Sellers Right to Cancel Claims

Every dealership purchase contract in California (and most of the lease contracts) will have a provision that allows the dealer (the Seller) to cancel the contract if the dealer is unable to arrange financing for your purchase. Dealerships big and small fraudulently use this cancelation provision to cheat consumers every day.

BACKGROUND: Most consumers purchase vehicles with a loan arranged by the dealer. No matter what a dealer tells you, finance companies do not approve loans before the vehicle is purchased. After you purchase the vehicle, the dealer is going to try to assign (sell) the purchase contract to a finance company.

The finance company will look at the signed purchase documents, your credit application, credit report, and may call you or your references before deciding whether to accept the purchase contract from the dealership.

REQUIREMENTS FOR CANCELATION: If the dealer is unable to arrange financing, the Seller’s Right to Cancel allows the dealer to cancel the contract IF THE DEALER NOTIFIES YOU OF THE CANCELATION WITHIN 10 DAYS OF THE PURCHASE. Notice can be actual (such as a telephone conversation) or in writing. If the dealer puts a letter in the mail on day 10, that counts even if you do not receive the letter until later. Sometimes, dealers will back date the letter so it is a good idea to save the envelope because the postmark on the envelope shows the date it was actually put in the mail.

Some dealers will send a letter on day 10, but then keep trying to arrange financing. If the dealer is still trying to arrange financing, then the dealer has not cancelled the contract.

If the dealership cancels the contract, the consumer returns the vehicle and gets 100% of their downpayment back, INCLUDING RETURN OF THE TRADE-IN VEHICLE. If the dealer is unable to return your trade-in, the dealer cannot cancel the contract.

HOW CAN AUTO LAW HELP: Even when dealers do not have the contractual right to cancel the contract (i.e., failed to cancel within 10 days, the dealer can’t return your trade-in, or refuses to refund 100% of your downpayment), they will still try to force you to give up the vehicle—some even resort to grand theft auto.

Auto Law can help stop the dealership from trying to illegally cancel your contract.