Can a Car Dealership Take a Car Back If Your Financing Is Not Approved?

Some car dealerships let loan applicants take possession of the car while they find financing.
i Ryan McVay/Lifesize/Getty Images

Many car dealerships operate with the best of intentions. They make broad claims such as a high percentage of guaranteed approval. With this guarantee they let you take possession of the vehicle while they get you financing to purchase the vehicle. The downside to participating in this type of arrangement is if you find yourself in the small percentage of people for whom they cannot get financing approved. When you cannot get dealer financing, you must find another way to keep the car or give it back.

Shop Around to Your Local Banks

Fill out applications with other financing companies such as your local credit union or your personal bank. They may take your current business and financial matters under consideration when granting your loan. The best part of shopping around is that filling out multiple auto loan applications within a 30-day period does not adversely affect your credit as normal credit inquiries do.

Go Online for Financing

You may also check with some online financing companies that specialize in bad or limited credit histories. You'll suffer with a higher interest rate if you go the subprime route but you'll get to keep the vehicle in your possession. Common subprime loan issuers include Capital One, HSBC and Ally Financial. These banks have a reputation for extending lines of credit to consumers who may suffer from poor or limited credit history.

Change the Terms of Your Application

Ask the dealer why you were denied. Determine if there is a way to fix the problem. It may be that you are asking for too much money. Increase the amount of money for your down payment to lower the total loan amount. You may also need to buy a less expensive vehicle. Another option is to find a co-signer. Co-signers use their income and good credit history to guarantee the loan for you. Many times credit is denied applicants who do not have established lines of credit. If this is your denial reason, a co-signer may help secure the loan for you. Bring your co-signer to the dealership to sign the necessary paperwork.

Return the Vehicle

The car dealership has every right to take a car back when financing is not available for the vehicle. The vehicle is not a gift to you, after all. You need to find a way to finance the vehicle or return it to the dealership. Do not be embarrassed to return the car. Both you and the dealer acted in good faith to make a deal. This situation happens quite often and dealers know how to handle it.

the nest