Was this car dealer taking me for a ride?
December 26, 2013 12:12 PM   Subscribe

Does auto financing ever fall through after a car has been driven off a lot? Dealer tells me this is a usual situation.

I was recently at a well known local authorized Honda dealership negotiating the price on a certified used Civic. When I checked the CarFax for the vehicle, it showed that it was purchased on November 1 (from the dealer I was at) driven roughly 2000 miles and then offered for sale again by the same dealer just two weeks later. So obviously the car was returned during those two weeks. When I questioned this, the dealer told me the buyer's financing had fallen through after the fact (he had apparently lied about this income) so they had to take the car back. This sounded fishy to me so I asked to speak to the head guy on duty, who told me that was indeed the case and that it happens quite frequently. Does this sound right? The whole thing seemed strange and I ultimately didn't buy the car because of it but am still wondering if this was legitimate.
posted by gfrobe to Grab Bag (13 answers total) 3 users marked this as a favorite
 
Most commonly, this is the "spot delivery scam", which is used to try to get people to accept worse financing terms than they agreed to when the car was sold.

Sometimes people call the dealership on the dealership's bluff and return the car rather than accepting worse financing terms. Whether this is "legitimate" or not is up to you.
posted by saeculorum at 12:22 PM on December 26, 2013


Yes, it happens all the time, although I bet it's not because the buyer lied.

"The financing fell through."

Delivery scams and yo-yo financing.
posted by peep at 12:22 PM on December 26, 2013


You should almost never finance your car through the dealership, because you can almost always get a better arrangement through your bank or credit union.

1. By arranging your financing with a bank of credit union, you're not in the high-pressure sales environment and you can comparison shop for the best rates or terms.

2. Dealerships always add fees and markups to their financing.

3. By coming in to the dealership with your borrowing limit already set, you can resist the urge to spend extra money on garbage that you don't need.

Disclosure: While I was not a salesmen, I used to work at a large auto dealership that sold new and used cars. The people that work at the dealership are your enemy.
posted by DWRoelands at 12:22 PM on December 26, 2013 [4 favorites]


Yes, this is possible. But I would question the 2000 miles in two weeks. That is a lot of miles!

Depends on the state you are purchasing the car. If the dealer promised 9% interest to the buyer, let them drive off the lot, then a few days later called the buyer and informed them the best interest rate is now 12%, the buyer can return the car. So

Here is an article on delivery loan type of car purchases. This article points out the scams in this type of transaction.
posted by JujuB at 12:26 PM on December 26, 2013


Ruthless Bunny has some excellent tips on buying a car.
posted by JujuB at 12:34 PM on December 26, 2013 [1 favorite]


Get any used car inspected by a mechanic. This has saved me from some money pits. I would assume the dealer is lying, and would use this as a bargaining point if a mechanic says the car is in good condition and you want to buy it. The end of the month gives you some leverage; there are always monthly quotas and bonuses. I've always been willing to leave the dealership to think it over, and have often gotten better offers.
posted by theora55 at 12:47 PM on December 26, 2013


My first car-buying experience, when I was young and naive, was pretty much exactly like peep's first link. It was a really, really horrible ordeal. I bought "my" car, drove it for about week, fell more and more in love with it, and then got the call that they couldn't make the financing work. (I have since educated myself about the proper way to buy a car and never walk into a dealership without financing already in place.)

So I think your instinct to walk away was a good one, because dealerships that pull this kind of scam are not good businesses that you want to support.
posted by rabbitrabbit at 1:05 PM on December 26, 2013 [2 favorites]


Thanks everyone.
posted by gfrobe at 1:36 PM on December 26, 2013


I'm a former car salesman. Yes, it's rare but it totally happens. It happened a couple of cars that I had sold. In order to facilitate sales, loans can get approved pending the resolution of whatever the issue is, especially if it's on a Saturday. Usually, if an approval is marginal like that, the dealer won't deliver the car until they're sure they have the final approval on the loan but it's a judgement call and delivering the car is one of the most important ways to cement the sale.

You should almost never finance your car through the dealership, because you can almost always get a better arrangement through your bank or credit union.

This is just not true. You should check out the rates that you can get at your CU/bank and be prepared to use them for financing. But, the dealer will almost certainly be able to beat that rate all fees and markups included.
posted by VTX at 2:45 PM on December 26, 2013


>> You should almost never finance your car through the dealership, because you can almost always get a better arrangement through your bank or credit union.

> This is just not true. You should check out the rates that you can get at your CU/bank and be prepared to use them for financing. But, the dealer will almost certainly be able to beat that rate all fees and markups included.


With a very good credit rating, the dealer beat my bank the last two times in financing.
YMMV
posted by PlutoniumX at 6:49 PM on December 26, 2013 [1 favorite]


Yo-yo financing happened to me and my spouse at a well-known (in my area), name brand dealership that sells both new and used cars. They offered a low-cash-down loan at an interest rate that was reasonable to me on a car that Mrs. Fireoyster wanted, so papers were signed and the car was driven home. Four days later, I got a phone call saying that "my financing had fallen through" and that I needed to come back to redo the loan. I'd heard of this "situation" before, so I drove the newly-purchased-but-not-brand-new vehicle back to the dealership while my better half drove our other vehicle. Since we didn't need the second vehicle--it was for convenience and schedule flexibility--we thought we'd have a bit of fun and Mrs. Fireoyster parked our paid-off Ford Escort station wagon (the one the dealership wouldn't consider taking for trade; the only smart choice they made in this deal) at a 7-11 on the corner and jumped into the allegedly-purchased vehicle.

The article linked to by peep was also spot-on. Once we arrived and walked inside, "our" car was surrounded--in about 10 minutes--by two other vehicles that "just happened" to be coming back from test drives. The finance manager, previously all smiles and cheerfulness, was cold and immediately sat me down with tales of "your credit wasn't as good as you claimed" and "your bank won't verify your check for the deposit." (We didn't give a check, I called our bank and asked for a debit card transaction raise for them to process it through their credit card terminal.) He then handed over contracts for an 18% interest rate and a doubled down payment.

I looked at Mrs. Fireoyster and she said "well, I guess we'll be going, then." The finance manager asked if we intended to walk home since "you can't take the car without signing these." "Nope," we said "we'll just go in the other car we brought." As we walked out the door, the salesman walked with us until it became clear that we weren't going back to the not-quite-purchased automobile, then walked off with a confused look on his face.

We hadn't quite made it all the way home before my cell phone was ringing. I, of course, being the safety-conscious mollusk that I am, let it go to voicemail since I was driving. Ten minutes later, after we'd walked in our front door, the dealership's manager was on the phone telling me to "come back and get your car" on the original terms and signing no new pieces of paper.

If it hadn't been such a good deal, I'd not have bothered, but it was, so I did, and that car has served us well in two different timezones.
posted by fireoyster at 3:19 AM on December 27, 2013 [4 favorites]


You should almost never finance your car through the dealership, because you can almost always get a better arrangement through your bank or credit union.

Attention to detail is the key to a good transaction. I bought a new car two years ago. When the dust settled, and Mrs. Mule and I stepped into the office to sign the documents, I noticed that the dealership had arranged the car loan with a bank--I had told them, clearly, that I wanted to finance the deal through my own credit union (I had already gotten a pre-approved APR from my CU). When I got to that part of the contract, I told the closer I wanted to change that clause and go with my credit union. He asked me what APR I enjoyed with them, and I told them. He excused himself, and came back five minutes later with an APR that was two points below that which my CU had offered. I found no reason to turn this down.

I am aware that the dealer employed various tactics that were designed to encourage me to drive away, that day, with the new car: tactics that create a sense of anxiety and so on. The only actual dim spot in that transaction was that I didn't get as much on the trade-in of my pickup as I wanted, but this wasn't a deal breaker.

I have not heard of a transaction whereby the buyer took the car home, provisionally, to await the final reading of his credit rating (the finalization of the terms of the loan). But then I am a consumer, not a dealer, so my experience is limited. It seems to me that, failing bad faith on the part of the buyer, the dealer was doing something that, at the very least, skirted the perimeter of good ethics. I am surprised to read here that this seems to be a not uncommon tactic. I don't usually dwell in humbuggery, but let's just say that I was also surprised when I found out that, not only did Santa not live at the North Pole, he didn't have another reindeer named Olive.

I had an experience, some years back, of having a dealer tell me to take the truck (I was interested in buying) home for the weekend and drive it around, to see how I liked it. Now, that guy knew how to sell a truck.
posted by mule98J at 10:58 AM on December 27, 2013


Nthing the "that sounds like a scam" opinion, and I'd avoid any dealer that tries to pull that sort of stunt on you.

Would note, however, that dealer financing isn't ALLWAYS bad. The car I just bought, they had some kind of finance kickback thing going, and I got a couple grand off the bottom line price in exchange for taking a mfgr loan at an interest rate half a point above what my credit union was offering--- a great deal for me, since I could just pay cash for the car, and in fact intend to pay it off w/o depleting my bank account in less than a year. The best advice with all financing is just to comparison shop.
posted by paultopia at 1:09 PM on December 28, 2013


« Older Help me subtly prank a Philadelphia-obsessed...   |   What CAN I eat? Newer »
This thread is closed to new comments.