When financing fails on a purchase

Buyers often get what is called seller-assisted financing. Frequently they do so without ever knowing what they are getting or what they have agreed to. Then weeks or even months after the purchase the dealer calls telling them the financing did not go through and they have to bring back the vehicle.

The rights of the buyer and seller are spelled out in the California Civil Code, and in the contract itself. According to the law, everyone, the dealer and the buyer, gets back what they brought to the table. The dealer gets back the car, and the buyer gets back the downpayment and the trade in, "without demand."

Most standard preprinted contracts have a section called "Rescission Rights." It should be called "Dealer's Rescission Rights" because it does not give the consumer many rights at all. It usually gives the dealer a 10 day right to rescind the contract if the financing fails. It also tells the dealer exactly how they must exercise the right to rescind.

But what happens if the dealer waits more than 10 days to exercise his rights of rescission. It is a breach of the contract. The reality is that the dealer, even though well outside the 10 day window in the contract, may very well send a tow truck and take the vehicle. If so, the dealer may be liable for the breach of contract, the taking of the vehicle, and damages caused by the taking.

Contracts vary and each contract must be read to determine your rights. You should consult a lawyer regarding contract questions.