Is is common for car dealers to offer a financing deal that includes both a loan for the car plus a substantial loan for "credit consolidation"?
A couple in their 80's went to the local Ford dealer to get an electronic key made for their Ford Fusion. They were talked into considering the purchase of a new Ford Focus. They didn't buy it the Focus on the spot and they didn't get the key either; (The key's cost was $160). They asked for my advice on the deal. All lthey knew about the deal was the pitch "Your payments go down from $480 per month to $320 per month and we write you a check for over six thousand dollars". They still owe money on the Ford Fusion, which wasn't purchased at the Ford dealer. They knew their monthly payments on it were $360 per month.
We all three went to the dealership. The terms of the deal were to borrow approximately $16,900 for the 2013 Focus SE and to get about $6,700 "in cash". This was supposed to reduce their montly payments from $480 per month (for some unspecified number of months) to $320 per month for 84 months. The explanation of the $6,700 was "to payoff a credit consolidation loan". The salesman claimed the figure of $480 was "from the credit reporting agency." (The Ford Fusion isn't involved in the deal. There isn't any trade-in.)
I thought the deal was bizarre. I advised my friends to find out if they indeed owned $480 per month on some non-car loan and what its terms were. I told them didn't need a Focus "SE" model since it's "extras" are things like satellite radio that they won't use. I told them they should only consider a plain "S" model. (The salesman said the dealership had S models but only cars that had manual transmissions. My friends wanted an automatic.) My friends remembered filling out the brief credit check paperwork at the Ford dealer but not filling out an actual loan application.
It's a week later and I found out my friends took the deal. I haven't asked if they were actually paying $480 a month on a credit consolidation loan. I suspect they weren't. I think what happened is that they've just borrowed $6,700 that they didn't need to and that they now owe an extra $320 per month.
If a credit reporting agency actually knows that my friends owe $480 per month for a particular loan. the deal might make sense. But isn't it more likely that $480 is, at best, an un-itemized estimate of all their monthly loan payments?