Sometimes a deal falls apart. The financing doesn’t go through, the buyer backs out, or the contract simply isn’t completed. Under the Rees-Levering Act and general contract law, a conditional sales contract that is not fully executed is not a binding agreement. If the buyer has not signed the contract, or if the dealer has not signed, the contract is not executed and neither party is bound.
A common situation is the “spot delivery” that goes wrong. A spot delivery is when you let a buyer take the vehicle home before financing has been fully approved. You submit the buyer’s credit application to lenders, the buyer drives off in the car, and then — a few days later — every lender declines the application, or the approved terms are significantly different from what the buyer agreed to. Now you have a buyer who’s been driving the car and thinks they’ve purchased it, but the financing hasn’t been secured.
In this situation, the contract may contain a conditional delivery clause that addresses what happens if financing isn’t approved. Typically, the clause requires the buyer to return the vehicle. However, unwinding a spot delivery is one of the most contentious situations in the car business. The buyer is upset, they may have already traded in their old car, and they don’t want to give back the new one. To avoid these problems, many dealers have moved away from spot deliveries entirely, or they’ve implemented stricter credit screening before allowing delivery.
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❌ Common Mistake A dealer spots a buyer — lets them drive the car home on a Friday evening before financing is approved. On Monday, the financing falls through. The buyer has put 300 miles on the car, their kids have spilled juice in the back seat, and they’re furious about returning it. The dealer is now in a difficult position — the car has lost value, the buyer is hostile, and the deal is dead. |