Spot Delivery Advisory

July 2013

By: Michael J. Dommermuth

Colorado dealers must be vigilant to fully comply with the spot delivery regulations in order to avoid lawsuits and regulatory issues with the Auto Industry Division. A number of recent claims highlight the need for proper procedures to be followed in making spot deliveries. Those policies include the following items:

  • FINANCING
    • Never guarantee financing. Your purchase agreement with consumers should state that the dealer does not guarantee financing. Further, your personnel should be trained so that they never make any promises or guarantees of financing.
  • CANCELLATION
    • Your purchase agreement must specify that you have the right to cancel the contract if financing is not arranged.
  • RETAIL INSTALLMENT SALES CONTRACT
    • If the form you are using requires a separate buyer’s signature in the Seller’s Right to Cancel box (such as the Reynolds Law contract), make sure the box is fully completed and signed by the buyer in every transaction.
  • NOTICE OF REJECTION OF FINANCING
    • A dealer must give notice of rejection of financing to a prospective buyer within 10 calendar days from the date of delivery. The best practice is to give notice in writing prior to 10 days in any deal that is not funded.
  • BAILMENT CHARGES
    • Your purchase agreement should specify that the dealer is entitled to apply bailment charges against any deposit received or against any trade-in in the event a sale is cancelled because financing is not approved.
  • RE-CONTRACTING
    • If a deal requires re-contracting, do not post-date the deal to the date of the original delivery. The contracts must be dated the date they are actually signed in order to avoid any Truth In Lending Act violations.
  • TRADE-INS
    • Never pay-off or sell the trade-in until the transaction is funded. Proof of financing approval is not sufficient as financing sources frequently change their minds or raise additional conditions. Thus, it is essential to hold pay-off and re-sale of the trade until the deal is actually funded.

If you have any questions or issues, please feel free to contact Michael J. Dommermuth at (303) 894-4432 or mdommermuth@fwlaw.com, or any member of the Fairfield and Woods' auto dealer practice group, Craig D. Joyce or Michelle R. Magruder

This article is published for general information, not to provide specific legal advice.  The application of any matter discussed in this article to anyone's particular situation requires knowledge and analysis by a lawyer of the specific facts involved.

Copyright 2013 Fairfield and Woods, P.C., ALL RIGHTS RESERVED.

Comments or inquiries may be directed to Michael J. Dommermuth.