The Co-Signer Story
- October 11, 2020
- Posted by: alakra
- Categories: Car Loan, Co-Signer
Knowing your credit situation when we explain it in detail helps when you hear this lie. Some shady car salesman/ finance manager may tell you a co-signer will be necessary to purchase a vehicle. This situation usually arises when a consumer has a slow credit history and a low-paying job. Instead of rejecting your application, a dealer will look for someone in your family to purchase the car. In other words, they are looking for a buyer, not a co-signer. They will say you need a co-signer and make that person the primary owner rather than a guarantor. They will tell you this for a few months and will remove the cosigner from your auto loan and you will be on your own! In fact, this is quite a big scam!
This is when a customer tries to qualify for a car loan but does not have the credit history to do so. The salesperson will ask the customer if they have a family member or friend, with good credit who will help them buy the car, or cosign.
When the cosigner gets to the dealership, the salesperson may tell them they’re only signing with the buyer as a reference, only to help the signer establish their credit. This is not true.
The person cosigning believes they’re helping out a close friend or family member buy a car while helping them build and re-establish positive credit history. The actual buyer is unknowingly removed from the loan and the cosigner becomes the sole buyer. The cosigner is now left with all the responsibility of repaying the loan and the actual buyer ends up not building any credit history or gaining anything from the transaction.
How the cosigner scam works:
Just like most car-buying scams, there are several different
variations of how the cosigner loan scam is committed on unsuspecting
car buyers.
1) In some cases spot delivered by the dealership
The most common is when a car dealer knows upfront your credit history is so bad, there’s no way you’ll qualify for a car loan on your own. The dealer will lead you to believe you’ve been approved and everything is great. They’ll have you sign the contract and paperwork and let you take delivery of your new car. This is also a spot delivery in the retail car sales industry. You’ll leave the dealership believing you bought a car and go about your life. After a few days, you’re called back by the dealer and told your financing fell through. You either need to bring the car back or find a cosigner with great credit to go on the loan with you… If you find a cosigner, you’ll have to go back to the dealership and resign the paperwork. This is where you will be susceptible to the next two scenarios.
If you can’t produce a cosigner. The dealer will either try to switch you to a cheaper car you can qualify for on your own, or you will be sent home on the “hush puppy express”
2) The actual buyer is removed from the car loan
This technique also works when the car dealer knows, up front, there’s no way the actual buyer can be on the car loan no matter how good the cosigner’s credit is.
The dealer will deliver the car with both you and your cosigner on the contract. The dealer will allow the car to be driven by you for a few days, or longer, in hopes that you will not want to give the vehicle back.
After a week or so the dealer calls and explains to you they were unable to get the car loan approved with you on the loan. However, they were able to get the car loan approved using only the cosigner’s information and credit history.
The dealer is hoping enough time has passed and you’ve “fallen in love” with the vehicle. The dealer is also hoping you will pull on your cosigner’s “heartstrings” to sign for the car on their own so the dealer won’t take the car away from you.
3) Signing multiple contracts and the paperwork shuffle
Last but not least is having you and your cosigner sign multiple sets of paperwork. The finance manager will have you sign a contract and a set of paperwork by yourself and then have the cosigner sign their own contract and paperwork also.
The finance manager may have both parties sign the title application or other fake forms for show and effect. Signing the title app will make it appear you’re on the title and registration and you’re legit. However, you will not get any positive credit, just parking violations.
To keep you or the cosigner from complaining or threatening a lawsuit because you’re not on the car loan at a later date. The finance manager will not give any copies to you, the buyer, and run any documents signed by you through the shredder as soon as you take delivery of the car.