FAQ Answer Page- Can the dealer cancel my contract?

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Overview: California's Lemon Law
Dealer's Right to Rescind

Q: The dealership called, claimed that they could not get my car financed, and demand I bring the car back immediately.  Can they do this?
A: Yes.  Assuming the car was delivered to you with the understanding that the sale was being financed, the dealer has every right to demand the car back if the dealership cannot obtain financing for you at the terms you agreed to.  In that case the agreement is deemed to be automatically rescinded, and the parties are obligated to return all consideration given to the other.  This means you must return the car, and the dealer must return your downpayment.  On the bright side, you just got to use their car for free.  Often, the dealer will try to convince you to change the contract terms, by increasing the down payment, interest rate, etc.  You are under no obligation whatsoever to do this.  If part of your down payment was a trade-in, the trade-in must be returned, or if already sold, the trade-in value or fair market value, whichever is greater, must be returned.  Occasionally, the dealership will simply tell you that no financing could be obtained, so make the payments directly to them.  Before agreeing to do this, you should have them verify, in writing, that your good payment history will be reported to major credit reporting service(s), as it would have by, say, Ford Motor Credit, so that your FICA score will go up.  If you really want to keep the car, this is a geat time to re-negotiate a better deal (assuming the dealership wants you to keep it).  If you bought the car  "new", it must be re-sold as "used."  If you bought the car "used," you may have discovered something about the car by now that is not what they represented.  Use this info to renegotiate a better deal, or eliminate/renegotiate items the finance manager convinced you to add on to the contract of questionable value, like a service contract, GAP insurance, or any needless and overpriced thing sprayed on the fabric, paint, or undercarriage.    

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NOTICE: Information printed here is not legal advice.  The information is general in nature, and is not intended as a substitute for legal advice or a legal opinion on a specific individual fact scenario. Individual rights, remedies and obligations vary; laws frequently change. Your specific facts should be reviewed by this office before taking any action on your own. Results are not a guarantee or indicative of future success. Site content approved by Michael R. Quirk.

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