Car dealer refusing to return money after financing was denied
Dear Consumer Ed:
I put down money on a leased vehicle. The bank did not approve the loan request, so I had to return the vehicle to the dealership. But the dealer is refusing to return my money. Can they do that?
Consumer Ed says:
You likely entered into a conditional sales agreement known as a "spot delivery" or “yo-yo” transaction, a common industry practice. These transactions can lead consumers to believe that a vehicle’s installment sale or lease is final when the dealer gives the consumer possession of the car “on the spot.” However, with spot delivery, although you took possession of the car, a lender had not yet agreed to give you a loan. You instead promised to lease the car if a lender would finance the deal according to terms you negotiated with the dealership. Ultimately, the car belongs to the dealership until a lender finances the deal. Since the dealership was not able to find a lender to finance your deal, the dealer will ask, as it appears has already occurred here, for you to return the vehicle.
Whether you get back your money likely depends on the terms described in the paperwork you signed when you took delivery of the car. You probably signed a "Bailment Agreement," which allowed you to use the car and which should have contained an explanation of what happens if the dealer is unable to secure financing with a bank or finance company. The money you put down, such as a down payment or deposit, may be refundable, but the language in the agreement will provide better insight on whether or not your money will be returned and under what conditions. For instance, some bailment agreements provide for rental rates and usage charges to be deducted from any money you put down.
However, even if the money down is non-refundable, the dealer could still be in violation of Georgia law if it otherwise engaged in unfair or deceptive conduct, such as misrepresenting to you that the deal was approved or final when it was not. If you believe that the dealership engaged in unlawful practices, you may file a complaint with the Georgia Department of Law’s Consumer Protection Division at consumer.ga.gov or by calling (404) 651-8600.
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