A few weeks ago a friend of mine bought a used car at a dealership. They arranged financing for her and she took delivery of the vehicle.
She says that she has now received a letter from the lender stating that they will not finance the total amount, but are willing to finance an amount which is approximately $600-700 less than the original amount. They state that their offer is good for only 30 days.
What to do?
I’m thinking that one of her options is to return the vehicle to the dealer and start all over elsewhere. Another option in conjunction with the former might be to ask the dealer to accept the lower amount.
Of course a 3rd option is to have her pony up the extra cash in lump sum, but that option isn’t very darned appealing to her at this time. She had gone to this particular dealership in part because of their advertised “$100” down special sale promotion, and she wasn’t planning on any extra out of pocket other than her handling her payments when they started coming due in January.
Is the “return the vehicle” option sound?..and how about that being able to bring pressure to bear on the dealer to take the lower anmount?
Any advice would be appreciated, although I must warn you, any admonishments about how she shouldn’t have taken delivery until she got the payment book will be redundant… This isn’t about what she did wrong, but rather where she should go from here.
My first thought is that there’s something shady going on between the dealer and the lender.
The dealer should never have let it off the lot without a binding committment from the lender. If she tries to take the car back, they’re probably going to attempt to charge her some sort of usage fee for the time she has had the car. It will probably be close the $600-$700 the financing company says she needs to come up with, so she’ll probably end up paying the money and keeping the car, instead of paying the money and having nothing. Unless, she is able to work something else out.
Is arranging financing through another lender possible?
If it’s an honest mistake by the dealer, she might be able to get them to settle for the lesser amount, if they think they’re going to get stuck with taking the car back and not being able to collect something in the way of usage, but I wouldn’t count on it. Talking to the dealer would probably be a reasonable first step.
As for not taking delivery of the car until she got the payment book, that’s just not reasonable. Dealers would have sold cars sitting on their lots for weeks if everyone did that. The inital approval from the lender should be enough. I don’t know what the contract states that gives them the right to renegotiate the terms weeks after the deal, if they have that right at all. The one thing I can think of would be if there was something that she hadn’t disclosed on the application that they found out about afterward.
There’s a dealership I know of that seems to have a habit of trying to renegotiate the deal after the fact. I’ve known several people who have been called by the dealer a few days after the sale was completed and been told the dealer wouldn’t be able to give as much on their trade in as originally stated, for whatever reason, and they had to get down to the dealership with another $1000 or more right away. Can you imagine trying to go back to the dealer a few days later and saying you couldn’t give as much for the car as you originally thought and they have to refund some money to you? Anyway… I hope your friend isn’t in a situation like that.
Sounds to me like the dealership is running a little fast and loose with the procedures here.
I don’t know if the lender is knowingly involved in the scam or not, but I would bet that your friend paid too much for the used car. My guess is that the dealer lured people in with the “$100 down” gimmick and had some sort of (possibly shady) deal with the lender. The lender apparently only found out about the car and loan after the fact. Lenders, who will ultimately reposses the car if a loan is defaulted on, are usually very conservative when assessing a car’s value. They will not loan you $7,500 on a car they believe to be worth only $6,500. If you never make a payment they now are out $7,500 on a $6,500 car.
My first guess is that the dealership exaggerated the value of the car to both your friend and the lender, and when the bank actually looked at the blue book value of the car said “Nope, sorry, we can’t write a loan for that amount for that car”.
IANAL, but I would have your friend carefully read the purchase contract. Returning the car is probably not possible unless the dealer is fairly liberal with its policies. The lender will probably stand firm on its willingness to loan only what the car is worth. Since a car purchase (especially a used one) is a negotiated deal, the dealership will just claim that they (innocently, of course) negotiated a price with your friend that just happened to be more than the bank thought the car was worth. This happens with new cars in high demand (Honda S2000, Nissan 350Z), but those people are paying the $5,000 premium out of their pocket, and not with a bank loan.
I think your friend was the victim of opportunism. By advertising “$100 down” the dealer is drawing in people who they know will be in a weak negotiating position (needing a new car, short on cash, etc). They know that a lot of people will sign any deal that will get them in a car today. [Sidebar - what was the interest rate of the loan your friend signed? I dated a girl once (in 1991)who was paying 21% on an auto loan and thought she got a good deal]
A report to the Better Business Bureau might not help your friend, but it might help other people from getting burned at the same dealership.
i had this happen to me with a new car a few years back. i got mad and thought that they were trying to pull a fast one, so i walked on the deal. i put over 100 miles on it in one day, and they didn’t try to charge me for the usage. i think that she can walk away without any payment for use of the car since most agreements for car purchase are contingent upon financing. i would not pay anything if they ask/demand unless there was a specific clause in the contract.
the options that you listed are sound. i’d go with the forcing the price of the car down. these puppies ain’t doin her no favors, and they think nothing of hammering her onon this deal, so i think that this is the way to go.
the taking delivery before getting the payment book seems to me to be a GOOD move. if the deal doesn’t make, she had the free use of a car!
I think this is becoming a common tactic, I have heard several similar stories around here…basically the dealers write as much paper as they can, then shop it around to all their lenders, trying to get the deal bought. If no lenders will take it as is, then they come back and ask for more money.
The objective is to get as many people off the lot in new cars as possible, and hope to work the financing out later…and if the financing doesn’t work out, the person hopefully is so fond of the new car that they pony up the extra cash.
I think what she got from the lender is called something like “conditional approval” it is actually pretty common. I am making a few assumptions here. Was she at the dealership on the weekend? Did they ask her to verify her income? Does she have less then perfect credit? If she got a conditional approval there should be a form she signed at the closing that explains it. She should definitely contact the dealership, she has the right to bring the car back. Dealerships will generally work with you on this, since they would rather not lose the deal.
Was this a dealer meaning “under the scrutiny of a large corporation with a lot to lose” or “Bob’s Used Cars” that could rent a different corner next week?
Also, in general principle it’s really, really nice to get your financing out of the way before you ever get to a car lot. Just for future reference.
Hmmm… kbb.com for ZIP code 43072 shows a retail value of $9,000. I used all of the defaults for a four-door, automatic model with 80,000 miles. I do find kbb to be a little high in my experience, though.
I recommend working something out with the dealer along these lines: tell the dealer that they screwed up and the sale was conditional upon financing. They can accept the car back with a complete refund and no use charges, since the conditions weren’t meant and they dropped the ball. Or, don’t talk to the dealer and then go a bank or credit union and get your own financing. Chances are the rate will be a little better than the dealer’s financing. Try also www.peoplefirst.com (I don’t work there but am a happy customer). When you have a check, take it to the dealer and make them happy. Note: don’t avoid the dealer for too long, since if the sales contract is void, it’s probably technically still their car!
She received the payment book in the mail today as though all is normal and the previous letter never happened. She also tells me that she has also received the lien title from the dealer…
Now she is wondering if she should just go ahead and pay the first payment and pretend she didn’t receive the letter…
Hmmm… $ 7,500 seems just a bit high to me also, for a 96 LX with 80K on the odometer. Also whether car is manual (less) or auto (more) and 2 door (less) or 4 door (more) will make substantive differences in the price.
Using Edmunds TMV (true market value) analysis for an Accord 96, 4 door, auto LX in average condition with 80,000 miles it shows $4,780, $5,756, $7,120 for Trade-in, Private Party and Dealer Retail value respectively.
$ 7,500 may have been pushing the envelope beyond the loan agencys confort zone.
No! The bank may take that as acceptance of the new terms! Have her call the bank and confirm that the account listed on the payment book (haven’t seen one of those in years!) actually exists and is fully funded.
She was thinking that it might signify the bank’s offer and her acceptance of the original terms. The payment book reflects the original payment amount and schedule.
Krispy, what I meant was the bank may say something along the lines of, hey, we told her the original offer is no longer good. She sent us a payment which is tacit acknowledgment of the new terms. So she makes the first payment, then the bank sends a new payment book for the revised terms.
Another thing would be to see if the dealership already received the wire transfer (or cashed the check) from the bank – then it’s a done deal.
In any case, try to make sure your friend covers all her bases.