Occasionally, I get involved with a listener who tried to buy a vehicle, trading his or hers in, and taking conditional delivery of a new vehicle. After earnest attempts by the dealer, financing could not be obtained. When a new car is delivered before financing is 100% completed, it is called in the car business a spot delivery.
So, just what does it mean if a dealer "spot delivers" you? The term has been used in the car business for as long as I can remember and simply put, it means a dealer is going to loan you the car you are interested in buying until the financing can be arranged.
With the technology dealers have today, they can usually get a quick approval or denial on a loan. However, there are a lot of cases, particularly at night, on holidays, and on weekends, that they have to guess at what their primary lender will say. If they have a good feeling that the loan will be approved, or if there is even a good chance, they may give you the car right there on the spot. This is a spot delivery.
You may be wondering why a dealer would take this risk? It is actually simple, it takes you out of the market and stops you from shopping. It is also a way to get you attached to the car, so you don't change your mind about the purchase. Your family, friends, neighbors, and co-workers will see the new car, and after that happens, the last thing you want is to get your old car back and embarrass yourself.
There is nothing wrong with taking a car before financing is approved as long as you understand the car is not legally yours. Before leaving with the car, you will be required to give the dealer a copy of your driver's license, insurance card, and you will sign a legal agreement, usually called a borrowed vehicle agreement (BVA).
Borrowed Vehicle Agreements
Most BVAs (sometimes called a BCA-borrowed car agreement) will have information about mileage limits while in your possession, and you will agree not to drive the car under the influence of alcohol or drugs. Most of these documents will forbid you from smoking in the car, some will not allow pets, and most will forbid you from letting anyone else drive the vehicle. Some dealers have a provision that you must pay for the use of the car if the financing is secured and you change your mind, so as I always tell you, read what you are signing! Know the terms of the loaner agreement.
Dealers will generally not spot deliver you unless they have a strong sense of being able to obtain financing. Finance managers in a dealership know what they can get approved, and they know the deals that will be difficult. Sometimes when a consumer has to return a car, it is because of information that was put on the credit application. Often, it is overstating income, putting down longer job time than they actually have, or perhaps understating their house payment or bills to lower their debt-to-income ratio. Lenders often check the facts on credit applications.
One plus of being spot delivered is it makes the dealer work harder to get you approved. No dealer wants to have to retrieve a car that it has loaned someone. The dealer ends up with an unhappy customer, it has lost a deal, and its car has mileage on it now, this is especially troublesome with brand new cars. If you choose to take a car on borrowed vehicle agreement, just know that car is not yours, yet. As always, even if the dealer pressures you to take the car, do what you are comfortable with and nothing more.
[Editor's note: This article has been updated since its original post date.]