Question about financing a car...

slickrick73

Hi...I have a "friend" who has a credit score of 633. He applied for a car loan (at the dealer) and put his annual salary at $60,000 instead of the actual $45,800. The rate is 9.99% for 72 months (monthly payments of $419).

He drove the car (2013 Volvo S60 T5) off the lot, but now the dealer is saying they need to see a recent paystub.

How likely is this deal going to fall through?

stever

We usually hear complaints about the dealers -- marking up rates or inflating consumer credit scores so a lender will do a deal. It's my understanding that the feds have been tightening up the financing rules and/or enforcement so maybe the pay stub requirement is a result of that.

Not really sure how this will go down - either refi at a higher rate or the dealer will unwind the deal is my guess.

(I got your dupes btw; sorry for your posting issues).

slickrick73

stever said:

We usually hear complaints about the dealers -- marking up rates or inflating consumer credit scores so a lender will do a deal. It's my understanding that the feds have been tightening up the financing rules and/or enforcement so maybe the pay stub requirement is a result of that.

Not really sure how this will go down - either refi at a higher rate or the dealer will unwind the deal is my guess.

(I got your dupes btw; sorry for your posting issues).

Thanks. Any chance it just "goes through" no problem? Or is that a ridiculous thought?

Mr_Shiftright

I think the deal will change. Hard to say because we don't know the buyer's debt-to-credit ratio. If he's already in the hole for other debts, then the deal might very well fall through. I think the dealer will try to make it stick but....

slickrick73

Mr_Shiftright said:

I think the deal will change. Hard to say because we don't know the buyer's debt-to-credit ratio. If he's already in the hole for other debts, then the deal might very well fall through. I think the dealer will try to make it stick but....

The buyer has little to no debt--some student loans, but zero credit card debt.

slickrick73

Mr_Shiftright said:

I think the deal will change. Hard to say because we don't know the buyer's debt-to-credit ratio. If he's already in the hole for other debts, then the deal might very well fall through. I think the dealer will try to make it stick but....

"Make it stick" meaning make the deal happen? Just trying to get some opinions...I know nobody can say for sure.

slickrick73

And I just realized the difference is actually "only" $8,300. His salary is $51,700 (he wrote $60,000).

stever

That helps - and yeah, like Shifty says, the dealer will try to make the deal stick. But the payment may change.

Sometimes little or no debt hurts your credit rating too. Go figure.

Mr_Shiftright

student loan isn't "just"---it's a debt. But the new info you posted is more encouraging.

slickrick73

stever said:

That helps - and yeah, like Shifty says, the dealer will try to make the deal stick. But the payment may change.

Sometimes little or no debt hurts your credit rating too. Go figure.

Well I think there is a seven day grace period that both the dealer and the buyer can walk out on the deal if financing cannot be secured.

Mr_Shiftright

It's not a matter of a grace period---the contract probably (hopefully) reads, in some form, "contingent upon financing"---so, no financing, no deal. But the car has to be returned promptly. Now, this all presumes the buyer is not at fault....but....since your friend mis-stated his financial situation, there could be a bit of back and forth and strong-arming on this.

It's also possible that the dealer already knew the financing would fall through (this scam is called "spot delivery") and they are hoping your friend already showed the car off to all his friends, and will sign a higher interest rate.

slickrick73

Mr_Shiftright said:

It's not a matter of a grace period---the contract probably (hopefully) reads, in some form, "contingent upon financing"---so, no financing, no deal. But the car has to be returned promptly. Now, this all presumes the buyer is not at fault....but....since your friend mis-stated his financial situation, there could be a bit of back and forth and strong-arming on this.

It's also possible that the dealer already knew the financing would fall through (this scam is called "spot delivery") and they are hoping your friend already showed the car off to all his friends, and will sign a higher interest rate.

I suspect the spot delivery thing. I think I will tell my friend to return the car the second they say they need to re-finance at a higher rate/longer terms.

stever

Here's some ammo if needed:

Don't Fall Prey to Spot Delivery Scams and Yo-Yo Financing

slickrick73

Thanks, just read that. Isn't it true that the dealer wants to make that deal happen, almost no matter what, because of the $$ involved? In other words, if they start to finagle my friend and are trying to re-finance the loan, isn't it best to threaten to pull out of the deal completely?

stever

Walking out is almost always an effective negotiating strategy. But the dealer will have to get the lender's approval so that could be the snag.

Maybe you can follow your friend over to the dealer so you can give him a ride home in case they do unwind the deal.

If there was a trade-in involved, that's a whole 'nother wrinkle.

slickrick73

Well he can take his clunker that he used for a trade-in and drive that!

Thank you for your help with this!

stever

Yeah.

Unless the dealer has already sold it or taken it to the auction house....

slickrick73

No..the dealer does not have the title yet for that car...but I wonder what would happen if they did sell it?!?!?

Also, couldn't my buddy accept the new loan and then refinance with a new bank or credit union in a few months?

isellhondas

This is what happens when people lie.

No smart store will deliver a car unless they are 99% positive the loan will fly.

Your friend is NOT in a position of strength here. My guess will be he will get to keep the car but they will jack up his rate. Worst case, the deal will get unwound. If this happens that dealer will be VERY unhappy with your friend for not being truthful.

Lastly, a 72 month loan especially on a troubleprone Volvo is NUTS!