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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