What Happens When Auto Finance Falls Through

ByRichard C. Sloan

Mar 8, 2022

After working with a dealership, you walk away with confidence in your new or new vehicle. Although financing has not yet been approved, on-site delivery allows you to get your new vehicle off the lot immediately.

But a few days later, you receive a call that no one wants to hear: your funding has failed. If you are in this awkward position, your next step should be to determine if you have been the victim of an on-time delivery scam.

Look for the signs of an on-time delivery scam

When a dealership allows on-site delivery, it means you can leave with your vehicle the same day you sign the paperwork. However, the actual financing of your loan may not be complete yet. This is especially true if you come to a agreement with the car dealer after the banks have closed.

See how the dealer reacts

If the dealer is threatening to report the vehicle as stolen or to repossess the vehicle immediately, you are probably dealing with a scam.

But it is important to note that not all on-time deliveries are scams. Mistakes can happen. And a legitimate dealer may allow on-time delivery but miscalculate your loan application, causing the deal to fail.

If the dealer could reasonably assume that a buyer would not be approved at the proposed rates and asks the buyer to quit for the vehicle at a higher interest rate, then something fishy is probably going on.

Look at the original documents

Take a look at the original purchase documents. If there was a “Seller’s Right to Cancel” or “Limited Right to Cancel” form, you are likely the victim of a one-time delivery scam. Otherwise known as yo-yo scams, these documents allow the seller to conduct a bait and switch scenario.

Essentially, this means you will be asked to pay more than the previously agreed price for the vehicle. Fortunately, these types of documents are illegal in most states. But if you find one in the mountain of documents you originally signed, chances are you’re dealing with a shady dealer.

What to do if you’ve been scammed

The sad reality is that there are scammers in almost every industry. And car dealerships are no exception.

If you are the victim of an on-time delivery scam, gather all original documents. Then contact the office of your state attorney general. At this point, officials will be able to walk you through your options at a state-specific level.

In some cases, investigators may request a timeline of events related to your car purchase. With this, it is a good idea to immediately write down all the details of the process. Otherwise, it may be difficult to piece together the details later.

How to protect yourself in the future

If you find yourself a victim of a on-time delivery scam, there are steps you can take to avoid this ordeal in the future.

  • Beware of Car Dealer Ads. Always read the fine print on advertised discounts or savings with strings attached.
  • Research dealers to work with. A quick internet search can help you find a dealership in your area with the best customer reviews. Don’t work with a dealer who has a reputation for doing shady business.
  • Arrange financing directly with a lender. Instead of relying on a dealership for financing, apply for an auto loan directly from a bank or credit union. You can pre-qualified before heading to the car park to ensure you get the best finance deal.
  • Take your time. Although buying a car can be a chore, don’t rush through the paperwork. Instead, go over all the details and make sure you’re comfortable with the terms. If you have questions about a document, don’t be afraid to talk about it.
  • Do not take delivery on site. Although you may have to wait to leave in the new car, avoiding on-time deliveries will eliminate the possibility of an on-time delivery scam.

If something about a dealership makes you uncomfortable, find someone else to do business with. Nobody wants to go through the hassle of an on-time delivery scam.

The bottom line

An on-time delivery scam can be financially and emotionally draining. If you are looking for a vehicle, it is best to obtain financing directly from the lender. Don’t rely on dealer financing. Not only is dealer financing often more expensive, but you’ll also be faced with the possibility of a one-time delivery scam. So if you are looking for a reputable lender to work with, check out Bankrate’s Top Auto Lender List.

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