A friend just got a call that the financing didn't go through on a car he just bought...

MushroomStick

So a friend of mine just got a call from the dealership saying he has to bring the car he just bought back because the financing didn't approve. The concern is what should he do if they are not super cooperative about returning his down payment and trade in? So we're clear, he has no intention of accepting new terms, a different vehicle, or any other business involving this dealership.

Enc

...he got the car off the lot without the financing being taken care of?

Enc

Spot Delivery Pitfalls

“Spot delivery” is a widespread and accepted practice in the automobile business. However, some less scrupulous dealers may try to take advantage of the unwary consumer.

In spot delivery, the buyer takes possession of the vehicle “on the spot,” upon making a commitment to buy or lease on installment, but not yet having a definite arrangement for financing with a bank or finance company.

There are inherent advantages and disadvantages to this practice. The advantages include 1) a probable sale for the dealership and 2) a gratified consumer who, in need of transportation, is able to get it immediately. Being able to drive the car home is a convenience to the buyer, for example, when the sale takes place after hours or on a weekend when his credit cannot be immediately verified.

A well-intentioned dealer can usually confirm the terms within 72 hours if you are creditworthy. He may or may not have conducted a preliminary credit check that indicates you’ll be approved for the requested financing, but you may be allowed to drive the new car off the lot if he is confident you’re a “good risk.”

The downside is that middle- to lower-income customers who don’t have excellent credit may end up not being approved for financing, and they may not have been informed orally of what the written contract states: that the agreement is not binding until financing is approved. If the financing isn’t approved, either the vehicle must be returned, or less favorable terms must be negotiated.

State of Georgia Website on the subject:
http://consumer.georgia.gov/consumer-topics/spot-delivery-pitfalls

It's a sort of grey-area legal scam. Your buddy may want to contact legal support and should definitely ensure he gets all of his downpayment back.

Jasconius

It's more common than you think. Especially for higher interest loans.

I'm going to say it depends MASSIVELY on what state you live in. This is something that is almost exclusively handled by state law.

In Florida I think you are entitled to everything back

This actually did happen to me once at a Honda dealer when I was in my broke ass college days. I ended up giving them $500 more and they cut another 1k off the car price because it's a huge pain for them to return a traded car I think

bowen

And his trade in.

MushroomStick

Enc wrote: »

...he got the car off the lot without the financing being taken care of?

Yeah, I know. One of the things I told him not to do when he was still looking at cars. I'm pretty sure he got caught up in the salesman's pace.

I forgot to mention that this is in Illinois.

Druhim

Something similar happened to someone I know, but it was because her credit union kind of bungled the whole thing. OP doesn't specifically state that financing was through the dealership, so I don't know if it was a similar situation but her credit was good and she got pre-approval from her CU for the loan. Took care of everything with the financing department and drove the car off the lot. The next day the dealership called to let her know the CU had declined the loan. The CU didn't even fucking bother to call her, they just sent her a letter in the mail that arrived a few days later. So she ended up financing it through the dealership.

MushroomStick

He let the dealership set up the financing (also against my advice).

Karrmer

This is reasonably common and I'd say more often than not isn't due to the dealer trying to scam someone. If its some random used car lot, maybe, but a real dealer is looking at losing more business by scamming people this way and very few are trying to pull stunts like this.

Just have him go in and work this out, they may require a higher interest rate or bigger down payment to secure a loan, and if he isn't interested he should get his trade-in and down payment back.

MichaelLC

The Illinois Attorney General says:

NOTE: The consumer who is unable to secure financing is entitled to receive his or her down payment back pursuant to the Consumer Fraud Act.

NOTE: The Three-Day-Right-to-Cancel Law does not apply to an auto purchase, and Illinois Lemon Law applies only to new cars, not used car sales or leases.