Me and my mom were approved for an auto loan on 1/27 we signed all the paperwork even got the car payment bank notes in the mail. And then I come home today (2/11) to find a letter saying we were denied for the loan. Keep in mind this is after I have had the car for 2 weeks and already signed needed contracts. Can they take my car away? Or make us pay more?
We asked automotive finance expert Matt Briggs, co-founder and CEO of CreditJeeves.com, what could be going on — and whether Ivory might actually have to return her car to the dealer.
“I would definitely have them read the contract terms, as that will dictate their options,” Briggs said. “The contract will stipulate whether it can be rescinded or rewritten. I have seen clauses which put a time limit — say 30 days from contract date — to rewrite or rescind. Bottom line: She needs to read the small print in the contract.”
His suspicion is that the contract allowed for at least 30 days to fully approve the loan. Even though all the paperwork was signed, he said, there is a great likelihood that the contract included language allowing the lender to rescind or rewrite the loan. He emphasized that the lender, not the dealer, would be behind an overturned loan decision.
If Ivory is disappointed, so is the dealer. The dealership, like Ivory, thought it had a sale. And if she has to return a new car, the dealer will have to absorb the depreciation. So the dealer badly wants this sale to go through, too.
Briggs went on to say that while a scenario like Ivory’s is rare, it illustrates the importance of reading the loan documents (yes, even in the midst of being excited about your new ride). He said one option Ivory may have for finding financing now is a credit union. It’s also possible that the dealer can help her find a different lender, though the terms could be different from the ones she initially agreed to.
Her predicament also highlights the wisdom of a different car-shopping strategy: shopping with a loan pre-approval. With this tactic, you’ll have an idea of how much you plan to spend and how long you are willing to make payments. You’ll also want to be very careful about allowing a dealer to check your credit. Readers have told us some applications at dealerships have triggered multiple inquiries (sometimes dozens) and their credit scores have been hurt as a result. At the very least, be aware of your credit score (you can see two of your credit scores for free, with updates every 14 days, at Credit.com); the dealer shouldn’t know more about your perceived creditworthiness than you do.
And despite its length and your eagerness to get behind the wheel, read your contract — even if someone has already told you what is in it. Read the fine print, and ask questions about anything that’s unclear to you.
More on Auto Loans:
- Are There Car Loans for People With Bad Credit?
- What to Do If You Can’t Make Your Car Payments
- Top 5 Worst Car Buying Mistakes