A recent thread over at Fatwallet taught us a new word to be aware of in dealing with shady car dealerships who game the system to your disadvantage: dehorse.
Here’s what happened: a customer went to the Volkswagen dealership in Corona, CA and traded in a 2012 Passat for a 2013 Tiguan. The new lease was $442/month for 42 months. And then, in the words of the customer:
3-4 weeks later. I call the dealership wondering why they have not paid off my trade yet. My sales rep assured me that it has been paid off because they’ve sold it to an older lady right after Christmas.
5 weeks later, My credit monitoring service alerts me of a 30-Day late remark on my report for the Passat. Dropped my FICO to 615. I immediately called VW Credit to appeal but they told me that I am still responsible for the loan regardless of what the dealership does with my deal. So I call my sales rep complaining about it and he said that he will bring it up to his manager. Sales rep at this point is useless.
5-6 weeks later. Manager calls to tell me that we have to restructure the deal and I need to come in to sign a new contract. He said the dealership is losing too much money on it and that VW Credit would not approve the lease under current terms. He also said that I need to buy the extended warranty to make it numbers “line up right” for approval.
6th week. Went in after work and grudgingly signed a new contract. New lease payment $433 for 48 months. Sorta glad that my payment went down even if I extended the lease for 48 months and I got the “consolation” ext. warranty contract. Went home with a dejected feeling.
6-7th week. Registration and plates arrive in the mail and lease with account number appears on my VW Credit On-line account. At this point I thought it was finally over.
7th week. General Manager of the dealership calls me and wants me to come back in to unwind the deal or sign a new contract for $466 a month for 48 months. He said the manager made a mistake and that is the only way he could get it approved
The worst part is, at least some of this is legal, and to see why you have to understand what dehorsing is. What is dehorsing? Here’s Jalopnik with the explanation:
Dehorsing exists because of a gray area in the law that allows a dealer to give you a car based on the assumption of financing (this is referred to as a bailment agreement, though you’ll never see that mentioned in an actual sales document). The consumer trades in his or her car and drives out with a new one. Days or weeks later the dealer demands the car back because they couldn’t secure financing or secured financing that was outrageous. The consumer tries to get the old car but the dealers insists the car has already been sold (often it isn’t).
This is most likely to happen with people who have bad credit or no credit, according to Barbara McGinity with the Better Business Bureau Education Foundation. And while it happens more often with smaller independent dealers, there are a few of the larger dealership companies that are notorious for this practice.
1. The best offense is a good defense in this case. The most important thing you can do to avoid getting dehorsed is to not take possession of a car until the financing is settled, this is especially the case if you’re worried at all about the terms you could get.
2. Check the company out. Do they have a bad record? Are they these guys? The best way to check is to go to the BBB website and find out if they have a history of complaints that are unresolved. Almost every business will have complaints, but a good business will try and resolve the issue.
3. Work out the financing ahead of time. If at all possible, you have the most leverage when buying a car when you have the financing worked out in advance. Also, your bank or your credit union will often have the best financing options if you’re worried about it.
4. Don’t give them your car. Don’t even consider the trade-in until you’ve worked out all the other parts of the deal unless you have a personal relationship with the dealer. Unless someone is really looking to move cars (which they might be), you’ll almost always get the better deal selling the car yourself.
And that said, the customer should not be paying $440 a month for a vehicle he can’t afford, should not be trading in a 2012 lease for a 2013 lease, should not be paying $21K over four years for for a car that costs $23K, should not have signed a second contract from the dealership…. and so on. If you make bad decisions, put yourself into a weak position, and don’t fight for your rights, don’t be surprised when the unscrupulous take advantage of you.
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