The Perturbed Pastor and the Audacious Auto Dealership-Assert Your Rights When Purchasing a Car (PART 1)
I recently received a call from a local pastor who has a congregation in the San Jose area. The pastor was in a panic because he bought a car at a local dealership over a month ago and the dealership was now telling him he had to return the car. Apparently, the dealership was able to receive a preliminary approval for financing at the time he purchased the car, but was unable to assign the loan to a third party in the days following the purchase. Now, the dealership didn’t want to carry the loan and wanted to take the car back.
The way car financing works, with most car dealerships, is that the dealership will extend financing to customers and immediately assign the loan to a third party lender with whom they have a relationship. This allows the car dealership to cash in on the interest they can get the buyer to agree to and the interest that the bank will charge to carry the loan. For example, the dealership may tell the buyer the best interest rate they can get them is 12% knowing that they can get a lender to carry the loan at 8%. The dealership would then keep the extra 4% interest it was able to convince the buyer to agree to.
The sales contract that the Pastor signed with the dealership stated the same in no uncertain terms. The contract specifically set forth “seller may keep part of the amounts paid to others” and “The annual percentage rate may be negotiable with the seller. The seller may assign this contract and retain its right to receive a part of the finance charge.” However, the majority of buyers never read the sales contract in enough detail to flush this out and this fact is likely never divulged by the dealership selling the car.
In the pastor’s case, he had agreed to 16.99% interest which meant he had the privilege of paying over $16,000.00 in finance charges for the approximately $26,000.00 he financed. I told the pastor that the rate was extremely high and perhaps getting out of the contract and returning the car was a good thing. He stated that he had some past credit problems and wanted to keep the car even with the nearly 17% interest rate. However, if you have an interest in interest and want to save some cash the next time you purchase a car, my suggestion is that you contact some lenders independently before visiting the car dealership. That way, you know what range of interest rates you could qualify for and you can use that information to negotiate a more favorable rate with the dealership.
If you or a loved one has been taking advantage of or treated unfairly by a business or another person, contact the Piccuta Law Group today to discuss your rights. Our attorneys have extensive experience litigating claims involving: breach of contract, unfair business practices, fraud and consumer rights. Our attorneys are here to help you and will provide a consultation at no cost.