Don’t Lose Your Shirt Trying to Save a Bad Deal

When a deal goes south and the customer refuses to go along for the ride, it's time to bail out

Who said money doesn’t grow on trees? A case in point is the awarding of more than $26,000 in attorneys’ fees to a plaintiff in a suit against a Connecticut dealership that unwisely fought to get its way in a soured purchase transaction.

This award was in addition to the judgment entered against the dealership and in favor of the plaintiff. Following a trial, the court found the plaintiff, Sharay Freeman, was entitled to $2,500 in compensatory damages, $7,500 punitive damages, and pre- and post-judgment interest of 10% per annum. With estimated accrued interest of $1,500, the cost to date for the dealership in question is $37,351.50.

This is a very expensive outcome for a dealership refusing to return a customer’s $2,500 deposit.

Suffice to say, if I could figure out how to legally turn $2,500 into more than $37,000 in little more than a year, I would not be writing this article.

The facts

Some in the industry will view this judgment as a judiciary out of control or the blight of plaintiffs’ lawyers. Such a view would be a mistake.

What happened here is all on the dealership. This kind of thing occurs when a dealership is hell-bent on taking an aggressive approach with a customer. When this customer did not yield, the dealership’s business practices cost it. Look at the facts before you write it off to another decision for a plaintiff in a car deal.

The plaintiff went to A Better Way Wholesale Autos to purchase a 2007 Honda Odyssey EX-L advertised for sale at $10,995. On February 16, 2013, Ms. Freeman signed a retail purchase order for the vehicle. The order showed a cash purchase price of $10,995, VIN etch for $198, dealer conveyance fee of $598, sales tax of 6.35%, and an unspecified amount for registration of the vehicle, which the plaintiff reasonably expected to be under $150. The purchase order showed a deposit of $2,500, with the statement “No Refund of Deposit.”

When Ms. Freeman questioned the no-refund language, she was told not to worry because the deposit would be returned if she could not secure financing for her purchase. Two days later she returned to the dealership and paid the $2,500 deposit after she calculated online that her monthly payment on a 42-month loan at 19% (the state maximum) would be $320 per month.

The “deal”

Five days later, Freeman was told she was approved at 26%, but because the law did not permit interest above 19%, the dealership had to “buy down” the loan to get it within the legal interest rate. In addition, she was told the bank required her to have gap insurance and a service contract, resulting in a monthly payment in excess of $500 per month. When Freeman declined the offer, the dealership came back with two other options:

  • Option one listed the sales price as $10,995 but included a tire and wheel package for $1,390, oil changes for life for $299, and a service contract for $1,474.
  • Option two listed a sale price—including sales tax of $949.58—of $12,441.58, a service contract for $1,474, and a tire and wheel package for $1,390.

Both proposals required the plaintiff to pay $21,292.90 over the life of the loan—an amount twice the cash price of the vehicle, and thousands of dollars more than she would have paid had her monthly payments been $320, which she calculated they should be.

This is compliance?

Neither financing package presented to Ms. Freeman contained exactly what was provided in the Buyers Order originally signed. All finance offers included additional charges or increased purchase prices. According to the testimony at trial, the dealership would have lost money on the original deal, but would have profited $1,000 had Freeman agreed to proposed extras in the finance packages.

And there, ladies and gentlemen, is the rub. Rather than simply walking away from a bad deal, the dealership refused to let go.

Forget the numerous compliance violations like failing to include forced gap as part of the finance charge, and the lack of an Adverse Action notice for failure to provide credit on substantially the terms requested, and no acceptance of a counter offer. How about using common sense?

A wiser tactic

If your aggressive sale and finance tactics don’t work and the deal is not good for you, walk away.

In this case, nowhere was there even a suggestion that the dealer would return the down payment if the deal suddenly became a loser and the customer was unwilling to pay more for the vehicle or additional products.

Over the years, I argued in court often that there is nothing wrong or illegal about a dealership making a good deal for itself that is maybe not so good for the customer. This argument was 100% successful where there had been full disclosure, and terms agreed to by the customer were provided.

Here is the bottom line:

  • Strong-arm tactics can cost far in excess of the profit being sought.
  • Before you even think about holding back a deposit, you better dot your i’s and cross your t’s, and submit a finance offer to the customer that reflects exactly what was agreed to, and signed off on by both parties.
  • Adding a month or twelve to the term, or including service contracts and other ancillary products, changes the deal for the customer and you the dealer.

When a deal turns south for you and customers refuse to go along for the ride, bail out and put them back where they were before you started—including returning deposits and trades.

David R. Missimer,, is general counsel for Automotive Compliance Consultants, Inc. He spent 28 years in private practice as a litigator representing lenders, auto dealers and numerous other entities and individuals.

David R. Missimer


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