Can a dealership claim a deposit is non-refundable if it's not in writing?

May 27, 2015 13:28 by Consumer Ed

Dear Consumer Ed:

Can a dealership claim a deposit is non-refundable if there was no written agreement and those terms are not explicitly written on their website?

Consumer Ed says: 

Generally, verbal contracts for transactions that are more than $500 are voidable (such agreements are usually required to be in writing).  However, if there were any circumstances that would make your oral agreement enforceable, the terms of such an agreement would be found in your discussion with the dealer.  You don’t indicate how you came to pay the dealer this deposit.  Even though there was no written agreement, a deposit can be understood as either money paid in anticipation of delivery of the vehicle or, under some circumstances, money paid to the dealer for its services rendered in finding you a car.  The dealer is likely taking the latter stance. However, if the terms under which you paid the deposit did not specify whether it was a deposit or a charge for the dealer’s services, the likely presumption is that you were paying the funds in anticipation of the sale going through; that is, as a deposit.  If you also agreed that the funds would be returned in the event the sale fell through, then the dealer should be required to refund the money.

Given this information, if you believe that the dealer in this case has no right to keep your deposit, you have several options.  First, you should write a letter to the dealership clearly explaining the situation and requesting a full refund of your money.  You could also submit a complaint to the Better Business Bureau (www.bbb.org) to receive help obtaining a resolution and to warn other consumers about the dealership’s practice.  You can also submit a detailed complaint to the Governor’s Office of Consumer Protection (www.consumer.ga.gov), which is responsible for investigating violations of the Fair Business Practices Act.  If the dealer continues to refuse to refund your money, you may also want to speak with an attorney regarding possible actions you could take.  The State Bar of Georgia (www.gabar.org) provides information to help you locate an attorney in your area that can assist you.

To avoid such pitfalls in the future, before you start shopping for a car, make sure you select a reputable auto dealer.  You can research dealerships through the Better Business Bureau’s website, www.bbb.org, to help you avoid doing business with companies that use these tactics.  When purchasing a vehicle,do not take possession of it until your financing has final approval from the lender.  Rather than obtaining financing at the dealership, consider applying for financing through your bank or credit union before you start shopping.  This will allow you to know in advance that you are approved for the loan and it will make negotiations much easier.  You should also require that the dealer put everything in writing.  If you are going to place a deposit with a dealer, you should obtain or yourself create a written document stating the purpose of the money and under what circumstances you are entitled to a partial or full refund.

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Elderly parent conned into purchasing extended vehicle warranty

April 7, 2015 15:43 by Consumer Ed

Dear Consumer Ed:

I came across a $395 charge on my 88 year-old father’s Visa card statement.  My father has dementia, and was conned into purchasing an extended warranty on his 2011 vehicle.  My father will be charged $160 per month for the next 18 months.  I have contacted the business directly, but the issue has not been resolved. What can I do, and how can I help prevent this kind of thing from happening in the future? 

Consumer Ed says:

If your father is in fact mentally incompetent, then there may be an issue as to his capacity to enter a legally binding agreement.  Whether the business actually understood your father’s condition at the time it sold your father the extended warranty isn’t clear, but if his condition is obvious, or there are other ways you can prove that the business knew or should have known this at the time of the transaction, then the business may have been acting in an unfair or deceptive manner in violation of Georgia’s Fair Business Practices Act (“FBPA”). If you believe this is the case, you should seek the assistance of an attorney.  Additionally, you may file a complaint with the Governor’s Office of Consumer Protection at www.consumer.ga.gov or by calling 404-651-8600.

As far as your options for preventing this type of situation going forward, you may want to consider becoming your father’s guardian in some capacity.  The Division of Aging Services within the Georgia Department of Health and Human Services has compiled a summary of guardianship law in Georgia that you may find helpful.  You can contact them at www.aging.georgia.gov or by calling 404-657-5258 (toll-free at 1-866-552-4464).

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Car loan denied; can dealer charge restocking and mileage fees?

September 24, 2014 23:30 by Consumer Ed

Dear Consumer Ed:

Is it legal for a car lot to charge a re-stocking fee and 50 cents per mile on a car because the loan was not approved?           

Consumer Ed says: 

It sounds like you entered into a conditional sales agreement known as a “spot delivery” transaction.  With spot delivery, the buyer takes possession of the vehicle “on the spot,” upon making a commitment to finance the vehicle, but not yet having a definite arrangement for financing with a bank or finance company.  It would appear that you negotiated loan terms with the dealership and agreed to buy the car only if a lender agreed to finance the deal according to those terms.   The car remains the property of the dealership until a lender finances the deal.  Since the dealership was not able to find a lender to finance your deal, the dealership may be entitled to order you to return the car and to pay for its temporary use.

The amount that you may be charged for using the car depends on the agreement you signed prior to taking the car off of the lot.  Dealers who offer spot delivery usually require potential buyers to sign a “bailment agreement” outlining what would happen if the dealer was unable to secure financing with a bank or finance company.  If you signed a bailment agreement, and if it includes a reasonable restocking fee and per-mile fee, then these fees are likely legal.

However, even if the fees are legal, the dealer could still be in violation of the Governor’s Office of Consumer Protection’s Auto Advertising and Sales Practices Enforcement Policies.  For example, if the dealer represented that you had been approved by a prospective lender prior to your purchasing the vehicle, it would be unfair and deceptive for the dealer to require you to return the vehicle for an alleged failure to obtain lender approval. In that event, the dealership should also return any down payment you made on the vehicle if you are denied credit approval and choose not to pursue any other financing options.

You have additional rights if you traded in a vehicle as part of your transaction.  First, the dealer should have retained both title and possession of any such vehicle until financing is actually approved.  Second, if you choose not to execute another finance agreement for the purchase of your vehicle, the lot must immediately return your old vehicle to you.  If you believe the car lot engaged in any of these prohibited practices, you may file a complaint with the Governor’s Office of Consumer Protection by visiting www.ocp.ga.gov/consumer-services/filing-a-complaint, or calling 404-651-8600.

To avoid this situation in the future:

  • Prepare in advance.  Shop for financing as you shop for a vehicle.  Ideally, arrange for financing ahead of time through your bank or credit union so you know the amount of money you can borrow.  At least contact them to find out what interest rate you would qualify for, so you can compare this with the dealer’s financing offer.
  • Read through all documents thoroughly before you sign. If there are any blanks left in the contract, you and the dealer should complete them before you sign.  Ask questions if there are items you don’t understand.
  • Get everything in writing. Insist in advance on a written assurance that if your financing should fall through, your deposit and your trade-in will be returned to you; or, if credit terms change, you may cancel the deal.
  • Wait until financing has been approved.  If you do work with the dealer to secure financing, seriously consider waiting until financing has been approved before you take possession of the vehicle.

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