Mama Wolf - Greater Cincinnati Automobile Dealers Association

Mama Wolf

By Thomas B. Hudson*

In the March issue, we reported on the experiences of a young woman who makes her living training dealers in the area of sales and financing compliance. A dealer F&I fellow, not suspecting that she was more knowledgeable about the sales and financing process than he, unsuccessfully tried to pick her pocket in several ways that constituted unfair and deceptive acts and practices and violated federal disclosure laws. We titled the article “A Wolf in Sheep’s Clothing.”

The young woman is the daughter of a good friend of mine. We’ll call her “Mama Wolf.” Shortly after the article appeared, Mama Wolf, who also teaches car dealers about sales and financing compliance, had a dealership experience of her own. Here’s her account:

So… I am the kind of person who likes to drive a car a long time, but my MiniCooper had proved to be unreliable. Since I take this as a personal betrayal, I decided it was time to find a new road partner. I have been eyeing the Audi Q5 for awhile, and I found a very gently used one at the local Audi dealership. My accountant advised me it was time to buy a car in the business name, a new experience for me but I don’t know that it made any difference in the process.

The salesman was actually very good – an older gentleman who figured out quickly that I was making the buying decision (and not my husband, who was with me). He knew the car well and encouraged me to have fun with it on the test drive, and spent a lot of time explaining all the newfangled technology.

But then it was time to deal with F & I.

I told the F & I guy what I do for a living. He pulled out his “menu,” and I told him that while I knew he may have been told he has to go over all the options, I wasn’t interested in most. He seemed personally offended that I didn’t want to buy GAP, but he didn’t try to tell me it was required.

He quoted me an interest rate that I could live with, so we signed the paperwork. He put a temp tag on the car, and off I drove. That was on Friday. On Monday, the F & I guy called me and told me that they hadn’t been able to get me financed at the rate he quoted me, and that the rate would be almost 1.5% higher. He asked when it would be convenient for me to come in to sign a new contract, or, if I preferred, he could send someone to my house with the new contract.

I thought about it for a few minutes and told him that I had signed a contract that I was happy with and that I had not signed a conditional delivery or spot delivery agreement. On top of that, the Dealer Reassignment form was signed and notarized, and he put a temp tag on the car, meaning, at least in North Carolina, that ownership had been transferred, and the car was mine.

He was very quiet, then said he thought a conditional delivery agreement was included in the Buyer’s Order, then asked me again when I could come sign a new contract! I told him I was familiar with the LAW ® Buyer’s Order and that it did not include a conditional delivery agreement. I told him I’d think about it, and maybe call my attorney and talk about it, but since I was happy with my current contract, I didn’t think it would be convenient to come back and sign a new contract any time soon.

About an hour later, the F & I manager called me and said, “Good news! We have a lender at your current rate! No need for a new contract.”

Mama Wolf’s story illustrates a legal point we’ve made in this publication for decades. When a dealer sells and finances a vehicle by having a buyer sign a retail installment contract, the dealer has agreed to sell the car and collect the buyer’s payments until the car is paid for. The dealer may assign the contract to a bank, finance company, or credit union, but if no potential assignee will agree to buy the contract, the dealer is stuck with it unless the dealer has entered into an agreement with the buyer to unwind the deal if no assignee can be found. If the dealer has no unwind agreement, the dealer has no right to undo a deal and must hold the contract and collect the buyer’s payment. In other words, the failure to use an unwind agreement turns the dealer into a buy-here, pay-here dealer.

Her story also makes me wonder. If we give her F&I guy the benefit of the doubt and assume that he wasn’t purposely spotting a car with the intention of pulling the deal back in and bumping the rate on the buyer, then we are left with a couple of conclusions.

Conclusion #1 – This F&I fellow doesn’t understand the most basic aspect of dealership financing, namely that the dealership is the initial creditor in a car sales and finance transaction.

Conclusion #2 – Here’s an experienced F&I operator who has not read and committed to memory the terms and conditions of the retail installment contract he is asking buyers to sign. He simply doesn’t know what is and (more importantly in this case) what isn’t in the contract. He ought to know that contract’s terms backward and forward.

The lessons for this dealership? If the dealership is unwinding deals without the legal authority to do so, chances are it hasn’t had a legal review of its operations recently. And, if the dealership’s experienced F&I folks are as clueless as this fellow is, spending a few bucks on F&I training seems like a no-brainer. It just might keep the wolf from using the dealership as its prey.

* Tom is the CEO of and Of Counsel in the law firm of Hudson Cook, LLP.  Tom has written several books and is the publisher of Spot Delivery®, a monthly legal newsletter for auto dealers.  He is Editor in Chief of CARLAW®, a monthly report of legal developments for the auto finance and leasing industry.  Tom can be reached at 410-865-5411, or by email at