The scenario is all too common. A car buyer with not so stellar credit goes into a dealership to buy a car. Everything seems to work out, credit is approved, paperwork is filled out and the buyer drives off with the car. However, a few weeks later the dealer calls and says the buyer has to bring the car back, the financing wasn’t approved. The buyer then gets pressured into a new loan near with near 20 percent interest rate. Facing the possibility of losing the car and the purchase, as well as the trade-in if one was provided, the buyer usually caves and agrees. It’s an age-old tactic used by less-than-scrupulous car dealers.
Something Smells in Denmark
The above situation is a type of switch and bait financing fraud which is illegal in most states. However, it happens on a regular enough basis that shadier businesses still try to pull off the scam and cover it up as the buyer’s fault not qualifying for financing in the first place. That said, buyers need to understand the time window that is allowed for financing a car. Most states have laws on the books that allow car dealers to qualify loans within a certain period of time. That’s usually a few days, not a few weeks.The scena Qualification should definitely not take more than a month. If a loan fails final qualification in a few days, usually with a weekend sale, then the car dealer is within its rights to pull the customer back and require a different financing package.
Solutions When Confronted with an Aggressive Dealer
Where a dealer calls a customer almost a month after the fact and says the first loan failed, the customer should be talking to a local district attorney’s office or the state attorney general’s office. Often, in such cases, that kind of a dealer has performed the same kind of pressure situation on other customers, forcing people into excessively expensive new car loans they never would have agreed to otherwise. If the deal involved the payoff of an old car loan and trade-in, the customer should call the older lender as well as let them know the issue is being investigated as a potential crime. This protects the customer from having his credit damaged by the old lender for failure to pay the original car loan that was supposed to be paid off.
So if confronted by a car dealer after a purchase who says the deal has to be renegotiated because the initial financing didn't get approved, follow the below steps:
- Check how long it has been since the car purchase first happened. If only up to a week, then the dealer is within his limits to resecure financing. However, you as a customer are not required to sign another loan but you will need to return the purchased car and turn it over. However, you may have to get an attorney's help to get your trade-in returned.
- If longer than two weeks, something is odd and authorities should be contacted to check out the car dealer.
- If the above bullet applies, call the original car loan lender if one applies to preserve your credit and let them know a problem is being investigated.
- Don't go to the dealership and submit to a new negotiated loan for the car. Keep the car at home or at a secure location until the authorities clear the dealer.