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I am in the process of purchasing a new truck. A few months ago I put a $500 security deposit down on a truck. I was told that the truck was at a neighboring dealership and that it would take 2-5 days to ship it to the dealership that I was buying from. I was told to get ready to purchase this vehicle, so I applied for an auto loan.

A few weeks later I learned that they accidentally sold the truck to someone else. So they told me that they would try to quickly find another truck. It took another 3 months for them to allocate an identical truck. By this time, my loan had expired and I needed to apply for a new loan.

Here's the problem: I reapplied for a new loan and my credit score has since dropped, presumably due to applying for another loan in a 2-3 month time period. The APR is 2% more than I was originally approved for. I am extremely responsible credit user and I have NEVER had a late payment on anything in my life. My original loan was for the lowest rate available by the bank. I feel that my salesman is somehow at fault for not securing the truck properly and caused me to damage my credit. Do I have any recourse in this situation?

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Have you talked to the bank about why the loan was 2% higher? Have you talked to the dealership to see if they will work with you? –  Steven Feb 15 '12 at 18:05
    
I did talk to the bank (PNC Bank). They said that their decision is strictly based on credit score, and while the first loan could have had a negative impact on my score, it's out of their hands. I have not talked to the dealership yet. –  James Jones Feb 15 '12 at 19:12
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@JamesJones have them give it to you in writing, and document your credit score and credit report changes, that should be a sufficient proof for cause and effect (verify with an attorney). –  littleadv Feb 15 '12 at 19:49
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Can a single credit application (not taken up) really make a 2% difference in loan interest? Doesn't that indicate that the credit rating system is broken? –  DJClayworth Feb 15 '12 at 19:54
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DJ - a lender might not have so many levels for ratings, it may be 6% for 699 but 4% for 700. There are many who feel FICO scores are a game, and it's tough to disagree. I wrote how I purposely paid my card in full the day 'before' the bill was cut, i.e. the bill was zero that month. For a month I lost about 10 points on my score. As I answered above, refinanced to save money, but score drops due to pulls. Cancel off old cards you don't use? Your score will take a hit. 'Broken' is as family-friendly as you can call the scoring system. –  JoeTaxpayer Feb 18 '12 at 20:53

4 Answers 4

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This shows the impact of the inquiries. It's from Credit Karma, and reflects my inquiries over the past two years. In my case, I refinanced 2 properties and the hit is after this fact, so my score at 766 is lower than when approved.

You can go to Credit Karma and see how your score was impacted. If in fact the first inquiry did this, you have cause for action. In court, you get more attention by having sufficient specific data to support your claim, including your exact damages.

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Will using Credit Karma affect my credit score? I really don't want it to go any lower than it already is. –  James Jones Feb 15 '12 at 19:10
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Using Credit Karma counts as a soft pull, so it would not affect your score. See money.stackexchange.com/questions/534 and blog.creditkarma.com/credit-scores/… –  AK. Feb 15 '12 at 19:40
    
AK - right. It's a pretty cool way to monitor one's score changes. –  JoeTaxpayer Feb 15 '12 at 20:24
    
What damages are there to sue for? –  user4127 Nov 19 '12 at 23:30
    
OP states the pulls were the cause of the lower score. The lower score resulted in a 2% higher rate, which can be quantified in the higher cost of the life of the loan. No idea if this would actually hold up in court, I was simply offering my opinion on what data to bring. Credit Karma if used over time, provides history that would show the cause and effect of the pull and drop in score right after. –  JoeTaxpayer Nov 20 '12 at 2:43

At one point in my life I sold cars and from what I saw, three things stick out.

  1. Unless the other dealership was in the same network, eg ABC Ford of City A, and ABC Ford of City B, they never had possession of that truck. So, no REAL application for a loan could be sent in to a bank, just a letter of intent, if one was sent at all.
    With a letter of intent, a soft pull is done, most likely by the dealership, where they then attached that score to the LOI that the bank has an automated program send back an automatic decline, an officer review reply, or a tentative approval (eg tier 0,1,2...8).
    The tentative approval is just that, Tentative. Sometime after a lender has a loan officer look at the full application, something prompts them to change their offer. They have internal guidelines, but lets say an app is right at the line for 2-3 of the things they look at, they chose to lower the credit tier or decline the app.
    The dealership then goes back and looks at what other offers they had. Let's say they had a Chase offer at 3.25% and a CapOne for 5.25% they would say you're approved at 3.5%, they make their money on the .25%. But after Chase looks into the app and sees that, let's say you have been on the job for actually 11 months and not 1 year, and you said you made $50,000, but your 1040 shows $48,200, and you have moved 6 times in the last 5 years. They comeback and say no he is not a tier 2 but a tier 3 @ 5.5%. They switch to CapOne and say your rate has in fact gone up to 5.5%. Ultimately you never had a loan to start with - only a letter of intent. The other thing could be that the dealership finance manager looked at your credit score and guessed they would offer 3.5%, when they sent in the LOI it came back higher than he thought. Or he was BSing you, so if you price shopped while they looked for a truck you wouldn't get far.

  2. They didn't find that Truck, or it was not what they thought it would be. If a dealership sees a truck in inventory at another dealer they call and ask if it's available, if they have it, and it's not being used as a demo for a sales manager, they agree to send them something else for the trade, a car, or truck or whatever. A transfer driver of some sort hops in that trade, drives the 30 minutes - 6 hours away and comes back so you can sign the Real Application, TODAY! while you're excited about your new truck and willing to do whatever you need to do to get it. Because they said it would take 2-5 days to "Ship" it tells me it wasn't available. Time Kills Deals, and dealerships know this: they want to sign you TODAY! Some dealerships want "honest" money or a deposit to go get the truck, but reality is that that is a trick to test you to make sure you are going to follow through after they spend the gas and add mileage to a car. But if it takes 2 days+, The truck isn't out there, or the dealer doesn't have a vehicle the other dealership wants back, or no other dealership likes dealing with them. The only way it would take that long is if you were looking for something very rare, an odd color in an unusual configuration. Like a top end model in a low selling color, or configuration you had to have that wouldn't sell well - like you wanted all the options on a car except a cigarette lighter, you get the idea. 99.99% of the time a good enough truck is available.

  3. Deposits are BS. They don't setup any kind of real contract, notice most of the time they want a check. Because holding on to a check is about as binding as making you wear a chicken suit to get a rebate. All it is, is a test to see if you will go through with signing the deal. As an example of why you don't let time pass on a car deal is shown in this. One time we had a couple want us to find a Cadillac Escalade Hybrid in red with every available option. Total cost was about $85-90k. Only two new Red Escalade hybrids were for sale in the country at the time, one was in New York, and the other was in San Fransisco, and our dealership is in Texas, and neither was wanting to trade with us, so we ended up having to buy the SUV from one of the other dealerships inventory. That is a very rare thing to do by the way. We took a 25% down payment, around $20,000, in a check. We flew a driver to wherever the SUV was and then drove it back to Texas about 4 days later. The couple came back and hated the color, they would not take the SUV. The General Manager was pissed, he spent around $1000 just to bring the thing to Texas, not to mention he had to buy the thing. The couple walked and there was nothing the sales manager, GM, or salesman could do. We had not been able to deliver the car, and ultimately the dealership ate the loss, but it shows that deposits are useless. You can't sell something you don't own, and dealerships know it.

Long story short, you can't claim a damage you never experienced. Not having something happen that you wanted to have happen is not a damage because you can't show a real economic loss.

One other thing, When you sign the paperwork that you thought was an application, it was an authorization for them to pull your credit and the fine print at the bottom is boiler plate defense against getting sued for everything imaginable. Ours took up about half of one page and all of the back of the second page.

I know dealing with car dealerships is hard, working at them is just as hard, and I'm sorry that you had to deal with it, however the simplest and smoothest car deals are the ones where you pay full price.

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I had an uncle who just did dealer trades for a dealership - they'd send him as far away as Buffalo NY from just north of Albany. Sales frequently take 2-5 days in the part of the country I grew up in :) –  warren Nov 21 '12 at 15:39
    
Welcome to Money.Stackexchange.com John. Thanks for sharing your experience! –  C. Ross Nov 29 '12 at 20:15

You can sue them for damages. It would be hard to convince the court that the drop in the credit score was because of that loan, but not unthinkable. Especially if you sue through the small-claims court, where the burden of proof is slightly less formal, you have a chance to win and have them pay the difference in rates that it cost you.

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If you want to go this way, consult with a lawyer and consider having them write a strong letter to the dealership. They may opt to work with you as opposed to going through the court process. Be advised small claims court in your area may be limited, e.g. to $10k max. –  Steven Feb 15 '12 at 18:04
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@JamesJones LegalZoom Personal Legal Plan includes a single 2-pages letter and a 30 minutues consultation. They charge $14.95 a month (you can just subscribe for one month). The decision whether to write a letter or to make a phone call instead is by the attorney, but that's a cheap start which may be very effective. –  littleadv Feb 15 '12 at 19:20
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I won't say this is wrong, but what damage? They didn't force him to sign the loan and fully disclosed the higher rate. I don't know what legal terms we have hear. I understand the frustration and I am on the OP's side.... –  MrChrister Feb 15 '12 at 20:05
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@MrChrister I would argue that by taking the deposit and providing the promise for delivery they caused the OP to sign the loan, which he wouldn't otherwise take at that time. Since they broke the promise and didn't deliver what was agreed, they caused the OP to postpone the loan which resulted in higher interest. Thus, the difference is the damage ($1300). They didn't force him to sign, but they did agree on providing a service that they didn't eventually provide, and thus caused the damage. –  littleadv Feb 15 '12 at 20:12
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I watch my score closely and was able to track the drop resulting from multiple mortgage refinances over the years. It's a crazy game, responsible financial transactions resulting in a better situation, still result in a temporary lower score. –  JoeTaxpayer Nov 20 '12 at 2:53

Hindsight is 20/20, but I offer some suggestions for how this might have gone down.

If you had told the bank what was going on they might have extended the terms of your loan until the truck was ready. Alternatively you might have taken the loan (was it secured on the truck?) and put the money in a savings account until the truck showed up, while asking the dealer to pay the interest on it until the truck showed up. Or you might asked the dealer to supply you with a rental truck until yours showed up.

I'm not saying I would have thought of these under the circumstances, but worth trying.

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