How Shady Dealerships Are Using Electronic Contracts To Fake Your Auto Loan

Illustration for article titled How Shady Dealerships Are Using Electronic Contracts To Fake Your Auto Loan

Technology has made car buying much easier, but also much more perilous. You can get price quotes and even apply for a loan with just a few clicks. But some unscrupulous dealers are using electronic loan contracts to take advantage of buyers and even sell them cars they didn’t even know they bought.


While the internet has empowered many car buyers to keep some shady dealers honest, the rise of E-contracts has given some of these stores an opportunity to take their rip-off tactics to a whole other level. A recent investigation by Forbes describes how dealers and E-Contract lenders can turn someone’s car buying experience into a nightmare.

In one particular instance, a woman bought a car and she didn’t even realize it.

From the story -

Tanisha Coley was window-shopping at a Kia car dealership in Stamford, Conn., when she decided to fill out a credit application to see whether she had enough credit to buy a car. As a 39-year-old student and mother of five who was working part-time, Coley was in the market for a reliable used auto. After looking around for a while, she left without buying anything. But a few weeks later, Coley was stunned to find her credit report said she had taken out an auto loan of $28,000.

How did this happen? The dealership “electronically booked” a car loan in Ms. Coley’s behalf without her knowledge. Not only did she owe a balance on her loan for the car, but the dealership was also kind enough to pack in an extended warranty. Of course, the loan was originated by a subprime lender that has had a reputation for predatory practices and Ms. Foley had to sue the dealer and the lender to get the contract canceled.

Due to dealer demand, E-Contracts are gaining in popularity and they can provide a benefit for both the dealerships and the buyers. If you have ever bought a new car at a dealer, the paperwork can take forever. It’s not unheard of for the process to take an hour or more. Consumers would rather not take all that time, and dealers know that the quicker a happy customer is out the door, the better chance of the store getting high survey scores. E-Contracts expedite the paperwork portion of the deal, and they generally work just fine as long as the dealers act in an ethical manner.


The problem arises when shady dealers utilize E-contracts to their advantage.

“Unscrupulous car dealers and shady lenders love e-contracting...The combination of all-electronic transactions and high-pressure sales tactics at the car dealership, which are aimed at consumers who are often tired and feeling rushed after hours of haggling and test-driving cars, make it much easier for dealers and crooked lenders to get away with fraud, forgery and other flim-flam.” - Rosemary Shahan, president and founder of Consumers for Auto Reliability and Safety (CARS), a Sacramento, Calif.-based non-profit.


So what should car buyers do to protect themselves?

The first step is to get pre-approved for your auto loan from a local bank or credit union. This will give you the power to avoid the whole dealer loan process to begin with but, as I’ve mentioned in previous posts, sometimes it’s more advantageous to use dealer financing.


Next, make sure that all the details of the deal are clear and in writing before you submit an application. You should know the sale price of the vehicle, all applicable taxes and fees and the total cost. Lastly, read your contract carefully, those documents are designed to protect the dealers, not you. It is imperative that you understand all the fees and conditions of the contract.


Do not sign anything without reading the entire document and always request a written copy.

Tom is a contributing writer for Jalopnik and runs He saves people money and takes the hassle out of buying or leasing a car. (



How to stop shady dealerships from taking advantage of you: stop going to shady dealerships. Seriously. 5 minutes of online research could save you a lot of time and trouble.

Most of us aren’t shady. We just want to sell you a fucking car. The places who do this don’t care about selling cars. The cars are just a medium. They would be taking advantage of you no matter what business they were in.