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Think Of Deposit As A Positive - April 22, 2006
When you're ready to buy or lease a new vehicle, the salesperson will ask you to make a deposit. This is standard operating procedure at all new-car dealerships across Canada.
A deposit is simply monies paid by the customer to secure the vehicle and to demonstrate a commitment to buy. Deposit amounts vary, but usually 10 per cent of the sale price is reasonable.
On leased vehicles, deposits usually amount to the first month's payment, a security deposit and a few miscellaneous expenses (PDI, licensing, etc.).
Why is a deposit necessary in the first place? Isn't a handshake agreement or verbal commitment enough? Nowadays, those types of agreements aren't the norm, especially on big-ticket items like cars or houses.
When booking air tickets or a hotel room, deposits are routine. It's a way for the vendor to secure the purchase of a product or service on the buyer's behalf. It also delivers peace of mind to you, knowing that your car, hotel room or condominium won't be sold or offered to someone else.
If I could give one piece of advice, it's this: do not put a deposit on any vehicle unless you're serious about buying it.
As a car buyer, it's your responsibility to understand the details of the Motor Vehicle Purchase Agreement and all of the information contained in it. If there is some aspect of the agreement that you don't understand, then you should find someone who can explain it to you.
It's also your responsibility to understand the type of car you're buying. Salespeople will do their best to explain about the various makes and models, standard features and financing options. But it's up to you to research your purchase carefully to ensure that you make the right decision.
In some circumstances, buyers will put deposits on vehicles, only to change their mind before taking delivery. This could happen for any number of reasons: lack of money, buyer's remorse, loss of employment, etc.
From a legal standpoint, once you sign a contract and make a deposit, you're obligated to fulfill the terms of that contract. That means paying the remainder in full with certified funds, financing or leasing arrangements.
Are there circumstances when a deposit might be refunded in full or in part? Yes. But it's usually at the dealership's discretion and it must be for a good reason.
Here's a scenario: A buyer puts a deposit on a brand new car and the dealership orders the vehicle from the manufacturer. The vehicle arrives five weeks later, after which the car is prepared and readied for delivery. The dealership has purchased the car, spent time preparing it for delivery and arranged financing on the customer's behalf.
Two days before the customer is scheduled to take delivery, he phones the sales rep and says, "Cancel my order. I've changed my mind. I want my deposit back."
In this case, the customer is not entitled to get the deposit back because the request was unreasonable. The dealership invested considerable time, money and resources in securing the vehicle and it acted in good faith.
In some cases, if the customer genuinely can't follow through on the commitment to purchase, a dealer might utilize the "explanation of damages" clause in the Motor Vehicle Purchase Agreement. This clause stipulates that the dealership can take a fee from the deposit, usually ranging from $500 to $1,000, to cover the salesperson's time, pre-delivery inspection, interest charges incurred and other fees that relate to preparing the car for delivery.
If you've put a deposit on a car and the purchase is contingent upon financing, that's a different story. When credit issues arise, then the dealership will help the buyer pursue other financial options. If financing still can't be arranged and all avenues have been exhausted, the customer is entitled to get the full deposit returned.
Or if a dealership fails to deliver your vehicle within 90 days, then you have the legal right to cancel the agreement and receive a full repayment of your deposit. Alternatively, a new agreement could be written up with a new delivery date and new terms of sale.
A deposit should be viewed as a positive step in the car-buying process. It signals an end to the decision making and the start of the excitement phase when you look forward to your brand new vehicle.
And the only thing more exciting than waiting for your new car is actually driving away in it.
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