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Auto Financing 101

9770 Views 7 Replies 6 Participants Last post by  ArtemisO
Posted this info on others forums and thought I'd share it here as well. - Dan

Long, but read......Just a little tid-bit I learned about getting your car financed. I just bought a 2009 Nissan Cube recently. One of the deal clinchers is that I was just coming off of a lease on an 06 Nissan Frontier. Because of the lease, my financing was already pre approved through Nissan up to x amount.

Anyway, I returned my truck and made a deal on this Cube. Signed all the papers and brought the new Cube home.

I got a call from the dealership telling me their finance person missed a signature and they would be sending me a new contract to sign, assuring me there were no changes, just a missed signature line.

I got the new contract and read it over. Sure enough there were no changes. But if you look over the contract closely you will see a block that say's "SELLERS RIGHT TO CANCEL".

If you read the terms it basically say's that the dealer can request the car back anytime withih 60 day's if they have a problem getting the financing through. This is the block I didn't originally sign. Their finance person didn't have me sign it because my financing was pre-approved. I wouldn't have agreed to this anyway.

In my case this term wouldn't apply since my financing was already pre-approved. I learned that if you sign this block, this gives the dealer blanket authority to request the return of the car and to change the terms of the contract for more money by simply telling you that the financial institute wouldn't approve the contract as originally submitted, and they want different terms. You have the car and don't want to give it back, so you will most likely agree to a slightly higher interest rate, payment, etc. making the dealer more money.

So, if you're like me and have pre approved financing, this condition doesn't apply. Be sure to have the dealer write accross it "Not Applicable" before you sign. Even if this doesn't apply the block still has to be signed (so they say), so be sure it's marked NA, because if you don't, this gives the dealership the leverage needed to change your financing or take the car back.

The new contract they sent me didn't have NA written accross that condition and I refused to sign it. I called them and b****ed them out. I caught them trying to pull a fast one on me. Had I signed it and sent it back, they would have manipulated it into another contract with "new terms and conditions" to their benefit. In my case, they already know how much Nissan approved me for. And since I was well under that amount this gave the dealership some room to increase my payment, or their profit by simply telling me they couldn't get the financing through (it's usually an interest rate spike they're after).

Anyway, they're sending me another contract. This time with "NOT APPLICABLE" written accross this statement.

I researched the subject and from what I've learned. This clause / condition has been added onto just about all financial contracts that dealerships use regardless of who they're doing the financing through. It's a bogus clause and is designed to give the dealerships leverage to change the terms on their behalf. It's just like the so called dealer fees. Dealer fees are nothing more than a tacked on amount the dealer asses to a sale, it's nothing more than a little more profit. The buyer get's absolutely nothing, no benefit what so ever from a dealer fee. - Dan

Here's an update. I got my new contract (third one). The Sellers right to cancel clause was indeed marked NA as it should be. But there was no requirement for a signature. So in essence, the third contract is identical to the original except it has NA in that clause which could have simply been added to the original.

I did learn a bit more about this clause. Shady dealerships started using this practice to boost profits until it was brought to light by angry buyers. Apparently they were told the practice is illegal because it wasn't a part of the contract and without the borrowers signature agreeing to these terms they couldn't enforce it. So, to make it legal they just simply added the clause to the contract. Now in the excitement of the buyer getting a new car, the stealership simply glosses over this clause collecting the buyers signature in agreement.

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I think the seller's right to cancel also states that they may retain any down payment/trade as necessary to cover expenses incurred. So basically a dishonest seller can make your life a living hell. Next car I purchase, I am going to line out everything I don't agree with. If they don't want the sale, then so be it.

In contrast, the buyer has no rights. You can't even sue if there is evidence of fraud, due to an arbitration agreement.
What your saying is true and buyers are at a disadvantage. Stealerships bank on the fact that the buyer is not at his / her best because of the excitement of buying a new car. Bottom line in this economy is to read the contract carefully. It seems everytime you turn around vendors of all kinds are trying to slip something past you that enhances their end while costing the consumer. - Dan
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