How to Avoid an Online Car Finance or Car Loan Scam

Posted by Jane Clothier on 16 September, 2015

online car finance scam

Do you remember watching a TV documentary featuring people who were victims of fraud, and heard someone say, “I never thought it would happen to me”?

 

It’s an unfortunate truth, recognised in consumer psychology studies, that a person who is already longing for something desirable is more likely to believe an offer – any offer – that makes their dream possible. This is because their emotions have been engaged, at the cost of the rational approach they usually take.

 

Let’s just say that you’ve been thinking about buying a new car, but know that you need help with the finance in the form of a car loan. At this point, it’s just a thought, and you’ve not taken any action. Suddenly, you receive an email out of the blue, with an offer of a loan at a really low interest rate, from a company you’ve not heard of. You’re invited to apply online.

 

If your desire for a new car is taking over many of your waking thoughts, then it’s just possible you may take a peek at that website and respond to the offer to apply. Whatever you do, you should resist this urge, and here's why. According to the Australian Securities and Investment Commission (ASIC), you could end up parting with a lot of money by making a payment up-front.

 

Here are some of the warning signs you should learn to look for in the offer:

  • A loan approval process that’s too quick and too easy.
  • A loan interest rate that’s very low (too low, eg 2% p.a.).
  • You have a free period before needing to make any repayments.
  • They contact you more than once.
  • You’re asked to transfer money up-front.
  • They don’t do any credit checks.
  • There’s a time limit on the offer, so you have to act fast.

 

ASIC states that you should always do the most basic level of research on a car finance company. Ask for:

  • The name of the representative and the company they work for.
  • The company’s business address.
  • The company’s Australian Credit Licence number.
  • The lender’s Australian Company Number (ACN).

 

You can go even further if you wish, by contacting ASIC Connect and doing a registry search. You can find more information about spotting fraudulent finance companies on https://www.moneysmart.gov.au.

 

It is always best to go to a reputable car finance company, where your financial circumstances are taken into consideration before advice is given. At 1800 Approved, we are committed to tailoring a finance schedule to suit your individual circumstances, whether you’re planning to buy a used car from a private seller, dealer or auction, or even brand new from a dealership.