Spot Delivery
What is spot delivery?
Spot delivery is when a dealer releases the vehicle to you on the spot, before the lender has funded the loan. The contract is signed but financing is still conditional, usually pending stips that can take 3 to 14 days to clear. It is legal and routine, and it is the mechanism behind yo-yo sales, where a buyer is called back to re-sign at worse terms.
Key takeaways
- In a spot delivery the paperwork is signed and the car is yours to drive, but the lender has not yet funded the deal.
- Spot delivery contracts usually contain a clause allowing the dealer to unwind the sale if financing is not obtained on the stated terms.
- It is legal in most states and is used on a large share of subprime deals, because subprime approvals are conditional by nature.
- The risk is not the delivery itself but what follows: being asked to re-sign at a higher rate, a larger down payment, or with a cosigner.
- Asking whether the loan is funded or still conditional, and getting the answer in writing, is what separates a routine spot delivery from a problem.
What is spot delivery?
Spot delivery means you take the car on the spot. You have signed a purchase contract and a retail installment contract, you have keys and plates, and you drive home — while the dealer is still working on placing the loan with a lender.
From the buyer's side it feels like the deal is done. From the dealer's side the deal is a work in progress. That gap is the whole subject.
Is it legal?
Yes, in most states, and it is not inherently a trick. Dealers use it because it closes sales, and buyers like it because they do not have to come back.
The contract you sign in a spot delivery typically contains a clause — sometimes called a conditional delivery or bailment agreement — that lets the dealer unwind the sale if financing is not obtained on the stated terms. That clause is what makes the delivery conditional, and it is usually in the paperwork you signed even if nobody drew attention to it.
Why does it happen so often on subprime deals?
Because subprime approvals are conditional by nature.
A subprime approval comes back with a list of stips — proof of income, proof of residence, references, employment verification. Until those clear, the lender has not committed. On a prime deal there is often nothing to verify, so funding is quick. On a subprime deal there is a real gap between "approved" and "funded," and spot delivery is what fills it.
That is why subprime buyers encounter this constantly and prime buyers rarely do.
Where it goes wrong
| What you were told | What can happen next |
|---|---|
| "You're approved, take it home" | Stips do not clear and the lender declines to fund |
| "We just need a couple documents" | The documents do not support the income on the application |
| "The bank will call you" | The dealer never placed the deal at the terms in your contract |
| "Everything's finalized" | The contract still contains a conditional delivery clause |
When any of these happen, you get the call: come back in, we need to redo the paperwork. That sequence is yo-yo financing, and spot delivery is its precondition.
The leverage problem is the trade-in. If you left your old vehicle at the dealership and it has been sold, declining the new terms does not put you back where you started.
How to handle it
Ask one question before you take the keys: is this loan funded, or is it still conditional?
If it is funded, ask which lender funded it and get that in writing. A dealer with a funded deal can answer instantly.
If it is still conditional, you have a choice. The safe option is to leave the car and your trade-in until funding is confirmed. If you take delivery anyway — and there are reasonable situations where you might — do it knowing the deal can still come apart, and do not sell, spend, or commit anything on the assumption that it is final.
Keep every copy of everything you signed. If the terms you are later asked to accept differ from the contract in your hand, that document is the whole of your position.
Sources
- FTC public comment record — motor vehicle sale and leasing roundtables — Federal Trade Commission