Is cancelling the finance contract after 10 days possible?

Is cancelling the finance contract after 10 days possible?


A very common case of dealer fraud our attorneys usually face is the dealership’s cancelling the finance or lease contract to make car buyers sign a new contract with new terms benefiting the dealership itself. The scenario for such a fraud goes something like this: a car buyer (usually with a low credit score) turns to the dealership for financing. In mysterious conditions the buyer gets a call next day and learns he can take the car home and enjoy the drive. A few weeks later the already worried buyer calls the dealership to see who has financed the car but there is no answer there. Another week later, the buyer receives an e-mail from the dealership stating that he/she didn’t qualify for the financing. What a shock! The dealer is actually cancelling the finance contract. Instead, they offer another contract with higher interest rate and so on, so forth.

The dealer fraud is obvious. This kind of fraud can also be considered a subtype of “Yo-Yo Financing”.

Now let’s look at the facts and see how cancelling the finance contract after 10 days of signing works.

In order to avoid such a fraud, first of all, look at your contract. That’s a document with “Retail Installment Sales Contract” at the top. At the back of the contract, there is a section called “Seller’s right to cancel”. This means that the car dealer will look for a financing source for your purchase. But if the dealer cannot find anyone who would do the financing (or buy your purchase contract), then they CAN cancel the contract. For this, they have 10 days only. If you applied for financing by trading-in your car and paying, for example, $3000, then when cancelling the finance contract the dealer has to return your money and your trade-in.  If they have already sold your trade-in in an auction, you can require the whole price of the car i.e. the price at which they sold the car.

A car dealership cannot charge you for driving the new car. You are only responsible for the damage (if there is any) the car suffered during those ten days when the car was in your possession.

Let’s not forget about the second part of this fraud. This is when the car dealership forces you to sign a new contract with a higher interest rate. Remember, this is illegal. You are not required to sign any new contract.

And, at the end, if they contact you after the 10 days are gone, they cannot cancel the contract.  They have to carry it.

As you can see this type of car dealer fraud is rather a complicated one and the best advice we can give you is to contact an attorney.