“Overcoming Humiliation…While Dying A Little With Each Event…With Challenged Credit”

Adventures At The Local Car Dealer, a story by Dale

Barry and Jessica had some scrapes created through job changes and loss time job injuries. No one ever expects it, but life is messy.  Now with credit scores just hovering in the low 500 FICO range Barry and Jessica needed to buy a new truck for his work as a pest control inspector. The company pays mileage and per diem for the use of employee owned vehicle but the job requires driving a newer vehicle with a removable magnetic advertising for curbside appeal and company image. The pay was good based on a salary plus commissions on sold jobs. Barry and Jessica owned their own home that they had purchased five years before and have very little equity due to a cash out refinance three years ago. With the current pressure to buy a new truck for work, Barry and Jessica set out for a local car dealer who had sent them an invitation. With the just received flyer in hand, which touted they had been pre-approved to buy a vehicle even with bad credit, they drove to the car dealership which featured almost new late model vehicles. The company was encouraging the purchase of at least an American named truck to offset any customer prejudice against foreign named vehicles. The company figured the sales rep would get a no just based on the make of the vehicle they were driving before ever setting foot on the property. So driving the older truck Barry had been used in his work, he and Jessica set out to the dealer. The truck did not have any rust but was showing it’s age. Barry and Jessica were hopeful of a good trade-in value even with over 80,000 miles. Used trucks had been selling well in the area.

Barry and Jessica approached the flag and balloon ridden car lot with all the hoods up in the front row with words “SALE” spread out letter by letter in huge block type.  Just as Barry and Jessica stopped their old truck a salesman popped out from between the cars and extended his hand before a word was spoken. Barry produced the promotional letter and shared it with the car salesmen later introduced as Brandon. Brandon began by making small talk and initiating probing questions about type of vehicle, whether they would be paying cash or would need financing. Brandon went on to ask about credit questions and suggested that it would be key to pull a quick one bureau credit report from Equifax to determine their qualifications to complete a car finance deal. Barry and Jessica had been through the drill before and were committed to tough negotiations to get a good deal. They knew, based on their current credit situation by recently taking advantage of the free annual credit report, that their credit report would show a lot of negative history. However, they felt that with Jessica’s current position as a dental assistant showing four years on the job that it would help offset a lot of the derogatory credit giving them a shot of getting a successful purchase. Brandon kept asking the sales manager questions as if he was unsure of the next step. It soon became apparent that he was new to the business. The credit score came back at a 540 FICO, which was higher than indicated on the credit score they had previously purchased.  Brandon explained they used a special credit model per finance company guidelines. With the credit score in hand, Brandon went over the payment parameters and Barry and Jessica thought a payment of $625 with all the employee mileage and per diem reimbursements would help to offset the additional cost of a larger monthly payment. Brandon hit the lot and started showing them some later model trucks. One in particular caught their eye. The price showed that the dealership was asking $22,500. It had everything and it was white per company requirements and had a cover. It was a Chevy truck with barely 9,000 miles and was two years old. In addition it had a box liner. On occasion, Barry had to haul company chemicals and tarps from job to job. After a test drive and demonstration, Barry and Jessica nodded to each other out of the salesmen’s view. They shared with Brandon that they might have an interest in this Chevy pickup if they could get the right trade in and price. Cash buyers can always get a better price with a straight up deal. Many times trade-ins are wholesaled right out the back door and never are put on the lot due to their condition and appearance. It’s really an accommodation to the buyer to facilitate a sale. The wholesale manager came out to appraise the trade-in vehicle just shaking his head and taking the number up to the sales manager’s desk.

Barry and Jessica were shown into a small 8-foot by 8-foot office with a small desk and two chairs. Brandon was looking at a blank sheet of white paper with a felt pen at the side. He picked it up the black ink felt tip pin and began to write a number on the top. He circled the number and pushed the paper toward them. It took up about a third of the paper. The dealership was offering to sell the white Chevy truck for $21,000 including the trade-in plus transfer taxes and tags.  Thus Brandon was offering only $1,500 for their vehicle. Barry took out his own pen and wrote $17,000 including the trade plus transfer taxes and tags and shoved it back to Brandon. It didn’t appear to Barry and Jessica that Brandon was used to negotiating. He excused himself and took the paperwork up to the sales manager. Soon another person appeared in front of them. He said his name was Dick. Barry had surmised this was the T.O., the take over guy. After hammering them with all the benefits of the Chevy truck and how there was no way to that number would work he countered that with the trade-in they had to offer that the very best that they could offer would be $20,500 plus transfer costs. Barry and Jessica were committed to diligent negotiations and were well aware of the dance that was unfolding. Hours passed. Several times Barry and Jessica stood up and were preparing to leave and each time the take over guy, Dick, pleaded with them to sit down and he would continue to talk to that hard nosed sales manager to see if they could get a number they could live with.  It was now close to 9:00 P.M. in the evening. Barry and Jessica had brought some small sandwiches and drinks in a small canvas bag to keep up their energy and mind sharpness. The numbers were flying back and forth. Finally, a price of $18,500 was agreed among the parties. Brandon wrote up the deal and told them that they would need to go into another office and meet with the finance and insurance manager to finish the paper work. Brandon and Jessica sat down with Pricilla the F. & I. Manager and started going over the paperwork. They had brought the title to the trade-in and put it on the desk.

A long discussion ensued regarding all the benefits of having credit life. If one or both of them died the truck would be paid off. It would only add $60/month to the payment. Likewise, a service warranty was touted even though the truck had a 50,000 miles bumper to bumper warranty with a year and a half left on the warranty time. A disability product was also presented which would make their payments if one of them became disabled. After an hour, Pricilla the F & I gal gave up on the ancillary profit centers and moved on to the financing aspect of the deal. As an approved originator by the finance company the dealership could originate the loans on the spot. Within another half an hour, Pricilla had completed all the paper work while explaining that due to the credit score they would need to go with a sub-prime car lender where the rate would be 28% with a 48 month term. With $18,500 plus transfer taxes of $1,295 and license and title transfer added another $195 for a total amount of $19,990. Barry and Jessica knowing their credit history planned on putting $2,000 down which they received back on their income taxes. The payment would then be based on a loan amount of $19,990 – $2,000 or $17,990 for a $626.99 per month. All the known income facts, current debts, and explanations on the credit report were included in the file. Pricilla indicated the loan approval would be a mere “formality” and they could just sign the title over on the trade-in and take delivery on their new purchase with the final paperwork coming to them in about 30 days. Their insurance agent had told them to call him at home and he would give them a temporary binder with the Vehicle Identification Number and new lender as first insured. In the meantime, they would have a cardboard temporary license tag in their window. Smiles all around as Barry and Jessica left the dealership with their new purchase. The next day, Sunday, Barry and Jessica went to a family picnic and Barry was showing off his new trophy to at least 20 family members while giving rides to a few of the kids. Yes life was good.

Tuesday morning a panic call from Pricilla indicated they needed to bring the truck back as the lender had chose not to approve the loan based on Barry’s job gap due to an on the job injury coupled with all the negative credit history in the past 12 months. Barry and Jessica were just devastated. Reluctantly Barry took the truck back with his tail between his legs. Barry pressed Brandon for the return of his old truck. Brandon came back with a panicked look on his face stating the old truck had been picked up by a wholesaler as they were certain the deal was going to fly. It would take two weeks to get the old truck back as it was now on its way to another state in the south. Barry got really angry and lost his cool. Now there was insult to injury. He asked how this could happen. The dealership gave Barry a temporary dealer car until he got his truck back.

The lesson here is, do not take delivery on anything until the deal has been bought by the finance company if there is challenged credit involved.  Otherwise, it is just conversation. Let the new deal vehicle sit until it is fully approved. Such is the plight of challenged credit borrowers. It’s a tough battle fighting out of the hole, but there is no need to add an unnecessary layer of stress.

Prolog: Barry’s boss assisted by going on the loan and deducting the payments from his payroll check. Barry was a valued employee and the owner wanted to accommodate him by buying the truck he had picked out. The boss bet on Barry. Many challenged borrowers have no one who will bet on them. They have to bet on themselves and take action to turn things around.

Lesson: A credit-challenged borrower needs to exercise caution in taking delivery before the financing is fully approved. Other buyer/borrowers can show up at a dealership with a loan approval in their pocket from the lender of their choice. They take on the power of a cash buyer. A credit-challenged borrower does not have that luxury at that moment. The condition is not fatal and is not permanent. Things can be turned around with work and discipline. As credit improves interest rates on purchases come down to competitive market levels.

Dale