“I feel very misled and deceived,” said Ashley Franson, of Pitt Meadows, B.C., who said TD has since refused to give her a lower rate.
Go Public first reported on the high interest auto loans when a B.C. couple came forward to say they felt misled into a 25 per cent interest loan from TD.
The customers are being charged between 15 and 30 per cent interest, over terms as long as eight years, on their subprime car loans.
“I questioned the high interest rate and that's when I was told, ‘Don't worry about that. You're going to be refinanced in a year and your interest will be lower.'”
Franson has two children and works full-time as an administrative assistant. Several years ago, she said she was saddled with debts a former spouse racked up in her name, which damaged her credit rating.
In 2011, Coquitlam Chrysler sold her a 2009 Kia Hatchback for a sale price of $11,085.
The dealership arranged financing from TD at 22.92 per cent annual interest. Including all fees, charges and interest, the total cost to Franson was listed at $27,182 — more than twice the selling price of the car.
“It makes me sick to my stomach,” said Franson, who estimates her car is now worth $5,000. “It keeps me up at night because I'm paying more in interest than what the loan amount is.”
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Many customers, same story
Franson and several other TD customers with similar loans insisted they only signed the papers because the dealership assured them if they made their payments they would get “refinancing” at a lower rate after a year.
“It’s not advice. They are asking a question and we are answering it. They are asking when can they come in and apply for a new loan and typically that answer is a year,” said Mark Hamilton, general manager of Coquitlam Chrysler.
He stressed lower rates are only possible if the customer pays all of their bills – not just their loan – and they don’t change jobs.
He also acknowledged customers are often not given those details.
“We’ve got literally 10 different people who sit down and negotiate these loans and everybody is going to say something different…I am more than happy to sit down with Ashley now and look at her overall deal and see what we can do.”
Franson’s story is almost identical to many others – customers who dealt with several dealerships in different provinces.
They all had a bad credit history or no credit history at the time of signing the deals. Many said they were desperate and vulnerable because they needed a vehicle and couldn’t get other financing.
They said the dealerships assured them paying the loans would help their credit ratings so the high interest rate was short-term pain for long-term gain.
“The finance manager worked some “magic” and was able to get me a preapproval with TD Auto Finance at 25.99 per cent,” said Jennifer Long, of Spencerville, Ont.
“I was specifically told that I could renegotiate the rate in a year, after I take the time to build my credit score. I remember this conversation very clearly.”
Turned down later by TD
Long said she contacted TD directly after the year was up and was told a much different story.
“The lady on the other end listens to all I have to say…she tells me 'Ms. Long I am sorry, the term you are locked into is a set rate, there is no renegotiating with this loan option. I am not sure why the finance manger told you that you could refinance in a year; that is not an option with your loan,'” said Long.
“I was also promised the same thing - that my interest on the car loan would go down considerably if I do not miss any payments in one year,” said Sohail Anwar, from Calgary.
“I have spoken to the [dealership] manager three times. Last time when I spoke to him, he said he would ask the sales agent to look into your file and ... to give me a call. I never heard from him thereafter.”
“It's highway robbery, is what I've gotten into”, said Greg Sentance of Thorold, Ontario.
He bought a 2005 Chevy Impala from Certified Affordable Cars in nearby St. Catharines in 2011. He is paying TD 22 per cent annual interest, because of problems he had years ago paying his student loans.
"What clinched the deal that the interest rate could be brought down," he said. "Basically, I feel like I was lied to."
He said he has had no hits on his credit rating since taking out the loan, but was taken aback when TD recently told him he would have to buy a new car to get refinancing.
"You're up against a brick wall...you call TD Auto Finance and they say they really don't have anything to do with it."
Matt Demarco, finance specialist for the dealership, told Go Public the dealership would never refinance a customer without selling them a new vehicle.
"We are just giving them the information the bank gives to us," said Damarco.
TD's one year offer
He said the one-year timeline comes directly from TD Auto Finance’s dealer’s handbook for 2013.
“TD Auto Finance values its customers and offers current customers who have made 12 months of timely and consecutive payments and opportunity to trade in their vehicle with rates starting at 10.9 per cent or 9.9 per cent with the flex rate option on approved credit,” reads the handbook.
Many of the customers who were turned down by TD after a year said they weren’t told why.
Industry insiders who contacted Go Public said giving false or misleading promises of refinancing after one year is common practice among some dealers.
“They say it when it’s not true because the subprime deals are very lucrative,” said a 30-year veteran of the car business, who was a sales manager who oversaw the business office.
He asked to not be named because he still works in the industry and fears he will lose his livelihood for speaking out. He said dealers often sell the used cars they can’t sell to regular customers to the people with bad credit, with a significant markup in price.
“The one-year promise is a tool to help seal the deal when the consumer’s resistance to the high rate has them thinking about walking away,” he said.
Dealers lie, say insiders
“It’s an outright lie. But it will never be put in writing. And that’s the challenge the consumer has.”
“Some dealers are unscrupulous and go for the throat,” said a current credit manager for a Chrysler dealership in Ontario, who claims his salespeople don’t lie to customers.
He also didn’t want to be named, fearing repercussions from the industry.
“It’s the way it’s explained. Those dealers just want to get the deal signed. They don’t care about them in a year’s time. Some salesmen think about today’s paycheque, not next year.”
Even when the bank does agree to give a lower rate after a year, the ex-dealer said the subprime customer still ends up with the short end of the stick.
“Then the payment goes up and they give you the longest term they can. So it goes from bad to worse when the dealer offers refinancing,” he said.
Whatever amount is still owed on the high interest loan is rolled into the new deal, usually resulting in higher payments on another car that is also worth far less than the money owed.
That’s exactly the kind of deal Franson said the dealer came back with for her, 18 months after making all of her payments on the initial loan. She said Coquitlam Chrysler offered her $5,000 for a trade-in, when she still owed more than twice that much on the car.
“I would have been in a deeper hole,” said Franson, who said the dealer offered to finance a $20,000 vehicle, at a lower interest rate. “I still would have owed $30,000 on a $20,000 vehicle.”
She said she turned down the deal because she said she couldn’t afford the higher payments.
“It’s taking advantage of people who don’t have a choice. The dealer is doing that in the bank's name and they [TD] should look into that,” she said.
Regulator warns dealers
As a result of Go Public’s initial story, the regulator that oversees dealerships in B.C. is issuing a bulletin, warning dealers it’s illegal to make misleading promises about refinancing.
“Everything that the salesperson says throughout the whole process, everything that the manager says, all of those are part of that transaction…part of the contract,” said Doug Longhurst of the Motor Vehicle Sales Authority of B.C.
Longhurst said the authority has heard this type of complaint before and will also investigate any new consumer complaints, with the possibility of penalizing the dealership.
"We’re an indirect lender. That means the dealer originates a car loan with each customer based on their individual information and vehicle needs," said a statement from TD. "To be clear, we don’t offer refinancing programs for existing car loans."
"Based on feedback Go Public has received, we will reach out to our dealers again to reconfirm our program."
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