Yes, he is full of it. Sometimes, smaller breed dogs (and even larger breeds) don't lose their baby teeth even though they ARE supposed to lose them. The dog should be taken to the vet and the teeth pulled, since it will lead to misaligned bites, tartar buildup, tooth decay, local and systemic infections .... which can lead to heart problems and early death.
If he is lying about that, no telling what else he would lie to you about. Don't walk away .... RUN!
I would definitely look for a dog that you could just spay/neuter and keep as a pet, not one that keeps you tethered to someone that lies to you.
Do you mind sharing the name of this "breeder?"
__________________ Life is merrier with a Yorkshire Terrier! Jezebel  & Chuy  ... RIP: Barkley  Loosie  & Sassy  |