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Discussion Starter · #1 ·
Hi, I am currently living in Ontario as a university student. My parents are living in Vancouver and I tried to put them as a cosigner for financing a new 2013 optima ex turbo+.

Finance manager at the dealership I went recently told me that I cannot use my parents as cosigner because they are not residing in Ontario that they cannot allow people living in another province sign for the cosigner. So she sent out a finance application to few banks and told me only RBC would approve a deal if I make a down payment of $17000 (more than 50% of total car price) and pay interest with 5% interest rate per year. She also noted that RBC life insurance(accidental death, accidental disability, etc.) is MANDATORY or else RBC would not approve the deal.

At that time I was talking to one of their dealer and got to overall price(including tax, hidden fees, everything all together) of 32000, and now it has increased to bout $38000 including the life insurance that I do not need and additional interests and taxes(I was aiming for 60 months with 0% interest)

I have met one of TD bank advisor and he told me that banks do not make a decision on whether if I applied for life insurance or not, unlike what finance manager at the dealership told me(MANDATORY). He said it is called a tight selling and illegal from the bank to use it as advantage, or it could be the finance manager trying to talk me on to adding all the possible fees for a kick back(commission).

I am new to all these and would really really appreciate if you could help me on resolving this situation for the best outcome!
 

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Cerato S Hatch Auto
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I know nothing of finance laws etc. in Canada, but it seems that "bundling" the deal will leave you vulnerable to the whims of the dealer. Also be aware that "5% interest per year" probably means a total of 20% over a 4-year term which would mean paying a lot more interest than a standard personal loan from the bank which offers interest calculations on the "reducing" balance. Life insurance to qualify for a loan seems to be a rip-off. Most interest rates already incorporate some sort of protection for this.

If your parents trust you (e.g. they appear willing to co-sign), perhaps a better deal would be to see if they are agreeable to lend you the money themselves, or they could set up a personal loan which you repay. If your parents have sufficient funds, a "family loan" is often attractive. e.g. Retired people like to get rid of a bit of money to qualify for social security etc., and repayments can be received in a "tax efficient" manner.

Spending a little time with an accountant or your bank manager might be worthwhile.
 

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Discussion Starter · #3 ·
Thank you for the info! I have talked to both TD and RBC advisors(also with their auto insurance, loan, credit departments over the phone), and they both said it is called tied selling(which I wrote above "tight selling" haha..) and it is illegal for the banks to force people to buy their product when it is only optional.

What is coercive tied selling?
Section 459.1 of the Bank Act prohibits banks
from practicing coercive tied selling. More
specifically, it is against the law for a bank to
“impose undue pressure on, or coerce, a person
to obtain a product or service from a particular
person, including the bank and any of its
affiliates, as a condition for obtaining another
product or service from the bank.” You cannot be
unduly pressured to buy a product or service that
you don’t want from a bank or one of its affiliates
to obtain another bank product or service.
-> This can be found on most of bank websites

I will be heading down to their dealership and see what they say about this. Not just about this tied selling but also possible craps that could have been put into the deal that I am not aware of.
 

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2020 Hyundai Palisades
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Why would you go back to the dealer that just tried to screw you and you might take somebody with you that has some practical knowledge of car buying and the scams some dealers try to pull. Wry 'Cuda gave you some good advice which you should heed.;)
 

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Cerato S Hatch Auto
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Something I didn't point out is that your are always in a better position if you can keep the dealer out of the loop, finance the car independently, and pay the dealer in cash.

It's instructive to work out the "future value of a series of payments". i.e. how much you will be actually paying over the term of the loan, and compare that with the depreciated value of the car. There's some tools on the web for doing this, comparing interest rates, terms of loans etc. MS-Excel can work it out for you if you know the (fairly simple) maths.

Good luck. Maybe also consider a less expensive car?
 

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Not sure about Canada, but if your parents own/mortgage a home, perhaps they could take out a home equity loan and give you the money and they you could pay off that home equity loan. Home equity loans usually have attractive rates (about 3% right now in the USA) and have a tax advantage.

This is actually how I bought my very first car (1992 Toyota Celica). I was going to do dealer financing and my mother realized how high the rate was compared to what she could get with a home equity loan and told me not to do the dealer financing. Car was titled in my name, paid for with money that my parent got from a home equity loan and the load was paid off by me.
 
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