I Bought a Car (And Then Got Rejected for the Loan)

The following is a personal narrative from the Financial Digits Author Ossiana Telephant that details the trauma and financial pitfalls following a car accident.

Once upon a time, I got hit by a car.

Well, more specifically, I was in a car accident while driving on my way to work. I was driving carefully when an idiot ran through a stop sign, and BAM! My car was totaled. Insurance paid out money for my beautiful but destroyed convertible, and now, I had to find a replacement. (I also, then quickly learned why I should have gotten GAP insurance.)

Yeah, it kinda looked like this.
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I found a nice, reasonably priced car that was 10 years old. Literally, it was the same make and model as my now-gone baby, and, it was affordable!

I went to the dealership, got my paperwork approved, and was handed the keys. The car drove well, I got to enjoy the drop-top weather with my partner, and all seemed to be going great.

Until it wasn’t. About two weeks after I drove the car off the dealership lot, I got a letter stating that I was rejected for the loan and would have to pay another $1,500. I wasn’t happy.
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My story had a happy ending. I contacted the dealership and they made sure I didn’t have to pay anything extra. I now will get to enjoy my car without issue due to a glitch in the credit union’s paperwork.

However, not all stories end like mine. If you find that you’ve been rejected for a car loan after you bought the car, there are certain things you need to know…

1. If the loan falls through, you are NOT obligated to keep the car.

Since the contract is on terms that have been declared null and void, your agreement to keep the car is also null and void. You are allowed to return the car and get the down payment refunded to you if you so choose.

This will allow you to get a different car or better loan terms, depending on what you decide to do. In most cases, returning the car is a smart move.

2. A lot of shady dealerships will actually approve you for loans you won’t actually qualify for, then "bait and switch" to less favorable terms.

This is a scarily exploitative scam that a lot of dealerships are known to do. Most of the time, dealerships will do this and will call you up personally—rather than have the credit union do so.
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They are banking on you not wanting to return the car. If you don’t want to accept the loan terms, tell them so and ask for a refund on the down payment.

Dealer "yo-yo" scams are commonplace, but if you call their bluff they’ll typically back down. Should you suspect that you’re being scammed, you should report them to the Better Business Bureau and refuse to sign any paperwork.

3. It can happen for a variety of reasons.

Credit score and down payment aren’t the only factors to be discussed in a loan. The car itself, the age of the car, and the condition it’s in actually matter more than you think with underwriters.

Don’t take it as a personal affront if the lender rejects you; it might not be your fault at all.

4. In many cases, the dealer will want the deal to go through as much as you do.

Yo-yo scams may be somewhat common, but that doesn’t mean that they are the rule. In some cases, such as what happened to me, the dealers do want to see you drive off in the car on the original terms.
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You can use their desire to see things pull through to your advantage. Talk to them, tell them you’ll take the car if they can get you a better deal or if they’ll add in some goodies. They don’t want to eat that depreciation, nor do they want to give up that sweet, sweet commission.

5. Read the fine print.

No, really, read it. Even if the dealers tell you what’s in the contract, you need to read the print. You might be surprised at some of the details you will read there.

In some cases, you may also find fees or additional terms you wouldn’t agree to—and that would qualify as a yo-yo scam. Should you notice hidden "agreements," you should immediately drop the pen and walk away.

6. Check your paperwork for a Borrowed Car Agreement.

A BCA is a legal agreement they may have had you sign as part of the stack of papers that you were given to buy the car. If you signed this, then the dealership knew you weren’t really approved and tried to scam you.

If you notice a BCA, immediately return the car. They’re charging you a rental fee for every day you keep driving it!

7. If the dealer refuses to give you back your down payment, contact a lawyer.

You may have grounds to sue, and that means you’ll probably get a settlement out of court via arbitration. That’s good money and very likely. Dealerships do NOT want to be known for settling lawsuits!

8. In most cases, it’s not a big deal.

Nine times out of ten, you shouldn’t freak out. The only real hassle here is calling the dealership and figuring out what your next step is.

At worst, you get your money refunded and get a new car. At best, it’s not a big deal and it was a glitch in the system like what happened with me.