A court decision in Texas within the past week has awarded a couple over $13,000 in damages resulting from their purchase of a new Suzuki Forenza. The actual damages were found to be $4401, the rest of the settlement amount was damages due to violating state finance laws.
The couple agreed to pay window sticker price for the car, which was just shy of $16,500. They also agreed to a $400 monthly payment. When they got to the finance department, they were told the payments would be $418 per month. They again agreed to the payment, signed the papers, and left.
At some point later, they looked at their finance contract and found out they were charged almost $21,000 for the car, and they sued the dealership, which by then had gone out of business. Odds are, they will never see a penny of the money, and will end up with a worthless judgment. In Texas, it is illegal to charge more when financing a car than the car would be if you were paying cash. In the trial, a dealership representative testified that the lender they went through charged over $6000 in “fees” to accept the loan. This is not uncommon with high-risk lenders.
Certainly the dealership was wrong in the way this deal went down. They charged the consumer more than was legal for the car, and they did a very poor job of disclosing the numbers, I’m sure on purpose.
With all that said, the consumers should bear some responsibility here too. If you don’t look at what you are about to sign before signing it, then shame on you, and frankly, you deserve what you get. People do this all the time…they get fixated on the monthly payment and nothing else matters at the moment. That is a license to steal for car dealers and any kind of installment contract you are about to sign, no matter what you are purchasing.
I understand that often, by the time you get to the finance stage of buying a car, you are tired and just want to leave and get in the new car you are so excited about. That is a serious mistake. You have been there for hours normally, but to rush through the single most important part of the deal is foolish.
My rule of thumb when looking over paperwork is to check any figure with a dollar sign in front of it. You might be surprised what is there. I would not recommend questioning official fees, but anything else you don’t understand, STOP and get an explanation. It is your money and nobody is holding a gun to your head. You are in control, if you don’t sign, the dealer does not sell a car.
Almost always, on an installment contract, the top line is the price you are paying for the car. If it looks higher than what you agreed to, question it. Bear in mind, often factory rebates are deducted on a different line, so to get your actual sales price, you have to deduct that amount. Again, if you are unsure, question.
There is also a bold box that lays out your payment amount, how many payments there are, the interest rate, and the interest charges. Every installment contract, whether a car, boat, RV, or home will have this. Pay attention, this is what you are obligating yourself to.
All contracts are legal and binding. It is your obligation to fulfill the contract, and it is your obligation to know what you are signing.