Edmunds Answers



  • Stever@Edmunds 12/26/09 8:00 pm PST

    All these years and I've never heard it called the yo-yo scam. But I don't follow the financing articles and forums around Edmunds and CarSpace very closely. Good name for it.

    What I've heard it called is "Spot Delivery".

    "A spot delivery occurs when a dealer looks at a customer's credit and sees that they will probably qualify for a car, but they don't have all the information to set up the loan. They allow the customer to take the car while they continue trying to get them qualified. In some cases, the customer is told to return to the dealership and a new contract is generated — at a higher interest rate."

    There's probably something in your contract saying that if your financing falls through, you have to return the car to the dealer. Often it's on a separate form. It shouldn't take more than 72 hours to get the financing approved, but your contract should spell it out. Could be that you are good to go.

    Most people get hammered when they sell their other ride (or trade it in and the dealer sells it) and then they learn that their financing has fallen through. So at least you are in good shape there.

    Monday morning, I'd call the dealer and ask the F&I person what the contract says.

    Avoiding Credit Hassles at the Dealership

    Source: http://www.georgia.gov/00/article/0,208

  • eore227 12/26/09 8:30 pm PST

    CRAP one of the contract reads this down at the bottom "This sale is conditioned upon approval of your proposed retail installment sale contract as submitted to or through the dealer. If that proposed retail installment sale contract is not approved under the terms agreed to with the dealer you may cancel this sale and any down payment an or trade in submitted will be returned to you provided that any vehicle delivered to you by the dealer pursuant to this agreement is returned to the dealer in same condition as delivered to you. normal wear and tear expected. within 24 hours or writen or oral notice to you of the credit denial." AHHHHHHHH I should have not takent the car oh well I can just return it no harm no foul when they call right???

  • tony78 12/26/09 11:17 pm PST

    I don't see where the dealer is scamming anybody, if the dealer doesn't approve your first contract and calls you in to sign a new contract at a higher interest rate,,and you do,,the only person that you have scammed,,is yourself.

    If the dealer claims that the first contract is null and void,,then that contract is destroyed,,and if the contract is destroyed,, there is no deal,,and if there is no deal,,then each person is free to go their seperate way.

    What i don't understand is your reaction,," AHHHHHHHHH ! " You sound like you live on a very small island where the honda dealer is the only game in town,,,

    Just like girls,,there are plenty of fish ( cars ) in the sea.

  • Stever@Edmunds 12/26/09 11:58 pm PST

    It's scammy because most buyers wind up trading in their used car or selling it privately, thinking everything is hunky-dory. Then the dealer calls a week later or sends the repo man out and takes the new car back. The buyer is left without wheels and no easy way to get another ride.

    Meanwhile, the buyer has shown the new toy off to his friends and neighbors and trying to explain that you can't get credit embarrasses some people.Often times the new interest rate is exorbitant and the dealer then tries to pack the new deal with extras or other crap.

    There's really no reason to take delivery on a new car like this when financing can be approved relatively quickly. The Honda dealer here knew that the buyer had already tried to get pre-approved and wasn't able to get a good rate, but they went ahead with the sale to try to tie him up in the Civic. Without the spot delivery, the buyer will keep shopping and may get a better deal at the GM dealer down the street or decide to buy used, or decide not to buy at all.

    I think the poster here should bug the dealer every day until he gets a definitive answer whether Honda has approved his loan.

  • 04350 12/27/09 7:34 am PST

    People shouldn't need to have their sales contract reviewed by an attorney when they purchase a car.

    The F&I person should/could have verbally pointed out that provision to you before you signed.
    Instead, he/she wasted his/her time, your time and the dealership's time by trying to slide
    this transaction by you and the lender. At least, you would have known before you left the dealership that your deal was "iffy."

    The part that I don't like is that you need to return the vehicle within 24 hours of their verbal notice
    which creates the issue of whether, when and how you received their "notice."

  • eore227 12/27/09 8:00 am PST

    So how do I know for sure if my loan was approved or denied who do I talk to at the dealership the finance manager???? How do I even know if they ran my application yet or not??? This is very unerving should have not taken car till later.

  • 04350 12/27/09 10:05 am PST

    General Manager and Finance Manager (altho that may be the person that you dealt with initially).

    When the sales floor opens tomorrow, be there and tell them you want the truth and their full integrity, in writing.

  • eore227 12/27/09 11:41 am PST

    Would they even know if the loan was approved or denied today being it is a sunday? I also have signed up with experian for awhile for my credit tracking and noticed that they didn't request my credit till today or maybe there is a lag in the system of when experian reports that. I don't want to walk in there tomorrow and get raked over again. I don't want them knowing that I know whats going on. Even if I go in tomorrow I can't return the car because they will say they are working on the loan to get approved and as long as they are doing that I can't return the car. I don't know if I should just wait for them to call me which who knows when that will be or just go and ask but I don't know what that will do either. Thank you everyone so much for all your insight into this situation.

  • morin2 12/27/09 12:38 pm PST

    Although I told you in a previous answer a couple of days ago in another post to just gather information and not sign anything, you obviously did. But I'm not sure that you did anything wrong or will necessarily get stuck with a higher interest rate. For your credit history, that 5.8 APR would be very good (was the F&I guy dressed as Santa Claus?) and maybe the dealership knows what its doing with that lender. It doesn't want the Civic returned with "normal wear & tear" because the next buyer will insist on a discount due to the miles on it.

    It looks like the worst that will happen is that you'll have to return the car to the dealer and find a ride home. If that happens, try to get a courtesy ride home from them for your prompt return of the car. Unless there's more to the story, it does not appear that you have obligated yourself to a higher rate than the one you agreed to with your signature. The contract works both ways. Now, if they call you next week and want you to come in and sign a new contract with a higher rate - once again, do not sign anything!

  • eore227 12/27/09 1:19 pm PST

    Yes Morin I did sign the paperwork and all but the one thing I should haven't done was taken the car. Should have waited a few days then taken but hindsight is always 50 50. 5.8 interest is good I guess. However i should have known right away that it couldn't be that good coming from a dealership. I tried getting a loan at my credit union and they said if I had a cosigner my apr for 72 months would be 5.2. However I don't want to go that route and ask anyone because no one wants to do that. As far as them not getting the approval of the loan right then and there I should have looked at the contract and seen that but that was another one of my mistakes. I guess in my opnion everything seems too good to be true which maybe it is. If I can be reassured that the loan went thru then I wouldn't have all these worries but it's just eating at me and again this is all my fault for not clearly understanding the way a car deal works. I don't worry about returning the car as I will already have a ride. So if they ask for me to sign a new contract with different rates and monthly payments refuse refuse right???

  • morin2 12/27/09 2:54 pm PST

    Yes, I would refuse a higher rate and if they won't honor the rate on the contract, return the car. You've done nothing to apologize for, don't feel like any of this is your fault. They should not have released the car if there was a high chance that you wouldn't get the loan. You must have done a credit app at the dealer and they must have reviewed it and thought you'd get the loan. If the loan is refused at that rate, act surprised that they will not honor the deal and return the car promptly.
    And Good Luck. I hope you get the low rate.

  • eore227 12/27/09 3:44 pm PST

    Thanks Morin for your reassurance. I'm wondering if by the miracle of something that I get the loan how would I know?? I have this thing with experian and anything that is looked at on my credit I get an instant email. Wouldn't Honda Finanace have to check my credit then go from there? Also if Honda Finance rejects it then that means the dealership will try to shop my loan around meaning more hits on my credit. Is this true what I'm thinking?? In one way I just wish I knew an answer that I didn't get the loan and I can return the car and then in another I wish I could get the loan and keep it. Crazy times sorry for all the stupid questions everyone.

  • morin2 12/27/09 4:36 pm PST

    This being a long holiday weekend, I don't think there was a live human being at a bank to actually make a final decision on your loan, or even to submit your info for a credit check. I'm guessing that the dealership looked over your credit app and thought you'd be approved, so they took a chance and let you take the car home. Perhaps you're being more critical of your credit-worthiness than is the dealership, who deals with carloans every day. Worrying about it isn't going to help any. You've managed to get everybody here pulling for you - so please let us know how this works out for you.

  • jamie38 12/28/09 12:41 am PST

    This does not sound like a scam. If you read the "Seller's Right to Cancel" on the back of your contract it explains that it may take a few days for the seller to verify your credit and assign the contract. If the banks that they regularly use to finance their customers won't accept the terms, the seller may cancel your contract. They have 10 days to notify you that they could not obtain bank backing for your auto loan. Once you have been notified you must return the car immediately or you face having to pay all fines related to they getting the car back from you. If you had a trade in or gave any money down they must return it to you.

    Source: Back of standard contract

  • 04350 12/28/09 8:47 am PST

    The Problem that arose would not have arisen had the F&I person clearly explained that the "sale was contingent on approval of financing at 5.9% for 72 months by lender" or if the buyer had insisted that language be printed clearly on the face of the front page. Or maybe the F & I person could have clearly stated "I don't think that you will be approved for a 5.9% interest rate at 72 months but I'll give it my best effort to find a lender for you at that rate because we really want to move this car off our lot."

    My guess is that the language on the backside only says the transaction is "contingent on approval of financing by lender" and certainly there are high risk lenders that might approve a deal at say 16.9% interest. There is a difference between "approval of any financing" versus approval of the specific financing rate terms that the buyer was led to believe by the F&I person that he/she would qualify for.

  • macford 01/07/10 12:26 pm PST

    Ok - this seems like a cluster of responses with no real answers given.

    First - 633 Credit score isn't great. It's not horrible either. 3-4 years ago it would of gotten the best interest rates available, today it get's mediocre. 5.9% with a 633 score is an amazing rate to get with no co-signor.

    Second - If it's late at night or a holiday week/end then the banks will most likely auto-decline the loan before an actual human can look at the loan information and approve/deny it. If the F&I person has any knowledge and knows what banks will buy based on your past history and/or money down, they know if they have a high chance of getting it approved or not. If they do not think they have a good shot, they will not spot deliver, especially at 5.9% rate.

    Third - Have they called you yet stating it was not approved? How long has it been since you took the vehicle? Are you just being paranoid because of what the contract says? Your contract will tell you who the Lender is, if the Dealership is not giving a clear response you can always call the Bank and verify that everything is ok and see when your first payment is due.

    It does not seem like the Dealership was scamming you. Sounds to me like you are just paranoid over little things. Relax, take a deep breath and call the Dealership. Verify everything is ok, and if not then take the car back to them.

    I know in some states if a Dealership rolls a vehicle off the lot at a rate and the deal does not go through, the Dealership has to finance the car for you and you get to keep it. Check your state laws!

  • 200_up_toooo 01/11/10 5:03 pm PST

    My Answer= everything that MACFORD said in his post above is correct.

    I work at a Toyota Dealership. This isn't a 'Scam'. It's a regular and fair business practice to use "spot delivery". It makes everyones job, including yours, easier. You still retain several rights. You can only get "screwed" if you screw yourself.

    Here are your options, straight up, not hiding or sugar coating anything.

    -If the Original Contract goes through
    THANK the dealership. Other than a Manufactuer 'Special Interest rate', 5.8% apr is an amazingly good approval based on your score.

    -If they call you with a new contract
    Keep an open mind, don't get mad until you see what the approval is. You have the right to hand over the keys and walk away, or to secure your own financing. So the only way to get screwed is if you let it happen. Go to the dealership and review the new approval. Decide if it is fair or not. Obviously if they say that your new approval is 24%, you probably shouldn't sign it. But if it's 7-15% you might still be better off taking considering your 633 score. See what your Credit Union or bank will approve you for without a cosigner. Weigh your options and use the best financing.

    You're only going to stress yourself out and further expand many false myths about Salesmen and Dealerships if you don't keep a level head.

    I'd apprciate if you post the final outcome of what happend. I realize that some horror stories do indeed happen, but if everything went fine and they got you approved for the original contract then their dealership deserves to have you state that on here.

    I hope this helped, good luck.


  • Stever@Edmunds 01/12/10 1:20 am PST

    It's scammy.

    If the dealer hasn't gotten your loan approval, they shouldn't take your car in trade, nor should they release the new car to you.

    People leave the dealership thinking they've successfully purchased a new car, have admired it in their driveway and given their friends and family rides in it. Makes it hard to go to work Monday morning and tell your coworkers that your financing fell through and you don't have the car anymore.

    What is going unsaid here is that the dealer wants to tie you with a new car so you don't shop elsewhere. That's known as "taking you out of the market".

    The better practice is to secure your own financing from your bank or credit union. Then if the dealer wants to meet or beat that rate, fine. They'll get their kickback from the bank that way.

    No loan approval, no car.

  • eore227 01/12/10 2:02 pm PST

    Hello all. Thanks so much for all the inputs. This is basically what happened. I got a call from dealership few days later saying something has changed and I was ready for it as I went to my local credit union to get my own loan before that. Lo and behold I was approved from them. They needed my bill of sales from the dealership. I called dealership and left message for finance manager saying I need that faxed and to call me back when it's done. I never got a call back and went to dealership to see him. I said can you faxed this over and he was like yeah and then he was like you already have the paper work and you can do it yourself so I go back to bank and they said my contract is not the same thing so back to dealership and they faxed it. All in all I got my financing thru credit union and I suggest everyone to do that before going to dealership. All is fine now but thanks to everyone for their insight into this whole thing


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