‘œA fool and his money are soon parted.’ ‘“ Thomas Tusser

In January 1998, I received a letter from the bankruptcy court informing me that my bankruptcy had been discharged.   It was a welcome relief to know that the worst of the mess was behind me.   I was still living in my 18-foot travel trailer, and I knew it was time to start rebuilding my life.

Almost immediately, I was deluged with offers for credit.   I received letters offering new and used car loans, credit cards, and even household goods.   Everybody seemed to want to offer me financing, since they knew I couldn’t file bankruptcy again for seven years.

The offers for car loans were the most interesting.   Now that I was living in my trailer full-time, my aging and underpowered 1/4 ton pickup was starting to seem like a liability.   Not only was it wearing out with over 181,000 miles, it wasn’t safe for the heavy towing I was asking it to do.

I started to think about buying a newer truck.   Although I briefly considered the idea of a brand-new vehicle, I thought it would be akin to committing financial suicide.   There I was, in the frying pan, getting ready to jump back into the fire.

After receiving one particularly interesting letter from a local car dealer, I decided to give them a ring.   Yes, they told me, it was possible to secure a car loan if my bankruptcy had been discharged. They also pointed out that they had several secondhand trucks within my price range that would handily pull my trailer.

I went to the dealer and I made a deal.   I traded in my aging, but paid for, 1/4 ton import for a beefy, American-made, 1/2 ton truck.   Although the price seemed fair, I was completely shocked by how much the cost of vehicles had gone up since I’d purchased my truck in 1989.   My new-to-me secondhand truck cost nearly $5,000 more than my brand-new truck had cost nine years earlier.

I signed papers, took the keys and happily drove away with my new-to-me truck.

In doing so, I had been taken by one of the top ten scams in the auto dealing world.   I had just fallen for the Spot Delivery (aka ‘œYour Financing Fell Through’) scam.   Roughly a week after I drove off the lot with my car, the finance manager called to tell me that my financing had fallen through.   He explained that their regular lender wasn’t willing to finance me because of my recent bankruptcy, so the reasonable interest rate he had promised wouldn’t be available.   All they could do was offer me financing with an alternate lender, but the rate was well over 21% APR.

I immediately offered to take the truck back.   ‘œSorry,’ he told me, ‘œyour trade-in has already been sold.’

I was stuck.   I needed a vehicle to commute to work, and I needed a truck to pull my trailer   My truck was gone, I probably couldn’t get better financing terms elsewhere, and I couldn’t afford to rent a car in the meantime.   Since I saw no reasonable alternative, I reluctantly agreed to the new terms.

I tried to make the best of things and paid extra each month to reduce the principal of the loan.   It definitely put a squeeze on my monthly budget, but it was doable.   I was still able to contribute the maximum to my 401(k) plan, but it left me with very little discretionary money at the end of the month. I consoled myself with the thought that I was doing something positive to improve my credit rating.

The irony of the situation wasn’t lost on me.   I should have known better, because I’d sold cars for a few months during the early 1980s.   Unfortunately, this was the one scam I’d missed during my short tenure as a car sales person.

Lessons learned:

1)       If you are going to finance a car, especially if you have bad credit, secure financing before you set foot on the dealer’s lot.   These days, it’s very easy to obtain financing through a variety of online sources or credit unions. If the dealer can meet or beat the deal you already have arranged, consider the offer, but don’t feel obligated to take it.

2)       Don’t drive your new car off the lot until you are 100% certain your loan has been approved.   If you have signed a contract that is ‘œsubject to financing,’ be aware that the deal could fall through and you may end up paying more than you expected.

3)       If you are scammed by your dealer, complain to the Better Business Bureau, your state attorney general’s office or bureau of automotive affairs.   All of these agencies are well-aware of the scams dealers pull, and they are all committed to fighting back.

Next in series: Disaster Strikes

Photo credit: stock.xchng