Nov 30 2008
Rewritten Contracts/Backdating
Often a customer will not qualify for financing upon the terms on the first contract. The customer may be required to increase a down payment, higher APR, etc. in order to qualify for a loan. The dealership has the customer come to sign a second contract with the different terms but backdates the second contract with the date of the first contract. This affects the finance disclosure laws in that the customer is being charged interest for a time period in which the contract is not yet in effect, etc. In addition to making a material misrepresentation regarding when the customer takes the obligation of the new contract, a backdated contract often also violates the single document rule because another form (usually called Acknowledgment of Rewritten Contract) has the actual date when the contract was signed. Further, many customers are not told that they do not have to sign a second contract, instead they can choose to cancel the contract and return the new vehicle and have the down payment and trade in vehicle refunded. Finally, a dealership only has 10 days to tell you they want to make changes to the contract or cancel the contract. After the 10 days, the dealership cannot change the deal.
I just bought a toyota corolla on may 3 2010. They offer a 0% APR deal special. They approved me with a $1500 downpayment. I signed the contract and i have my car with me but yesterday the financial guy called me and told me they want $2000 more. If a do not have the money. what can they do??? Are the going to take my car away?? Can they do that?
Thank you
Thank you for the comment. Generally, there is a ten day grace period within the agreement during which time if the dealership fails to secure financing it has the option to cancel the sale. This means they get to take the vehicle back and refund your entire down payment. Note that this is regardless of how many miles you have driven the vehicle. Please read your contract to find out if such a ten day provision was included therein. If so, notify the dealership of the miles driven and the fact that you cannot afford to pay more. They will assess their circumstances and often times let you keep the vehicle according to the original agreement. If they opt to take it back then you must either return it or negotiate a new deal. Note that if they are proposing to keep the same purchase price and accordingly reduce your monthly payments in correlation to the extra $2,000 then perhaps they are being genuine. However if they are attempting to increase the sales price in order to get you approved then they are simply trying to defraud you. Feel free to call our offices if this matter does not get resolved amicably and promptly.
I recently bought a 2010 Dodge Challanger two days ago. They told me I was being given a 2.99% Interest Rate, which was a special deal they were only allowing to give to few customers. Well today I was just notified by the dealership saying I didn’t get the 2.99% interest rate that they have to increase it to a 3.99% interest rate. I asked what does this mean and why now are they discovering I dont qualify. The guy responded saying the 2.99% was for only a 5yr loan not a 6yr which is what I had. He told me not to worry that my payments won’t go up b/c they are going to change the trade in value that they gave me to a higher amount so my payments stay the same. I dont know if this is shady or some sort of scam, b/c I find it odd that they didn’t have this info from the beginning. Im now thinking they told me I could have the car for a 2.99%IR just to reel me in. Anyway let me know if this sounds suspicious b/c if so I’m going to cancel the contract and give back the car for my old one.
Your situation is fairly common. Sometimes it is a way to induce a sale. In most of those cases they call back and say instead of 3 percent the rate is now 10 percent. In reality they never had a means to give the low rate. Your case could be the same. However, since they are only increasing the rate one percent it is possible that it was an oversight on their behalf. I know that the longer the finance term the higher the rate. So it is very plausible that they did mix up the two available rates. From a legal stand point you do have a binding agreement and if they wish to change any term then you may opt to refuse and thereby force them to cancel the transaction all together. In CA in this situation they will be forced to either honor the terms or refund you all your payments and/or trade-in regardless of how many miles you put on the new vehicle. However, from a practical perspective if they are willing to increase your trade-in value enough to compensate for the higher rate that means that your loan amount will be reduced. This means if you make your payments over a period of six (6) years you will end up paying the exact same amount. If you end up paying off the loan sooner then six (6) years you will end up spending less on the vehicle. So if they do reduce the loan amount you will be advantaged by this change. However if you want to use this as an excuse to get out of the deal all together or if they try to increase your monthly payments or the term of your payments then simply refuse to sign any new agreements. I presume you are in CA and the above discussed laws apply in CA. If you are out of state you should take the basics on my analysis and consult with a local attorney to make sure you cover possible local state variations in the law. Thank you for the comment. Please do comment back regarding your results so that I and my readers may know what happened. If this matter does escalate and you are in CA, please do call me at my office.
- Hovanes Margarian, Attorney At Law
818.990.0418