Purchasing a vehicle involves complex paperwork and financial agreements. The Utah Motor Vehicle Business Regulation Act governs these transactions. Utah Code § 41-3-401 sets the rules for dealer-arranged financing. This law dictates what happens if financing falls through. In certain situations, Utah law grants consumers the right to rescind a car purchase. This article explains how that right works.
Dealer-Arranged Financing and Disclosures
Many buyers rely on car dealers to secure their auto loans. Before releasing the vehicle, the dealer must include a financing disclosure in the sale document. When the dealer agrees to arrange financing, the disclosure must state the primary terms. These include the interest rate, loan term, monthly payment, and down payment. The disclosure must appear clearly and conspicuously on the first or front page of the sale document. Both the buyer and the seller must sign it. A dealer may not release the vehicle or issue a temporary permit without it.
The Seven-Day Notice Requirement
A dealer may release a vehicle before final loan approval occurs. Sometimes, the dealer cannot secure financing under the disclosed terms. If this happens, Utah law sets a deadline for the dealer. The dealer must mail a written notice to the purchaser. The notice must state that the dealer could not arrange the financing. It must also tell the buyer of the right to rescind within 14 calendar days. The dealer must mail this notice within seven calendar days of the sale date. A notice is timely if it is postmarked before the seventh day ends. It must go to the buyer’s address on the sale document.
The Buyer’s Fourteen-Day Window
Receiving this notice triggers specific rights for the purchaser. The buyer now faces a choice regarding the vehicle. The purchaser has the legal right to rescind the contract of sale. The buyer must decide within 14 calendar days of the date of sale. The period runs from the sale date, not from receipt of the notice. Rescinding the contract cancels the purchase.
What if the Dealer Fails to Notify?
Sometimes, a dealer fails to provide the required seven-day written notice. The buyer still retains their right to rescind the contract. The buyer may then rescind within seven days of first learning that the dealer could not secure the financing. Separately, if the disclosures are not properly executed, the buyer may return the vehicle for a complete refund. This remedy applies in addition to other penalties under the Act. It is not available to a buyer who materially misrepresented information in writing on a credit application.
Requirements for the Buyer to Rescind
Choosing to rescind a contract comes with specific obligations for the buyer.
- First, the purchaser must return the motor vehicle to the seller.
- Second, the buyer must pay the seller for the vehicle’s usage. This is calculated using the federal Internal Revenue Service standard mileage rate. The buyer owes this rate for each mile driven while the vehicle was in the buyer’s possession.
- Third, the purchaser must compensate the seller for any physical damage. The buyer is responsible for damage occurring while the vehicle was in their possession.
Dealer Obligations Upon Rescission
The dealer also has obligations when a contract is rescinded. The seller must return all payments or consideration paid by the purchaser. This includes any down payment. Furthermore, the dealer must return any motor vehicle traded in.
What Happens to Sold Trade-in Vehicles?
A complication arises if the dealer has already sold the trade-in vehicle. Utah law addresses this situation. If the trade-in is disposed of, the dealer must provide equivalent monetary compensation. The dealer must pay the buyer a sum equal to the trade-in allowance. The allowance is the amount noted in the document of sale.
Declining to Rescind the Contract
A buyer is not required to rescind the contract. Signing the disclosure does not prevent the buyer from seeking other financing. If the buyer does not rescind within the deadline, the following rules apply. The buyer must comply with the contract terms or risk default. The disclosed financing terms no longer bind the dealer. The buyer becomes solely responsible for arranging any needed financing.
Legal Assistance in Utah
If a car dealer has violated your rights regarding contract rescission, you have options. You can seek legal representation to address potential violations of Utah law. Contact Head Law to discuss your situation with a qualified attorney.