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The Sales Contract
If this article sounds preachy, it's for good reason. The subject matter - sales contracts - requires a blunt honesty in order to drive home my point. Or, perhaps it's my way of venting the collective frustration of our 340 new-car dealers.
In writing about sales contracts, I want to give readers the straight goods on what it means to sign a contract when buying a new car. As a dealer, I am amazed at how casually some customers will sign a contract that is worth tens of thousands of dollars. They often do so without batting an eye.
Remember the advice our parents gave us when we were young? "Never sign anything without reading it." All customers should heed their parents' advice. If you are unclear about any details in the contract, don't sign it. It's YOUR responsibility to understand all the details of what you're signing.
In the early stages of shopping for a vehicle, I strongly recommend that you request a copy of a blank retail sales agreement. Take it home and study it. If there is something that you don't understand, then ask the sales staff or a third party to explain it to you. The dealers understand their rights and obligations under the law; it's essential that you understand yours.
The fine print of a sales contract contains a lot of legalese. The print is small, not to hide information, but because there is limited space on the contract. Don't let your enthusiasm about buying a new car stop you from knowing the facts about the contract that you're about to sign.
By signing a contract, both customer and dealer are entering into a legally binding agreement. Both parties are now bound, by law, to honour the terms and conditions outlined in the contract. Just as in real estate, once you have signed an offer, which has been accepted by the dealer/vendor, you've bought the car/house. It's yours.
After you have signed on the dotted line, there is no 'cooling off' period - unless the contract is signed at your principle residence. In that case, customers have 48 hours in which to abrogate (walk away from) the contract if they wish, without penalty or financial obligation.
You might ask, "What if I get buyer's remorse"? Well, if you feel that you have made a bad decision, or that you can get a better deal somewhere else, it's too late once you've signed the contract. In cases like this, when the dealer refuses to cancel the deal and return the deposit, unbelievably, the customer will accuse the dealer of dealing in bad faith and of being disreputable. In reality, the reverse is true - the customer has acted in bad faith by failing to honour the contract. When a customer feels buyer's remorse, it's bad for the customer, and bad for the dealer as well.
Sometimes buyer's remorse is triggered by a follow-up call from a sales rep of the dealership that you did not buy from. The rep will want to know how much you paid for your vehicle. Regardless of the figure you admit to paying, an upset sales rep may try to convince you that you paid too much. Unfortunately, buyer's remorse can happen needlessly, as a result of a sales rep who is annoyed at having invested time and energy without receiving compensation for his/her efforts.
If you have signed a contract that you now regret, don't expect the dealer to cancel the deal and return your deposit. If you sign another contract at a second dealership, you are now the proud owner of two cars, unless you are prepared to pay the consequences of canceling the first contract. According to the Ontario Motor Vehicle Industry Council (OMVIC), "Dealers do not encourage or counsel anyone to break a contract already made with another dealer". A sales rep or dealership involved in this type of activity is subject to a review of their OMVIC sales licenses.
Feelings of regret could work both ways. For instance, after a dealer has signed your contract, he/she may get a better offer from another customer, on the car you have just purchased, which may happen to be the last one available, of that model. Would it be okay for that dealer to try to break your contract because he/she is offered more money than you have paid? No. A contract is a contract, and both dealer and customer are bound by its terms and conditions.
If your trade-in vehicle is part of the contract, then it is valued 'as appraised'. Modifying the vehicle in a way that reduces its value (i.e., changing tires, removing accessories, damage to the vehicle, etc.), prior to turning it in, is unethical and not allowed. You wouldn't expect a dealer to remove items on your new car prior to you taking delivery of it.
The circumstances by which a contract can be cancelled are part of the fine print on the back of the contract (items 10, 11 and 12). If a deal is canceled, the dealer has the right to be compensated for damages/costs (i.e., transporting the vehicle, license fees, cleaning, accessory installation, interest costs until the vehicle is resold, additional resale commissions, etc.). The dealer is entitled to keep a portion of your deposit as damages, not as a penalty, as long as he/she is able to prove damages. In calculating damages, some dealers often believe that the sales rep should be paid a portion of his/her commission on the sale. After all, the rep did his/her job and should be compensated for the time and effort that went into making the sale.
What about verbal agreements? Are they valid in a court of law? Courts have determined that verbal contracts can be valid, but they are usually difficult to prove. To avoid any misunderstanding, make sure that any verbal promises and representations (i.e., subject to finance, insurance, delivery date, etc.) are always in writing, on the contract.
In conclusion, contracts are serious business. Before you sign one, you must fully understand all of the terms and conditions of the contract. If you are unclear about anything at all, find out. After all, a well-informed customer is a better customer. Knowing your rights and the dealer's rights will save a lot of grief for everyone.
Ken Shaw Jr. is President of the Toronto Automobile Dealers Association and is a new-car dealer in Toronto. E-mail comments to president@tada.ca
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