Dear Consumer Ed:

I purchased a new car and arranged for financing through the dealership. They said I could drive the car home that same day. Now, two weeks later, they say my financing was denied and I need to bring the car back AND pay a fee for the mileage I put on the car. Can they do that?

Consumer Ed says:

Possibly, yes.  You entered into a conditional sales agreement know as a "spot delivery" transaction-which is legal in Georgia.  Although you took possession of the car, you did not buy it.  You instead promised to buy the car if a lender would finance the deal according to terms you negotiated with the dealership.  The car therefore belongs to the dealership until a lender finances the deal.  Since the dealership was not able to find a lender to finance your deal, you must return the dealership's car and pay for using it.  The amount you must pay depends on the terms described in the paperwork you signed when you took delivery of the car. You probably signed a "Bailment Agreement," which allows you to use the car but requires you to pay usage fees if the deal falls through. Some contracts allow the dealership to deduct the usage fee from your deposit and/or the value of your trade-in vehicle.
 
"Spot delivery" transactions may be helpful in some cases; however, the practice can be abused if a dealership waits weeks or even months before notifying a customer that the deal could not be financed. The delay costs the customer usage fees, (which eats away at any down payment), and forces the customer to either give up the car or agree to additional fees or excessive financing terms.  Backing the customer into this corner is unnecessary.  Dealers have access to a customer's credit information before the customer leaves with the car. As a result, the dealership should know if the customer will qualify for a loan, or at least know the status of the customer's loan application, within a few days of the spot delivery.
 
No customer should be strong-armed into accepting a bad deal.  The best way to protect yourself is to refuse to accept a vehicle on spot delivery.  You may also want to arrange for financing through your bank or a third-party lender before you go to the dealership.  You should be able to leave the vehicle on the lot and then pick it up once financing is approved.
 
If you decide to accept a spot delivery, then be sure that you understand the terms to which you are agreeing - if you sign a bailment agreement, then read it.  Ask what is meant by "excessive mileage" and "excessive use" and ensure that these descriptions are clearly written in the bailment agreement.  You should be sure that the bailment agreement describes the method you must use to request a refund of your down payment.  Don't forget that the vehicle isn't yours until financing is approved, so don't treat it like you own it.  Understand that you may be responsible for excessive mileage and plan accordingly.  Finally, remember that if the dealership is unable to secure financing for you under the terms of the original agreement, then you can return the vehicle and request that the dealer return your down payment and trade-in.

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