Dealership Tells You Financing Fell Through

The Financing Fell Through

(What Do I Do?)


Consider this familiar scenario. You go to buy a car.   You don’t have the cash to pay for the purchase in full.  You ask the dealership to help you find financing so you ask the salesman if the dealership can find financing for your car purchase.  You go into the sales office and the meet with the Finance and Insurance (“F&I”) person at the dealership. You fill out a credit application usually with the F&I employee asking you questions about your job, income, expenses, time that you lived at your residence, and other financial information.  All this information, along with obtaining your social security number, will be entered into a computer program and the F&I employee will tell you if the dealer can finance your purchase. You are told who the potential finance company will be, the interest rate, monthly payment, and the term of your payments, i.e. how long will you be making payments.  After considering the proposed financing, you feel that you can make the payments and that the interest rate is acceptable and you sign the Retail Installment Sales Contract (“RISC”) and drive off in your new purchase excited that you have a new car or a used car that is new to you. In your mind, life is good, and you now own the car and just have to make your payment each and every month.   Out of nowhere, you get a call or text from the dealership, the financing “fell through” and the dealership has given you one of two of options. You don’t generally get your choice of options. The dealership tells you what “you have to do”. You are either told that you can come in and sign a new contract with potential different terms, e.g. a longer term, higher interest rate, bring in a co-signer, or make a larger down payment or you must bring back the car and there is no option for financing unless you find it yourself.  You are blindsided. You thought everything was fine. You may have even made a payment to the company you thought financed the purchase. What should you do when this happens?


What Does This Mean?

First, it is important to stay calm and not panic.  Speak with the dealership. Call them F&I Manager and ask to know specifically what a new RISC would look like.  What are the new terms? Are you paying more for the car? The same? Less? While it is not common but sometimes, we see that the dealership has changed the deal and lowered the purchase price or other terms so that the deal is acceptable to the finance company.  Why would they do that? Sometimes the finance company requires that the purchase price of the car or of the add-ons, like the extended warranty, are reduced so that the deal can be financed. Depending on the amount of profit the dealership is making, it is simpler just to make the deal match the finance company’s demands.  This is rare.


If it is the typical case where the deal is being changed and is worse for you, you have to consider your options.   Do you want to keep the car? Is the dealership returning your down payment in full and your trade-in? Do you have other options to buy a car?  If you are satisfied with how the dealership is unwinding the sale, then you could simply unwind the deal and get your down payment and trade-in back and look for a new car to purchase.  I would strongly recommend that you get a copy of all three of your credit reports to see who pulled your credit report and to ensure that all of them sent you declination letters that confirm the reason the dealer provided to you.  If you don’t receive the declination letters or there are some issues with why financing was declined, then you should contact an attorney who handles credit reporting issues.


If you are not going to unwind the deal, then you need to look at the documents that you signed at the dealership.  These documents are very important and dictate what options are available to you. There are two important documents that you need to locate.  The first document is the Conditional Delivery Agreement (“CDA”). This agreement generally states that you do not own the car and that the dealership has a certain amount of time, usually 15 days, to find financing or you have to return the vehicle. It may also be called a Spot Delivery Agreement.  There may be other terms on it, such as you must keep the car insured, the condition it must be returned in, mileage charges, etc. This is the agreement that the dealership will rely on to demand the return of the car. The second document is the RISC, or sales contract, that spells out all of the terms of the deal. You may have signed both documents or either of the two documents.  This is why it is very important that you get copies of every document you signed in the F&I office.


Do You Have Any Insight?

When we get calls about these types of situations, the first document we need to look at is the RISC.  If you have the RISC, then you can be in a position to enforce that contract. Under Texas law and usually by the terms of the CDA, once a RISC is entered into between the dealer and the buyer, the CDA becomes null and void.   What does this mean? The dealership will be telling you that because you signed a CDA, they have a set period to find financing or you are contractually obligated to return the car. That would be incorrect because the CDA was rendered null and void once you signed the RISC. The RISC makes the dealer the finance company.   The RISC says that you are paying the car dealership the payments for the term specified to purchase the car. The dealership doesn’t want you to know this because in most cases they aren’t set up to be the finance company. So instead of honoring the RISC, the dealership represents that they haven’t found financing and try to either undo or redo the deal instead of honoring the deal as they are obligated to do.  The CDA is irrelevant in this case. The RISC can be enforced. You will need to go to court and get a temporary retraining order and if successful, will have to post a bond to get the car back.


The bigger issue arises if you only have the CDA but do not have the RISC.  Under the law, this is the proper way to handle this transaction. The dealer would have you sign the CDA and then have you come back to the dealership when the financing is located so that you can sign the RISC.  If they don’t timely find financing, then you are obligated to return the car and unwind the transaction or find financing on your own. As a practical matter, dealers don’t like to call customers back to the dealership to sign the RISC and often have the customer sign all of the sales documents while they are in the dealership buying the car.  This is why it is very important that you get copies of all of the documents that you sign when you are in the dealership. It can be very difficult to prove that you signed the RISC unless you have a copy of it.


What do you do if the dealership is calling you demanding the car back, but you have the RISC in your possession?  This is where the case gets interesting. Once the dealership or any of its employees tell you that you that you need to bring the car back as there is no financing, they are violating the state of Texas collection laws by misrepresenting the status of the debt.   From there, the dealership usually makes various other misstatements creating other collection law violations. Some of the bigger issues we will see are sending repossession agents to your place of employment or residence to repossess the car, talking about the issue with friends, family, neighbors, or your employer, sending constant and harassing text messages or phone calls, and even threats of arrest and filing police reports calling the car stolen.  The key is here it keep all texts and voice messages and take detailed notes of all discussions that you have with anyone from the dealership, repossession agents, the police, or anyone trying to get you to return the car. This will be crucial evidence in the case. Not only can you enforce the contract, but you seek additional, and potentially substantial damages for the collection law violations.


Having a car purchase fall apart like this can be a very scary time but if you have the right documents and keep records of what is said and done when the dealership calls for the car back, you have legal rights against the dealership and potentially get substantial monetary damages as well.