Wednesday, September 21, 2011
Help Me Howard: Car Financing
When you sign the paperwork and drive off with a new car, it's yours, right? Not always. In fact, there is a clause in the contract that many people find out about when the dealer calls and says, "We have a problem." What is that clause? It's why one family called Help Me Howard with Patrick Fraser.
WSVN -- When the baby came, Kenneth and Milagros' life changed forever.
Kenneth Lanham, Thought He Bought Car: "Oh! Excited, love him to death. He's just the best thing that has happened, and he turned a year today, so we're excited."
One of the differences the baby made: Kenneth had to park his sports car.
Kenneth Lanham: "We decided we needed a family car, something a little larger, you know. Something that will fit a car seat. My mother-in-law is elderly."
And so they found a good used car, negotiated the price, the financing, and signed the paperwork.
Kenneth Lanham: "So when we got the rate, we said, 'You're sure you can get that?' 'Definitely, sign everything and the car is yours.'"
Like most people, Kenneth had not read every single line of the lengthy, detailed, car contract, so he was surprised a week later when the dealership got in touch to let him know the financing did not go through.
Kenneth Lanham: "Raise everything, interest rate, wanted to add more months to the term of the loan, all of that."
The interest rate went from almost 6 percent to nearly 9 percent, adding $1,500 to the cost of financing and another three months to the loan. So Kenneth drove the car to the dealership to give it back to them.
Kenneth Lanham: "He just took the keys, and we're thinking, OK. How are we going to get home? It's dark out. It's at night. What are we going to do if we don't have the car?"
Kenneth and Milagros talked and said, "OK, forget it. We will agree to sign a new contract and pay the higher costs." But they weren't happy about it.
Kenneth Lanham: "So we figured we would sign it and hopefully we would find some help somewhere to find out if it was legal or not."
If I had a nickel for every person who calls us after signing the paperwork, then finds out a few days later that the financing didn't go through, I could buy a new car. So Howard, you sign the contract. Can the dealership then change the terms of the contract?
Howard Finkelstein, 7 News Legal Expert: "Yes, because this is what the law calls a 'conditioned precedent.' In other words, certain conditions have to be met before the contract is valid. In this case, getting financing is a condition that wasn't met, and so the contract is null and void."
Sure enough, on page 7 of Kenneth's contract, in Section C is a line that says, "Final approval for financing has not been obtained." In Section F, it says, "If that happens, the buyer can return the vehicle or enter into a new contract with the new terms."
When we talked to the dealer, they told us, this usually only happens when the customer leaves out financial information or lies, but Kenneth and his wife were honest; that the dealership's lender wouldn't agree to the terms.
The dealership wanted to make the couple happy, so they told us they would pay for GAP insurance and an anti-theft program for Kenneth's car for five years.
And Howard says, you can make buying a car easier by being careful.
Howard Finkelstein: "Don't sign anything until you read every word. Take it home, make sure you understand what you are signing. And most important, do not take that car off the lot until the deal is finalized. That way, buying a car is a much better experience."
Kenneth and Milagro did get a good car for their growing family, and they got a lesson in buying a car.
Kenneth Lanham: "Unfortunately, it's a mistake you learn from, but hopefully, other people won't make the same mistake, and they can learn from us."
Patrick Fraser: "Buying a new car can be fun if you are careful and patient. Don't let a car salesman rush you. They aren't going to run out of cars. And if you want to make sure of the interest rate you pay, go to your bank or credit union and get approved before you start looking for a vehicle. Then, you can enjoy the experience of picking out your new ride."
Troubles driving you to financial ruin? Hit the brakes and give us a call. Our interest is high, but at no cost to you, of course.