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Information About Auto Lender Changing Loan Terms

Can an auto loan dealer change my interest rate after I buy my vehicle?

I recently purchased a 2008 pickup truck (about 2 - 3 weeks ago) and the dealership has called me saying that the interest rate went from 7.7% 84 mos. to 8.99 75 mos. and that I needed to come in and sign a new contract. I reside in NC and need to know what are my options with this issue. Can the dealership/bank do this since I already have a signed contract and was approved for the 7/7% 84 mos. I also traded a 08 pickup on this different truck, so what happens with this trade?

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Bill's Answer
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Unfortunately, the situation that you describe is actually quite common in the automobile finance industry, and is, to my knowledge, a perfectly legal practice. In my experience, dealerships treat the initial paperwork on which the interest rate, price and term of the auto sales contract are written as preliminary and conditional until all of the major aspects of contract are verified and closed. For example, the title of the trade-in must be verified, the pay-off balance confirmed by the existing secured creditor, the costs and initial payments negotiated, to make sure the funds are good, etc. It does not become final until the funds are disbursed to the dealer by the new finance company. When you go in to purchase a vehicle, the dealer will run your credit report and, based on your credit score and the information in your credit profile, make you a “contingency” finance offer based on what the dealer thinks that the banks it works with will approve for you. The dealer then offers the loan terms it has offered you to various lenders to try to find a lender who will accept the terms in your contingency offer. If they find a lender willing to accept the terms, then there is no problem and the loan goes forward. However, if the dealer cannot find a lender willing to accept the terms they offered you initially, they may be forced to accept less favorable loan terms to obtain financing for you. Unless you are able to pay the full purchase price of the vehicle out-of-pocket or find alternative financing yourself, you must acquiesce to the new loan terms being offered by the finance company if you wish to keep the vehicle. If you look at the paperwork you signed with the dealership, you will almost certainly find a clause in the contract explaining that the finance terms offered are contingent upon the acceptance of the terms by the bank financing the loan, so it is unlikely that the dealership or the lender have done anything to violate the terms of your finance contract or any state or federal law. For more information about automobile financing and the options available to consumers, I encourage you to visit the auto loans Information page.

In many states, you can refuse to accept the new loan terms and return the vehicle you purchased to the dealership. Since you traded your previous vehicle when purchasing this new truck, if you decide to refuse the financing offered and to return the truck, the dealer should return your trade-in vehicle to you. If your old truck has already been sold, the dealer will probably be required to pay you the fair market value of the vehicle. On the other hand, if you decide to accept the new loan terms being offered, your loan will go through as previously contemplated, except that the interest rate will be higher and the loan term shorter. This increase in interest rate and reduction in loan term will almost certainly make your monthly loan payments increase, so I would encourage you to carefully weigh your options and make sure that you can afford the new finance terms before you accept them. Also, if you do accept the new loan offer, I would encourage you to carefully review the new finance contact to make sure that it is a final agreement, as you certainly do not want a similar problem to arise again.

If you feel strongly that you do not want to accept the new financing offer but also want to keep the vehicle, you should see an attorney licensed by your state to review how your state’s laws may benefit you in this situation. Please keep in mind that I am not licensed to practice law in North Carolina, so I cannot provide you with legal advice. Only an attorney licensed in North Carolina is qualified to review the specifics of your case and determine how your state’s laws may apply to this situation. It is especially important that you seek an attorney’s advice if you decide to fight the dealership and lender to force them to honor the original agreement, as such a position could result in analysis of law and in litigation that you may not be prepared to handle on your own.

I wish you the best of luck in working out a suitable arrangement with your dealership and lender, and hope that the information I have provided helps you Find. Learn. Save.



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  • 35x35
    Mar, 2009
    I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often. Alessandra
    0 Votes

  • BA
    Mar, 2009
    Contacting your lender will not create any problems, but you might find that most auto lenders are inflexible when it comes to modifying the loans terms, even due to a financial hardship. There is no harm in trying.
    0 Votes

  • RK
    Mar, 2009
    I recently lost my job. I am 10 months into my new car contract and have not missed a payment or been late on any payment. Can I re-negotiate my terms, or will contacting the lender create problems for me.
    0 Votes