Reviewed by Attorney Chuck Panzarella
KEY TAKEAWAYS
- 10-Day Window: In California, when you buy a car and the dealership arranges financing, they have 10 days to secure a loan for you. If they can’t secure financing within this period, they must notify you, cancel the contract, and return any down payment or trade-in.
- Dealer Becomes the Lender After 10 Days: If the dealership cannot find financing within 10 days, they either have to cancel the deal or offer to finance the car themselves under the original terms of the contract.
- Dealership Responsibilities: The dealership cannot charge you extra fees or change the terms of the contract after these 10 days if they end up providing the financing themselves. They also can’t threaten you with legal action or repossession once the 10-day period is over if they haven’t secured outside financing.
- Your Rights: If a dealership fails to comply with the 10-day rule, you have the right to enforce the original purchase terms, return the car without any penalties, or potentially sue for breach of contract.
Understanding California’s 10-Day Rule for Car Financing
In California, car dealerships have 10 days to secure financing when a buyer purchases a vehicle. This timeframe is known as the 10-day rule in auto financing.
What Exactly is the 10-Day Rule?
The 10-day rule requires car dealers to find a lender to finance the customer’s purchase within 10 days of the sale. If financing falls through in that timeframe, the dealer must:
- Notify the buyer and cancel the contract
- Refund any down payment or trade-in value
- Allow the buyer to return the vehicle without penalties
After 10 days, if financing is still unavailable, the dealership becomes the financier. At that point, the buyer has the legal right to either:
- Enforce the original purchase contract
- Make payments to the dealership directly
In other words, 10 days is the deadline for dealerships to secure outside financing under the terms promised to the buyer.
What Dealerships Can and Can’t Do Under This Rule
Dealerships cannot:
- Wait longer than 10 days to notify buyers that outside financing fell through
- Charge extra fees or change contract terms if they become the lender
- Threaten legal action or repossession after the 10 days
They must either find funding or adhere to the original financed purchase terms.
On the other hand, dealerships legally can:
- Cancel the purchase contract within the 10-day window
- Have the buyer voluntarily agree to new financing terms
This timeframe gives dealerships a short window to secure competitive financing. However, it also protects car buyers from predatory lending practices.
Exercising Your Rights Under the 10-Day Rule
If a dealership violates the 10-day rule, contact a qualified consumer protection attorney immediately. An experienced lawyer can help you:
- Hold dealerships accountable to the law
- Potentially sue for contract breaches
- Fight improper repossessions or credit impacts
They can also provide specific legal advice for your situation at no cost. Don’t let dealers exploit gray areas or convince you that funding failures are the consumer’s fault. Know your rights and exercise them accordingly.
Key Takeaways
- The 10-day rule limits how long dealers have to secure financing
- After 10 days, consumers can enforce original deals or repayment terms
- Violations may require legal help to resolve properly
Understanding these California auto financing regulations can empower consumers during what is often a high-pressure purchase. Make sure dealers adhere to legal timeframes and processes.
Contact a qualified attorney if you have any other questions or issues.
5 Minutes To Find Out If You Have A Case