HB 2494 sale contingent on financing approval

I am not one who thinks more regulation is a good thing, but in this case, it could be a good idea. HB 2494 deals with automobile sales. I am not going to quote the full bill. but will paraphrase it. The bill says that when a customer signs the contracts to purchase a car, he will also sign a paper that says the car dealer must find a financial institution who will buy this contract at the terms stated in the contract. If the contract can be sold on those terms, the buyer is obligated to keep the car. If the contract cannot be sold on the original terms, the deal will be canceled. The dealer must return the customers down payment and trade in if there was one. the buyer must return the car. I would like to see language in the bill to say that the car must be returned undamaged in its original condition, or the buyer would have to pay for repairs.

The process of " spot delivery" has been around in the car business for years. The buyer looks at and likes a car. He wants to buy it and so the dealer writes a deal and the customer drives away. The deal is usually written with low down payment and payments for a very long term. Then the car dealer shops the contract to many financial institutions starting at the best and going down to the sub prime if need be in order to get the deal approved. Some times in order to get the deal approved, the down payment,term and payment amount and interest rate will be changed. The customer may see a payment go from $300 to $400 , down payment change from $1,000 to $3,000. Any variation so the lender will buy the deal.

The reason the dealer wants the customer driving the car, is that the neighbors will see it, he will get used to driving the new car, the family will want to keep it etc. In other words, the customer is out of the buying mode. If the customer went to the dealer, filled out an application and was told to come back in 2 days, when the loan was approved, and take delivery of the car. How many would come back? How many would go somewhere else to buy a car?

Right now if you take delivery of a car, and the deal cannot be approved, you are under no obligation to change the terms and keep the car, but most people don't know this. The dealer must give your trade and down payment back. If you have been driving the car for four or five weeks, they can hit you up for mileage driven. It is illegal for the dealer to sell the car you traded in before your loan is funded by a finance company.

This is just good common sense, but there are people who fall in love with the car, and will give more down payment or change other terms even though they may not be able to afford those payments.