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What to do when a car dealer says your financing fell through

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Perplexed woman on phone while looking at laptop
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After working with a dealer, you drive off in your new or new-to-you vehicle confidently. Although the financing hasn’t been approved quite yet, spot delivery allows you to take your new vehicle off the lot immediately.

But a few days later, you receive a call that no one wants to hear: your financing has fallen through. If you are in this uncomfortable position, your next step should be to determine whether there’s an issue with the information in your application that caused the denial or if you have fallen victim to a spot delivery scam.

Can you be denied a car loan after preapproval?

Although the likelihood of it happening for a legitimate reason is very low, you can get denied a car loan even after driving off the lot. Here are some common reasons why:

  • You lost your job. The lender will likely verify your employment when processing your application for financing. If they’re unable to confirm your employment because you were terminated, laid off or resigned, your application could be denied.
  • Your income went down. Whether it’s the result of a job change or reduction in hours by your employer, the lender may decide you can no longer afford the monthly car payments and deny you an auto loan.
  • Your application contains unverifiable information. Are there typos in your application? Did you get a new job or relocate after getting preapproved for an auto loan? These are all reasons for the lender to deny your loan if you failed to notify them of the changes.

However, there are instances where your financing could fall through due to a spot delivery scam. In this case, you’ll want to take swift action to have the situation rectified and avoid falling victim in the future.

Look for signs of a spot delivery scam

When a dealer allows a spot delivery, that means you can drive off in your vehicle the same day you sign the paperwork. However, the actual financing of your loan might not be completed just yet. That’s especially true if you come to an agreement with the car dealership after the banks are closed.

See how the dealer reacts

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

But it is important to note that not all spot deliveries are scams. Mistakes can happen. And a legitimate dealer may allow spot delivery but make a calculator error on your loan application which leads to the deal falling through.

If the dealer could reasonably assume that a buyer wouldn’t be approved at the rates offered and demands the buyer resign for the vehicle at a higher interest rate, then something fishy is likely 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 a victim of a scam. Otherwise known as yo-yo scams, these documents leave room for the seller to proceed with a bait and switch scenario.

Essentially, that means you will be asked to pay more than the previously agreed upon price for the vehicle. Luckily, these kinds of documents are illegal in most states. But if you find one in the mountain of paperwork you originally signed, it is likely you are dealing with a shady dealer.

What to do if you’ve been scammed

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

If you are a victim of a spot delivery scam, gather all of the original documents. Next, reach out to the office of your state’s attorney general. At that point, officials will be able to guide you through your options at a state-specific level.

In some cases, the investigators may ask for a timeline of events relating to your car purchase. With that, it is a good idea to immediately write down every detail of the process. Otherwise, it can be difficult to piece the details together later.

How to protect yourself in the future

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

Be skeptical of advertisements by car dealerships

Always read the fine print to learn more about rebates of savings the dealer is advertising. Many come with conditions that could make them unavailable to you.

Research dealerships to work with

A quick internet search can help you find a dealership in your area with the best customer reviews. Avoid dealerships with several negative reviews or that have a reputation for shady deals.

If anything about a dealership makes you uncomfortable, find someone else to do business with.

Arrange financing directly with a lender

Instead of relying on a dealer for financing, apply for an auto loan directly through a bank, credit union or online lender. You can prequalify before heading to the car lot to ensure you get the best deal on financing.

Take your time

Although buying a car can be a chore, don’t rush through the paperwork or sign without reading the fine print to get the deal done.

Don’t take a spot delivery

You may not be thrilled with the idea of having to wait around until your loan is approved, processed and funded to drive off in your new car. However, avoiding spot deliveries will eliminate the possibility of a spot delivery scam.

The bottom line

A spot delivery scam can be financially and emotionally taxing. If you are in the market for a vehicle, the best move is 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 face the possibility of a spot delivery scam. So, if you are looking for a reputable lender to work with, check out Bankrate’s list of top auto lenders.

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Written by
Sarah Sharkey
Contributing Writer
Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a range of subjects, including banking, savings tips, homebuying, homeownership and personal finance.
Edited by
Auto loans editor