Tips on Buying Cars: conditional loan, delivery agreement, conditional sale

Question
what exactly is a conditional auto loan. i am buying a 2004 and my credit is not that great but the car lot said i qualify for a conditional loan. what does this mean and what should i watch for. ive never bought a car before so id rather be safe than sorry
thanks

Answer
Ruby,

Thanks for your question.  A conditional loan, simply means that the dealership is going to put you on a contract, and try to sell the contract to a bank.  If they do not sale it to the bank, then they have the right to back out of the contract.  In most states, these are illegal, but most dealerships do it anyway because the consumer doesn't know any better.  For example in the State of Texas where I live, a conditional sale and delivery agreement, the same as a conditional loan, doesn't amount up to anything.  Its not worth the paper its written on.  If the dealership chooses to put a consumer out on a contract, and can't get the contract bought by a bank, then if the consumer knows the law, it doesn't matter what that conditional sale and delivery agreement says, the consumer owns that car, and would simply have to make payments to the dealer.  In some states, there are laws that protect the dealership in this situation, and in most their are laws that protect the consumer not the dealer.  

All you need to be aware of, is that if the dealer can not get this loan bought, that you will have to bring the car back to the dealership.  You should get any amount that you put down back and any trade that you had back as well.  

If I were you, this is what I would do;  I would simply tell the dealership to get the loan bought first, and if the loan gets bought then go in an sign paperwork, and take delivery of your new vehicle.  It saves you a lot of headache that way.

Hope this helps.  If you have any other questions, please feel free to ask a follow up question.

Thanks - JB