Forced financing: a new upsell that might send you walking away from a car

Finance & Insurance

Imagine you’ve finally found your dream car. Oshawa resident Tami Hamilton and her husband were thrilled to find a 2017 Subaru BRZ Sport Tech on a local dealer’s lot. For the auto enthusiasts, it was to be their long-awaited “fun” car … Their experience with their sales rep was smooth. “He was terrific,” said Tami. “The trouble came later.”
“Once we were in the finance office, we were told we had to take financing on the car. I said we didn’t want or need financing. We just wanted to purchase the car. We had the money.”

Instead, what played out was a dog’s breakfast of excuses, manipulations, and while not illegal, certainly questionable reasons why they had to take the offered financing.

“He (the dealer’s business manager) told us doing it this way protected us from wholesalers. He said wholesalers are going around buying up stock, so this was to protect real customers. He told us there was a problem paying upfront due to COVID concerns, but of course, it would have been a bank draft, not cash. I asked if there would be fees for financing, and he said of course. I asked if this was standard protocol, and he said Subaru was fine with it. He said I was the first “problem” he’d had over this, though we later were told they’d lost five sales already over it. He said if we didn’t buy it, someone else would. He wasn’t worried. I asked if those costs could be deducted from the sale price of the car. He said no …”

“I said I wanted my deposit to be everything except for the seven months of financing they were forcing on us. I was told they would not take more than half the price of the car as a deposit, I had to finance the rest. I was also told I couldn’t cancel the loan until the seven-month point because they would lose their fee from the lender. He made me sign a paper that said if I closed the loan before seven months, they would charge my credit card $750 to make up that fee. I asked them to use my bank, CIBC. The papers came back with BMO on them …”

George Iny at the Automobile Protection Association (APA) says it’s not uncommon. “Some dealers are being sneaky because the supply of new vehicles is limited, and some mass-market manufacturers don’t want them selling new vehicles for more than the MSRP. By financing a new vehicle through a lender, the dealer can collect a healthy commission from a third party that escapes the scrutiny of the carmakers. For used vehicles, making financing mandatory boils down to greed and ineffectual enforcement by dealer regulators …”

The dealership has not responded to an enquiry asking if this is indeed their policy, but Subaru Canada stepped up immediately. “We have been troubled since learning of the situation and do not condone the actions taken by the dealership’s finance and insurance office in this instance. We do not stand behind forced measures and are addressing this matter with the individual dealership to ensure these actions do not reoccur.

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