Spot Delivery Scam
Sure You're Approved!
The spot delivery scam is one of the most commonly used car dealer scams in the car business today. Although, it's not necessarily always a car buying scam, it is still very frustrating and can lead to a nasty surprise.
Below we'll cover what this scam is, when it is not a car buying scam, some examples of this scam and how to avoid this scam.
What Is The
Spot Delivery Scam
This scam involves contracting a car buying customer and letting the customer take delivery of the vehicle without having an actual lender approval in place.
This can lead to a costly and often times humiliating situation for the customer the next day or even weeks down the road.
The intention of the car dealer, when this is an out right scam and not just a mistake, is to make you the customer fall in love with the vehicle.
Not only do they want you to fall in love with the vehicle, but they want you to proudly show off your new vehicle to all your family and friends.
This makes it much harder for you to try and back out of the deal after the car dealer calls you back and tells you that:Your payment is going up another $30+ per month
That you'll need an additional $1,000+ down payment
That you'll need a co signer. Read Co Signer Loans Scam
When A Spot
Delivery Is Not A Scam
Sometimes a car dealer will make an honest mistake and/or the lenders rules have changed without them knowing.
This usually happens when it is after hours and/or they are really busy and it's not possible to get a lender approval prior to contracting.
Approval times vary with auto lenders and some are fully automated and give approvals (or declines) in a matter of seconds, while human reviewed applications can take as long as a few hours.
Some lenders, like credit unions, are closed on the weekends and approvals wouldn't take place until the next business day.
Auto lenders are constantly updating their programs and if the dealer was not informed of the update, that may have occurred that day, then they will use the most current rate sheet they have available.
They'll use their lending criteria from the most current rate sheet they have and will contract and deliver. It's simply a matter of being misinformed and it's an unfortunate mistake.
My dealership, in my opinion, does the right thing and will eat (absorb the loss) the difference, so in essence nothing affects the customer or their payments.
On the other hand, an unsavory dealership will try to make you the customer pay for the difference. In fact, they will try and word it so that you feel as if you have no choice but to comply.
Some Examples of
The Spot Delivery Scam
Coincidentally, just yesterday, I witnessed the spot delivery scam in it's purest and most deceptive form.
My dealership will periodically have Liquidation Car Sales Events that are staffed by an out of town sales crew (please follow the link to see how I feel about these events) and we are right in the middle of one now.
Well yesterday, we had a customer with major credit problems and little money down come in to buy a car with the help of her boss.
Her boss has excellent credit and qualifies for the best approvals, but even her excellent credit couldn't help to get her employee approved under the circumstances.
So here's what they did...Knowing full well that they would not be able get the loan approved with both of them on the loan and knowing that the boss would not sign by herself (at that time) they contracted with both of them on the loan.
They even went so far as to tell the boss that as long as her employee made her payments on time she could refinance in her own name in six months. Not Gonna Happen!
Not only did they know the refinance would never happen, they knew the original approval wouldn't happen. Their sole intention was to put the employee in the car and then tug on the bosses heart strings and have her resign the next day, by herself.
They figured the boss would not be "cruel" enough to not sign and allow her employees new car to have to be returned to the dealership.
This is in no way a joke, but as I was writing this (not more than two minutes ago) I was just handed the new contract that the boss signed by herself to buy the car for her employee.
Be very wary of the spot delivery scam, as you can see...It works out well for the car dealer most of the time.
As mentioned in the "what is the spot delivery scam" section there are three other ways that I've most commonly seen this scam play out...
Let's say a customer came in and wanted a $250 a month payment. They find a car that they really want/need, but the payments for this vehicle based on their credit rating would be $340 with $1,000 down.
The dealer presents them with the true figures and the customer absolutely can't do anymore than the $500 down and is willing to stretch and take on a $300 payment.
The dealer tells this unsuspecting customer that they have a deal and spots the car. Knowing full well that the approval they get or have already gotten will require $1,000 down and the payments will be $340 a month.
They'll let this customer get really comfortable with the car, it's called "taking ownership," and then call them back with the bad news. This could be a couple of weeks down the road.
"We need an extra $500 down and your new payments are $340 a month."...Pony up or give the car back.
This works the same with the co signer..."You'll need a co signer or give the car back."
How To Avoid
The Spot Delivery Scam
Some of this advice may vary from state to state and in fact may not apply at all. I'd definitely refer you to your local Motor Vehicle Department to see what laws are in place in your state.
Even if they can't help you, they should be able to point you in the right direction.
First off, it's important to note that you are not legally obligated to re-contract if things get worse. This means that if you contracted at an 8% rate and they are now trying to get you to sign at 18%, you don't have to.
The only time you are still obligated to the contract, assuming your state does not have a mandatory return policy, is if things get better.
If you contracted at 18% and your rate went down to 8% then you are still bound to the rest of the terms of the contract.
In some states, where the state government has stepped in to protect against the spot delivery scam, the dealer may be legally obligated to the original terms of the contract.
If they can not get the approval for the terms on your contract they are then obligated to meet those conditions.
Often times this means the dealer may have to finance your contract in house.
One of the dealerships I used to work with would have customers sign a "borrowed car agreement" (BCA) in addition to the contract.
This way if they could not get an approval to match the contract they would use the BCA to supersede the contract and tell you the BCA had expired and you'd need to return the car or agree to the actual terms of the approval.
If they are asking you to sign one of these BCA forms at the time the contracts are being signed that's a huge indication that you are not currently approved and you may want to ask to see the approval.
If you ask to see the approval, which I'd recommend doing even if there is not a BCA form, don't be surprised if you are told it is confidential and based on their dealer agreement with the lender they can not disclose.
This is to a degree true, but it really applies more to other people not authorized to view personal information about you. Basically you'll want to use some sound
judgment to avoid the spot delivery scam.
If you know you have very bad credit, but the dealer is offering you a 5.9% APR with no money down you are probably stuck in the middle of a spot delivery scam and should proceed with caution.
The best way to avoid this scam is to get pre-approved for your auto loan. If you've got excellent credit you can take a look at my Bank Auto Loan Rates page to see what some of the nations top auto lenders are offering.
If you have below average or even terrible credit you can find local dealers that specialize in Bad Credit Car Loans here.
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