Signing the contract for a used car

Signing the contract for a used car – is there a “cooling-off period”?
Almost everyone’s had the experience of making a purchase, and then thinking better of it. If you bought from a door-to-door salesperson, Ontario law gives you ten days to “think about it” and change your mind; same with a contract with a fitness club. But what about a used car? After signing the contract, do you have the right to cancel it? Let’s look at the legalities as well as the options available.

You’ve signed the contract, agreed to payments and made a deposit on the car. How long do you have to cancel the deal?
Legally, you don’t have the right to unilaterally cancel your used (or new) car purchase (unless there are special circumstances, covered below). There is no “cooling-off period”, as some people may assume. In fact Ontario law requires that a large, bold print statement be included on all motor vehicle bills of sale that states “SALES FINAL” and that the contract is “final and binding” once you have signed it.

Can I negotiate a solution with the dealer?
Possibly. You may, for example, be able to arrange to have a portion of the deposit returned or applied to the purchase of a different car.

Are there any legal grounds that would allow cancelation of the contract?
Yes: In 2010, the Ontario Motor Vehicle Dealers Act was revised to protect buyers who are deliberately misled about certain information. “If three of 22 items are not disclosed, if the odometer reading shown on the contract, for example, is off by more than 1,000 km from the exact reading, if the contract did not state prior use, if there is an incorrect description of make model or year, or if the contract does not states the vehicle is branded, salvaged or rebuilt, when in fact it is, a consumer can cancel,” explains Bob Pierce, Member Services Director of the Used Car Dealers Association of Ontario.

What about advertising?
The guidelines are clear about advertising claims. If a vehicle had been used as a daily rental, police cruiser, taxi or limousine, this must be spelled out. Failure to disclose information or false advertising can be considered reasonable grounds for cancellation of a sales contract on used cars.

Is there a cancellation policy?
Some dealers have a written cancellation policy and will not keep or hold a deposit, but this varies from dealer to dealer. Most bills of sale in use in the industry have standard contract clauses on the back. They explain the process, as well as the rights and obligations of both buyer and seller in relation to deposits, in the event the buyer refuses to close the deal and take delivery.

Is there any other protection?
Yes. The Motor Vehicle Dealers Compensation Fund provides coverage up to $45,000. Let’s say you gave a deposit to a dealer, and he went bankrupt before you took delivery; you could recover your deposit from the fund.

The regulations are two years old. Are they making a difference?
The 2010 regulations have helped make dealers even more accountable by insisting that information is provided upfront and in writing. This has resulted in greater trust in both salespeople and dealerships.

What about protection for private sales?
Unfortunately, the same protection does not exist in cases of vehicles sold by private individuals. “The worst thing is going into the marketplace and buying privately,” explains Bob Pierce, “because consumers who purchase vehicles through curbsiders are not protected by provincial legislation.”

How can customers protect themselves?

  • Don’t assume there’s a cooling-off period. Unless there are special circumstances, the sale of a new or used car is final. Do your research and ask your questions before signing the contract.
  • Make sure promotional items are spelled out. If there’s a banner making mention of a free snow blower, iPad or trip to Florida included in the car sale, ask to see it in writing and get the true retail value of the incentive.
  • Check the back of the contract. It should include information about the Ontario Motor Vehicle Industry Council (OMVIC) and the Motor Vehicle Dealers Compensation Fund – which could provide protection up to $45,000.
  • Buy from a dealer you trust. Most used car dealers want your recommendation and your repeat business. They do not want unhappy customers.