If a car buyer wants to cancel a signed contract, you, as the dealer, have four options:
- Cancel the contract and refund the deposit: This is usually the quickest and simplest solution. It can also generate goodwill and boost your brand reputation.
- Try to salvage the deal: Provide the customer with options that address their concerns. For example, offer to find a more suitable or affordable vehicle.
- Ask for money: You can ask the car buyer to pay for the costs you have faced because of the canceled contract. These costs should make sense and be proven. If a car buyer complains about these costs, OMVIC might ask you for proof.
- Go to court: You could pursue civil action and ask the court to enforce the contract. While an option, this course of action is expensive and time consuming. Meanwhile the vehicle sits on the lot and can’t be sold.
See Section 50 of the MVDA for more details on contract cancellation.
When a car buyer can cancel a contract
Car buyers have a legal right to get their money back or cancel a contract in these cases:
- If there’s no signed contract.
- If you, the dealer, don’t meet certain conditions in Section 50(1) of the MVDA.
- If the car buyer wasn’t informed of important things about the deal.
- If there are unfair business practices used. These are outlined in Sections 14-16 of the CPA.
You as the dealer must inform car buyers of certain mandatory disclosures and if this doesn’t take place, car buyers can cancel the contract within 90 days of getting the vehicle. These mandatory disclosures are referred to as the “Six Deadly Sins” because they can ruin a deal. Cancellation of the contract includes financing, extended warranties or other agreements stated in the contract.
Under the CPA, if you engage in deceitful practices and mislead car buyers into signing, they can cancel the contract within a year of signing.
To find out what to do when customers can legally cancel a contract watch the video and review the fact sheet below:
Understand contract cancellation: fact sheet [pdf]