Tuesday, January 25, 2011, 06:42 PM
Posted by Administrator
Editor's Note by Bob Smith: Yes, Duhl used to sell cars. Now if he'd just shut up about it........

Duhl writes:

I got a call this morning from a former secretary of mine (who said I could use her name and tell her story). She had bought a Nissan Pathfinder from a Miami used car dealer over the weekend and was regretting the purchase. She liked the car but she was having buyer's remorse over the deal she made. I called the dealership for her (because she is my former secretary, not because I do car-dealer-law). This is what I was able to figure out.

She had bought the car for around $18,000. She put $1.5K down and the dealership said it would get her financing for the remainder at 4.9% interest. Presumably, the dealership told her this so that they could "make the deal" and send her home with the car...they would worry about the details later. The lore of the car dealer business is that if a customer doesn't leave the lot with a car......they'll never see them again.

One of the details the dealer would worry about later was that no bank was going to lend Nellie the rest of the money to buy the car and certainly not at 4.9% interest. Credit is tight. She has a good "Beacon Score" but she only has low-limit credit cards and has never financed a big purchase.

When I called the dealership, I was told that they probably would be able to get her a loan with only the $1.5K down....through a credit union and at 10% interest. So, the dealership would have to get Nellie back in to sign new loan papers at the 10%.

Or, alternatively, the dealership could just hold onto the loan, themselves. When the dealer had Nellie sign the loan papers, they intended to sell the loan to a bank for the full face value and "without recourse". "Without recourse" means that the bank or credit union that bought the loan from the dealer couldn't come back and demand that the dealer pay the money if Nellie didn't. The dealer could just be the lender...and make good on their deal with Nellie. Or, assuming the dealership itself were credit-worthy, they could sell the loan "with recourse"...and guaranty that the buyer would get paid...either by Nelly or by them.

But, in reality, what the dealership is going to do is call Nellie...probably tomorrow...right around 10:30 AM and tell her that she has to come in and sign more papers. The "more papers" will be a loan at the higher interest rate. Maybe they'll tell her to "bring your checkbook" because they will try to get her to put more money down....all to make the loan saleable "without recourse".

If Nellie refuses to sign the papers, they'll tell her she owes some exorbitant amount for the use of the car for the few days she has had it. Or, they'll point to some language in her contract that requires her to sign papers at a higher interest rate.

When we spoke in the afternoon, she was really, really anxious to just return the car and walk away from her $1,500. I told her to wait until tomorrow and, when the call came from the dealership, to call me. It is always bad to make big decisions when you are upset. And, maybe, she can somehow make the dealership's problem into a benefit for her.

Also, whatever car she buys to substitute for the Pathfinder...there will be problems for her with that deal too.

It isn't that car dealerships are bad, it is just that they are much better at the business of selling cars than we are at the business of buying them. Also, times are tough in the car business so they've got to make money wherever they can. The salesmen have mouths at home to feed...and they need your money to do it.

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