Car Sale or Return Agreement and Issues

A car ‘sale or return’ agreements, or ‘sale on consignment’ is a simple idea where you enter an agreement with a third-party car dealer to offer your car for sale, in the way an estate agent would do your house, the main difference being the car dealer has possession of your car and displays it at its premises.

Car auctions are a form of sale on consignment where the auction house agrees to sell the Vehicle either with or without reserve for a commission.

The problem a car sale or return agreement is, not only do you give up possession of your car to the car dealer, but either on consignment or upon a sale being agreed, you are expected to give up the V5C log book.

At this point, there is no guarantee you’ll get your money. It’s different with a car auction; firstly, the auction maybe a large PLC or national firm, secondly, you’ll know when the car is going through auction and if and when it sells, thirdly, the buyer knows the Vehicle is being sold by a third party via the auction; none of which usually happens with SOR agreements.

The problem is made worse by the car dealership. By its stock it gives the appearance of liquidity and legitimacy, which in truth may just be a front.

Car dealers attempt to overcome this with sale or return agreements, which set out what they will do, for how much they’ll offer the car up for sale, and how much they will charge for doing so.

However few, if any, firms include any information in the vehicle advertisement and/or documentation informing the prospective buyer it is you who owns the car, and not the dealer.

This and the purchase price being paid to the dealer rather than you creates the breeding ground for fraud.

In recent years the sale or return business model has developed to include cars which are subject to a car finance or hire purchase agreement. This has added a further layer of complexity and opportunity for malfeasance.

Firstly, it is a condition of your HP agreement that the car must remain in your possession, and you must not give it up to anyone else. Therefore, if you enter an SOR agreement for a car on finance and give up possession of it, you are in breach of contract and the finance company may terminate that agreement.

Secondly, it is not uncommon for buyers to assume the cars being offered for sale by a dealer are finance free and as a result do not carry out an HPI check.

As a result, a buyer would pay the car purchase price to the dealer and if the dealer does not settle the finance, you will be liable for it. This leads to people in this position continuing to pay the monthly finance payments to avoid liability, which enables the fraud to go unnoticed.

Thirdly, a more recent fraud has emerged of double financing, where your SOR car is sold by way of a finance agreement without settling the original finance. Like the previous example, this results in the car dealer receiving the full asking price without ever paying for the car.

It is not uncommon to see the vehicle number plates being changed for a personal plate to assist in disguising the fraud. Using the registration number of a similar car when advertising the car can result in no finance markers being displayed, giving the impression the car is finance free.

The problem with a car sale or return agreements is they provide an easy opportunity for unscrupulous car dealers and organised crime groups to commit fraud, obtaining huge gains quickly and largely unnoticed by the police and trading standards.

The lack of formality of SOR and consignment agreements and the absence of title documents for vehicles as there are in other European countries, affords innocent sellers with no protection at all. This also allows for relatively easy export of vehicles obtained by fraud to Europe, the Middle East and Asia.

If you have given your car to a dealer on consignment and have not been paid or have not had the outstanding finance settled,  call the Car Lawyer first for free advice on 0333 700 7676. This is why it is so important to understand your car sales law!