“Spot deliveries” are an exposure unique to the retail automotive business. Many losses have occurred after a car has been released to a customer under the pretense of being a spot delivery. It is easy to be fooled into delivering a vehicle to an unscrupulous “buyer” as evidenced by the following examples.
A couple entered a dealership to look at a new Toyota Landcruiser. They take it out for a test drive and decided to buy it. Although they didn't have a trade-in, they did have $1,500 for a down payment. The credit bureau report showed an excellent credit rating. The dealership “spotted” the vehicle to the couple. When the dealership tried to contact the couple to inform them that the financing had been approved, the people denied buying a car. It turned out the “buyers” were using stolen identification. Amount of loss - $40,000.
A 20 year old came into a dealership looking for a car. She had a trade-in with a negotiable title, her credit check was good, and she provided a proof-of-insurance card. Based on this information, the dealership spot delivered the vehicle. Before the financing could be approved, she was involved in a fatality accident. As it turns out, her insurance was a 7-day binder for physical damage only and there was no liability coverage.
In both of these examples, a loss could have been avoided if the dealership had done a few basic checks. In the first example, the dealership did not confirm the couple's identity. Employment, home phone number, and permanent address should have been verified. “Red flags” on the application were ignored. The birth dates did not match those on the drivers' licenses, and they listed working in one state and living in another. In the second example, the dealership did not verify the insurance coverage with the buyer's agent - a critical step, especially on younger customers.
The following checks may reduce your exposure to liability if undertaken prior to spot delivering a vehicle; however, you should always seek the advice of legal counsel before implementation:
- Be wary of a customer who is overly anxious to take possession of a vehicle before the financing is approved. He or she may be more interested in simply obtaining the vehicle, not purchasing it.
- Upon obtaining the advice of your dealership legal counsel, you might have the customer sign:
Conditional Delivery Agreements - these state the date the car is to be returned if the financing is not approved.
Verify the customer is who he or she claims to be.
- Get a photocopy of their driver's license, where allowed by law.
- Call their place of business and verify employment.
- Verify their permanent address.
- Determine that the probability of financing is good. Run a credit bureau check, where allowed by law.
- Make sure the customer has proper security, such as:
- A trade-in with a negotiable title;
- A cash down-payment;
- A check where the funds can be verified. Accept no post-dated checks.
- Verify insurance coverage for physical damage and liability or have the customer bring in a 30-day binder from a local agent.
- Use common sense. Thoroughly check out any red flag such as: information given on the application that does not match up; or no title on a trade-in.
- Be cautious with young, inexperienced drivers.
- Spot deliver cars to regular/repeat customers only.
- Develop and use a dealer checklist as a guide for employees to make sure all appropriate steps have been taken.
This form is provided for informational purposes only. Please consult with qualified legal counsel to address your particular circumstances and needs as well as to ensure your compliance with all legal requirements.