What is the law regarding getting your down payment back from an autodealership if you are denied loan approval?

UPDATED: Feb 20, 2011

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What is the law regarding getting your down payment back from an autodealership if you are denied loan approval?

I purchased a car a few days ago. The bank approved everything but due to a previous accident my gap insurance is still in process, so it got denied. I asked for a refund; the dealer said that he had, just bring the in the car. Will it didn’t turn out that way. They took the keys from me and did not give me back my down payment. They stated that they had charge me for mileage? Is this possible? And shouldn’t I get my down payment back?

Asked on February 20, 2011 under General Practice, California


M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

Sounds like the dealer is pulling a fast one onyou.  I would contact the state attorney general's office as well as the division that licenses dealerships and file a formal complaint.  You signed a contract I am sure and really the contract is binding as to what ever you agreed to in case this happened.  If the contract does not speak to this issue I am sure that the law would not be construed against you, as the dealer should have been wiser in anticipating that this could happen.  They are the "experts" here, not you.  There may even be some oter 3 day right of recission that could be construed here in your favor.  Good luck to you. 

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