Can a dealer kill a car loan and repo car?

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Dear Driving for Dollars,
I purchased a new car and traded in my old one, with the amount I owed added to the new car loan. Two months later, the dealership called to tell me that I don’t make enough money, that it was taking my car back and giving me my old one.

I never missed a payment on the new car, but during those two months the dealer did not pay off my old car loan or make payments, so now I am delinquent on the loan for the car I traded, and the dealer says I am responsible. What can I do?
— Winter

Dear Winter,
Wow, there’s something fishy with this car dealer. It sounds like what the dealer is trying to tell you is you don’t qualify for the car loan it originally said you qualified for. While this is possible and actually happens fairly often, it should not be happening two months later. In most states, there are laws requiring dealers to have the loan qualification finalized before the sale is completed, though it’s not uncommon for a car loan to be rejected at the initial terms a few days after the consumer has driven away with the car.

The fact that two months have passed raises eyebrows. Something odd is going on. Get out all of the paperwork associated with this transaction, and read it thoroughly so you understand what you signed. Then call the attorney general’s office for your state and file a complaint with authorities. They can provide you free guidance about how to proceed. Also call the lender associated with the car loan on your old car and tell the lender what is happening. Let the bank know you’ve filed a complaint with the attorney general and ask officials there what they can do to help ensure your credit isn’t harmed while this is straightened out.

Finally, it’s not clear from your question whether you realized the amount you owed on the car you traded in was going to be added to your new car loan. If you were led to believe the dealer was paying off your car loan on your trade in full, contact the Federal Trade Commission to file a complaint. The commission recently has cracked down on car dealers who state in their advertising that they’ll pay off a car loan on a trade in full.

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If you have a car question, email it to us at Driving for Dollars. Read more Driving for Dollars columns and Bankrate auto stories. Follow her on Facebook here or on Twitter @SheDrives.

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