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 in the industry as the "financing fell through scam," "resign documents scam" or "yo-yo financing scam."
This dealer tactic is very common and widely used in dealerships today. AutoCheatSheet.com receives a lot of email about this dirty little scam.
The spot delivery can be emotionally devastating because of the way it works. You're led to believe you have just bought a car and two weeks later the dealer calls you and tells you to bring the car back.
All about the spot delivery scam:
What is 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 have the customer sign all the paperwork and take delivery of the car. This leads the customer to believe their loan has been approved and the car deal is complete.
A spot delivery is when a car dealer does not officially have a customer approved for a car loan but has them sign the contract anyway. The dealer will have the customer sign all the paperwork and take delivery of the car. This leads the customer to believe their loan has been approved 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. He will then assume which lender will approve them and at what interest rate and term. He will then have the customer sign all the paperwork at what he believes he can get their 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 will 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. If there are any special circumstances with the individuals credit or the car deal, the F&I manager cannot rehash (discuss) the deal with anyone at the lender.
Although the customer is not officially approved for financing he will have to make a judgment call to spot deliver the customer and rehash the deal with the bank at a later time. The customer is led to believe they've been approved for the loan, will sign all the paperwork, and allowed to take the vehicle home.
Not all Spot Deliveries are Scams
First, I would like to state that not all spot deliveries are considered scams and not all dealership personnel should be considered deceptive. Spot delivering cars to customers is an everyday process at car dealerships across the Nation.
A car dealer understands if you're in the market to buy 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 up now, the next car dealership you visit WILL.
The spot delivery process is where a lot of car dealership horror stories originate from. When a dealer leads you to believe you've bought a car and then calls you back a few days or even weeks later telling you to bring the car back...It can be upsetting.
Example calls from the dealer to bring the car back:
- We need more money down.
- Your interest rate is going up.
- You must resign your paperwork.
- We forgot a couple forms for you to sign.
- You must switch to a cheaper car.
- You will need a co-signer.
- Your financing fell through.
- We can't get you approved for the full amount.
- We can't get your loan approved.
You may know someone this has happened to or have experienced this yourself. It's a horrible feeling. Dealers know you've already shown everyone in the world your new car, and they hope that you'll do anything you can to keep it and not want to give it back due to embarrassment.
Sometimes it can truly be an accident. A finance manager makes a bad call and signs an unsuspecting customer up at the wrong interest rate or term. This usually happens with customers with less than perfect credit.
A good F&I manager does everything in his power to get the deal approved before he has to do a spot delivery, after all, he doesn't get paid if he doesn't get the deal done and has to get the car back from you.
Sometimes the lender just won't approve the loan at the rate or terms you signed, for whatever reason. If the finance manager truly missed something on your credit bureau and cannot get the deal approved, although not a good experience for you, it wouldn't be classified as a scam.
You should always arrange your financing by getting a pre-approved auto loan before contacting a car dealership. Read more on how to get a pre-approved car loan in my car financing chapter.
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When a Spot Delivery Becomes a Scam
A spot delivery becomes a scam when the dealer tells you you're approved for a car loan at a certain interest rate and term. However, he absolutely knows there is NO WAY you will qualify for the loan as written. The dealer will even go as far as having you sign all the paperwork and let you take delivery of the vehicle to take you out of the market.
Believing you just bought a vehicle, you will no longer shopping for cars and this gives the dealer first shot at your business. The dealer is also counting on you to fall in love with the vehicle, develop an emotional attachment, and show the vehicle off to all your friends and family.
Meanwhile, while you're out driving around in the car for a few days or couple weeks believing it's yours. The dealer is hard at work trying to get your auto loan approved. Most legitimate finance managers work hard and do their best to get the deal approved as it was written, but most of the time it doesn't work that way and sometimes they're lucky to even get the deal approved at all.
When the dealer let you take the vehicle, he already knew they would be contacting you again in the near future. You may get a phone call telling you something like, "there was a problem with your deal and we need you come back and resign" or "I'm sorry, your financing fell through." This is a horrible phone call to receive and they're made every day. Many people drive a car for weeks before getting this phone call. There has even been cases of people driving brand new cars for a couple months before being forced to come back in because "there was a problem with their paperwork." This happens all the time in the retail car sales industry, don't think it can't happen to you.
Use this handy Car Payment Calculator to estimate the payment on any vehicle.
Once you arrive at the dealership they'll attempt to use your emotional attachment to their advantage, especially if you want to keep the vehicle. Be aware, no matter how nice or smooth they are, there's a reason they called you back in and they have an agenda. This is when they'll try and hammer on you to sign at a higher interest rate, longer term, switch cars, or put more money down. The sad part is, this technique works on many people, they'll do just about anything to keep the vehicle and avoid embarrassment with their friends and family.
The worst case scenario is when you've been driving the car for two weeks and you get the call because the dealer can't get you approved at all. If you have a trade, it can be even worse. Some dealerships have it written in their paperwork that all they have to do is give you the actual cash value of your trade. If they happen to have sold your trade, all they have to do is give you the ACV in the form of a check. So in reality, you could be left without a vehicle at all. This is a rare occasion, but it does happen. Most dealerships are pretty good about putting a "Trade-Hold" designation on a vehicle if the deals not done.
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 for. 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 at this point. Car dealers have been doing "spot deliveries" for a 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" (Borrowed Car Agreement). They'll use a BCA to supersede the contract if they don't get your auto loan approved. This is another reason you must 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 a long and very expensive fight.
Every car dealer I've ever been associated with has spot delivered customers.
In my 18+ years in the car business I have never seen a customer (not approved) win a lawsuit, or get to keep a vehicle 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. They get enough complaints on a dealer, they'll do an investigation.
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 too.
Sometimes a car dealer cannot get the entire amount carried included in your loan. This may make your payment 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 arranging your financing beforehand. You will know upfront how much money you can borrow and what interest rate you qualify for.
Visit our section on how to get low interest car loans online to learn how to get free no-obligation car loan quotes sent to your email.
Having a pre-approved car loan in place gives you the upper hand when negotiating a loan with a dealership. You can check the most current rates with your bank, credit union, or for the best rates check with online companies such as myAutoloan.com and LightStream.
Further Protection from the Spot Delivery Scam:
- Keep in mind that 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 or applying for any kind of car loan. Get and review your personal credit reports and scores from a reputable online company such as MyFreeScoreNow.
- Use reputable online financing companies like myAutoloan.com or Up2Drive to get pre-approved. You can use the free loan quotes from these companies as leverage against a dealerships finance department. Click here to read my bad credit auto loan guide.
- 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.
- Check to see if a "Borrowed Car Agreement" or "Borrowed Vehicle Agreement" is included with your final paperwork...If so, you're most likely being spot delivered.
What to do if a 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 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 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 auto loan right now with a reputable company such as myAutoloan.com. This company will send you up to four quotes for free, with no-obligation on your part, and will let you know within minutes if they can help.
These companies are secure and will not play games with you. Once approved, they'll send you a check immediately. You can then take your approval check to the car dealership and not have to worry about having to give the vehicle back..
Read my section on how to get free car loan quotes online to read more about online auto finance companies and how they work.
If the dealer demanding you bring the car back because they couldn't get your loan approved because of a bad credit situation. Get approved through one of our recommended companies that specialize in bad credit auto loans and see what they can do for you. There is no-obligation and you will know exactly where you stand when it comes to financing an automobile.
If the dealer tries to force you to resign paperwork through their in-house 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.
Continue to familiarize yourself with more common car dealer scams.
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