ARIZONA STATE SENATE
Phoenix, Arizona
motor vehicle transactions;
financing arrangements
Imposes new contract
standards for motor vehicle dealers and creates new requirements for the handling
of vehicles taken in trade. These
requirements address the situation wherein a customer takes delivery of a new
or used vehicle before financing is approved.
According to the Attorney General’s (AG) office, “spot delivery” is the practice by motor vehicle dealers of requiring or allowing customers to take a vehicle home before the dealer has made final arrangements to place the customer’s loan or lease contract with a lender. Dealers are often unable to place contracts for the interest rate and down payment to which a customer has agreed and often take several weeks to notify a customer that financing arrangements have fallen through.
Customers often trade in
their vehicles to a dealer as a down payment on a new vehicle, and, by the time
a dealer notifies a customer that financing has fallen through, the dealer may
have sold the customer’s trade-in.
Dealers have, at times, been willing to offer the customer the wholesale
value of the trade-in vehicle, which may be lower than the agreed upon value of
the trade. The dealer can repossess the new vehicle if the customer does not
return it, and a dealer may charge the customer 10 to 40 cents a mile for each
mile the customer has driven in the new car.
Customers who, through this process, are left without a vehicle may be
asked to sign a new contract for purchase of the new vehicle at a higher
finance rate.
There is no fiscal impact to
the state general fund associated with this measure.
1. Requires a motor vehicle dealer to agree to and clearly disclose the following in a written contract when the sale or lease of a vehicle is conditioned on the final approval of financing:
a)
The
motor vehicle dealer will use its best efforts to obtain financing
arrangements.
b)
The
motor vehicle dealer will promptly inform the customer if the dealer is unable
to obtain financing.
c)
If
the financing arrangements have not been approved within ten days after the
vehicle is delivered to the customer, the customer is no longer obligated to
purchase the vehicle.
d)
The
dealer will retain ownership and possession of any traded vehicle until the
financing arrangements are final or the traded vehicle is returned to the
customer.
e)
The
customer will not be liable for mileage charges or other considerations if
financing arrangements are not approved.
f)
If
financing arrangements are not approved within ten days, the dealer will return
to the customer any consideration including any vehicle traded by the customer.
2. Stipulates that if a motor vehicle dealer fails to return a traded motor vehicle pursuant to the written contract, the customer may recover damages equal to the trade in value in the contract for purchase or lease of a new motor vehicle, or the retail value of the traded motor vehicle at the time the dealer took possession of it, whichever is higher.
3. Voids any attempt to waive these contract requirements.
4. Provides for a general effective date.
Prepared by Senate Staff
January 22, 2001