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Forced financing at the car dealership: Following WFAA story, Texas regulators getting complaints about dealers who refuse outside financing

The dealer demands in the finance office are frustrating car buyers, who are already navigating lack of inventory and higher prices.

DALLAS — If you're repeatedly saying, “I’ve never experienced this before," you may be going through the process of selling and/or buying a vehicle. After experiencing it firsthand…and repeating the phrase above (and a few others I won’t type here), I recently documented some of what is happening. It quickly became the most-watched episode of Right on the Money I have ever done.

Your outside financing may be great for you, but not so great for the car dealer

One of the experiences I shared was of having to practically force checks into the hands of auto dealers. Giving them money was hard because I had already secured great financing terms through my own lender. But I encountered several dealerships that wanted me to use their lenders. Dealers can make extra money at a customer’s expense by arranging the financing through their lenders and adding to the percentage, so the dealer gets a cut.

That could be especially beneficial now, since pandemic supply chain problems have vastly decreased new auto inventory, costing automakers and dealerships a lot of money. Some dealers aren’t just pushing their own lenders; they are refusing to take checks when car buyers secure their own financing with outside lenders.

RELATED: I had never heard this before from an auto dealer, so I asked a state regulator about it. They responded: 'We are concerned'

In WFAA’s initial report on this phenomenon, the Office of Consumer Credit Commissioner said, "We are concerned about the practice." In response to the initial story, the OCCC said it wanted to be contacted by consumers who experience this. 

"I wasn't sure how to until I saw the WFAA article," one person wrote, as they filed one of a few dozen complaints about this practice. Here are some more snippets from car shoppers complaining to the state about what feels like forced financing at the dealership:

  • “They actually told a client in front of us to leave because they had their own financing.”
  • “I was turned down as a veteran with an approval from Navy Federal Credit Union.”
  • “The manager... stated that it would allow him to make money on the back end.”
  • “[Even with an offer of cash] they would not sell me the car.”
  • “The interest rate was about 2.5% higher but I needed a car quickly, so I agreed.”
  • "The sales manager told me directly, 'If you choose to go with the credit union this will change the price of the vehicle.'"
  • “I handed them a check from my credit union for $50,000. Salesman...stated at this time they were not accepting financing from credit unions.”
  • “How is a business able to force a customer to use their financing?”
  • “When I asked why he said, 'Because the owner can do what they want.'"

There's no law preventing this, but regulators want to hear from those experiencing it

In this particular scenario, the owners kind of can do what they want. As we have reported, there is no specific state statute against dealers refusing outside financing in favor of their own lenders. But the OCCC says all of the above complaints (and more) are now being investigated, adding they are “continuing to monitor this issue. We highly encourage consumers who have experienced dealers denying outside financing to contact us.”

You can contact the OCCC's Consumer Assistance staff at (800) 538-1579 by sending an email to consumer.complaints@occc.texas.gov, or you can file a complaint through their website.

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