Dehorsing exists because of a
gray area in the law that allows a dealer to give you a car based on the assumption
of financing
(this is referred to as a bailment agreement, though you'll never see that
mentioned in an actual sales document).
The consumer trades in his or her car and drives out with a new one.
Days or weeks later the dealer demands the car back because they couldn't
secure financing or secured financing that was
outrageous. The consumer tries to get the old car but the dealers insists
the car has already been sold (often it isn't).
This is most likely to happen
with people who have bad credit or no credit and while it happens more often
with smaller
independent dealers, there are a few of the larger dealership companies that
are notorious for this practice.
A Hypothetical Situation
Let's assume that you're a twenty-something
recent college graduate who rents an apartment, has no credit cards
and therefore has little credit. After diligently comparing models and going
on dozens of test drives you decide your ideal
car is a new Ford Mustang V6 GT.
You've called every dealer and found one in the color you want, with the options you want for just US$23,000.
When you show up to the dealership
you can't resist being shown a a brand new V8 Mustang. After taking it for
a spin
and talking with the salesman he says you're a great kid and he wants to
give you a deal: just US$25,000 for the V8 GT Premium.
You're floored.
Even better, he says you can trade in your old junker Probe (for $2,000)
and drive out with the your cherry Mustang today while
they work out the financing.
The next month is great. You
meet someone nice and take them for long drives in the countryside.
So it's a bit of a shock when
a month later the salesman calls you and says that because of your lack-of-credit
you're going to
have an interest rate of 15%. The maximum interest rate is usually tied to
the prime rate, with a certain amount over that and
could thus be as high as 24%.
This means that to pay for your
$23,000 Mustang GT you'll have to fork over $547 per month for 60 months for
a grand total of
$32,820. However you do the math, at 15% you're going to have high payments
or pay forever. You decide to return the car rather
than be the dealership's bitch forever and find out that your old junker
Probe is gone.
This means that you no longer have a car. You have just been de-horsed.
How to Avoid Getting Screwed
1. The best offense is a good
defense in this case. The most important thing you can do to avoid getting
dehorsed is to not take
possession of a car until the financing is settled, this is especially the
case if you're worried at all about the terms you could get.
2. Check the company out. Do
they have a bad record? Are they these guys? The best way to check is to go
to the BBB website
and find out if they have a history of complaints that are unresolved. Almost
every business will have complaints, but a good
business will try and resolve the issue.
3. Work out the financing ahead
of time. If at all possible, you have the most leverage when buying a car
when you have the
financing worked out in advance. Also, your bank or your credit union will
often have the best financing options if you're worried
about it.
4. Don't give them your car.
Don't even consider the trade-in until you've worked out all the other parts
of the deal unless you
have a personal relationship with the dealer. Unless someone is really looking
to move cars (which they might be), you'll almost
always get the better deal selling the car yourself.
When it comes to dehorsing, there
are no victims just volunteers.
In the end, many victims of
fraud look back and see opportunities where they could have avoided getting
screwed.