Is Your Car Dealer Financing Final?

Protect Yourself with These Car Finance Tips

Is Your Car Dealer Financing Final?
January 2, 2017

You have driven off the lot with your new, dealer-financed car and couldn't be happier with your purchase. Everything is going well until you receive a call from the dealership a few days later. The dealer claims that your financing fell through and tells you that you must bring the car back for further negotiation. You are presented with a contract with a higher interest rate than you agreed to and are told that you cannot just return the new car and get your old one back.

How could this happen? You had a finalized deal to purchase the car — or so you thought. You only skimmed through the contract and missed the part that says that the deal is contingent on whether or not the dealer can find a suitable financing source. Now you are seemingly stuck agreeing to poor terms or wrangling with the dealer to get your vehicle and down payment back.

Do not let this scenario happen to you. The Federal Trade Commission (FTC) offers some tips to avoid being stuck with a bad dealer financing experience.

  • Find Your Own Financing – You do not necessarily have to rely on the dealer for financing. If you already have an idea of the car you want to buy and the price range you can afford, visit your bank or credit union and fill out an application for a pre-approved loan. You can have your financing arrangements taken care of before setting foot on the car lot, giving you leverage over the dealer instead of the other way around.
  • Shop Around for Dealer Terms – If you cannot qualify for other loans and are forced to settle for dealer financing, shop around for different dealerships with as much emphasis on financing as on the car itself. Ask if the dealer will clarify terms in writing, stating either that the sale is final and not contingent, or that they will return your car and down payment to you if the deal falls through.

If a dealer will not agree to those terms, do not take the new car off the lot. Either hold onto your car until the financing is finalized or seek a different dealer.

  • Read All Contracts Thoroughly – Before signing any deals, read the terms thoroughly to make sure that you understand them. Look for contingency clauses and verify that all of the basic terms (the annual percentage rate, total amount borrowed, and the length of the loan term) are what you agreed to. Unscrupulous dealers may try to alter the terms or include add-on purchases into the contract such as extended warranties.
  • Do Not Be Pressured Into Follow-Up Deals – Dealers may try to pressure you into a secondary deal if the financing on your first deal falls through. They may threaten to keep the down payment, trade-in vehicle, or both — or even threaten to file a police report claiming that you stole the vehicle you purchased. Dealers cannot legally force these terms on you.

Should you find yourself in an unacceptable situation with a dealer's abusive financing arrangement, do not just accept the poor terms. Report any unscrupulous behavior to your state's Attorney General, the Better Business Bureau, and the FTC. You can reach the FTC by phone at 1-877-FTC-HELP or through their website.

Simply accepting bad terms from an unscrupulous dealer not only harms your bank account, but it also enables the dealer to hurt others in the same way. Fight back and do the right thing for you and your fellow car buyers.

If you are interested in an auto loan, visit our curated list of top lenders.


Photo ©iStockphoto.com/seoterra

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