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Guy gets ripped off, is embarrassed

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Here’s an email I got just now (names changed).

I need a little help. Well actually a lot of help. My friend got suckered into a TERRIBLE car deal. I mean bad. I don’t know all the details but I know he has a contract for 6 years on a $20,000 car with a APR of 17.something%, and that 1/3 of this monthly income will be spent on this car. Basically I have 2 problems.

1. My Friend is an IDIOT, and not just because he got suckered into a bad deal, that happens, but because he is too embarrassed to do anything about it. He thinks he will just trade it in to the same car dealership and get a cheaper car.
2. I don’t know enough about buying a car (I don’t own one because I cannot afford it right now) and am not familiar with possible legal recourse.

I am a pretty dedicated Ramit follower and have read your site for awhile. I told John (my moron friend) to contact a lawyer, and since I can’t do that for him, I am emailing you. He cannot afford to make these payments and to lose $15,000ish on interest (did I do the math right?) is ridiculous. This is highway robbery, and those car dealers are swine. They made him think when he was signing the papers that he could bring it back in 24 hours if he had second thoughts, and then when he did (I made him) they wouldn’t take the car back, saying that “That wasn’t what we meant”.

I know you don’t have time enough to solve everyones problems and you are not some kind of inexhaustible free resource, but if you can help, please let me know. I would be happy to return the favor in any way I can.

We have exchanged emails a few times in the past. Even if you don’t remember, I did follow through with your advice. It was prolly 6 months ago, and I should have followed up with you. Lesson learned. Now I follow up.

Three things:

Every paragraph has something super-interesting in it.

I find it interesting how we get embarrassed by our money mistakes and we don’t want to talk about them. I’m not pointing fingers–I’ve done it before, too. Rationally, in this case, it would make sense for this guy to ask for help. In fact, it could save him thousands of dollars. But the social pressures to appear knowledgeable exact a surprisingly high cost.

Finally, does anyone have any advice for him? I have no idea, so I just suggested that his friend see a lawyer ASAP.

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44 Comments on "Guy gets ripped off, is embarrassed"

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shawn
shawn
9 years 7 months ago
I’m only responding because I got suckered similarly… I was just out of college, no credit history, needed a car, and didn’t read the fine print. I think I was paying over 19%, but luckily it was only about an $8000 car. The good news is that he should have some options, assuming that he’s not locked into some crazy scheme where there are pre payment penalties. What I did was find a generous family member who took my loan over at a more reasonable (for the time) 8%. While that’s not ideal, it’s better than 17%. When I got… Read more »
Joe
9 years 7 months ago
He can hire a lawyer to see if there’s any way he can renounce the contract, but it’s going to have to be for something more substantive that that the dealers are “swine” with 17% APRs. If he was legitimately promised a 24 hour return period, and then had that denied him when he tried to exercise it, that would be grounds enough. Also, if it’s still within 30 days of purchase there may be state laws that grant him various consumer-protection rights. But a lawyer would need to look more closely at the facts. Assuming he can’t have the… Read more »
Jenny
Jenny
9 years 7 months ago
The same thing happened to my husband when he was 19. He bought a 16,500 truck at 19.9% interest for 6 years. He purchased the truck through a reputable dealer and got financed through GMAC, the primary lender for all GM vehicles, he was told that he could only buy brand new due to his lack of credit history. He paid payments on time for a year and then he got 3 months behind. They worked with him and he got caught up on payments. He made payments on time again for the next 4.5 years then he fell a… Read more »
cgould
cgould
9 years 7 months ago

He definitely needs to see a lawyer as soon as possible. A simple letter from an attorney might be able to get him out of this situation without wasting more money.

Nick
9 years 7 months ago

Uh-huh. Suuuuure it’s his “friend.” 😉

In all seriousness, there is little this guy can do unless he has something in writing saying he could bring the car back in 24 hours. That said, while there may not be anything the legal system can do for him, he could always start a blog about his experience and become the #1 Google ranking for that dealership. It probably wouldn’t take much if it’s a small-time operation.

jokermage
jokermage
9 years 7 months ago

I wish the social pressure was to gain knowledge rather than to appear knowledgeable, but that’s just me.

My only advice would be to get some kind of math and finances education to avoid this kind of stuff in the future.

For the current problem, he could also try contacting the Better Business Bureau for his area.

Einar
Einar
9 years 7 months ago

Can’t he just finance the car through someone else and pay up the bad contract?

Russ
Russ
9 years 7 months ago
I’m in the UK and have done something similarly stupid myself (in fact, it was also a car deal and the numbers involved are almost identical). I was able to take a loan from another source at a much better rate, and immediately pay off the high-interest finance deal with it, though it cost me the equivalent of about 1800 dollars in admin fees. Not smart, but it got me out of a particularly bad deal and I’ve paid it off now, so no harm done and lesson learnt. I don’t know if that’s a n option here though, since… Read more »
Matt
Matt
9 years 7 months ago
Most states have a 3 day “buyer’s remorse” period where you can return a vehicle with no questions asked. The dealerships aren’t always upfront about it and you might have to force their hand though. If this guy’s three days are passed then he probably needs a witness that will say that he really did try to return the vehicle within the period or it will just be his word against the dealer’s (and we already know this dealer is slime). Some states may have different periods or may not even have this law, but it doesn’t hurt to check.… Read more »
a
a
9 years 7 months ago

If he’s going to do something he better do it fast–if there IS a grace period it may be fairly short (as little as 3 days it appears from a couple minutes of googling).

easyfrag
easyfrag
9 years 7 months ago

Lawyer for sure. In the meantime invest in 2 big pieces of white board, some paint and string. Make yourself a sandwich board and patrol in front of the dealership, especially on Saturday. Be sure not to write anything libelous or obstruct traffic to the dealership. Handouts explaining the situation are a nice touch too. This in combination with a lawyer’s letter will make it worth their while to get rid of your friend by settling.

Jonathan
9 years 7 months ago

Financing the car through someone else and paying up the bad contract would probably be one of the best ideas. Hopefully there is no early payment fee or something.

This is one of those things where it would have been best to avoid ahead of time, but I’m sure there’s a way out of it or to at least make it better.

K
9 years 7 months ago

You’ve already received some great advice.

Unfortunately if the friend isn’t brave enough to ask questions, odds are he isn’t brave enough to take action.

I find a big difference between successful people and not-so-successful people is that successful people are willing to admit when they’ve made a mistake.

dimes
9 years 7 months ago
We see this all the time where I live, where the kids are young, naive, short-sighted, and are fresh meat for predatory lenders. If he has decent credit he can try and refinance with his bank, and if not, he may have to just suck it up and try to pay that loan down quicker next time. It looks like others have suggested to refinance as well. My question to him is, why in the hell did he sign such a stupid finance agreement in the first place? Wasn’t the idea of being tied into such a big payment for… Read more »
alexkreuz
alexkreuz
9 years 7 months ago
i did the calculations and at 17% for 6 years with a principal of $20,000 and no down payment he should have monthly payments of $444. the amount he’ll be paying in interest over the 6 years is $12,000 i suggest getting a lawyer. if the lawyer says he can’t do anything, then i suggest getting the car re-financed. the friend needs to contact a bank or a loaner like e-loan to see if they will finance him. if the friend has horrible credit he should get his mom or dad to co-sign for him. should he need to grovel… Read more »
Transcendental Success
9 years 7 months ago
I’m assuming there are no easy “outs” in your contract like paying it off early without penalty. I’m also assuming that it is still very soon after you bought the car (like before your first payment and you haven’t really used the car much yet). Play hardball. Tell them you want the car, but want a better financing deal, and if you don’t get it you’re not going to pay and they can have the car back. Tell them you will go bankrupt if you have to pay for this car. What are they going to do? Pay thousands in… Read more »
Enrique
Enrique
9 years 7 months ago

All depends on what he wants. If he has good credit, he could get a loan through a credit union at probably 8 to 10%.

I would suggest he buys a used car and start investing right now. All the money that he will be giving to the bank, he could invested.

Signed up for Ramit’s blog.

We all made money mistakes. Our school system doesn’t teach wealth creation.

Paul
9 years 7 months ago

I believe it may be Federal law, but normally there is a 3 day right of recision during which a buyer can cancel the contract. Contact a lawyer

Wei
Wei
9 years 7 months ago

In addition to the recommendation above, two things your friend can do:

1. Check out Capital One Auto Loans. They lend money not necessarily based on credit score.

2. Check our Prosper.com. This is a peer lending website that *may* be able to help should you find deadends with the bank.

Rhiannon
Rhiannon
9 years 7 months ago
California does not have any provisions for Buyer’s Remorse on new cars, so if he bought it here he is probably SOL. Some dealerships do have this thing called a 24 hour test drive, where they run papers for you like you are getting ready to buy the car, but you don’t actually sign the purchase agreement until the next day when you decide to purchase it. Once you sign the purchase agreement you have agreed to buy the car at the terms offered. The reason this guy got such an ass deal is that he has terrible or no… Read more »
Araceli
Araceli
9 years 7 months ago
My husband did the same thing. I searched at different banks and credit unions for a lower interest rate and transfered the balance into it. Call and ask the dealership wath the full pay off amount is, of course the sooner that you do this the better, since the loans accumulate interest on a daily basis. Then once your balance gets low enough you can transfer that balance into a 0% or the lowest that’s offered to you into a credit card and pay it off. That’s what I’m doing on my car that I bought for $20,000 after paying… Read more »
Drew
Drew
9 years 7 months ago

Check out your local news stations and see if they have one of the public legal advocate teams (i.e., 5 on Your Side) that uncovers scams and reports them in the news. If a personal lawyer isn’t in the cards, fear of public scrutiny in their local market may entice them to settle and take the car back. Then get a lawyer.

MyNameIsMatt
MyNameIsMatt
9 years 7 months ago

Beyond getting a lawyer to fix things, I’m guessing he got his loan through the dealer. Therefore, he needs to get a loan from somewhere else and pay off the loan at the dealership. If a bank will give me the same amount on a loan at 6% or whatever, then he takes that pays off the other loan, and now has the loan to the bank to pay off. It’s like refinancing your house at a lower rate. Not a problem.

Lee
Lee
9 years 7 months ago

A bad deal does not a legal case make.

It sounds as though he has a job. Does he belong to a credit union? Most CU’s would be happy to finance a car new or used. Unless there are pre-payment penalties, he should be able to cover most of the onerous 17% loan with a new loan.

Ervin
Ervin
9 years 7 months ago

If he wants to refinance, find a local credit union. It will be better than any bank. Most of the time, their APR does not depend on the individual’s credit score, so John could get a nice 6% APR loan for 5 years (less than $400/month), with no prepayment penalties and a friendly loan officer.

My CU offers 5%, so I guess finding 6% will be easy.

John
John
9 years 7 months ago
hire a lawyer? maybe, but does this guy have a couple grand sitting around to pay one? i’d say seek financing elsewhere. as others have stated, credit unions & online lenders offer the most competitive rates. the high-pressure environment of the dealership floor is often too much for many & dealerships count on this intimidation factor to pressure you to buy. just remember, you don’t owe them anything until you pen that paper. while it sounds like this guy got hosed, it could be much worse. i’m currently dealing with clients that have been suckered by “we finance anyone” dealerships… Read more »
AndyB
AndyB
9 years 7 months ago
I dont think you have enough information here to make any kind of informed decision about this deal. Did the “friend” trade in a car? If so, did he owe any money on it? Did he make any kind of down payment on the new car? If so, how much? What is this person’s credit score like? They may not have been able to qualify for anything better than what was received. Did he shop his car loan around to other banks to find competitive rates? It is unlikely that this “friend” will be able to re-finance this car for… Read more »
Milind
9 years 7 months ago

A lawyer should be able to bring various consumer protection laws into play, whether for predatory lending or used car purchase.

With such a rotten loan, I bet there’s a pre-payment penalty too, making it difficult to get out of that way.

gritmonkey
9 years 7 months ago

Unless he is in a state with a specific law providing a remedy or can reach an accommodation with the dealer [which I rate as unlikely if they will sign you to 17% on a 20k car], he is screwed. The 3 day buyer’s remorse is a legend.

Ryan
Ryan
9 years 7 months ago
Let me first start off by saying that I am a finance manager at a dealership in the state of Washington. I am not a lawyer. That being said, everything depends on the state of purchase, and the timing. In Washington, there is no rescission. Once you sign the contract, it is binding. The only recourse is if the dealership cannot find a bank to take the loan as contracted. Then they will call you and try to get you to re-contract at the terms you are approved at. My guess is that the “friend” did not tell the author… Read more »
mishelek
mishelek
9 years 7 months ago
Something that might be helpful would be to review the Truth in Lending Act. From the 1/29 case on an appellate decision blog (http://law.enotes.com/decision-blog): “The TILA imposes disclosure requirements on lenders and gives certain types of borrowers a three-day grace period in which they may rescind their loans. Moreover, if lenders do not disclose the three-day grace period, a borrower gets three years to rescind the transaction.” That would imply that you DO have 3 days to change your mind when financing a vehicle and this friend could have 3 years to ream these jerks. I’m no legal person and… Read more »
Scott
Scott
9 years 7 months ago

I would write a letter to his local newpaper detailing how terrible his experience was. Bring it to the dealership, have them read it, and tell them if they don’t work with him he will send it off. Hopefully the threat of bad publicity will outweight the $ they will “lose.”

Christian
9 years 7 months ago

This might be an American thing, but in Australian I’d say don’t bother with a lawyer.

Just sit down, do the math and see what your REAL solutions are. If you can’t get a better deal put it down to a lesson learnt. Pay the amount, like Jenny said don’t EVER be late on a repayment.

In the short term, it might be expensive, but in the long run the lesson learnt is cheap.

HTH

Mike
Mike
9 years 7 months ago
Consult a lawyer quickly and re-read the contract. If there is a minimal (or zero) penalty for early payment, get in touch with another lender (try your bank or credit union) to transfer the loan to a lower rate. Regardless, if you can’t afford to buy that much vehicle, get a reliable used car next time. Many can be found for under $5K. Also, regarding post #32, I would take it a step further and send a letter to local newspaper/TV news companies (many of them have “helping the common people” segments) and send a copy to the dealership –… Read more »
Finance Guide 101
9 years 7 months ago

As Jenny (3rd reply) mentioned it’s better not to get into late payment and yes lenders have rights to take the vehicle anytime for any reason because of the agreement which one makes with the lender. Everyone makes mistakes but one will be a successful if he/she tries to get rid of it and fixes the problem ASAP.

sfwriter
9 years 7 months ago

There’s nothing to be embarrassed about getting ripped off. At least you’re seeking solutions.

No problems are being solved by living in fear or fear of judgment

I’ve made some bad purchases in the past but just learn from the mistake and do your best.

AndyB
AndyB
9 years 7 months ago

Everyone should re-read comment #30. The “friend” is getting a 17% loan because he probably deserves it.

Trying to make some sort of grandstand play in the local media over this is silly.

Joshua Keezer
Joshua Keezer
9 years 7 months ago

The Truth in Lending Act only applies to Financial Institutes. They disclosed the information to the Auto Dealership which was a third party acting in behalf of you. This regulation was not violated unless you can prove the lender did not disclose the information to the auto dealership.

Chris Fox
Chris Fox
9 years 7 months ago
A few years back I was involved in a car accident with my brand new car. Sadly, it wasn’t my fault but the other people fled the scene. Insurance wriggled out of paying so I was stuck with a repo on my credit. Last year I went to buy a new car. I work for a mortgage bank so I know how financing worked and did my homework. The very best interest rate they’d give me was 22.9% and this was after checking a number of dealers. I make good money and while I wasn’t happy about that rate I… Read more »
Björn
Björn
9 years 7 months ago

He should read ‘Influence – The Psychology of Persuasion’ by Robert Cialdini so he would never make such a mistake again.

Jason
Jason
9 years 7 months ago

This is simple. I’m kind of surprised no one has mentioned this…but in our society today it’s just accepted that people will always have car loans.

Sell the car! You may be upside down on it so get a loan from a local bank or CU to cover the difference. And most importantly…drive a car you can afford. If you are making monthly payments, you can’t afford it! Ever heard of Dave Ramsey? Radio talk show host who gives very good advice on these areas of personal finance.

Rich Boy
9 years 7 months ago

Paying with cash if possible is almost always the way to go!

Jon
Jon
9 years 7 months ago

Yea, paying in cash is the best way to go. PEOPLE- LIVE WITHIN YOUR MEANS. If you can’t afford a car, rough it for a bit without one. Or use a zipcar if you are in a city.

Josh
Josh
2 months 11 days ago

This is quite interesting. I guess this is how dealers and salesmen get portrayed as “swine” and “bad guys” who “rip-off” everyone. The dealer, in MOST cases, does not dictate the interest rate on the loan. So if you’re main concern here is the 17% interest rate, maybe you should call the bank a crook. The bank is the one making 10k dollars on this vehicle, not the dealer. He didn’t get a bad deal, he had BAD credit.. He should be lucky he got a car at all.

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