auto loan

[mar878]

I live in Indiana, and about 3 months ago a went to a local dealership to purchase a car. I had a car to trade in which I was given $1500 for, but I still owed $7000 on. So, I traded in my car and I also put down an additional $4000. I was told by the salesman that it shouldn't be a problem, my credit and my mother's credit was ran and I was told that I was approved for a loan and was allowed to drive off with the car the same day. A few weeks later, I was told that there was a problem with the loan app., the finance company said I had too much outstanding debt and that I should put my mother on my apt. lease to make it appear like someone was paying half of my rent. On top of that, I even got another job to show that I had a little extra income coming in. After doing all of that, my mother and I went back into the dealership and signed a new agreement and was told once again that everything should be ok now.
Now 3 1/2 months later, the dealership is telling me that the original finance company will not approve the loan and they can not find another company to finance me either. They want to take back the car that I have had for the past 3 1/2 months and give me one of the cars worth $1500. And they don't want to give my $4500 back, because they sold my trade-in car and paid of the auto loan that went with that car before the loan was finalized. I am also expected to pay them back the balance of what was left from my original auto loan after the $4500.
So, my question is can they do this?

 

[Suzyanet]

The same thing has happened to us. We were told to volunteer our vehicle, now the loan has not gone through after we have had our new car a month. Is there any way to find out if this can be legally done by a dealership. It seems that when the consumer signs the fin. contract, gives a downpayment, the loan is done.