The Truth About Spot Delivery

Spot delivery can seem convenient at first glance, but it has the potential to lead to higher costs for car buyers.


Article QuickTakes:

When banks and other financial institutions are closed, such as late in the evening or on federal holidays, you may still be able to take home a new car. If you notice that the sun is setting just as you're ready to begin the car buying process, the dealer may ask you to sign a series of documents allowing you to drive a new car off the lot without having solidified financing options.

This is called spot delivery, and while convenient, it may not work for everyone. Many dealers might offer this option, but some may choose to use it as a tactic to get more of your money.

Here's a closer look at this kind of financing and how it works, from the documents and agreements to the practices to be aware of.

What is Spot Delivery?

Spot delivery—also known as yo-yo financing—allows a buyer to drive off with their new car while the dealer secures the financing for them. If the buyer isn't seeking an auto loan from an outside source, the appeal is that the dealer can get them into their new car as soon as possible. This can be an especially attractive option if banks are closed on nights, holidays, or weekends, and the buyer would otherwise have to wait a few days to take possession. Once the buyer drives away, the finance manager of the dealership will try to have a deal approved by a bank.

Problems may arise with this type of financing, though. For instance, even if the dealer gives the buyer the impression that they now officially own the car, the loan technically hasn't yet been originated. This means that the deal isn't final and the terms may be subject to change. In some cases, the seller may reveal they couldn't secure favorable financing and push the buyer to either return the car, take on an auto loan with high interest rates, or risk having the car repossessed or reported as stolen.

Spot Delivery Documents and Applications

As part of the process, the buyer will sign several documents the dealer prepares. One of those documents may be a RISC form that can include a "Seller's Right to Cancel" or a "Limited Right to Cancel." In rare cases, these forms may be legally contrary to the Truth in Lending Act (TILA), Fair Credit Reporting Act (FCRA), Equal Credit Opportunity Act (ECOA), and Unfair or Deceptive Acts or Practices (UDAP) regulations. This means that it's important for car buyers to read through everything carefully—and fully—before signing a form related to spot delivery.

The RISC form and other documents are meant to persuade buyers to drive away with a new car immediately after agreeing to buy it but before finalizing finances. Dealers typically offer spot delivery with the hope of discouraging buyer's remorse and process the sale quickly, and it can be convenient for the buyer as well. This could all work out the way financing normally does if the dealer is able to secure financing. However, if the dealer's attempts at securing an auto loan for the buyer fail, the buyer may face a new set of obstacles.

Why is Spot Delivery Referred to as Yo-Yo Financing?

If the seller cannot secure a loan for the buyer, they may ask the buyer to take on less-than-favorable financing (with high interest rates) to keep the car. Alternatively, the buyer would have to return the car—or risk having it repossessed or reported as stolen.

The reason spot delivery is referred to as yo-yo financing is that the target for financing may slip through the buyer's fingers. When this happens, it can feel like a bait-and-switch. Without the financing deal, the buyer might not be able to afford the car and may have to restart their search. Or they may choose to keep the car and take on a loan they might not be able to afford.

How Buyers Can Protect Themselves

If the buyer is concerned financing won't work out through the dealer, they can always secure financing before heading to the car lot. Additionally, with the understanding of how yo-yo financing works, buyers can consult the dealer when reviewing documents to ensure they know what their deal will include—and if it really is finalized.

Arming themselves with this knowledge beforehand can help buyers feel prepared and protected against less favorable financial agreements. It's also important to carefully review any documents from the dealer before signing. If there's a form that states the sale is conditional, it may be wise to wait until financing is officially locked down or choose to shop at another dealership.

If you're nervous about driving off the lot without agreeing to specific financial terms, you can avoid yo-yo financing by securing outside financing. You can even seek a pre-approved loan instead of pursuing financing through the dealership.

This site is for educational purposes only. The third parties listed are not affiliated with Capital One and are solely responsible for their opinions, products and services. Capital One does not provide, endorse or guarantee any third-party product, service, information or recommendation listed above. The information presented in this article is believed to be accurate at the time of publication, but is subject to change. The images shown are for illustration purposes only and may not be an exact representation of the product. The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any Capital One product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional.
author photo
Jacqueline DeMarco
I’m a freelance writer based in Southern California who graduated from the University of California Irvine (UCI) with a degree in Literary Journalism and Digital Art. Through my studies, I learned how to combine journalistic style research with a touch of creativity. Today I create content that touches a variety of different subjects, but all work toward the same goal — to provide valuable resources to readers looking for answers to their trickiest questions.