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OMVIC Blog: Car Buying Tips

What happens when you sign a contract, but your financing doesn’t get approved?

Sep 21

Written by: OMVIC Communications
Monday, September 21, 2020  RssIcon

confusion

Recently a consumer named David wrote in to ask,  “I was planning to buy a used car, but my financing didn’t get approved, can I get my deposit back?” 

There are two different financing situations that can affect whether or not David can get his money back. 

The dealer arranges financing 

The Motor Vehicle Dealers Act says that dealers have to provide an ‘Initial Disclosure Statement’ (IDS) on the Bill of Sale. The IDS states that the financing is for _____months at ______interest rate. These are the financing terms on the contract. Both the dealer and the consumer must agree to them. If the dealer can’t get the financing based on the terms, then the consumer can cancel the contract.

The dealer should return David’s deposit or come up with different terms that would be acceptable to him 



The consumer arranges financing

If David got his financing elsewhere, such as a bank, and didn't include a condition in the dealer's contract that payment was “subject to financing,” getting the deposit back may be very difficult. Some dealers may return a deposit as a gesture of goodwill, but they are not obligated to do so. Visit OMVIC's page on Contract Cancellation to learn more. 


Good conditioning

Conditions help establish clarity between the buyer and seller. They spell out what needs to happen before completing the deal. If the condition isn't met, there is no deal and the deposit must be returned. 

An ounce of prevention

Think of including conditions on a contract as an ounce of prevention. If you are unsure of receiving financing for a vehicle, make sure to include it on your contract!

You can make the financing condition as specific as you like, for example: “Subject to financing for ___ months at a rate no higher than _____per cent.”

Note: A dealer could refuse to include conditions on a Bill of Sale. Including conditions isn’t mandatory. The decision is up to you, the consumer. Before you proceed, ask yourself, how important is this condition to me? If it is important and the dealer won’t include it, you may want to shop elsewhere. 

The Bottom Line: Providing written conditions on the contract (before it is signed) can protect you, the consumer. Verbal promises are very difficult to prove: conditions must be written on a contract for validity. 



We Speak Your Language

If English isn't your first language, don't worry. The Complaints and Inquiries Team uses a multilingual translation service.
You can call 416-226-4500 x3942, request a translator in one of over 150 languages and get help. Visit OMVIC's Translation Services page to learn more. 


How to Get in Touch

If you’re a consumer with a car-buying or OMVIC-related question, get in touch with OMVIC's Complaints and Inquiries team via email or phone 1-800-943-6002 ext.3942.

About OMVIC

As the regulator of motor vehicle sales in Ontario, OMVIC’s mandate is to maintain a fair and informed marketplace by protecting the rights of consumers, enhancing industry professionalism and ensuring fair, honest and open competition for registered motor vehicle dealers. Visit omvic.ca to learn more about your car-buying rights as well as additional tips for buying a car in Ontario. For car buying tips, check out the OMVIC Academy. You can view other resources such as multilingual videos and download the OMVIC Car-buying Guide.


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