High Interest TD Bank Car Loan upsets car buyer

[Great68]

^ The couple was misled, or the couple misunderstood?

[white rocket]

Misled. The problem started with the dealership forcing them into a high rate loan with the promise that they could renegotiate after one year. As I mentioned previously, that is complete bullshit and never happens. It's a sales tactic to help the dealerships bottom line.

[Jgresch]

The couple also went to another dealership, asking for a trade-in and new financing. They said that dealer arranged another loan, also from TD, at 15 per cent interest, including the dealership's cut.

Perfect...

[freakshow]

This is a lesson in reading contracts and getting things in writing. They should have got TD to agree that after X on time payments, they could reduce the rate to X or by at least Y.

When you go by everything you're told by a salesman, you're just asking for it. I had to learn that a few times before becoming so paranoid that I get everything in writing now, and usual record the conversations I have with people when there is some sort of customer service issue or contract negotiation.

cool story bro:

Spoiler!

I was getting a scotia bank credit card once. The card was supposed to be shipped to me within two weeks by Friday.
The following Wednesday, I went in to Scotiabank to ask where my card is. They said that there was a delay, but it will be there guaranteed by the coming Monday (already over a week late).
I went back the following Wednesday (two days after it should have arrived) to ask about my card.. I walk up to the teller, ask for the teller I originally spoke to. Played back our conversation and her promise that i recorded, and asked for her manager. After calling me creepy, she got her manager, and they had the card over nighted to me within the next few days.

[lowside67]

Originally Posted by white rocket

It's unfortunate that dealers convince clients to sign high interest loans with the promise that in 1 year(or whatever time period) they can renegotiate for a lower rate. That's all bullshit. Why would a lender want give up it's profit just because you made 12 payments on time? Dealers pray on people like this. Making all these promises then when called on it they're throwing their hands up saying that they don't have any control over the deal thus throwing TD under the bus. It's not TD's fault. They're starring at a car that's overpriced and a high risk client. Giving them a prime rate when clearly they are a sub-prime client is just bad business. Having the car dealers as the middle man between the customer and the lender is the problem. Always has been, always will be.

You, along with most people in this thread, clearly know absolutely nothing about how the business office of a car dealership works; since this is the case, please do us all a favour and stop spewing your nonsense lest somebody actually confuse it with fact.

This is some actual information about how this works:

As a person who worked the business office in an actual dealership who offered financing through TD Bank, I'd like to shed a little light on how this process works. First and foremost, the dealership, salesperson, or business office rep doing the financing has absolutely NO CONTROL whatsoever on whether the client is offered a prime rate (~6%) or a sub-prime rate (12-25%). The way the process works is simple, we enter the clients' information into the system - SIN, DOB, address, major assets (own a house, second car, etc), major liabilities (mortgage, credit cards), and job information. From there, the system pulls a credit bureau and automatically assigns the person to prime or subprime.

The biggest misconception in this thread is that we as a dealer WANT the person to go subprime because the interest rate is higher. The kickback dealers receive varies a bit, but is actually higher per percentage on a prime deal than a subprime. What this means is that we would earn more money on the subprime deal but the difference wasn't that great. The biggest problem is that if the deal goes prime, it is automatically approved, and you are ready to drive out in an hour. If it goes subprime, I have to spend hours sending documents back and forth to TD, fighting with them to approve the deal as the client has crap credit and the bank is understandably nervous to extend them credit.

In addition, of course, the client isn't obligated to take the financing - you give them prime TD financing at 6% where they can pay it off at any time with no penalty, etc. and they are pretty happy camper. At 20% where the interest is guaranteed up front, it's a much harder sell. The bottom line is that some financing profit in 10 minutes beats a bit more profit after several hours of fighting with both the bank and the client. Anybody who says the dealership PREFERS to sell a person a car with 25% financing has never worked in one, that's just not true. The amount of additional profit is absolutely NEVER worth it in terms of time.

Mark

[StylinRed]

Originally Posted by white rocket

Misled. The problem started with the dealership forcing them

into a high rate loan with the promise that they could renegotiate after one year. As I mentioned previously, that is complete bullshit and never happens. It's a sales tactic to help the dealerships bottom line.

If they were actually guaranteed that after 1 year they would have a lower interest CBC would have done a story on the dealership and td banking fraud rather than the story they did

the couple likely misunderstood, were too gullible, or simply didn't care because they just thought "oooh car"

CBC probably worded it in a way to rile viewers because they aren't idiots and i posed that question to kathy tomlinson (sp?) as she was replying in the comments and my message was deleted :rollseyes:

[Noran]

Correct me if I'm wrong, but they knowingly signed up for 25% interest rate?

Why the fuck would you buy a $20,000 car when you know that you will be paying 25% interest, even if it's only for a year.

[pissedoffe55]

I got ass raped hard by a dealership on financing when I bought my second vehicle when I was 19. I learned my lesson, and I learned it good.

I ended up paying $24,000 for a car that was worth $8k. The absolute worst worst part of my story is that I had $6k saved up and could have easily bought a good cheap reliable car, but somehow managed to get swindled into putting the $6k down on a car worth $8k that the dealership sold to me for $15,000....

the moral of the story is, if you dont have the money DO NOT FINANCE!! If you dont have a penny to your name-Ride the bus! if you are on a tight budget- buy a beater car thats within your budget. I am sure so many of us have stepped outside our budget and literally handed away thousands of dollars.

Make wise choices when it comes to loans and be sure to read the find print. If you dont understand what your getting yourself into fully you could be in for a very big surprise.

[alf]

are these people the biggest suckers??
it sounds like the dealer put a gun to their head and forced them to buy a car under the dealers terms

“We had to get the car they wanted … we didn’t even get to choose the car that we purchased,” said Hauser, despite their preference for a lower-priced model.
that right there, i would tell the dealer to F___ Off and i would go somewhere else to look for a car i wanted

[Wild_Penguin]

Originally Posted by white rocket

Misled. The problem started with the dealership forcing them into a high rate loan with the promise that they could renegotiate after one year. As I mentioned previously, that is complete bullshit and never happens. It's a sales tactic to help the dealerships bottom line.

You are completely wrong, When I was 18 I got a 2 year old TL Type S. With low K's from a Acura dealer. Being 18 I had zero credit. So my interest rate was something like 12 or 14% (can't remember now) But after one year of paying my bills, getting a CC and making all my payments and putting money into investments. I was able to refinance and drop my loan down to 7%. So, in my case it worked. If I was dumb and didn't pay my bills and rack up tons on my CC of course they wouldn't refinance me for a lower rate.

[RRxtar]

"Rich Dad Poor Dad" needs to be required reading in school.

[multicartual]

Originally Posted by pissedoffe55

I got ass raped hard by a dealership on financing when I bought my second vehicle when I was 19. I learned my lesson, and I learned it good.

Kids of wealthy parents are generally taught good money habits by their parents, but when you're 19, want pussy and a sweet ride, you can get swindled by a sly salesman pretty fucking fast

[Vale46Rossi]

I don't find anything wrong with the bank offering a high interest loan (especially on a high-risk)

I find it retarded that the idiots take the 25% loan.....

FFS the MoneyMart charges higher interest than that... they are within their legal limit of 33%

[RRxtar]

The alternative is the bank simply turning them down for credit. And the same people would be bitching about that too.

[Jmac]

Originally Posted by dared3vil0

So let's get something straight; this family is broke, already declared bankruptcy, general financial turmoil. They then decide to go running to the car dealer and spend $21,000.00 on a crappy Dodge Avenger.

If they need a car for work, fine. Go buy a late nineties, early 2000's, Civic, Corolla, Camry, Accord etc. ~5,000? But NOOOOOOOO they go buy a basically new car for 21000... Hell, if it HAD to be new they could of gotten a brand new Civic for 6k cheaper. Idiots.

The lenders won't give loans that small. That's the problem.

My buddy had this exact same issue when he was looking for a car about 2 years ago. He had made some poor decisions while he was in university that ruined his credit, but now he had a wife and a kid, a stable job, etc.

So he had saved up $2000 for a down payment and we're out looking at cars in the $5,000 to $8,000 range. Find a couple that look good. Every single lender says they won't do loans that small on that short of a term (He wanted to do 24-36 months). Tells him he needs to look at cars in the $12,000-$18,000 range with as they won't do loans less than $10,000. Also, the terms of the loans offered were all ridiculous. Lowest interest was 20.9% x 72 months with severe penalties for paying it off early. He, too, was told that the loan could be re-financed at a lower interest after a year or two of on-time payments.

He didn't end up getting a loan, instead choosing to fix his broken down beater with the money and hoping it would last until he could save up enough money to buy with cash, which in no way helps his credit either, but at least he's not shelling out $30,000 for a $15,000 car when all he wanted was an 8-year-old used car for around $7,000.

It's completely predatory and forcing already vulnerable people into situations that they REALLY have no business being in.

[RRxtar]

^Ya thats not true at all

Nearly anyone can get a $6k loan for prime+3 over 36 months.

[StylinRed]

Originally Posted by StevenDuang

they are within their legal limit of 33%

legal rate limit is under 60%

lawyers have some restrictions on the percentages they can take from what clients are awarded (33 1/3% and 40% depending on the type of case)

oh and before i forget each province has limits for short term loans (payday loans)

[Jmac]

Originally Posted by RRxtar

^Ya thats not true at all

Nearly anyone can get a $6k loan for prime+3 over 36 months.

I was there with him.

[Lomac]

Originally Posted by Jmac

I was there with him.

Might have just been a shitty loan specialist then. I had no problems getting a short term $6k loan a couple years ago. Interest was cheaper than the LOC as well.

[white rocket]

@lowside67, @StylinRed

I suppose the point I was trying to make in my rambling is that the business office/salesman, who has no control over the lending parameters, makes the promise of a lower interest rate if 12 payments are made on time like clockwork. Why would the person who has no control over that decision make that sort of promise? No saying that this was the case however, just saying that this practice happens very frequently.

My apologies for coming across as an arrogant prick talking shit. I am very familiar with DealerTrack and have been a sub-prime lender for many years.

[lowside67]

It seems pretty obvious why a person would make that promise... to get the couple to sign on the dotted line to get the deal done asap. However, anybody who reads the contract would understand that that promise is legally impossible.

This is because it says in bold print on the first page of the TD contract for subprime that the interest is calculated for the ENTIRE LOAN upfront regardless of whether you pay it off early. That means no matter when you pay it off, you still have to pay the interest for the whole 5 years.

Here's an example with real numbers so you can see what I am saying: Assume a $20,000 car (no taxes) financed at 20% interest for 5 years. The monthly payment works out to $529.88.

In a PRIME loan where the interest is calculated only while the loan is out, refinancing at 10% after 1 year.

After 1 year, you have made 12 payments of $529.88, but have only paid off part of the loan. Your balance is $17,412.88.

You now need a new 4 year loan at 10% for $17,412.88 which works out to $441.88.

At the end of the day, you have paid 12 x $529.88 + 48 x $441.88 = $27,568.80

In a SUBPRIME loan, you are responsible for 20% for the WHOLE 5 years

After 1 year, you have made 12 payments of $529.88 but still owe $25,434.24 since you have to pay the interest for the 5 years, even if you pay it off.

You now need a new 4 year loan at 10% for $25,434.24 which works out to $645.07.

At the end of the day, you have paid 12 x $529.88 + 48 x $645.07 = $37,321.92

This is obviously worse than just paying 60 x $529.88 so nobody would ever choose to refinance at a lower rate when they are required to pay the interest anyhow.

Mark

[tool001]

for my first car,, i took a 5k loan.... as i was waiting to cash in my stocks.. was able to pay back within a week without any interest,, if i remember correctly . only paid about 20-40$ over.

alot of people arnt good with reading fine print. these people knew what they were getting into. however were under the impression that once they keep up with payments, bank would renegotiate with them (as per sales agent).

now its dumb of them trust the sales guy.. then again everybody falls for it..once in a while.

[seekerbeta]

when i went looking for my first car, back in 2005ish, I went to the bank to get my passbook updated (made it easier to see where the money was going) the girl was like "you have been pre approved for a personal loan for up to 10,000$" i said "cool, book me in to see someone" came back the next day, talked with the girl, got my 10,000$ x 5 years @ 9.4%, i immediately found the car i wanted, only 5500$, so i paid for the car, and put a lump sum payment of 4500$ back on the loan, all that did was make the term shorter, but thats what i was looking for, fast forward a year and a half, and im down 1100 dollars on the account, get a 700$ tax return and funnel that onto the loan, and put 400$ out of my paycheck on the loan, BAM loan paid off, bank got some money off me, and i got a nice car that i feel i earned because i paid it off myself with no help. i didn't buy some new car, it was a 2001 Sentra SE SR20DE. i think they should have just bought a cheap car to get them by, and BS to anyone who says that the bank wont do small loans.

[dangonay]

While I agree the main responsibility is with the buyers, part of the blame has to go to TD for giving out such ridiculous loans to people who shouldn't get financing.

Just like a person allowing an alcoholic to have access to alcohol is "enabling" them, TD and others who lend are also enabling these people to get in over their heads.

IMO, a bank like TD should just refuse credit to people who can't afford a car. I agree that different credit ratings qualify you for different interest rates, but it should stop at the ludicrous.
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[dared3vil0]

Actually you're right on the lenders won't give small loans, when i bought a 2007 Civic Si for $11,500 back in October of 2012, i wanted to finance 5k for 2 or 3 years, they wouldn't do it. I would of had to finance the ENTIRE thing at 3.99% for 48/60 months (can't remember which) in the end i had to pay cash for the car, which still puzzles me that they didn't want to make money off a 5k loan for a few years...

Regardless, reading some of these horror stories sure makes me thankful for the position i'm in...