Skip to main content

Can a car dealership legally keep my down payment when they ask me to return a car they cant secure financing for ?

Salt Lake City, UT |

Recently purchased a used truck as a cosigner (my father was listed as primary due to credit). My father lives in a different state, so the dealer was going to fedex papers to my dad to sign once they had secured financing and knew the final interest rate, payment, etc. After a week the dealer sent us a letter saying they couldnt secure financing and we needed to bring the truck back... they never sent anything to my Dad to sign. The only thing that was ever signed was my signature as the secondary buyer, on a contract they never gave me a copy of. Well after almost 2 more weeks, I ended up returning the truck, but they say I owe for mileage and wont return my down payment. Can they do that ?

+ Read More

Attorney answers 1


There should have been a "spot delivery agreement" document in the transaction that would say what would happen if the deal fell through and you gave the truck back, whether you would owe anything or get your deposit back. In most states, if there is no spot delivery document, then the dealer would not have a right to deduct anything for mileage because it should have known at the start that the entire deal could fall through because of the contingency that financing might not be approved. It may be hard to believe, but it is true that car dealers will sometimes deliver a new or used car to you and have no idea of whether or not your loan is really approved or not. They do it because they know that if they can put you in their car, and take you out of your’s, then they take you out of the shopping market and that keeps you from buying somewhere else. They only worry about setting up the financing later. If they can't get a lender, then they may call you back and say they need you to get your own loan at your own bank yourself, or you have to come back to the lot and sign a new contract for one reason or another (such as, you don't qualify with that lender, they want more money down, etc). In many states, that can be illegal. Look at your sales paperwork for a document that is often called a Spot Delivery Agreement and then check with a local Consumer Law lawyer. A Spot Delivery Agreement is a paper that says what how long the dealer has to set up the loan and what happens if they don't get it done on time. It usually says they have 3 to 30 days (usually on the short side of that total) and that if they can't set up a loan then you have to give them back the car and maybe pay for the mileage you drove on it. Whether or not you get your trade in or down payment back should also be covered. This whole process is called "dehorsing" by the car dealers themselves (you can read a Car Dealer's Slang Dictionary at this web page: and doing it can be a violation of most state Unfair & Deceptive Acts and Practices laws, if you were buying the vehicle for non-business (personal) use. If your amount being financed is less than $25,000 (look at your finance contract's "federal box" where key finance numbers are stated) then it's very likely to also be a violation of the federal Truth In Lending Act too (that’s a federal financing disclosure law that protects consumers). Some states (like Ohio) also have a law that specifically applies to car dealers doing this sort of thing. If you don't have any spot delivery document in your deal and there is nothing on the finance contract that says it is contingent on financing approval and it says on it that the dealer (by its name) is the "creditor", then your deal may be a final contract and if the dealer can't get a lender to finance the sale for you then legally the dealer is probably stuck having to take your loan payments or accepting your cancellation of the deal, but of course they won't tell you that and they, in fact, will probably say they don't have to let you do it your way at all. You need to talk to a local Consumer Law attorney who deals with this kind of case (it's called "autofraud" or car sales fraud). Call your local attorney's Bar Association or you can go to this web site page for a Free Online 50 State National List of Consumer Law Lawyers ( and find one near you. Don't wait too long becauses there is a time limit before your rights run out (called the statute of limitations). If this answer was helpful, please give a thumbs up below. Ron Burdge,

Can't find what you're looking for?

Post a free question on our public forum.

Ask a Question

- or -

Search for lawyers by reviews and ratings.

Find a Lawyer