A jury last week ordered an Albuquerque, N.M., Chevrolet dealership to pay a customer more than $2 million in damages for unfair practices and spot delivery regulation violations.

Albert Smith traded in two vehicles to Reliable Chevrolet in a spot delivery deal in 2020, Smith’s attorney Susan Warren, of the Law Offices of Feferman, Warren & Mattison in Albuquerque, told Automotive News. Warren said Reliable Chevrolet defrauded Smith by outlining financing terms they knew a lender would not take and damaged his credit when it missed loan payments for which it was responsible.

Concluding a lawsuit that spanned more than two years, the jury awarded Smith $87,000 in compensatory damages and $2.5 million in punitive damages. A spokesperson for Reliable Chevrolet said the store “disagrees with the jury’s decision” and “will be appealing the verdict and award” but would not comment further.

A spot delivery occurs when a customer is allowed to take their new vehicle home before a lender has purchased the finance contract. The deals are made with the understanding the dealership will find a lender to purchase the contract at the agreed-upon terms as fast as possible.

Spot deliveries have received criticism recently from consumer groups claiming most customers do not realize their deal is incomplete.

“It seems like it is final,” Warren said. “Even though there is language in the contract stating that you can cancel the deal in 20 days if the dealership has not found financing, no one is thinking that will happen. You have left your vehicle and taken their vehicle.”

When Smith came in for the trade-in, he still had $34,000 in an outstanding loan on one of his vehicles, Warren said. Reliable Chevrolet offered Smith $22,000 for the trade-in and told him the remaining $12,000 would be added to the loan for his new vehicle, she said.

“What Smith didn’t know and what Reliable Chevrolet did not tell him was that no lender was going to approve that kind of loan-to-value ratio,” Warren said.

Within the next six weeks, Smith signed two more retail installment sales contracts for the same deal, Warren said.

Critics of spot deliveries want to make dealers responsible for the contract even if they are not able to secure financing. However, some dealers have warned that this would make dealerships into creditors where they are only meant to service loans.

Meanwhile, Reliable Chevrolet was responsible for the outstanding loan under state regulations, Warren said. Though it had already sold Smith’s trade-ins, the store missed two loan payments, and Smith’s credit score dropped 126 points, she said.

Smith had a “consolidation loan denied, and then he also got a credit limit decreased on one of his credit cards,” Warren said. “He ended up having to cancel his plans to move, so you could see the cascading damages.”

Reliable Chevrolet eventually asked a local credit union to make an exception to its loan-to-value guidelines to take on the deal and it agreed, Warren said.

“I think spot delivery violations are an enormous problem, and I don’t think it’s limited to New Mexico,” she said.