Dealer Fraud

Spot Delivery usually occurs when a dealership allows a consumer to drive the vehicle home from the dealership even though the sale is not complete. If the customer decides to finance the vehicle at the dealership, the car dealer most often does not get a banks acceptance while the consumer is there at the dealership. Car dealer lets the buyer know that he/she can take the car home while the dealer’s finance department is arranging the financing.

Spot delivery is not illegal in most states. Dealers are well aware of this and use the situation to implement various scams.

One of these auto frauds happens when the dealer asks the car buyer to sign a new revised contract that has increased the payments. Dealer knows that most of the car buyers will agree to sign a new contract after he/she has grown accustomed to the car, perhaps is proud of the new purchase and has shown it to friends and family. Also, the consumer will probably agree to bring more money for a down payment.

Certain consumer rights statutes may be violated taking into consideration why the dealer got the consumer to come back in. These dealer tactics are also known as “yo-yo” scams because the dealer sends you out and pulls you back in like a yo-yo.

Keep in mind, that if a dealer can’t manage to obtain financing on the terms previously agreed upon, you can refuse to agree to new terms, and can cancel the deal. In this event, the consumer is entitled to whatever down payment or trade-in vehicle that they gave to the dealership with no amount to be withheld.

The “spot delivery” is a dealer trick used to get you to take delivery of a vehicle immediately after you agree on a car deal. However you should know that even though you pay down payment and drove away from the dealership with a new vehicle doesn’t mean you’ll get to keep it. Dealers know that most car buyers are in a hurry to sign the paperwork and to leave in their new vehicle.

The scam happens when you allow the dealership to handle the financing. You first sign some paperwork which the finance manager should try to get approved with the bank. If he can’t get the deal put together with the bank whose paperwork you signed, he then has to go to another bank. The finance manager will probably call you to let you know you have to sign new documents. Moreover, at the dealership the buyer will be informed that he/she has to return the vehicle or sign a deal at a very high interest rate per year.

Often, the people with low credit or low income become victims of spot delivery schemes. The best way to avoid this car dealer scam is to be informed and not let the dealer rip you off. If you believe that your car dealer tried to scam you contact an experienced dealer fraud attorney.

An increasingly common car sales tactic is the “spot delivery” or “yo-yo sale”—allowing a buyer to take delivery of a vehicle before the dealer has confirmed that another entity will buy the finance agreement. (Technically, in most dealer-arranged financing, the dealer is the original lender or creditor. The dealer then sells the finance agreement to a third party lending institution). The yo-yo sale involves telling buyers that they are approved for financing on a specific vehicle, having them sign all the paperwork, and allowing them to take the vehicle home. A few days or weeks later, the salesperson calls the buyers and informs them that the financing has “fallen through.” The salesperson tells the buyers that they can keep the vehicle if they agree to pay a higher interest rate or get a co-signer. Alternatively, the salesperson might tell the buyers that they must buy a different vehicle. Essentially, the car dealer tries to rewrite the contract with terms that are more favorable to the dealer and less favorable to the buyer. If consumers express unwillingness to comply with the post-sale demands, then the salesperson threatens repossession or arrest.

However, this sales tactic is illegal. Federal law (as well as the laws of some states) prohibits this type of transaction. The federal Truth in Lending Act, for example, requires clear and conspicuous disclosure of financing terms, including the annual percentage rate (APR). Spot deliveries make the point at which financing begins uncertain, which causes the annual percentage rate (APR) stated in the finance agreement to be incorrect. Moreover, because the dealer is usually listed as the creditor or lender in a finance agreement, financing has not “fallen through.” Instead, the dealer has been unable to sell the finance agreement for as much profit as it wants. Through spot deliveries, dealers are merely attempting to increase their profits by having the consumer enter into a new finance agreement. However, dealers should still be bound to the original sales terms.

If you are in a situation like this than you should know that your options are not as limited as you may think. This situation occurs when a car dealer performs a “spot delivery.” Basically, you give permission to the dealer to obtain your credit report, and you and the dealer agree to terms for a vehicle that you intend to purchase. As the dealer wants to sell the car as soon as possible he will often just deliver the vehicle and “guess” at the finance rate. However if the dealer gets the rate wrong and the lender requires more down payment, a higher interest rate, and/or a shorter term loan, then the dealer contacts you to inform.
The letter sent to you by the dealer is referred to in the industry as a “10-day letter,” because a provision in the letter allows the dealer to rescind the contract within 10 days if they are unable to obtain financing on your behalf. When you receive this letter or phone call, you may be getting set up for the “yo-yo contract,” which is a type fraud where the dealer delivered the vehicle at terms that you thought were favorable but the dealer acted in bad faith. The situation may be worse if the dealer has already sold your trade-in vehicle. Then the dealer calls to let you know that they need another $1,000 or more down in order to get you financed. Thus the dealer has already sold the vehicle you traded in and if you don’t agree to whatever the dealer offers and decide to return the car you will simply be left without transportation. This type of auto fraud can be difficult to prove and will most likely require professional or experienced assistance, and the worst part is that it is very inconvenient for you because of the transportation situation. Your best defense is to act quickly to get this resolved.

Risky Credit Rating occurs when the dealership informs that your credit is riskier than it really is. However they decide to offer you a sweet deal by stating they will take a chance on you. As a result you get a much higher interest rate and the car dealer gets extra profit.

Spot Delivery or YOYO Selling is one of the scams that car dealers use the most often. This happens when the dealership agrees to your terms, allows you to drive away with the vehicle, and then calls you to inform that the terms haven’t really been approved. Car dealer asks you to return to the dealership where they re-write the whole deal and you end paying a lot more than originally planned.

Reduction of your trade-in value is when the dealership determines that your trade-in vehicle is worth a specific amount to them. Then they will explain what extra costs they will have to spend to make your trade-in ready for resale. They offer you much less than the vehicleit is really worth. If you agree to the offered price you just gave the dealership hundreds of dollars in extra profit.

Car dealers are constantly thinking of new ways to make more profit and take advantage of car buyers. One of the most recent and commonly used car dealer tricks is Spot Delivery.

Spot Delivery occurs when the consumer has chosen the car, filled out all the paperwork and the car loan application with the car dealer’s finance department. The car dealer will tell the consumer that although the car loan hasn’t been “officially” approved yet, the consumer can drive the car home.

However when the consumer does so the dealer calls a few days later and lets the consumer know that the car loan wasn’t approved at the interest rate previously discussed. The dealer will also tell that the buyer was approved at a higher rate.

Thus, the consumer will most likely have to pay thousands of dollars more than he/she expected. When the consumer tries to walk away from the deal the car dealer will probably inform that they already sold your trade-in so you have no options. The dealer will also tell you that they will sue you if you don’t agree to the new terms. Check your loan agreement. If it includes a “writ of rescission,” which means that you agreed to pay a higher interest rate if you did not qualify for the original loan then you are probably stuck.

• You own the car after you have signed car purchase papers, even if the vehicle has not been financed.
• Remember that if your credit wasn’t good the dealer would not have delivered the car to you at the price you agreed to pay.
• A finance document showing payments, deposit, interest rate and other financial items is a binding contract, giving you specific legal rights.
• You own the car subject to making payments only. The dealer cannot change that once you take possession.
• Keep all copies of calendars, photographs, advertisements, paperwork and any other document associated with the sale in a safe place. Keep in mind that the finance manager can ask for your papers at any time for any reason. Refuse to give him your paperwork.
• The dealer may call you to ask to go back to the dealership and sign additional papers. Do not go or if you decide to go do so in a different car than the one you bought.
• Do not go to the dealership alone! Take a spouse or a friend and have them witness whatever is being told to you. This will prevent the dealer from taking your car as hostage.
• If you have a dispute over the contract with your car dealer the dealer may demand that you return the car or take it against your wishes. To prevent this park the car in a garage or remote location until the matter is resolved.
• Try to keep the track of a complete timeline of everything that happened beginning from the time you thought of purchasing the car until the car was taken away. Try to remember names of personnel at the dealership and conversations with the sales and finance staff.
• Keep track of all monies you had invested into the purchase, including registration, insurance, down payment and trade. Never pay cash and always get a receipt!

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