If a customer provides a deposit without signing a bill of sale, the customer is entitled to a full refund of their deposit, should they decide not to follow through with purchasing a vehicle. Bottom line, it makes little sense to accept a deposit without a signed purchase agreement.
For Members that use UCDA Bills of Sale, the process for making a claim to a deposit on a signed contract is simple and outlined right on the back, under section 3 (section 4 for older versions of the bill of sale):
“ACCEPTANCE BY PURCHASER:
If you refuse to take delivery of the vehicle when it is made available to you, or on the delivery date specified in this agreement, the dealer shall notify you, by registered mail, sent to your last address known to the dealer, that the vehicle is available for delivery.
If you fail to take delivery of the vehicle within seven (7) days of signed receipt of this notice, or if the notice is returned to the dealer unclaimed, the dealer may resell the vehicle with no further notice to you. When the dealer resells the vehicle, you agree to pay the dealer for all losses the dealer incurs.
Any deposit or vehicle traded-in may be kept by the dealer to apply against any loss suffered by the dealer. If the loss is greater than the total of the amount paid as a deposit and the value of the trade-in, you agree to pay the difference to the dealer. The dealer agrees to provide you with a detailed accounting of the resale and a list of expenses incurred. The dealer shall maintain the right to use any legal means available to collect any sum owing by you under this agreement.”
In other words, dealers are required to send the customer a letter, by registered mail, urging the customer to follow through with the vehicle purchase. If the customer fails to take delivery of the vehicle within 7 days of receipt of the letter, the dealer is entitled to re-sell the vehicle and itemize all their reasonable damages incurred in doing so.
The dealer can only claim damages if the dealer has actually spent this money and can justify the spending. Once the vehicle sells, the dealer must provide the customer with a detailed written accounting of all reasonably incurred damages.
What about “Deposit Agreements”? Can you have an “Agreement to Agree”?
Some dealers will take a deposit, and either issue a receipt for the sum received, or draft a short invoice noting the date, the vehicle and deposit received.
This is not a bill of sale.
In order to take a deposit against the purchase of a motor vehicle a dealer must have a fully completed and signed bill of sale. That is law in Ontario. If a consumer asks for their deposit back when there is no signed deal, because they changed their mind, you would have to refund the money, which defeats the purpose of taking a deposit in the first place obviously.
Finally
If you want to be able to make a claim to a customer’s deposit, follow the process listed on the UCDA Bill of Sale. It’s crucial that you have the customer sign the bill of sale—a deposit “agreement” is not enough. Members interested in purchasing bills of sale, or with questions for the legal department about deposits, can contact the UCDA at (416) 231-2600 or toll-free at 1-800-268-2598.