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Dealer scam #2761 "Bailment Agreements" What they are. Caveat Emptor!


Senior Member
If you finance through a dealer and they "took care" of the financing they may ask you to sign a "Bailment Agreement" on delivery. Bailment is defined as "an act of delivering goods to a bailee (buyer) for a particular purpose, without transfer of ownership." A dealer may ask you to sign one when you pick up your new car. What this agreements says in essence is they DO NOT have your financing arranged and this document gives them many legal rights to screw you over that you agreed on.

This scam works like this......the dealer promises a low rate they know they can't get based on your credit score. They are under no legal obligation to give you that rate. But when you sign the agreement and take the car home you are not the owner yet! The agreement says if the financing falls through (they know it will) you agree to return the car and pay 50 cents a mile or so for using it and "liquidated damages". The liquidated damages consist of you driving off in a new car and returning a "used" car. You agreed to the terms so they can charge you the difference....thousands of dollars to return the car. Then they give you "options"......give the car back and they legally keep thousands of your down payment OR you can take a much higher financing rate and note. This usually leaves you in a no win situation. If you walk you have lost your down payment so you take the higher interest rate. The dead give away should be the lack of financing documents and only "estimated" payments along with the "agreement" to sign.

WALK AWAY! Don't sign the dealers license to steal as you sign away any legal rights you may have. If they do not have financing documents with all the numbers including your actual monthly payments and the name of the Bank holding the note then the financing is NOT arranged.

Ran into this a month ago when the dealer kept promising to beat our private financing. We refused to sign a bailment agreement and walked. We now have a beautiful new Mustang GT/CS with our own financing from a dealer not into games.

A dealer makes more money in the "Finance Manager's" office than the car sale usually, things like gap insurance, loan insurance, extended service agreements and any other thing they can sell you and gladly bundle it into the loan....... they are so nice! The service agreement will be cheaper in 3 years and you will not pay financing charges for 6 years!

This scam works because the dealer will offer say 4% knowing the best they can get with your credit is 5%.......they get you to sign the agreement and drive off. A week later they tell you to come back with the car and present you with loan documents at 6% or more. Having zero choice you take it and the dealer gets the 5% loan and pockets the other 1% or more.
Running these numbers with 72 month financing at $20K shows the dealer will pocket an additional $648 in interest alone. They will also get a kickback for the financing from the bank. And this is just on a 1% difference, it will be more than that if you get caught in this game.

Be careful out there.....remember buying a car is war over your money. Learn how to fight before going to their battle ground or you will get decimated by trained liars. Also keep in mind a dealer has to cover overhead and make a profit, set a reasonable price based on research and shop until you get your price. Be prepared to walk away. We were at 2 other dealerships in the finance office and walked due to attempted scams, first one the car had 150 miles on it they did not disclose and the second tried the bailment scam, the 3rd beat the other 2 dealers price and no games. All three cars were identical MSRP and colors. All were in different states but we were shopping an exact car to take advantage of all rebates and lower prices. If you are in the E. NC area or don't mind a drive give me a PM and I'll tell you where to shop. The last 4 new Fords were purchased out of state (NC, TX, GA and IL) and saved us many thousands and very little in costs to pick them up. Good luck with your battles!