What is it?
- The Straw Purchase is a crafty
scam which tricks cosigners into assuming responsibility for a loan. They do this when someone with bad credit
needs a cosigner in order to purchase a vehicle. Really what is happening is that the buyer’s
credit is so bad, that there would be no way to be approved for a loan. Somewhere in the paper work signing, they will
have the cosigner sign a separate document from the actual buyer. What is actually happening is that the cosigner
is signing to become the primary borrower on the loan. This is a very tricky and dangerous trap to
fall into as many state laws are ambiguous when addressing such issues as straw
purchases.
How to avoid? – Avoiding this is somewhat simple. Read your paperwork before you sign and never
allow the cosigner to sign a separate document (that has not been properly
inspected). For the most part, however,
if you do not have the credit to even get a loan, you should consider building
it up before making a big time purchase like a new car.
Terms & Trigger words to avoid? – “You’ll need a
cosigner”; As soon as a salesman mentions to you that you need a cosigner, you
should either already know that based on your credit history. Hearing the word “cosigner” should
immediately kick up your guard. While
this is a general term in the automotive world, it is because it is so widely
understood that dealers can get away with the straw purchase scam. Be alert to what is happening.
And please be sure to check out One Stop Motors for the latest vehicle listings.
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