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Can a Car Loan Be Revoked?

A car loan can be revoked if you provided false information during the application process and it was not discovered until after the loan was approved. Having said that, there are other issues at play behind the scenes of this question.  Many car dealerships are telling buyers that their car loans have been revoked, when in reality there was never a loan. The people most commonly affected are those with bad credit or no credit. Here is how it works.

“Conditional Financing

A buyer goes into a dealership looking to buy. They find the vehicle they want, the dealer’s finance department approves their financing, and they are sent home with their new vehicle. A few days or a few weeks later the dealership calls and says that the financing has been revoked and that they are coming to repossess the new vehicle. In reality, the financing has not been revoked. The dealership had approved the loan based on the belief that they could get an institution to commit to the loan at the stated rate, often called ”conditional financing.” So, the borrower is sent home with a new vehicle while the dealership floats the loan to several institutions. Usually, the loan is taken on by someone, but not always.

Occasionally, the loan cannot be approved at the interest rate stated or no lender is willing to approve the loan at all. In either instance, the dealership must either get you to sign new papers for a different interest rate, or, if no financing can be found, repossess the vehicle. In either scenario, the car loan was not revoked, because it had never existed. The dealership had taken a chance and sent the buyer home with ”conditional financing” in place.  This is also known as “spot-delivery” or “yo-yo” financing.

This practice is currently legal, but it is under scrutiny by the Consumer Financial Protection Bureau (CFPB). Since the practice is legal, your best protection is to ask if the financing is definitely in place or if it is conditional. If it is conditional, leave the vehicle at the dealership until the financing is approved by a financial institution.

About the Author

The author has many years of experience in automotive finance and insurance. However, each consumer's situation is unique. It is best to contact a finance specialist for further assistance.
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