03 February 2023
Just when you got the exciting announcement that you were approved for car finance came the disappointing news that you were declined. Is it possible? Does this sound familiar? After all, financing a car is a complicated issue, so let’s figure it out and clear out any confusion.
Yes. It doesn’t happen a lot, but it’s a possibility. Most lenders go out of their way to make unequivocal decisions: they either accept applicants or reject them right away. Especially when it comes to finance from banks. But, in rare cases, a car loan may get revoked even after the final approval or signing of the documents at the dealership.
It’s definitely unpleasant when your loan is denied, and it gets trickier if you manage to drive the vehicle off. But we’ll help you get a grasp on the situation and resolve it.
Important note: Make sure you’re not confusing lending institutions. Some borrowers apply for loans at different firms and get letters with different decisions. Make sure the denial letter is from the same lender you went with.
If you had your car finance approved then declined, there are a few possible reasons:
The car finance application should be clear of any discrepancies, and all the accompanying should be accurate. But if either condition isn’t met, you may get a “false positive”. In other words, the lender will invalidate your finance deal if they weren’t provided with all the information.
Perhaps there are issues with your financial history that the lender wasn’t aware of. For example, outstanding debts. At first, the processing team may consider a more dependable borrower than you actually are. If presented with new information, the financing company may decide differently.
Or it can be a simple technicality. If there are incorrect details like your identity or address, such errors in the drafted contract are considered a sufficient cause for car loan revocation.
Processing teams at car finance firms aren’t perfect. They aren’t devoid of a human factor, so you can end up with refused finance because they’ve made a mistake.
Possible explanations are endless. For example, they may send you two emails: one with acceptance and the other with a rejection. From your perspective, it would seem that the initial decision has been changed. From their perspective, they may have only intended to send you the second email. You can’t really know what’s happening on their end.
This is the most unfortunate possibility out of all because it’s a predatory practice. Yo-yo financing is also sometimes called spot delivery, and it happens when you’re allowed to take the car home while the application is still pending. You’re not actually approved, but the dealer signs you on based on the assumption.
If you’re wondering what they have to gain from this situation, it’s probably the charges or the possibility of changing the agreement. If you turn the car back in, the dealer may keep their commission. If you decide to keep the car, you may be tied to worse loan terms. Technically, you’re not protected by the initial agreement because it wasn’t finalised when you drove the car off the lot.
We recommend you take the following steps:
Ask the lender why the agreement can’t be carried through. Don’t make any assumptions, and certainly don’t take any measures before you hear from them directly.
It may be one of the common reasons listed above or something that happens less frequently. Again, it’s hard to guess what’s happening on the other end of the agreement and why. You need as much information as you can get before moving to the next step.
Read the agreement that you’ve signed. You want to be sure your rights aren’t violated and prevent nefarious companies from taking advantage of you. If the car dealership or lender is in the wrong, you can claim breach of contract and pursue legal justice. You can at least recoup your finance charges if you were wrongfully denied.
In addition to knowing your rights, you need to know your obligations to the dealership. Those are also specified in your contract.
If the dealer asks for the car back (and they’re contractually allowed to do so), comply with their demands. You don’t usually have legal grounds to hold the car hostage. Doing anything for the principle of it will only open you up to more troubles.
Obviously, this attempt isn’t going your way. But you can take control of the situation and apply again. Perhaps this time, you’ll want to go a different route, like pre-approved offers.
Try to become an even better candidate for the next finance applications: save as much as you can for the initial payment, establish a stable income, work on your credit rating, etc.
Loan rejection won’t affect your credit score if the lender performs a soft check. In fact, it doesn’t matter whether you get approved or denied for car finance (or you get denied after being approved), only some inquiries matter when it comes to your credit profile.
You want your finance company to make the decision based on a soft check, which won’t be shown on your credit report or impact the score. However, some lenders will perform hard checks, which will stay in your credit history for up to two years and even slightly lower your credit score. We suggest you keep these checks to a minimum and avoid them when possible.
So, don’t stress out. Focus on finding a good finance company and making your payments on time.
Now, you’re equipped to face any situation with the finance company. There are solutions to revoked finance cases. Let us summarise. Depending on why you were rejected, you can get your current application straight or apply for car finance again (although, consider doing it through other lenders).
Luckily for you, this isn’t likely to happen with Carplus. We work with trustworthy finance companies that stand by their decision: if you get accepted, be sure you’ve got a great deal that will be processed quickly and smoothly. Reach out to learn more about the process and your options!
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