Huh? What do you mean?

Welcome to the wonderful world of dealerships. This kind of stuff actually happens way more than it should – the dealer you worked with a couple weeks ago calls you up and tells you that you need to return your car, or sign a new contract with a higher payment.

Is this legal?

First, it’s important to understand how car leasing works in order to answer this question. The dealer essentially works as a middleman between consumers and the leasing company. This means that in signing your leasing contract (under your bailment agreement), you basically are also signing for your dealer to represent you and set up the financial terms of your leasing contract. Your dealer could also theoretically look for a leasing company after you already signed the bailment agreement as a separate document.

What this basically means is that if the dealer can’t find a leasing company to finance your lease (let’s say your credit is bad), then they can actually ask for their car back after you already signed the lease, being that you were never actually approved. Wild, no?

Yes, wild. I can’t just keep the car anyway being that we both signed the contract?

Nope, sorry. The contract is contingent upon your approval from a leasing company and the car doesn’t technically belong to you at all. You won’t even be able to register the car.

How is this even possible?

Well, usually dealers will do a soft credit check on consumers to see where they’re at and decide whether or not to waste their time on the deal and weed out people with bad credit. This is usually a pretty smart practice on their part. But suppose a person comes out with border-line credit and they’re not sure if the leasing company will approve them or not? They’ll oftentimes not even tell the consumer of this potential problem and allow them to sign the agreement and drive away with the car unaware that they actually have no claim to the car whatsoever. Yeah, dealers can be sneaky. We know.

So what can I do?

If this happens to you, make sure to ask the dealer EXACTLY why he wants you sign a new contract with a higher payment, and definitely also know that you always have the choice to just return the car and look for a different deal elsewhere.

Also, if your credit is bad you could try to get your own auto loan from a credit union or local bank if you want to keep the car.

Check out our exclusive lease deals here.