Customer’s Right to Cancel Online Motor Vehicle Sales
Sarah J. Horner | 07.28.21
With online sales becoming more prevalent, dealers should be aware of the protections a customer might have when they electronically sign a motor vehicle purchase contract. One of those protections is the three-day right to cancel, also known as the “cooling-off rule.” Wisconsin law requires dealers to provide customers with written notice that they have a right to cancel the transaction within three business days if: (1) the transaction is initiated by face-to-face contact away from a dealership, or by mail, email, or phone solicitation specifically addressed to the customer; and (2) the customer signs the purchase contract away from the dealership. Although no motor vehicle sale transaction that takes place at a dealership meets these criteria necessary to trigger a customer’s right to cancel, the same is not always true for online transactions.
The Wisconsin Department of Financial Institutions takes the position that if a salesperson directly approaches a customer in-person at a location other than the dealership, and, in response the customer signs a motor vehicle purchase contract electronically at home, the dealer must provide that customer with written notice of their right to cancel. Likewise, the Wisconsin Department of Transportation considers contracts signed electronically to be “away from the dealership.” Therefore, whenever a dealer initiates an online conversation directly with a customer about a vehicle and the paperwork is completed electronically, the customer has a right to cancel the transaction.
Because the three-day right to cancel does not start until the dealer gives the proper written notice, it is best to provide notice to the customer at the time of sale. If the customer mails written cancellation by midnight of the third business day following the transaction, the dealer must refund all of the customer’s payments and cancel the motor vehicle purchase contract within 10 days. The customer may not be held liable for any finance charges, but must keep the vehicle in reasonable condition and make it available for the dealer to pick up within 20 days of the date that the cancellation notice was given.
The bottom line is that dealers should err on the side of caution and provide a customer with two written copies of their right to cancel if the dealer contacts the customer directly and subsequently completes the transaction online away from the dealership. The Wisconsin state notice can be found here. Dealers that engage in interstate commerce (i.e. sell vehicles in more than one state) must provide two copies of the federal notice, which can be found here. Providing this federal notice makes a dealer compliant with the Wisconsin state notice requirements as well.
The fact-specific nature of these online transactions can get complicated. Below are a few examples for when the right to cancel does and does not apply.
Online Sales That Require Notice of Right to Cancel:
- A dealer calls a customer directly to sell them a specific vehicle currently available and customer completes the motor vehicle purchase contract for that vehicle online at home.
- Without having received any direct ads, emails, or phone calls, a customer goes to a dealership on their own, interested in buying a vehicle, but changes their mind. One week later, a salesperson gets a different new vehicle and directly emails the customer asking if they want to look at it. The customer says yes, wants to buy the new vehicle, and completes the motor vehicle purchase contract online at home.
- A dealer has a vehicle at a local fair and is approached in-person by a customer interested in buying the vehicle. The customer then completes the motor vehicle purchase contract for that vehicle online at home.
- While delivering a vehicle to a customer’s home, a salesperson offers the customer a service contract and the customer signs that service contract agreement electronically at their home.
Online Sales That Do Not Require Notice of Right to Cancel:
- Without having received any direct ads, emails, or phone calls, a customer goes to a dealer’s website on their own, calls the dealer via videoconferencing to purchase a vehicle, and completes the motor vehicle purchase contract online.
- Without having received any direct ads, emails, or phone calls, a customer goes to dealership on their own, interested in buying a specific vehicle, but then goes home and signs the motor vehicle purchase contract electronically for that specific vehicle.
- A customer hears a radio advertisement for a certain vehicle and then goes to the dealer’s website to complete the motor vehicle purchase contract online for that vehicle to be delivered to their home.
Dealers should contact an attorney if they have questions about the written notices required for particular online transactions.
The information provided is for general informational purposes only. This post is not updated to account for changes in the law and should not be considered tax or legal advice. This article is not intended to create an attorney-client relationship. You should consult with legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.