Slightly overbought

This cry came in from Quora, and I spent a little more time on it as a result:

The car was listed at $14,400. I have 620 FICO and no co-sign. APR is 14.94%. The total sale price is $27,979.44. Am I being fooled by the car dealership? If so, what should I do?

“Fooled” seemed unlikely, but another explanation seemed less so, so I came back with:

How long is this loan for? You’re obviously getting a subprime rate, which is commensurate with a 620 credit score. You might want to read over the contract to see if you’re paying extra for stuff like gap insurance (a good thing), extended warranty (not such a good thing), and weird dealer fees for which you’re getting no good explanation.


Loan term is 72 months. Only thing that stands out is “ETHOS GROUP VSC” for $4,000. The lady told me it was for the warranty after I asked that the car(2015 Honda Civic) was still covered under manufacturer warranty.

Okay, maybe there was a bit of foolery going on. I saw my chance, and I ran with it:

The basic Honda warranty is 3 yrs/36,000 miles, so this is actually an extended warranty. (It’s not offered by Honda itself, which is a dead giveaway.) Hondas aren’t especially fragile at this age … you might want to check with the warranty issuer to see if it can be canceled.

As it turns out, it can, and she says she plans to do exactly that. I guess this is my good deed for the week.

Disclosure: Last time I got a car loan, a decade and a fraction ago, I was running a 642 and got hit with a 10.4-percent interest rate. On the upside, I put down about 44 percent of the purchase price, and I paid off the 48-month note almost half a year early. I haven’t checked with FICO lately, but one of my card issuers monitors TransUnion for me, and they give me a 790 or so.

1 comment

  1. McGehee »

    14 May 2018 · 8:41 pm

    It’s tempting, I suppose, to want the warranty to last at least as long as the loan, but if I can’t qualify for a loan that will discharge before the warranty expires, I’m not buying new.

    Then again, I’m never buying new anyway, so there’s that.

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