The Expert Podcast

So there's a tactic that some car dealers use that has been going on for a long time We we've seen this back 30 years ago 40 years ago. And it's come up in the news quite a bit recently. And it's a way that dealers can do something kind of underhanded kind of almost invisible that might put your purchase at risk and in jeopardy. And it's…called a bailment agreement. And some people call it yo-yo or be back or come back.

But basically what happens is when you purchase a car and you drive off the lot. There may be an option where the dealer can call you back and leverage you or coerce you or blackmail you into giving them more money After you already bought the car, they can make you come back with more cash They can make you come back and make your payments higher on the car, or even give you a different car. How can they do that if you already drove off Well, it's a very common practice and it's invisible You almost don't even know what's happening when it's happening. And the reason we're bringing this up now is because, you know Jalopnik had a really good article about this.

just. you know today and even Steve Lato The high profile. YouTuber he's an attorney. he talks about it again dealers' worse tactic under fire In fact in this video, he says his first video on his channel was about this tactic many many years ago. So it's coming up again because for a while it was kind of out of favor, but now it's…being used more How does it work?

Well when you go into buy a car at a dealership, you have to sign a bunch of documents You have to sign a buyer's order a bill of sale and odometer statement a car loan. If you have that. And you sign this big stack of papers and you drive off the lot. Well the way dealers do financing is they do what's called a spot delivery or on the spot delivery Meaning that when you come in and you want to buy a car they want to get you out the door in that car Right Then they don't want you to go home and think about it and have them get all the paperwork ready and come back later because you might change your mind. So they want to do a spot delivery to get you over to curve with that car Right then.

So, how do they do the financing Well, they're going to take your application and they're going to submit it to their lender or maybe more than one lender. And they're going to try to find the lender that has the highest advantageous financing for you but even for them, because they'll get a kickback, they'll get a commission on that financing and they may want to find the dealer that has the best kickback. But not everybody gets approved for financing So they want to make sure that if they give you that car and let you drive home if for some reason the financing does not get approved, you have to bring the car back and that's legitimate…

So mixed in that paperwork is what's called a bailment agreement And that bailment agreement basically says if my financing does not get approved, I will bring the car back. Immediately upon request. And we'll give you your money back and your trading back and they'll basically undo what they did right That's a legitimate fair thing now. We'll talk later about whether or not you should even do that bailment agreement but that's what the dealership does. So.

and and how to avoid this from happening. So what happens? Is that the dealer sends your application out to some lenders They they pretty much have a good idea of how you're going to get approved They see your credit score They see your. there your income your pay stubs whatever the case might be and they know okay. This person qualifies for this type of, financing.

But what did they guess wrong Or what if the lender doesn't approve it the way they want to maybe that you got approved for a higher rate maybe you've got approved but for not as much money. They might've been trying to finance a higher amount of money than the bank's willing to approve for you or for that car. Now they get the call back a couple of days later from the bank and your approval didn't come in the way they thought it did And they say wait a minute. You have to come back in and put more money down. You have to come back in and sign up for a higher payment because your rate is higher.

That's not fair Well here's your bailment agreement You signed it. Or you didn't get approved at all and you have to bring the car back or maybe switch to a lower price car. So this is something that dealers…

Dealers we'll put in every deal if you're getting a spot delivery So how can you avoid this…

So here's what you do First of all, do not sign a bailment agreement If you're buying a car at a dealership and you're financing. wait until they have their financing done to pick up the car. If you're in the dealership and they make agreement on numbers and your financing through the dealership. unless they have the financing already approved and done the way that they have it structured Just tell them Hey call me when you get it done. It's not going to take a more than a day.

Maybe two. If you want to leave him a deposit to hold the car that's fine. That's not much at risk. Well here's what we'll do Even if you're not worried about getting declined for financing or rejected, it's still a good idea Here's why. Let's say for example, You do your deal.

And they put you in as like an A tier financing or a very low rate or low…monthly payment. and it doesn't come in that way. Now they have to readjust it and they have the option to do it They have the leverage to do it. If they do something with a low price and then decide later wait a minute we made a mistake. They can bring you back in to fix that mistake.

We've seen this happen. We had an example where a customer went into a dealership to buy a car. It was late at night. Finalizing the deal. They negotiated and they got a really good deal on this car.

And it was the lease deal. And the dealership figured the price of the car with incentives. Of from the factory like rebates This was back in 2017 or 18 when there were incentives and rebates on the car…

And they also did a lease deal which had incentives on the lease They had a lower rate for the lease and they figured the payment up It was a really good deal they, they, they deliver the, the you know spot of the car and the customer said no I don't want to do this bailment. Just call me when the deal is ready. So they didn't take the car. That day that night. They said, you know if you have to wait for it to financing to be approved I don't want to take a car that I'm not approved for yet It's not a done deal.

So let's wait until the next day…

So. The dealership. Call back And they said well it might be a little different So. The customer said forget it That I that's the deal I thought I was getting if you can't do the deal that's fine And they were going to go look somewhere else Finally the dealership said okay fine We'll do it. And they came back in.

And it wasn't that the customer wasn't getting approved because they had very good credit. It was that they had missed, miscalculated the numbers, the lease deal incentive and the, and the, rebate incentive You couldn't do them both You could either do the incentive or do the lease deal. The dealership made a mistake and they used them both when they figured out these numbers. If they had done a spot delivery they could have called them back and said Hey. You got to come back and pay a higher payment.

Especially since it's been two or three days you're driving the car you're enjoying it You're not going to undo that deal. But since you didn't take the car yet you actually have more leverage now because you don't have to. To go back to the dealership, right? You're more likely to go back and redo that paperwork If you already have the car in your driveway your garage, driving it around whatever you're doing because you don't want to give back a car you already have. But if you didn't do the deal in the first place now you have leverage.

So the what the dealership had to do was they actually had to sell the car for a lower price. Probably then they even could have it was probably a below cost deal. In order to make those numbers still happen because they didn't want to. To lose the customer and also have like a bad review for that transaction. Make a long story short If you're buying a car.

And the dealership has mixed in that paperwork a bailment agreement or some agreement where you have to bring the car back. Call foul on that deal. And tell them that you're not in kind of do it when you have the financing done and you know you can do this deal. Call me and let me know. Right.

And I'll do it Then I'm not going to do speculation with you as a dealership. That you think you can do this but maybe you can't because I'm committed to it You you don't have the option of bringing the car back. Right. The dealership is doing an unfair advantage to you where they have the option of undoing the deal but you don't. So you want to level the playing field if they can't commit to the deal and know that it's going to be.

Completed and etched in stone, then you shouldn't have to be locked into it either. So unless they're willing to say well you know you have the option to bring it back to then why would you do that Because it's not a…

level playing field So this has come up a couple of times we saw these two on Jalopnik and Steve Leto. It was also in a car and driver article. it seems like dealerships are doing it again Again it was very very popular in the eighties and nineties, but it appears that dealerships are starting to maybe mix this back into their, in their playbook and you want to avoid it So you don't run into a problem where you've had the car for a few days or a week, and they tell you you have to bring it back pay more money, or have a higher payment Don't worry There's plenty of cars to go around. So if for some reason you can't get that one somebody else will do that deal for you.