A lot of the time, when you finance a car through a car dealership, especially American ones, you are actually approved by the dealerships finance manager, not the individual bank. They prepare all the paperwork, in accordance with the individual bank, and then submit it. They are aware of what creditworthiness it will take for an individual to get approved and use those guidelines when deciding which/what financing products to use. Usually, you sign (probably didn't notice signing so many papers) a "release" of sorts (also usually don't receive a copy) saying that you weren't "approved" by the individual lender but by the dealership. Usually, this document is used in case you get rejected by the lender and they either need to find you another lender, or need to return the car due to inability to obtain financing. This especially happens when you are able to take the car home the same day as walking into the dealership. It is also entirely possible that the bank the approved you through no longer offers a 7 year loan and this is all they have to offer or you didn't get approved for the longer loan. In a final answer to your question, "Can they do this?", the answer is yes. Like I said, you usually sign away all rights with a financing deal, to cover their a$$. You can ask for different financing options, but if this isn't available to you (either by not qualifying or progran expired) you're pretty much stuck. You could threaten to return the vehicle to them, due to lack of financing, but usually if you qualify, you're stuck. I have seen instances where a car had to be returned to lack of being able to obtain financing, but none in a case like this.
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