Services
Insurance
Loans
Repairs
Advice
About

What is a backup contract from a car dealer?

A local Toyota dealership is requiring me to sign a backup contract on the car I want to buy. The salesman says that I have to sign this backup contract if I want to purchase the car in case my financing falls through. Not only does it have a higher APR than my credit union loan, but it also means the dealership can run my credit again, potentially lowering my score. What is a backup contract and should I sign it?

avatar
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
“A backup contract is relatively common in the automotive retail space to avoid deals falling apart.
However, since you’ve been approved for financing by a credit union, it’s extremely unlikely that they’ll deny you now.
Instead of signing the backup contract, have the salesman call your lender. Your lender can verify the check is legitimate and the funds are available. The
dealer
will likely agree to bypass the backup contract.
If they’re forceful about it, you can still walk away. Don’t sign any contract you aren’t comfortable with, especially if the interest rate is sky-high compared to your current loan.
Don’t forget that when you buy a new vehicle, you will need proper coverage. Use the free
Jerry
app to help you find the best deal. Jerry compares rates from the top 50 companies in under a minute, delivering the best deals to your phone.”
View full answer 
WHY YOU CAN TRUST JERRY
Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.

Join 4M+ members in lowering their car insurance

Easiest way to compare and buy car insurance

√
No long forms
√
No spam or unwanted phone calls
√
Quotes from top insurance companies
Find insurance savings