IMO.Not sure if it "normal practice"but the dealer would be concerned you may have "problems" with your trade while you are waiting,not sure about if you change your mind while waiting if you have a contract,if they have your car it could be hard to get out of the buy Especially if they wholesale it.
As long as the yard is responsible for any mechanical problems with the loan car you should be ok.It could work out better for you as it protects you against any unforseen mechanical problems or an accident with your car
Who is the dealer?
I am thinking about trading my SS as my kid wants a P plate friendly car so I will probably trade in on a SS ute and buy her a 250 GT Skyline coupe that I will drive during the week.I don't want the Skyline as my only car as I will miss the V8