Steer Clear: How to Avoid Costly Auto Buying Traps

Tax refund season is here, and for many people, that extra cash feels like the perfect chance to finally upgrade their vehicle. It’s not just a feeling — tax season is historically one of the busiest times for auto sales and financing, driven largely by shoppers using their refunds for down payments. 

That surge in activity creates an opportunity for predatory sellers. When you’re excited about getting into a new (or new‑to‑you) car, it’s easy to overlook the fine print or miss red flags. And with today’s high prices and tight inventory, more buyers are running into shady practices — from unsafe cars to junk warranties to surprise fees.

To help our members make informed decisions, we’re sharing the following resource from our trusted partner GreenPath Financial Wellness, a trusted, national nonprofit organization that provides financial counseling and education to help people achieve financial stability.

Why Auto‑Buying Traps Are On the Rise

Inflation, high demand, and a tight used‑car market have created the perfect environment for questionable sellers to take advantage of hopeful buyers. These traps aren’t always obvious. They often show up as “too good to be true” deals, complicated financing, or cars with hidden mechanical issues.

Understanding the red flags can help you confidently choose a vehicle that’s actually worth your tax refund.

Watch Out for These Common Traps

1. Overpriced Loans for Subprime Buyers

If your credit is bruised, some lenders may offer you a loan — but at sky‑high interest rates. And while higher rates for low‑credit borrowers are common, some dealerships markup rates even further.

What to do instead:
Check with your financial institution before stepping onto a lot. You may qualify for a lower‑cost loan than you think, and pre‑approval gives you more negotiating power.

2. “As-Is” Cars That Aren’t Road‑Ready

Some sellers offload vehicles with major, undisclosed issues — knowing they won’t last long on the road. When the car breaks down, they may offer to “take it back” …for steep fees or with no refund at all.

Protect yourself by:

• Asking for a full vehicle history report
• Bringing a trusted mechanic to inspect the car
• Walking away if the seller discourages questions

3. Add-On Warranties That Don’t Actually Protect You

Extended warranties, service contracts, and protection packages can sound reassuring. Unfortunately, many aftermarket warranties have long exclusions, difficult claim processes, or coverage so narrow they’re practically useless.

Ask these questions:

• What exactly does this warranty cover—and not cover?
• Are repairs required at specific locations?
• Is the seller pressuring me to buy this add-on?

If the answers feel vague, it’s okay to decline.

4. Yo‑Yo Financing

This happens when a dealer lets you take the car home before financing is finalized. Days later, they call back claiming your loan “didn’t go through,” pressuring you into a worse deal.

How to stay safe:
Never drive off the lot until all financing paperwork is complete and signed.

5. Hidden Fees That Inflate the Price

Documentation fees, “prep” fees, vehicle etching, nitrogen‑filled tires—many of these add-ons create profit for the seller, not value for you.

Tip: Ask for a detailed price breakdown and challenge anything that seems unclear.

You Don’t Have to Navigate This Alone

Buying a car is a big decision, especially during tax refund season when timing adds extra pressure. Connect with your financial institution to see if they can help you make the most of your refund by offering:

• Auto‑loan pre‑approval with transparent terms
• Guidance on affordable financing options
• Budgeting tools to help you determine what you can truly afford

As an additional resource, GreenPath offers free, confidential financial counseling to help you explore your options, understand loan terms, and choose the path that best supports your long‑term financial health.

How Verity Can Help with Auto Financing

If you're preparing to purchase a vehicle, having financing options lined up before you visit the dealership can help you make more confident decisions and stay within your budget.

At Verity, members have access to auto loan options designed to support a range of vehicle purchases and financial situations.

Auto loan features available to members include:

• Financing for new and used vehicles

• Pre-approval options so you can shop with more clarity on your budget

• Flexible repayment terms, with terms available up to 84 months for qualified borrowers

• Financing available for vehicles up to 15 years old and up to 150,000 miles

• Potential rate discounts for EPA SmartWay Certified vehicles, including many electric, hybrid, and fuel-efficient models

If you're exploring your next vehicle purchase, Verity’s team can help you understand your financing options and prepare before you begin shopping.

Learn more about Verity auto loans or apply today.