CAR FINANCE "RECONTRACTING"
by NM Attorney General Patricia Madrid
The purchase of an automobile, whether new or used, is an exciting and important undertaking. Based on the number of complaints my Consumer Protection Division receives about car purchasing, it is not always a good experience. Many people will do a bit of research before we purchase a car. Reports on a vehicle's safety record or rate of repair are available. One thing that is frequently overlooked is to find out the amount of financing you will qualify for and the interest rate you will be charged BEFORE you set foot in a dealership. Talk with your bank or your credit union. Knowing this information can help you to make informed decisions.
The worst case scenario in automobile financing is called recontracting. This is a situation that has been reported to my office many times. Here is what we typically hear:
A consumer signs a contract to purchase the vehicle at a particular interest rate and payment amount and drives the new vehicle off the lot leaving the trade-in vehicle. This situation tends to occur on weekends or evenings when the banks and credit unions are closed. Days later the consumer receives a call telling them to come back and sign a new contract because financing could not be secured at the rate of the signed contract. The new rate is higher, in some cases much higher than what the consumer thought they would pay. To make matters worse, the consumer often learns that their trade-in vehicle has already been sold. The consumer may feel trapped into agreeing to a much more expensive deal than they thought they were getting.
How could this situation be prevented? Do your homework, check with your bank or credit union and know what interest rate you should be able to get. You could arrange your own financing before shopping to avoid recontracting. Most importantly, carefully read any contract before signing it. If you allow the dealer to arrange financing, make certain you have a fixed and final interest rate before you drive off the lot. If you are trading in a vehicle, make certain that the contract states in writing that the trade-in may be retrieved if the financing is not approved.
If you have been the victim of recontracting, call a private attorney or contact my office and file a consumer complaint. You may call our office at 800 678-1508 or 505 827-6060. You may write the office at PO Drawer 1508 Santa Fe 87504-1508, or visit our web site at www.ago.state.nm.us.
Patricia Madrid is the Attorney General of New Mexico.
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