Spot Delivery Car Dealer Scam Exposed
Everything you ever wanted to know about the "Spot Delivery Car Dealer Scam" but didn't know who to ask. Also known as the "Resign Documents Scam".
All about the Spot Delivery Scam:
- Definition of "spot delivery" at a car dealership.
- Not all "spot deliveries" are scams. Why do car dealers use the "spot delivery" technique?
- When does a "spot delivery" become a scam?
- How the "spot delivery" scam works.
- How a "spot delivery" can actually work in your favor.
- How to tell if you've been "spot delivered and how to avoid the "spot delivery" car dealer scam.
- What to do if you're a victim of the spot delivery scam and the dealer tells you to bring the car back.
Definition of a Spot Delivery at a car dealership.
A spot delivery is when a car dealer does not officially have a customer approved for a car loan. The dealer will still have the customer sign all the paperwork and take delivery of the car. This leads the customer to believe they have been approved for a car loan and the car deal is complete.
The F&I manager will look at the customer's credit history, financial information, vehicle information and the details of the car deal, then he'll assume which lender will give the customer a car loan and what interest rate and term to contract them. The finance manager will then sign the customer at what he believes he can get the customer's car loan approved for at a later time. The customer is oblivious of the fact that they are not officially approved for a car loan and the dealer does not tell them otherwise.
Dealer's spot deliver customers to take them out of the market. Spot delivering a customer gives the dealer first shot at selling them a car without the worry of the customer going to several different dealerships and losing the car sale to a competitor.
Most spot deliveries usually happen during the weekend or later in the evenings. This is when most banks and lenders have gone home for the day. The F&I manager does not have a contact at the lender to rehash (discuss) the deal if there are special circumstances associated with the car deal, so they will spot deliver the customer and rehash the deal with the bank at a later time. The customer is then allowed to take the vehicle and is led to believe the deal is complete.
Not all Spot Deliveries are scams. Why do car dealers use the Spot Delivery technique?
First, I would like to state that not all spot deliveries are considered scams and not all dealership personnel should be considered crooked. Spot delivering cars to customers is an everyday process at car dealerships across the Nation.
A car dealer understands if you're interested in buying a car, they better have you sign all the paperwork if you're approved for a car loan or not. If they don't sign you, the next car dealership you visit, WILL.
The spot delivery process is where a lot of the car dealership horror stories come from. You've probably either had a car dealer call you back wanting more money, or to resign paperwork after buying a car. You may have heard of someone being called back saying their car loan or financing fell through and they must return the car.
Sometimes a finance manager will make a bad call and sign an unsuspecting customer up at the wrong APR or term. This usually happens with customers that have less than perfect credit. A good F&I manager does everything in his power to get the deal approved before he has to make that call, after all, he doesn't get paid if he has to get the car back from you.
Sometimes the lender just won't approve the loan at the terms and/or rate you signed. If it were truly a mistake by the dealer, although not a good experience for you, it wouldn't be a scam.
Read our automotive financing and car loan tips section to learn more inside information on how to save money and avoid car dealer finance scams.
When a Spot Delivery Becomes a Scam
A spot delivery becomes a scam when a dealer tells you that your approved for a car loan at a certain interest rate and term, and they absolutely know upfront there is NO WAY you will qualify for the car loan as written. The dealer has you sign all the papers and take delivery of the vehicl. Meanwhile, knowing they will call you back in the future telling you, "you're financing fell through", and try to force you to put more money down or buy the car for a longer term or higher interest rate.
Since the dealer let you take the car prematurely, this will take you off the market and allow you to fall in love with the vehicle. Believing you just bought a car, you will of course, show it off to your friends and family. The dealer will use this emotional attachment of your new car to their advantage when they call you back at a later date and tell you, "your financing fell through". This is when they'll start to work you for more money or try to sign you for a longer term or higher interest rate if you want to keep the car.
How the Spot Delivery Scam works
After signing the contract and all the paperwork for the car your buying, the dealer will let you take delivery of the car and drive it home completely unaware you are not officially approved at the terms and conditions of the car loan you've agreed to and signed.
You go about your normal life and show your family, friends and co-workers your new car. About a week or so later the dealer calls you (normally the finance manager) and tells you, "I'm sorry, the bank did not approve your car loan as written." "You must come back to the dealership and resign paperwork according to the banks approval to keep your vehicle".
Sometimes the F&I manager will call the customer back and tell them whatever they can to get you to come back to the dealership. They usually tell you they forgot a paper for you to sign. To make matters worse, this is usually a week or two later after the customer has shown everyone their new car.
Once the customer is back at the dealership the devastation begins. The F&I manager will tell you he couldn't get your car loan approved at the agreed terms you already signed and your payment is now higher, interest rate has gone up, you need more money down, and/or you have to buy a different car or you can't buy a car at all.
Now you're emotions have kicked in, at least this is what the dealer is hoping. You're in love with the car and all your family and friends have already seen it, the pressure is mounting. You are now at a huge disadvantage, you can succumb to what the finance manager offers you, or you can try to get your money and trade back and GET UP AND WALK OUT! I personally would do the second option. The dealer that does this to a customer gives all dealers a bad name.
Car Buying Tip - The one thing you have on your side is if the dealer could not get you approved at the rate you signed for the first time, you're not legally bound to resign another contract at a higher rate. If you signed the first time at 6% APR, you do not have to re-sign at 18% APR, you can just walk away.
The customer is usually very upset and mad at this point. Car dealers have been doing "spot deliveries for a very long time and are very good at covering themselves legally. Most car dealers include a "Right of Recession" agreement with their paperwork. It's an actual form that the customer will sign that says for any reason if the dealer cannot get the car loan approved you must return the car. Another form they may use is a "BCA" or Borrowed Car Agreement that they'll use to supersede the contract if they don't get an approval, another reason you need to read everything you sign. As a customer you can try and fight the car dealer if you do not want to return the car, however this may turn out to be an expensive fight.
Every car dealer I've ever worked for, and my own dealerships have spot delivered customers. In my 15+ years I have never seen a customer (not approved) get to keep the car or win a lawsuit because of a spot delivery.
You should always file a complaint on the car dealer with the BBB, and the appropriate State's Attorney General. The more complaints they get on a car dealer, they will then investigate. The best way to handle the spot delivery scam is to not fall for it by receiving your own financing, check out myAutoloan.com and Up2Drive for the companies we recommend.
How a Spot Delivery can actually work in your favor
On the rare occasion a spot delivery may work in your favor, you may actually be called in to sign for a lower APR. If this happens to you, remember if you signed at 9% and your car payment is $375/mo and your rate went down to 6% your payment better go down also. Sometimes a car dealer cannot get approved for all the money for your loan carried, this may make your payments go down also. It's rare, but it does happen and it will benefit you as the customer.
How to Avoid the Spot Delivery Dealer Scam
The best way to avoid the spot delivery scam is to only use a car dealerships financing as a last resort. Find out what you qualify for before contacting a dealership. By setting up a pre-approved car loan online, you will know upfront how much money you can borrow and what interest rate you qualify for.
Visit our section on how to obtain low interest car loans online to learn how to get free no-obligation car loan quotes.
Having a pre-approved car loan already in place before visiting a car dealership gives you the upper hand when negotiating financing terms with a car dealership. You can check most current rates with your bank, credit union, or for the best rates check online with companies like myAutoloan.com and Up2Drive.
How to further protect you and avoid the Spot Delivery Scam:
- Even after signing the contract and all the paperwork, it doesn't mean you're officially approved for a car loan.
- Don't let the finance department know more about your credit history than you do. Know your credit history before visiting a car dealership. Get and review your personal credit reports and scores from a reputable online company such as CreditReport.com before applying for any kind of car loan.
- Use reputable online financing companies like myAutoloan.com or Up2Drive to get pre-approved. You can use these companies free car loan quotes to use as leverage against a dealerships finance department.
- You can still be a victim of the spot delivery scam when trying to lease a new car.
- Ask the F&I manager if you are officially approved or being "spot delivered?"
- Make sure you get copies of all your paperwork. Dealers do not like to give copies if being spot delivered (they mail them).
- Ask to see the approval from the lender (they may say it's confidential) that's a LIE!
- If you know you have questionable credit and you are told you're approved for 3.9% you're probably being spot delivered.
- Do not take delivery of the vehicle until you are told in writing you have been approved for the car loan.
- Never use cash or a check to give a car dealer a down payment. Always put your down payment on a credit card.
- If a Borrowed Car Agreement is included with your final paperwork, you're most likely being spot delivered.
What to do if the Car Dealer Tells You to Bring Back the Car
If you just bought your car and the car dealer called you a few days later to tell you your financing fell through or you need another $2,000.00 down to keep the car. You could possibly be the subject of the spot delivery scam. If the car dealer keeps calling and harassing you to bring the car back, you still have a few options.
How to get out of a spot delivery scam and increase your chances of keeping the car
If you believe you received a good price and would like to keep the car. Apply for an online car loan right now with myAutoloan.com and Up2Drive. These companies are free, with no-obligation on your part and you will know within minutes if they can help you.
These online loan companies will not play games and will send you a check immediately when approved. You can then take your approval check to the car dealership and not have to worry about having to give your new car back to the dealer. Read more on how to obtain a low interest car loan online here.
If the dealer tries to force you to resign paperwork through their financing sources and they're requiring more money down or your payment is going up for any reason, refuse to sign. Don't let your pride get in the way. This is your chance to get out of the car deal, get refocused, and start again.
By law, a dealer cannot force you to sign at a higher rate or payment. They will try to use your emotions against you and manipulation tactics to get you to re-sign the contract. Once you sign paperwork with an approval you cannot return the car, so make sure you are committing to an arrangement you are happy with.
If you don't want to re-sign the paperwork on the car, JUST DON'T DO IT!
There are many car dealerships out there doing business honestly. Getting wrapped up in emotions when buying a car is one of the most costly mistakes you can make. Cars are made of metal, and I promise you the manufacturers will produce more. Take your time and make good buying decisions when purchasing your next automobile.
Familiarize yourself with the most common Car Dealer Scams committed in dealerships nationwide.
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