We’d all love to believe buying a car is as easy as picking one and driving off into the sunset.
In reality, however, there’s more to it — especially in terms of paperwork.
When buying a car, the most important document you’ll sign is the car purchase contract, which covers everything: the price, payment terms, warranties, and any extra fees.
But what if things change later? Maybe your financing falls through or you discover that your new car is a lemon. In these situations, cancelling the deal might be possible, but typically only through a formal car cancellation agreement.
At Cline APC, we help clients get out of-purchase contracts when they discover their new car is a lemon (defective) under California law. Our California lemon law attorneys can identify potential legal grounds, explain your rights, and guide you through the process.
In this post, we’ll explore everything you need to know about car purchase contracts, cancellation agreements, and your rights as a buyer. Let’s begin.
What is a Car Purchase Contract?
A car purchase contract, also known as a vehicle purchase agreement or sales contract, is a legally binding document that details the transaction terms between the buyer and the seller. It covers:
- The vehicle details, including the Vehicle Identification Number (VIN)
- The agreed-upon purchase price of the vehicle
- Payment schedule and terms
- Trade-in details (if applicable)
- Warranties
- Financing details
- Other fees
Once you sign the sale agreement, you’re legally obligated to follow through with the purchase- unless you qualify for an exception.
Can You Cancel a Car Purchase Agreement?
Yes, in some cases, you can cancel a car purchase contract, but it’s not simple.
The ability to cancel depends on several factors, including state laws, the terms of the agreement, and the type of sale (new or used vehicle, dealership or private seller).
Here are some legal grounds on which you can cancel your car purchase contract.
‘Cooling-Off’ Periods
California does not have a cooling-off or other cancellation period for car purchases/leases. Dealerships usually emphasize that once you sign, the sale is final.
However, under the California Car Buyer’s Bill of Rights, there is a two-day contract cancellation option available for used cars purchased for less than $40,000. If you choose to buy this option, you can cancel the sale for any reason within two days.
To successfully return the car, you must:
- Bring it back to the dealer within two business days before closing time
- Ensure the car is in the same condition as when you received it
- Keep the mileage within the limits specified in the contract
- Provide all original paperwork with the return
- Make sure the car is free of any tickets or liens
If a dealership does not take the vehicle back, you have the option to file a Record of Complaint Form with the California DMV.
Financing Contingency
Some car purchase agreements include a financing contingency, which lets you cancel the deal if your loan application is denied or if you cannot secure the financing terms specified in the contract.
Misrepresentation or Fraud
You have the right to cancel the purchase if the seller provides false or misleading information about the vehicle’s condition or history. This can include hiding previous accidents, tampering with the odometer, or exaggerating the car’s features.
Breach of Contract
If the seller doesn’t follow through on their promises — like failing to deliver the car on time or giving you a vehicle that doesn’t match what was agreed upon — you can cancel the contract.
Lemon Laws
California lemon laws protect you if you end up with a defective car that cannot be fixed after several attempts. In case your vehicle turns out to be a “lemon”, you could be entitled to a refund, replacement, or cancel the purchase altogether.
Remember, you cannot opt out of a car purchase agreement just because you’ve changed your mind. To legally cancel, you need to fit into one of the categories mentioned above.
How to Cancel a Car Purchase Contract?
If you have decided to cancel your car purchase agreement, it’s important to approach the process carefully and follow the right steps.
Review the Contract
Start by thoroughly going over your contract. Look for any specific clauses that address cancellation, such as provisions related to financing falling through or undisclosed issues with the car.
Contact the Dealer
If your contract doesn’t offer clear guidance on cancellation, reach out to the dealer. Be upfront about your reasons for wanting to back out. Some dealerships may offer a grace period or work with you even if it’s not explicitly stated in the contract. For example, they may allow a return within a few days or provide other customer service-based options to cancel/modify the agreement.
Document Everything
Keep detailed records of all communications and transactions related to the cancellation for future reference. If you end up needing to file a lemon law claim, this documentation will be very important.
Gather Evidence
If you believe the seller-provided false or misleading information about the car, document any communication, advertisements, or written descriptions that don’t match its actual condition.
Consult Legal Help
Sometimes, the dealer may refuse to cancel the contract, even if you believe you have valid grounds like misrepresentation or fraud. In such cases, it’s wise to consult a California lemon law attorney. They can review your situation, explain your rights under the law, and guide you through the legal steps needed to resolve the issue.
What is a Car Cancellation Agreement?
A car cancellation agreement is a formal document that releases both parties from their obligations under the original car purchase contract. It outlines who’s involved, why the contract is being cancelled, and when and how it will happen.
Here’s what is included in a cancellation agreement.
- Refund of the Deposit: The car cancellation agreement should state whether your deposit will be refunded, partially returned, or forfeited.
- Return of the Vehicle: If you’ve already taken possession of the car, the agreement will outline how and when the vehicle should be returned. The car must typically be returned in the same condition you received it, usually within a mileage limit.
- Additional Fees: Canceling a contract may come with certain fees, including restocking expenses, administrative costs, or other charges. |
- Financing Cancellation: If you financed the car through a loan, the cancellation agreement should address how it will be handled.
A car cancellation agreement is usually the best way to make sure there are no loose ends after the deal is called off.
Potential Consequences of Canceling a Car Purchase Agreement
Cancelling a car purchase agreement can come with consequences. Before you move forward, you must understand what could happen if you choose to back out of the deal.
Loss of Deposit
One of the most immediate consequences is the potential loss of your deposit or down payment. Depending on the terms of the contract, you may forfeit part or all of the deposit you made when agreeing to purchase the car. Some dealers may keep it as compensation for the time and effort spent on the sale.
Legal Disputes
Cancelling a contract may lead to legal disputes. For instance, if the dealer believes they’re owed compensation or if they argue that the cancellation terms were not met, you may need legal assistance to resolve the issue.
Time and Hassle
Cancellations also take a fair amount of time and effort. The back-and-forth between different parties and the need for formal documentation can make the process more complex than expected.
Be sure to consider these potential consequences and understand how they could affect you financially and legally.
Get in Touch with a Lemon Law Attorney Today
Buying a car is a big commitment, and chances are, you’ve put a lot of thought into it before signing the purchase contract. Most of the time, you’re confident there won’t be any need to back out.
But sometimes, life throws a curveball. Whether it’s due to a change in personal circumstances or discovering that the dealership sold you a defective vehicle, there may come a time when you need to cancel the contract. A cancellation agreement can protect your rights and make sure you’re legally covered.
Since cancelling a car purchase contract can be complicated, it’s important to have the right legal support, especially if your new car turns out to be a lemon. The California lemon law attorneys at Cline APC are here to protect your rights every step of the way. Contact us today and get the expert advice you need.
