Car dealer changing terms of deal after purchase?
February 4, 2010 12:29 PM   Subscribe

A few days ago, I traded in two cars at a Toyota dealership. I signed contracts detailing trade-in, down payments, and monthly payments. Today, the dealership called and said that Toyota Financial wants a bigger down payment, and to remedy the situation, they will issue me a credit card for XX dollars, but my monthly payments will be reduced by XX dollars, so in the end I will be paying the same amount. Is this a scam? Or is the dealer just trying to maximize their profit? Is this a common practice? Can the dealer nullify the contracts and force me to return these cars? Any insight would be greatly appreciated.
posted by redbed to Shopping (27 answers total) 1 user marked this as a favorite
I don't know anything about contracts but I know a little about car dealers, and if you respond by saying you'll take your business elsewhere, I don't see how he can reasonably counter that you can't because you've signed a contract. I mean, if you can throw the contract out the window, why can't you?
posted by stupidsexyFlanders at 12:34 PM on February 4, 2010 [2 favorites]

IANAL, but a signed contract is a contract and unless there is language in it permitting them to do this, they should not be allowed to.

I would run it by a lawyer, though.
posted by Danf at 12:35 PM on February 4, 2010

It's not clear from your description if the sale is complete. Did you leave with a new car and signed paperwork? If so, that sure sounds like a scam to me. You might want to call the finance company, presumably Toyota Financial, and ask them what's going on. If you haven't actually bought a car yet, this would be your signal to go someplace else.
posted by LastOfHisKind at 12:36 PM on February 4, 2010

This sounds similar.

I feel like I saw this on AskMe awhile ago, but I can't find it at the moment.
posted by backseatpilot at 12:40 PM on February 4, 2010

here's the other AskMe
posted by nadawi at 12:41 PM on February 4, 2010

and here's another
posted by nadawi at 12:44 PM on February 4, 2010

Classic shady car dealer business -- tell them no thanks and take your business elsewhere.
posted by M.C. Lo-Carb! at 12:49 PM on February 4, 2010

One thing I don't understand is how the dealer makes money off this scam - are they just moving a car that they otherwise wouldn't be able to sell to you?
posted by backseatpilot at 12:49 PM on February 4, 2010

What's the interest rate on the credit card and how does that compare to your car loan? Are they trying to push a super-expensive cash advance (most cash advances have fees on top of higher interest rates too) on you here? It's also entirely possible the dealer gets major incentives for selling credit cards.

I have no idea if they would actually tell you anything, but you could try calling Toyota Financial directly and see what they say about the status of your loan. It would be interesting to see how that matches up with what your dealer is telling you.
posted by zachlipton at 12:55 PM on February 4, 2010

how the dealer makes money off this scam

They get more money up-front with a bigger down-payment, or alternately, make more interest by way of the credit card instead of the (presumably low) automobile financing.

redbed, stand by the initial contract. If things are signed, they're bound to it. Call their bluff, and see what they do. If they get in trouble with Toyota Financial, that's not your concern. You bought a car, didn't cheat, and that's all you need to care about.
posted by explosion at 12:57 PM on February 4, 2010

Okay, before we all start yelling SCAMOMGWTF!!!11!, recognize that most purchases which are financed make the availability of financing a condition of the contract, i.e. if you can't secure a mortgage for a house, the closing is off unless you can come up with cash.

It is entirely possible that Toyota Financial has given the dealer some pushback here. Credit is getting tighter across the board, and requiring a higher downpayment is one way lenders minimize their risk. Granted, the way the dealer is choosing to work with that pushback sounds a little weird, but it's not obviously outside the realm of good practices.

I'd call the dealer and figure out exactly what is going on. It may be that there is something fishy going on, but on the other hand it could be entirely above board. There's just no way of telling.
posted by valkyryn at 12:59 PM on February 4, 2010

First off, have you read all of the fine print on both the front and the back of the contract? I am guessing that somewhere in all of that there is a statement that the sale is subject to credit approval. While you do not say where you are, most states have a limit on the remedies available to each of you. In general, most states do not allow you to break the contract due to "buyer's remorse." The dealership is limited in the ways it can break the contract. One of those ways is if your credit is not sufficient for their in-house credit-extending company (Toyota Credit?) to accept your no- or low-down payment. It looks like they are trying to salvage the deal. The way they are trying to do this is to satisfy the credit company on down payment and to lay off the down payment risk onto a credit card that does not use the car as collateral. This is good for them, but leaves you paying a portion of the price with a high-interest loan (the credit card).

I have always felt that having your credit turned down is a polite way of saying you can't afford the payments. This might be a good time to assess whether this is the deal for you or whether you can limp through another year with one or both of the other cars. You haven't told us enough for us to have a valid opinion on that subject.

If you can't / don't want to do the deal their way, thank them very much, return the car and pick up both of yours. They have an obligation to return the cars to you in the same condition as they received them if they can't make the deal they set out to make.
posted by Old Geezer at 1:01 PM on February 4, 2010

What have they done with the two cars you traded in? They move fast to get rid of the trade-ins. Definitely follow through and demand your money back. Post haste!
posted by JayRwv at 1:02 PM on February 4, 2010

Response by poster: Thanks for all the links...I've definitely got some reading material.

I spoke with Toyota Financial & they have no record of the deals, so the dealership hasn't submitted them yet.

I made an appointment to come in & hammer it out, but clarified that my old cars are still on their lot & ready for me to take them back.
posted by redbed at 1:03 PM on February 4, 2010

Read the fine print on everything that you signed -- there's probably some clause that says "subject to credit approval" somewhere. But if they re-neg, they can't legally force you to comply with the new terms.

They might try to play hardball by not giving back the two cars you traded in, in which case you might be in for a tedious lawsuit (of course you'd eventually win, but they'll try their best to bully you first).

I'm not sure how you'd make this right with the least headache...maybe talk to your state DA's office.
posted by randomstriker at 1:09 PM on February 4, 2010

Don't think of it as the dealership nullifying the contracts and forcing you to return the cars. Think of it as you getting the terms you agreed to, otherwise they have to follow the terms of the contract and take back the (now slightly used) cars. From your perspective, you're no worse off (your trade-in or the dollar value equivalent should come back to you as part of the whole thing.)

Still, a quick call to the dealership to get the name and contact information of the person you're talking to, the finance manager and the dealership owner(s) "so that I can forward them to my lawyer; he takes care of this sort of thing for me" wouldn't hurt. Just be willing to follow through on it. They might cave.

If it were me, though, I'd just call 'em back and say "okay, as per the terms, I'll bring the cars back today, provided you have my trade-ins ready to be returned to me, or the cash value you credited me for them in the form of a bank check. What time should I show up?" And when I drove up, I'd have my camcorder running (in the hands of a friend) to record the entire transaction that follows.
posted by davejay at 1:11 PM on February 4, 2010

Okay, the fact that Toyota Financial hasn't heard about any of this suggests that something may well be up. They've made a misrepresentation about the nature of this contract, and though it isn't obviously an obviously material misrepresentation, it's still not something which suggests they deserve your trust.

It may be time to contact the BBB. See if there's a file open.

Still, if this isn't going to cost you any extra money, you may decide to just go along with it. I mean, yeah, they're pulling something which looks a little shady, but if it isn't actually costing you anything, the headache of holding their feet to the fire about upright dealings may not be worth it. Just something to think about.
posted by valkyryn at 1:16 PM on February 4, 2010

Tell them you want to unwind the deal. My dad was in the car business for a long time and deals were often unwound up to two weeks after the papers were signed.
posted by mattbucher at 1:21 PM on February 4, 2010 [1 favorite]

Don't forget to actually do the math yourself about how their proposed change would actually affect you / how much it would cost you. Even if they are being shady, and even if your fighting might result in you getting your original deal, you might rationally conclude that you're basically OK with the new terms and decide to go ahead with it. Remember the value of the time you would otherwise spend fighting with them, and/or having to start over the trade-in/purchase process.
posted by Perplexity at 1:35 PM on February 4, 2010

Ah-ha, but does the credit card have a fixed interest rate like the terms of your financing, or can that interest rate go up over time?
posted by PercussivePaul at 2:11 PM on February 4, 2010

I should have expanded on my casual reference to the higher interest rate on the credit card. They are probably representing to you that the monthly payments will be the same. I doubt that they have represented to you that you will have paid off the credit card balance with minimum payments in the time it takes to pay off the car loan. This would simply not be true. If you sell the car before you have paid off both the car loan and the credit card, you will be making payments on the card balance and no longer have the car you are paying on. In the alternative, you will have paid off the car loan and still have a balance on the card at that higher interest rate.

I wouldn't do it.
posted by Old Geezer at 4:22 PM on February 4, 2010

The part about changing the terms of your financing is legal, and happens all the time: you pay the (worse) terms or give back the car (and get back your down-payment and trade in).

Pitching you a credit card is an interesting angle. If the interest rate and term are the same as the car loan, you might consider it a wash (but run the numbers carefully). However, if the interest rate is higher, the principal pay-back term is shorter, or the interest rate can be adjusted up, it could be worse, and you might want to walk away. Tread carefully.
posted by MattD at 4:55 PM on February 4, 2010

Re: "Credit Card"

is it really a credit card? and not one of those Visa/Mastercard gift cards?
posted by ArgentCorvid at 5:10 PM on February 4, 2010

It sounds a little odd that Toyota Financial has not gotten any paperwork but it is possible it is sitting on someones desk and not "in the system" yet. Another possible reason is that the dealership is trying to shop around your loan not just through Toyota Financial but to local banks as well to see which one will give them the largest kickback for your loan. One of these banks may give the dealership a bonus for signing you up for a credit card even if the bulk of the loan is financed by someone else.

I would go over the terms of the credit card very carefully. There should be some type of "Truth in Lending" statement with the card. Hopefully there is a fixed interest rate for this initial balance equal to the term of your original loan. Look for the penalties if you miss a payment - Your rate may skyrocket on the entire balance or you may be charged a fee and this fee and any additional charges to the card will be subject to an insanely high interest rate.

If this is just a run of the mill bank issued card, it may be that they consider you a good credit risk and want to make legitimate income from you for a longer period than a typical car loan by giving you this unsecured credit. Remember, the banks don't make much money if people are not borrowing their money.
posted by Yorrick at 9:07 PM on February 4, 2010

I don't know if this applies to the details of your situation, but if they are trying confusing stuff about monthly payments, beware. It's worth reading the article Confessions of a Car Salesman, where a reporter becomes a car salesman for a few months to learn the various tricks they use. One of the primary tricks involves fast-talk about your monthly payments, which ends with you signing up for a much more costly loan than you otherwise would. (eg if they set it up so your monthly payments are a little lower but you are making payments for an extra year, you obviously end up paying a lot more to them) The stuff about the "four square" sheet and monthly payments fast-talk is on p 4 or 5 of the article, I think.
posted by LobsterMitten at 9:29 PM on February 4, 2010

There's no reason for you to trot down to this dealership again, ever. If they insist on playing this game, you insist that it be played at your place. "Have my two trade-ins and the cashier's check at my house on Friday..."
posted by dinger at 9:35 AM on February 6, 2010

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