How to get out of buying a new car after signing the contract
If you’ve just signed a contract and paid a deposit on a new car, but you’ve suddenly realised you need to back out of it, here’s how you can do that…
This report is inspired by a consumer, possibly just like you, who has started down the road of purchasing a vehicle before realising it was a mistake.
Firstly, you shouldn’t get yourself in this situation, but it does happen, even to those with the best intentions.
Buying a car is a financial aggressive process, because nobody else is in it for you, certainly not the carmaker, and definitely not the dealership.
Here’s the question as it was put to me:
I assure you, Robyn’s daughter is not alone here, and I’m not suggesting this is the wrong deal, the wrong vehicle or the wrong price here.
There’s a philosophical misalignment between the consumer (you) and the sales person at the dealership - and I’m not suggesting every single employee at a dealership is strictly going to do the wrong thing by you.
But you need to remain absolutely vigilant in these places and in whom you speak to and deal with, because the goals of the dealership are diametrically opposed to yours. You want the vehicle for as cheap a price as you can get it, and the dealership wants you to pay the maximum possible price they can extract from you. These are polar opposite objectives, which means you cannot rely on the dealership to have your best interests in mind.
The dealership doesn’t get paid unless the sales person gets your deposit.
Maybe you just want to browse, or you want a different car, or a certain type of car, or a certain set of features.
The dealer sales guy wants your signature and deposit - you want the best price, for the ideal vehicle.
You need to be clear about your objectives in these places.
If you’re browsing, do not be coerced into signing anything or paying anything.
The sales person will be empowered to say whatever they need to convince you to sign.
It’s important to do your research in full before deciding which vehicle you will buy. Don’t be doing your research, test driving and then settling on one and negotiating the price at the same time. That’s a bad idea.
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BRAND POWERLESS: HELPING YOU YOU BUY BETTER
So let’s talk about how Robyn’s daughter might be able to get out of her contract.
In some states in Australia you get a cooling off period, where you can get out of a contract within a certain time period, without penalty. You need to know whether you have such a period in the contract you’ve signed, or in the contract you’re about to sign. Put a cooling off period in if you can.
If you’re outside the cooling off period, or your state doesn’t do cooling off periods, commercially you might send them an email telling them why you need to get out of the contract purchase for whatever reason.
In doing so, they might tell you it’ll be a $750 cancellation fee, or something similar. At this point, I suggest you don’t correspond with them any further, and see what happens.
There’s a slim chance they could put a debt collector onto you, or they might have a go, putting some intimidating threat to you. If you continue to ignore that weak threat, there’s an even slimmer chance of getting sent a summons.
However, I’d suggest, it won’t come. It’s a bad look apart from anything else, because it’s terrible PR. But what’s it going to cost them to do that? And what kind of reward are they chasing, a $750 deposit? The economics don’t stack up - and car dealers understand money. Why would they chase you?
They’re much better off trying to convince you to stay with the intended purchase - that’s worth a lot more money to them.
Let’s think about those 5 per cent termination clauses which are written into contracts for buying a new car.
In the context of buying a $50,000 new car, you put down $1000 deposit, you go home and realise it’s the completely wrong car and you could’ve found the same car elsewhere for $5000 less - you’re going to lose your deposit. That’s gone. You made a hasty call putting a deposit on a vehicle you weren’t certain on.
But as for paying the balance, 5 per cent of 50K is 2500 dollars, so the outstanding amount is $1500 and they’re not going to come after you for that - it’s uneconomical to do that. These are more like coercive practices to force you to buy, rather than a means to make money because it’s a financial loss even if they win.
If you need to back out, do it by email. Say, ‘In relation to contract X-Y-Z, on whatever date, signed whenever, I’m going to decline to proceed with the purchase.’
You don’t need to write war and peace, you don’t need to give them a bunch of reasons or why, just tell them what. Do it with integrity, be polite but straight.
Many people are conflict averse, which is kinda understandable, but these people aren’t your friends, they want you to part with a big sum of money. Don’t let them take advantage, and just tell them firmly what you’re doing.
Now, I’m happy to help people buy a vehicle at a discount rate, but what we also do for you is to separate you from the price negotiation process which won’t be something you’re particularly skilled at.
We try to insulate you from the dealer salespeople because they don’t have your best interests at heart. We remove the coercive dynamic at play between customer and dealer. We do that bit and just give you the cheaper price.
What you do need to do at the dealership is get your hands on the car, touch it, feel it, put yourself in it, check out the features, learn about how to use it.
Test driving it is not as important, but you still should do it, but try not to compare it with your current car because your old car will always feel shittier than a new car.
New cars always feel better than your old car so focus more on what you hate, stuff that you won’t be able to live with. And look at what you really love about that car.
Do not do price negotiation when test driving it. If you get asked, tell them you’re not there to discuss price.
Remember that you have the power in this situation, and the dealer wants you to feel pressured to buy.
It’s much easier for you to walk away, than for the dealer to watch you walk away.
Research, think it through, then negotiate.
And don’t worry about the threat of fees and penalties if you back out. It’s just an empty threat because the dealer knows you have the power to walk away.
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