If you sign anything at a car dealer's it's probably a sale contract. Car sale contracts are legally enforceable. Read all documents carefully and do not sign anything unless you are certain that you will be buying that car. Refer to dot point ‘Form 10 Contract of Sale’.

It is common practice for dealers to take a holding deposit when you sign a contract. Make sure that you only pay the minimum amount and you get a receipt for this money.

If you have decided to buy a car but you need to have finance approved first then have this written in the contract as "subject to approval of finance to the purchasers' satisfaction". If you have this specified in the contract and you cannot get a loan after reasonable attempts, you may be able to cancel the contract and have the deposit returned to you.

Remember that signing a contract is legal and binding. If you change your mind and want to cancel the contract, you could lose your deposit. However a car dealer cannot retain more than 10% of the total selling price of the vehicle.

Contract forms

Form 10 is a Contract for the Sale of a Second Hand Vehicle and must be used when buying from a licensed Motor Vehicle Dealer. Once signed, this form is a legally binding contract.

Refer to dot point ‘Form 10 Contract of Sale’.

Form 11 is a contract for buying a vehicle from a licensed Motor Vehicle Dealer that is not fit for registration. This form must be signed in front of the police or an officer from Consumer Affairs.

Form 12 is a contract for excluding Statutory Warranty. This means you are agreeing to waive your right to warranty. This form must be signed in front of the police or an officer from Consumer Affairs.

Think about this one carefully before you sign, as it may mean the price of the vehicle is cheaper, but once you have waived your rights to the Statutory Warranty, you will have to pay for any faults the vehicle may have.

Lost Deposit – a case study.

Kim and David spent all day on Sunday looking at used cars. Late in the afternoon they found a late model station wagon that was ideal for them. The wagon was priced at $9,000 and Kim and David signed a contract of sale (Form 10) to buy the car and left $400 as a holding deposit. It was agreed that they would come back the next day with a bank cheque to pick up the car.

Kim and David left the dealer/trader but on the way home they saw another car for sale at another dealership for the same price. They stopped and checked it out. That night they decided the second car was a better deal.

David telephoned the sales person who took their deposit the next day and told him they didn't want the station wagon. The salesperson told David that if they wanted to withdraw from the contract, they would lose their deposit and a percentage of the purchase price.