HELP! The car loan was denied after I already bought the car!?

This is a blessing in disguise.

Run away from the Volt. It is a dead end car with minimal support and even more limited parts availability.
 
What is the proper “needed” profit margin?
I cannot say, as I have not done my research on that vehicle specifically. But there is a "price range" that the lending institutions will use as a guide. If it is way outside of that range they will not move forward. We as consumers need to do our research and verify the dealer is not just adding insane markup.

I can give you an example of insane markup, in 2022 I watched 2014 ford fusion S trim at an auction. They go for $7400 ~ $8600 depending on many factors. There is a dealer buying them up by dozens, and selling them for $19,995. To me that is insane and we as consumers need to simply learn to walk. Proper research shows the average price range (again lots of factors here) to be around $9500 ~ upwards of 13,995.
 
So you seem to have a pretty good understanding of the why, but there may be something missing here.

Your modified LTV (as others have rightfully spelled out, LTV=Loan-to-value) has to make sense to the bank. It includes everything that you're including in this loan, which according to your first post, sounds like everything: taxes, fees, GAP insurance, etc. Now, an auto loan is a secured loan- the vehicle being purchased is the collateral against the loan.

The vehicle being purchased has an ACV, or an Actual Cash Value. The ACV is simply that- the actual value of the car according to independent sources, or in other words, someone other than the dealer or the buyer. This ACV is considered in the writing of the loan, because that is the collateral used to secure the loan in its entirety.

Essentially, your credit union is doing a pretty simple equation: what is the total value of the loan being requested and dividing that by the ACV of the car. So in your case, it would be the final sales price of the car, plus tax, fees, and GAP insurance (at a minimum). Using what minimal tools I have at my disposal, and with limited information about your car (basically only year, mileage, and your location), your car is roughly worth $12,500 private party sale according to KBB. Your credit union will have their own source for ACV, supplying a much more accurate number than mine. If your total loan amount goes too far beyond that number, in this instance we'll use the $12,500 amount, the loan is now too risky for the credit union to sign into contract. They may be willing to accept greater risk in exchange for a higher interest rate, but if the purchaser's income or credit score won't support this, then there's nothing to incentive the credit union for taking the extra risk.

There are a couple of ways to fix the problem, but they all deal with the same side of the equation- the total loan amount side. You can supply a down payment, which obviously brings down the amount being borrowed. You can exclude things such as GAP insurance (which if I'm not putting money down, I wouldn't recommend) or sales tax from the loan. This would require you to pay cash for them, however. Or you can negotiate down the price of the car with your dealer. Without fixing the total loan amount side of the equation, there's little chance your credit union is going to change their mind. You could try a different lender, as each lender has their own risk tolerance, but that's about all the options you have.

Now, as for potentially switching gears and looking at a different, cheaper car. Maybe I misread, but it didn't sound like you were putting any money down. Moving to a cheaper car won't necessarily fix the problem since, as you can probably guess, a cheaper car is likely to have a lesser ACV. We're bringing down both sides of the equation, which doesn't really help balance it out. The only way the Fusion Energi makes sense is if it has an ACV similar to the Volt, but at a cheaper price. Maybe it's been sitting on the dealer's lot for a while, maybe it's a lesser trim, who knows. That's the only way it solves your problem, however.

My recommendation would be to return the car and work on saving some money. A down payment potentially cures a lot of ills when it comes to financing a car. I'm sure you don't need my financial advice, but in reality, financing an 8 year old car with little to no money down is not a great recipe for success. I've said my piece, however. I hope this works out for the best for you, whatever ends up happening.
 
The part I don’t understand is that the dealership arranged the loan through your credit union. You should have done that yourself. The dealer is getting something out of this.

Hopefully your car is still on the lot.
 
I cannot say, as I have not done my research on that vehicle specifically. But there is a "price range" that the lending institutions will use as a guide. If it is way outside of that range they will not move forward. We as consumers need to do our research and verify the dealer is not just adding insane markup.

I can give you an example of insane markup, in 2022 I watched 2014 ford fusion S trim at an auction. They go for $7400 ~ $8600 depending on many factors. There is a dealer buying them up by dozens, and selling them for $19,995. To me that is insane and we as consumers need to simply learn to walk. Proper research shows the average price range (again lots of factors here) to be around $9500 ~ upwards of 13,995.
Lenders do not get to determine adequate profit margins for sellers. The free market does. Lenders determine if the loan amount to value is sufficient for their risk assessment and if the borrower is credit worthy enough to pay back the loan. If you add on extended warranties, services plans, taxes and fees, or roll over another loan the borrowed amount goes up but purchase price of the vehicle did not. It is added to the price on the backend. That is how one could easily end up in this situation even with a fair purchase price. Yes there are dealers taking advantage of buyers such as in your example. But arbitrarily saying the dealer is making too much profit margin doesn’t take into account all the potential variables associated with the loan amount.
 
You're most likely screwed. They did a spot delivery and you probably signed some type of conditional delivery agreement. For one reason or another, this was probably a borderline deal and the bank (after underwriting) decided it wasn't going to work.

You have to return the car, or ask the dealer to restructure the deal in a way to make it work.
 
This is a blessing in disguise.

Run away from the Volt. It is a dead end car with minimal support and even more limited parts availability.
The bank thinks you are overpaying for the car. I agree that this might be a blessing in disguise.
 
This. Wouldn’t trust the number on the letter they sent you though if you call unless it matches what’s on their website.
That would be interesting if the dealer crafted a letter on the CU's letterhead or similar. Definitely call the CU directly using their known phone # (I know mine from memory...for some reason).

Surprised they let him drive off without the loan nod.
This is normal or at least not unusual. Maybe it's an after-hours (bank hours) thing typically, but I had to sign a form (that was almost 10 years ago) and our son had to as well ~1 year ago. I have to presume that a human still ends up reviewing the loan agreement and the "instant" approval the computer gives the finance manager is just preliminary.
But there is a "price range" that the lending institutions will use as a guide. If it is way outside of that range they will not move forward.
Two different things. Dealer isn't a non-profit and they are free to make as much profit on a sale as they can get away with. Doesn't mean a lender will finance the item, but again, these aren't related. OP could pay $58,000 in CASH for that vehicle and good for the dealer.

My credit union will finance up to 125% of a vehicle's value. I suspect that other lenders will do (much) more than that.

The bank thinks you are overpaying for the car.
That's exactly what's going on here. As I mentioned above, I'm guessing a human reviewed the loan and looked up the vehicle's value vs what the loan is for and it exceeds their allowance. Could be the gap insurance that pushes it over. OP didn't mention an "extended warranty" but that would push it over as well.
 
Is Gap Insurance something you have to get if you put no money down? Or with no money down a lender will not do the loan unless Gap Insurance is taken by the buyer?
 
Alright, I have an update. I called the bank/lender and they said they sent the dealer back a lower number and I went to the dealer and they claimed everything is fine and that I have nothing to worry about and can keep the car.

So I guess all this didn't matter, I just overreacted to the letter I received.
 
Alright, I have an update. I called the bank/lender and they said they sent the dealer back a lower number and I went to the dealer and they claimed everything is fine and that I have nothing to worry about and can keep the car.

So I guess all this didn't matter, I just overreacted to the letter I received.
So you paid less? Lower payment?
 
2015 Volt?

$1200 automobile in my book. Tops.

Wow. Are we being trolled/spoofed here?
Based on what? In this post-covid market, a 20 year old beater can fetch $1200+ unless it's located out in the boonedocks or salvage title. I'm sure some auction prices are lower, but that's a gamble in itself and vehicles likely needing work/$$$$ put into them.

I haven't priced Volt batteries recently but would guess that the battery alone is worth near twice that, unless it has very high miles.
 
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Is Gap Insurance something you have to get if you put no money down? Or with no money down a lender will not do the loan unless Gap Insurance is taken by the buyer?

Maybe. It covers the negative equity, it would be a real good thing to have if you're buying in a high market like late last year (and early this year but prices are trending down...
 
Is Gap Insurance something you have to get if you put no money down? Or with no money down a lender will not do the loan unless Gap Insurance is taken by the buyer?

You don't need to, but I put no money down so it seemed like a good idea.
 
This has been an interesting thread. I’ve only bought a few cars from a dealer in my life, and only financed a few.

I had no idea of the chicanery that can, and clearly does, take place.

I appreciate the OP sharing this. I’ve learned a lot from the responses.
 
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