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NSW What is an Acceptable Deposit When Purchasing Car?

Discussion in 'Australian Consumer Law Forum' started by David Chang, 1 September 2016.

  1. David Chang

    David Chang Active Member

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    Hi All,

    2 questions under Australian Consumer Law.

    1. When buying used car from a dealership, how much is the acceptable amount of deposit for a $55k car? Will it be a slap in the face if I put down $100 or $200? My line of thinking: It's just a formality to signify that I'm committed.

    2. If I'm to draw a contract this weekend, what special term/clause should I include in the deposit receipt/contract? My original thinking is to include something like the below:
      • Holding deposit is fully refundable and will go towards the agreed purchase price.
      • Subject to mobile mechanical inspection result and Novated lease approval.
    Do you have anything in mind to include or delete from the special clause above?
     
  2. Sophea

    Sophea Well-Known Member

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    I'm not sure that a dealership will accept a deposit of $100 to $200 dollars. It may indicate a commitment to buy on some level but not a strong one. I'm not sure why you are drawing up a contract / receipt if you are buying off a dealer (usually they attend to that), but I would include clauses that state specifically in what circumstances your deposit will be refundable.

    The nature of a holding deposit is that it is not refundable, that's the whole point. However in circumstances where something material changes - such as - you learn that the car has major mechanical issues after a inspection, then you need to be entitled to a refund then. So cover yourself for that.
     
  3. David Chang

    David Chang Active Member

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    Apology @Sophea I wasn't really clear in my post earlier.

    I'm just preparing myself as I plan to go to the dealer this weekend for a test drive.

    I haven't done my due-diligence (mobile inspection) and just a quote on Novated Lease (on which I believe should be okay and approved).

    So to protect myself if the dealer asks me to sign a contract (which am sure he will), I'm planning to put these sentences in the contract:
    • Holding deposit is fully refundable and will go towards the agreed purchase price.
    • Subject to mobile mechanical inspection result and Novated lease approval.

    In a legal term (especially in NSW), how should I define fully refundable deposit (subject to due diligence process i.e. mechanical inspection and novated lease approval)?
     
  4. Tim W

    Tim W Lawyer

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    Speaking as somebody who used to work in the motor trade (albeit a long time ago now)...
    • Back in the day, I expected at least ten per cent of the agreed price;
      I can't imagine a customer offering a deposit of 0.36 per cent
      (ie two hundred dollars on a fifty five thousand dollar deal)
      being regarded as a serious buyer.

    • There's no such thing as a "holding deposit". You're either buying the car, or you're not.
      You cannot expect the dealer to take the car off the market while you continue shopping around.
      If somebody else wants to actually buy the car, while you are dithering,
      then there's no reason not to sell it to the somebody else.

    • As a matter of business readiness (if not of law),
      if you don't have ten per cent in cash (or available on a credit card),
      then you are not in the market for a fifty-five thousand dollar car.

    • As to the deposit refund clause, same as the "holding deposit".
      That is, you're either buying the car, or you're not.
      You are not in K-Mart - you don't get a refund if you change your mind.
      That said, if you can persuade a dealer to agree to that term, then good for you.

    • Subject to Mechanical Inspection should never be a problem.
      That said, if you are spending that much, and you are not buying on Form 4
      (vehicle sold with statutory warranty), then you are a mug.

    • Similarly with novated lease approval. Shouldn't be a problem.
      A smart dealer will have his F&I guy call your lease provider there and then,
      or at least, first thing Monday morning.

    • The dealer will (should be) using the MTA standard form contract and add your special condition to it.
      It's not unusual.
    Have a read of this, and this.
    And take somebody with you who knows what they're doing.
     
  5. David Chang

    David Chang Active Member

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    Thanks @Tim W @Sophea

    How do I identify if the car contract I'm signing is eligible for statutory warranty?

    Should I look out for the word Form 4 or perhaps Statutory warranty in the contract?

    So it seems that form 5 has now replaced form 4? Prescribed_forms_for_the_motor_industry

    Apologies if that came across as a dumb question. I could ask for it and salesman can confirm verbally but I just want to make sure I'm covered in writing.
     
  6. Tim W

    Tim W Lawyer

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    It will be printed in the body text of the Form displayed in the window of the vehicle. If there's no form on display, then don't buy the vehicle.
    Not every vehicle comes with a statutory warranty - it depends on age and mileage.
    Yes and yes.
    It should be displayed in the window of every vehicle for sale.
    It is also possible that the dealer will feed you some bollocks about why there is no form in the window.
    Don't be fooled.
    Last car I bought (January 2016) was on Form 4.
    Not strictly ballroom for the dealer, but then again, I am not personally naive in these things.
    You are about to make one of the biggest single purchases of your life.
    In that context, there is no such thing as a dumb question.
    Ask for it. See the paperwork. The salesman's word is not worth much.

    One final thing - it's helpful to understand the thing called "Extended Warranty".
    Mostly, it's not a warranty, it's an insurance product with a number of obscure conditions.
    I don't normally recommend buying this product.

    Sometimes, buyers are offered them "free". They are not "free" - the premium is built into the cost of the car.
    In any event, if the only thing that ultimately inspires you to buy a particular car
    is the availability of an Extended Warranty, then maybe that's not your car, or your deal.
     
  7. David Chang

    David Chang Active Member

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