor's Office of Consumer Affairs says Erin signed her deposit away when she signed something called a bailment agreement. According to Barry Reid with the Governor's Office of Consumer Affairs, "In this case, as we looked at it, there was a clear bailment agreement in the buyer's contract, which clearly indicated that she was obligated for a certain amount a day, and some other charges, in the event that her credit didn't go through."
To prevent this from happening to you, separate the process of buying a car into three parts:
1. Get pre-qualified for financing at a bank, credit union or online lender. Only use the dealer if they will give you the lowest rate.
2. Shop for the car.
3. Sell your old car first. Or if you're going to trade it in, make sure you cut the deal on the new car first, before making the trade-in.
If you keep these three steps separate, you'll greatly lessen your chances of being taken for a ride. And as always, be careful what you sign -- things like bailment agreements can cost you thousands.
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