Uses and Abuses of "Spotting"
Dealers say spot deliveries are essential to their business and are a clear benefit to a customer who is eager to drive off in a car. Spot deliveries, dealers say, turn shoppers into buyers. But consumer advocates say spot deliveries leave buyers with so-so credit vulnerable to dealership abuses. Consumer protection agencies have long tried to enact laws against the practice of spot deliveries.
The issue arises because most banks can't approve loan applications at night or on the weekends, which is when many cars are sold. With a spot delivery, a dealer begins the loan application and lets the customer drive away in the car. When the banks reopen, lenders review the applications and approve or decline them.
In "Confessions of an Auto Finance Manager," auto finance manager Nick James says that spot deliveries led to some of his worst experiences in a dealership. When he told one young buyer that the financing had fallen through and that he had to return a pickup truck he had just purchased, the man lunged across the desk and tried to strangle the sales manager.
The buyer had already shown the truck to friends and family and had developed an attachment to it, James says in the article. "Now the dealership was taking it away from them. It was an unintentional form of public humiliation."
In a Federal Trade Commission (FTC) roundtable discussion with dealer representatives and consumer advocates in 2011, attorney Michael Beniot said, "Yo-yo financing is a very, very bad practice, and I don't think there's one dealer in the country who would stand up to support it." However, he added that it is a "small subset" of spot deliveries as a whole.
But Chris Kukla, senior counsel for government affairs for the Center for Responsible Lending disagrees. He says that one Raleigh, North Carolina, attorney gets so many requests from consumers for help in untangling such cases that he only takes one in four of them. Because of laws favoring dealers, "every single transaction is a potential yo-yo," Kukla says.