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I am going through the process of ordering a car. It's a factory order, so it's not like it is sitting in the lot.

The dealer said I had to pay a deposit of $1000, which I did. Then I applied for credit, but since it was Saturday, it was left until today. The guy contacted me and said he needs proof of income and references, which to me means that the likelihood of me getting that loan isn't very high.

For the record, I can pay cash for the car, but I don't want to. My credit score is like 730, I didn't think it would be an issue.

Now, if the credit doesn't get approved, do you think I can get my deposit back? Technically the dealer will not have fulfilled their side of the contract (60 month 0% APR financing), nor did they make the car... But of course dealers do whatever they want. Curious what your thoughts are.

And yes, I don't think I should have done the deposit in hindsight. I'm 24, this was going to be my first car...

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    What does your contract say? When you gave the deposit you should've had a contract that indicated what kind of deposit this was (refundable, non-refundable, etc.) and what the disposition of the deposit was under various circumstances (nonapproval of credit, bankruptcy of the car dealer, etc.)
    – Joe
    Commented Feb 2, 2015 at 22:41
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    What's the matter with your income and references that make you think you aren't going to get the loan?
    – DJClayworth
    Commented Feb 2, 2015 at 22:42
  • Also note that 730 is decent, but not the top bracket; so it's possible you may not qualify for 0%/60. And don't assume you're "saving money" by taking the 0%/60 as a free loan; you likely are paying a higher sticker price in exchange for that.
    – Joe
    Commented Feb 2, 2015 at 22:44
  • @Joe, my contract says that deposits/downpayments/partial payments are non-refundable. And underneath it says something along the lines of "this contract is conditional on credit approval". Does that mean if the credit is not approved, the deposit is still taken away from me? Also, I got employee pricing... so I don't know, I felt like I got a pretty good deal on the car itself.
    – Mewa
    Commented Feb 2, 2015 at 22:46
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    Contract says non-refundable. If you don't buy the car there, the money is gone. Consider two things. One is that we in the US (assuming) are conditioned almost from birth into a society filled with marketing and based on planned obsolescence. We're taught that we need a car and a house and a cell phone and cable tv. They're all luxuries. Read the Mr Money Mustache blog about the high price of commuting. If you determine that you do, in fact, need a car, for goodness sake get a used one. And if you can pay cash for new, do that for used and invest the rest of your cash.
    – Xalorous
    Commented Oct 3, 2017 at 21:04

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Without the contract it's hard to say for sure, but Consumer Reports indicates that it's pretty easy to lose these deposits; they're not as well protected as other deposits or purchases (depending on your state and other details). You should make an effort to comply with all of the requests from the financing arm promptly, and in particular you should probably highlight that you could afford to pay for the car in cash (and be prepared to show bank/money market/investment statements to back that up). Credit is mostly a numbers game, but there is a human on the other side making the decision (assuming you're remotely close) and that makes a big difference.

I would be prepared to walk away from your deposit if they come back and offer you a 5% APR or similar (and you're uncomfortable with the loan at that rate) - over 5 years, a $20k loan at 5% APR will cost you several thousand dollars; it might be worth it even if they don't give you your deposit back. And if you're clearly ready to walk away from the deposit, that might cause them to negotiate in better faith.

Some tips, both from that article and my general experience:

  • Make sure you have the contract in writing, and anything that the dealer/salesman says to you verbally is explicitly referenced in the contract. No ifs, ands, or buts; this is not your friend, it's a legal transaction (and my friend would not hesitate to put his/her word in writing).
    • Ambiguities in the contract are usually interpreted in the favor of the person who didn't draft the contract, but that's only if you're willing to go to court - and have a likely high priced lawyer to defend your side versus their high priced lawyer. Make sure you are clear on every line of the contract, and it is clear in writing - anything you think is confusing, make them write down their interpretation.
  • Next time, get a preapproval from an outside lender. Not only does that mean you have assured yourself of a good loan rate (or at least, a sufficiently good one for you to move forward), but you can use it in negotiations. The car salesman wants you to use their financing - which is fine, if it's a better deal for you.
    • You can still probably get an approval from an outside party on this transaction if the credit is not approved; it might be worth asking your bank (who has a relationship with you, even if not a very long one) for example.
  • Complain on the internet if this goes badly. Not here, of course, but on Yelp or similar sites. Don't be petty or overly harsh: just lay out the facts, give them a poor rating, and see what happens. Many dealers (or other companies) will try to fix customer service problems that are listed on Yelp and similar public social media ratings sites, because that's how they get new business - by having a good rating.
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  • Thanks, Joe. I have shown them that I have savings to pay for the car flat out, I hope that gets taken into account. I'm definitely backing out for high APR (like 5% is just too much, even 2% is, IMO). I think you are right, I'm going to ask my bank just in case if I don't get the 0% APR; I've been with them since my very first job 10 years ago or so. Thank you for your idea about the internet complaining - I will do that if things go south.
    – Mewa
    Commented Feb 3, 2015 at 1:43
  • Oh also the bottom of the contract says "Deposits, partial payments and down payments are non-refundable. This offer is subject to buyer's credit approval." Which I took to mean deposits are non-refundable once I order the car/get credit approval. Though it kind of seems the other way.
    – Mewa
    Commented Feb 3, 2015 at 1:46
  • That sounds to me like explicitly non-refundable. (They'd still have to give it back to you if they cancel the contract on their end for non-delivery, probably, but not for credit approval reasons.)
    – Joe
    Commented Feb 3, 2015 at 16:53
  • Thanks for your advice, Joe. I got approved anyways with the stipulation that I must put $1000 down (which was my deposit either way). They never called any of the references I gave them.
    – Mewa
    Commented Feb 3, 2015 at 17:25
  • @Mewa If you get outside credit, you can still buy the car and have them include the deposit. If you pay cash for the car, you can still buy the car and have them include the deposit. If you don't buy the car from them, or if you don't buy it at all, it's non-refundable. They "subject to credit approval" assumes you're buying with their credit plan, however, you can pressure them to deduct the deposit when you bring your own credit. The deposit is on the car, not on the loan.
    – Xalorous
    Commented Oct 3, 2017 at 21:15

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