Warranty issues and unpaid liens drive substantial compensation claims

Published On
December 20, 2023
Category

OMVIC’s compensation fund has provided a safety net for more than 100 car buyers left out of pocket in the past year by failed or dishonest Ontario car dealers

Graham Michaels / Postmedia Content Works

The compensation fund of OMVIC, Ontario’s motor vehicle sales regulator, is there as a last resort to help car buyers affected when dealers cease trading or have their licence to trade revoked or when there are issues with registered dealers and salespersons. During the financial year 2022-23, the fund paid out more than $800,000 – more than double the 2021-22 total – to buyers left out of pocket by failed auto dealers. OMVIC compensated 128 car buyers let down by the bad practice or bankruptcy mainly as a result of four dealerships in the Ontario. 

The fund paid out around $240,000 when GTA-area dealer, Echo Auto Group failed to discharge the liens on trade-ins, did not submit paid-for warranty applications and failure to deliver a vehicle leaving the car buyer on the hook for the entire loan. A further $171,000 went back into the pockets of customers of the bankrupt CarOne operation in Kingston, whose in-house warranty scheme was rendered worthless. When OMVIC revoked the licence of Best Rate Auto Sales in Windsor, $140,000 was paid out in compensation for unpaid liens and warranty non-submittals, with the same reasons accounting for another $517,000 – more than half of all payouts from the fund – returned to car buyers who had dealt with the bankrupt London dealer, DriveTime. 

This year, there have been some common claim types made to the compensation fund. The first is when a dealer has failed to pay off an outstanding lien on a vehicle that the car buyer has traded in against a newer one. As we saw in an article earlier this year, if you find yourself on the hook for two sets of repayments – against the new vehicle as well as for the old – alarm bells should ring. As OMVIC’s director for the Compensation Fund, David Dailly observes, “It’s not normal for the dealer to be reimbursing the payments for your trade-in, either. Regardless of whether the dealer is reimbursing you, by not paying off the old lien it is already in the wrong.” 

The second common reason for compensation payouts is when a dealer has failed to register an extended warranty that the customer bought and paid for in good faith. We tackled that topic in detail in an article last April, noting that the dealer is legally responsible for submitting payment for the policy to the warranty provider within seven days of the transaction. But as the above list of 2023 payouts reveals, the collapse of a dealer’s in-house warranty scheme can be just as damaging to the car buyers who were relying on it. 

As always, it’s better to avoid a problem altogether than to deal with it once it’s come up. When buying a new or used vehicle, Dailly says you can help to protect yourself against financial loss, even a temporary one, by following these simple steps. 

  • If you had a lien outstanding on your trade-in, follow up with the finance company a week or so after the transaction to ensure that the dealer has paid it off and you won’t be left liable for payments on a vehicle you no longer own. 
  • If you took out an extended warranty as part of your vehicle purchase, contact the warranty company directly to make sure that the dealer registered the policy as promised. 
  • When considering an extended warranty, research long-established providers. 
  • When buying a vehicle sight unseen, make sure you get photos of the exact vehicle and its VIN number. If the dealer does not then deliver it within the agreed upon delivery date, there could be an issue – especially if you’re making payments that are then being reimbursed by the dealer. 
  • Finally, don’t forget that there is no cooling off period for vehicle purchases in Ontario, so make sure you carefully check the vehicle sales contract and finance agreement before you sign. 

If you still encounter issues like those highlighted here when buying a car, and the dealer is unable or unwilling to help, your next stop should be OMVIC’s consumer support team. They’re a great source of advice and in many cases can help resolve the problem with the dealer. Contact details are at the end of this article. 

In the worst-case scenario – the dealer’s license is revoked, it goes into receivership, or you obtain a court judgement against it – then you may be eligible to apply to the compensation fund.  

“The compensation fund is a last resort,” sums up Dailly. “It’s simpler and less stressful to resolve the problem sooner – which is where OMVIC’s consumer support team comes in – or to avoid it altogether by following the simple steps mentioned above. But as we’ve shown in our substantial payouts this year, when all else fails, the fund’s Board of Trustees will help car buyers when we can.” 

OMVIC has been delegated responsibility for administering and enforcing the Motor Vehicle Dealers Act (MVDA). Visit omvic.ca to learn about your consumer rights when you purchase from an OMVIC-registered dealer and sign up for OMVIC’s monthly newsletter. 

Contact OMVIC’s compensation fund team at compfund@omvic.on.ca for questions related eligibility criteria for compensation.  

OMVIC also offers free education and webinars for car buyers upon request. To learn more about your rights as a consumer, contact education@omvic.on.ca for more information on our services and materials. 

Our new OMVIC website launched this past November. It’s been designed to empower car-buyers like you. Whether you’re in the market for a new car, seeking expert advice, or simply exploring your rights as a buyer, our website is your gateway to a wealth of information. With a mobile-responsive design, intuitive navigation and engaging content, we’re committed to making your experience seamless and informative. 

Follow OMVIC on social media to stay up to date on the latest news. IG, Twitter, Facebook. 

This story was created by Content Works, Postmedia’s commercial content division, on behalf of OMVIC.