The Payoff Your Loan Scam

"We can pay off your current car loan for you!"

This is when the dealer offers to pay off the balance of your current car loan no matter how much money you still owe on it.  It is a common sales strategy.   (This is another case where it would be helpful to have a car loan payment calculator with you.)

When the average buyer hears it, they think that by purchasing a new car with a new dealership, they will automatically owe no more money on their current car, but...

That couldn’t be further from the truth!...

...What really happens is that the dealership does help you get out of your current loan contract; however, they'll "forget" to tell you how high your auto loan fees are going to be for breaking the loan agreement with your old dealership.  So now you'll be responsible to pay fees that are in the thousands to make up for it.  They get the extra money from this refinancing of your old lease or car loan. 

You also will not be able to refinance for a new car loan until those fees are paid.

The dealership can now add the cost on to your contract for your new vehicle that you're buying with them at a substantially higher rate.

The dealership only agrees to this deal because they want to get more money off of your current car. They aren’t really doing anything for you at all except lying to you with smiles on their faces.  What ends up happening to you is that you'll end up with interest rates that are similar to if you had to refinance a car loan for bad credit.

The dealership will also give you far less for your old vehicle than it's worth.  This scam works because they will up your monthly fees, and then sell your trade in for more than it's worth.  Even if they sell it for the Kelly Blue Book value, they stand to make money on it because they paid you less than it was worth to begin with.

Here's where they plan on making all of this invisible to you:

The dealership then extends your monthly payments so it appears that you are paying a small amount monthly.  However, you don’t even realize that you have committed to an extra year of payments!  It's as if you refinanced a car loan for bad credit!

To avoid this scam, you have to bite the bullet and ride out your current lease untill the end. If you are really determined to get a new car, you should try selling your current car on your own.  Besides, you will get far more money for it selling it yourself.  Take 5 minutes to put a 3-line ad in the newspaper.  One way to sell it is to have the buyer to take over the lease payments...

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