Dear Consumer Ed: 

What is the law regarding a used car dealer keeping a consumer's deposit to hold a car pending adequate financing?  I was denied financing.  The dealer refuses to return my $4000 deposit. No contract was signed.

Consumer Ed says: 

If no contract was signed, the dealer should not keep your deposit, even if under ordinary circumstances the terms of his contracts allow him to do so.

To get the dealer to give back your deposit, the first thing you should do is write a letter to the dealer requesting that your money be returned.  Before you send the letter, you may want to consult with an attorney who can actually assist you with writing the letter, as well as with taking legal action should that become necessary.  You can also submit a complaint to the Better Business Bureau (www.bbb.org) and see if their mediation department can negotiate with the dealer to get your deposit back.  You can also submit a complaint to the Governor’s Office of Consumer Protection at www.consumer.ga.gov or by calling 404-651-8600 or 1-800-869-1123.

If you used a credit card to pay the deposit, you should also consider disputing the charge with your credit card company.  Even if you take this route, the assistance of the Better Business Bureau and the Governor’s Office of Consumer Protection described above may still be helpful. 

For future transactions, you should always take the following precautions:

• Select a reputable auto dealer.  Check them out with the Better Business Bureau.
• Ideally, arrange for third-party financing before you go to the dealership so you know the amount of money you can borrow.  At least contact your bank or credit union to find out what interest rate you would qualify for, so you can compare this with the dealer’s financing offer.
• If you do finance through the dealer, wait until financing has been approved before you take possession of the vehicle.
• Before signing anything, give yourself a cooling-off period.  Take your time, think it through, and don't let the salesperson rush you into anything.
• Carefully read all provisions of the contract.  If there are blanks in the contract, ask the dealer to complete them before you sign.  Ask questions if there are items you don’t understand.
• Keep records of all monies you pay in the transaction, and don’t pay with cash.
• Insist in advance on a written assurance that, if your financing falls through, your deposit will be fully refunded and your trade-in will be promptly returned to you. Also, get assurance that if credit terms change, you can cancel the deal.

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Dear Consumer Ed: 

I purchased a brand new 2012 car, and when I got home I noticed it had been previously damaged and repaired (paint runs/different bolts), which the dealer never disclosed to me. I have talked to the dealer three times since discovering this. They keep saying they will replace the vehicle but refuse to put it in writing. It's been two weeks now. What can I do?

Consumer Ed says: 

There could be two kinds of problems in connection with a new car. First, there could be a defect in the car that occurred during the manufacturing process. In that case, you would be protected under the Georgia Lemon Law. However, it doesn't sound as though that's what your issue is. It sounds as though you're dealing with damage to the car that happened after the car got to the dealership.  A dealer is required by law to inform the buyer of any damage to a new vehicle that the dealer is aware of, if the cost to repair it was more than 5 percent of the manufacturer's suggested retail price of the car.  The dealer is also required to disclose any damage to the paint that he is aware of which costs more than $500 to repair.  On the other hand, a dealer is NOT required to disclose damage to glass, tires, wheels, bumpers, radio, or in-dash audio equipment, regardless of cost, so long as the item is replaced with original or comparable equipment. If a dealer does not follow these disclosure requirements he is in violation of Georgia’s Fair Business Practices Act.

If you think the dealer violated the law, you should speak with an attorney.  In addition, you can file a complaint with the Governor’s Office of Consumer Protection at www.consumer.ga.gov or by calling 404-651-8600 or 1-800-869-1123.

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Dear Consumer Ed:

I wrecked my car and it needs major body work. I saw an advertisement for an auto body shop that said they would pay my insurance deductible.  Is that legal?

Consumer Ed says: 

While having the auto body shop pay for your insurance deductible might not be illegal at face value, we would strongly caution you against it.  First, you should look carefully at the specific terms of the contract you have with your insurance provider.  Allowing the auto body shop to pay the insurance deductible may violate the terms of your policy (frequently, insurance contracts state that the policy holder must pay the deductible).  Also, it is likely that the auto body shop will want to recoup the extra cost of the deductible somehow.  It can do this in one of two ways:  by charging the insurance company more than what the repairs would actually cost, which would constitute insurance fraud; or, by spending less money and time on repairing your car, which could lead to more problems in the future (as well as a depreciation of the value of your car). Or, it could do a combination of both of these things. The fact that a practice may not technically be illegal doesn’t make it a good idea, especially if it’s an offer that seems too good to be true!

For more information, you should contact Georgia’s Office of Insurance and Safety Fire Commissioner by visiting www.gainsurance.org, or by calling 800-656-2298.

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