Options for getting out of expensive car loan

By  |  Published: June 2, 2017

To Her Credit
To Her Credit, Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also wrote for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs.
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Question Dear To Her Credit,
I just bought a 2008 Dodge Charger for what I thought was $10,000, but when I look at the sales agreement, it turns that I’m paying $15,000. I’m not happy about this because the car might not last as long as the time it will take me to pay it off. I want out.

Can I file for something to take away this debt?  – Jamie

Answer

Dear Jamie,
There’s a huge difference between $10,000 and $15,000. I can think of three different possibilities for why the final selling price is so much larger than you expected.

The worst-case scenario is that you may have been tricked or ripped off. Disreputable car salespeople have a few tricks for getting customers to agree to a price, and then to actually charge more, hoping you’ll never notice. If the invoice and financing papers are complicated enough, it could be difficult for anyone to figure out what the actual cost of the car is, at least before they’ve signed on the line and drive away. I saw an invoice once where the “selling price” in large letters was actually entered after the customer’s down payment, making it look like the customers were paying less than they actually were.

If you determine that the dealer acted in a deceitful way, you can file a complaint with the Department of Revenue or attorney general’s office in your state. You may also want to consult with a local lawyer to see if you have a right to a legal remedy.

Sometimes the final sales price of a car is more than a person expects because a number of additional charges are thrown in. You pay sales tax, of course, which can be up to almost 10 percent of the sales price. Vehicle registration fees, which the dealer remits to the state, can cost you hundreds of dollars. So far, the dealer is being straightforward. But then the fun begins. There are document fees, which dealers use to charge you up to $500 to fill out the paperwork so you can buy your car. They may also throw in advertising fees, dealer prep costs and shipping – all dealer expenses you might expect to have been included in the price of the car. Unfortunately, dealers can and do charge exorbitant fees sometimes. If you signed to agree to them, it’s probably too late to do anything about them now.

There’s a third possibility for why your paperwork may show that you are paying $15,000, not the $10,000 you expected. If you are looking at your financing paperwork, you may be seeing the total amount you will pay by the time you make all your payments, including interest expenses. Look a little closer, and you should find the actual sales price of the car, before interest. It may be closer to the amount you were expecting.

As far as “filing something to take away this debt” goes, I’m afraid there is no such thing. The Federal Trade Commission’s “cooling off” period for certain sales does not apply to car sales, so you probably can’t just go back to the car dealership and tell them you’ve changed your mind. (Some dealers will take back a car within a short period of time, especially if you buy a different vehicle from them.)

You can’t file a partial bankruptcy, and you certainly wouldn’t want to file for Chapter 7 bankruptcy over just a car purchase you regret. Stopping payments and letting the car be repossessed would be a very bad move. You’d lose your car and seriously damage your credit, and you may still owe the dealer money when it’s over.

You have two good choices at this point. You liked the car when you purchased it. You might want to just pay off the car sooner, either by selling it or paying down the balance faster. You’ll save hundreds, if not thousands, of dollars in interest expense.

If you’ve decided you can’t afford or don’t want this car, the best way out may be to sell it and pay off your loan. If you sell right away, however, and you didn’t make a large down payment, you may have difficulty getting enough from the sale to pay off your loan. Plus, you’ll have to turn around and pay sales tax and other fees on the next car you buy.

Whatever you decide, take your time and don’t sign anything before you read it thoroughly and understand it. That’s the best way to take care of your money and your credit, and to make sure you are happy driving this car or the next one for a long, long time.

See related: How a car repossession affects your credit, Car lien shouldn't come as a surprise

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Updated: 10-23-2017

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