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I have not read all the posts so forgive me if I am repeating info here. This does sound like a pretty shady scam, and may be legal depending on the state.
What I would do, is shop around some banks with a co-signer and then go back to the dealer with that. They will retain the down payment (bank should account for that in the LTV ratio) but they will in turn lose out on the kick backs they get from originating the loan. You will also get to keep your car.
I almost always go into a dealership with my own financing (exception being if they have a 0% promo like my Silverado). I also do not tell them I have my own financing secured until the price is set in stone and I have seen their finance offers. A lot of times the dealer will end up paying down points on the loan so I originate through them in the end with a better deal, but I always have my financing secured as a fall back. Also, all inquiries on your credit during a certain (i think 30 day) period for car loans only count as one inquiry so there is no 'penalty' to shop around. This method will always get you the best rate and also you have the security of knowing you are fully approved up to a certain amount before you step foot in the dealership.
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