BramptonThe purchase agreement is not, in Canadian auto retail practice, the same document as the financing contract. The purchase agreement is signed at the point of sale: the consumer and the dealership agree on the vehicle, the price, the trade-in value if applicable, and the deposit. The financing contract is signed later, typically at delivery, in the finance and insurance office, when the vehicle has been prepared and the financing has been arranged. In the period between the purchase agreement and the delivery contract, the dealership's finance department has submitted the consumer's financing application to one or more lenders, received approval, and prepared the delivery paperwork. The consumer, having signed the purchase agreement and paid the deposit, has a reasonable expectation that the financing they agreed to in principle at point of sale is the financing they will be asked to sign at delivery. This expectation is, on the file in front of this magazine, sometimes wrong.

The consumer at the centre of this story agreed, at point of sale at a Brampton dealership, to a financing term of eighty-four months on a used electric vehicle. The eighty-four-month term was discussed. The monthly payment that follows from eighty-four months at the agreed rate was reviewed. The consumer made a deposit and returned on a scheduled delivery date two days later. In the finance office, on delivery day, the consumer was presented with a financing contract from the lending institution the dealer had arranged. The contract specified a term of seventy-two months. Not eighty-four. Seventy-two. The difference is twelve months of amortization. At the principal and interest rate of this transaction, twelve months of additional amortization reduces the monthly payment by a calculable amount. At seventy-two months instead of eighty-four, the monthly payment is higher. The total interest paid over the life of the loan is also higher on a shorter term at the same rate, though marginally, the more significant effect for the consumer is the higher monthly obligation. The finance manager, on the consumer's account of the delivery-day conversation, did not volunteer an explanation of the discrepancy. The consumer, with the vehicle in the service bay and the keys on the desk, signed.

Why delivery day is the worst moment to discover a discrepancy

The dynamics of a vehicle delivery are, by design and by culture, optimized for completion rather than renegotiation. The consumer has been waiting, typically, between two and five business days since signing the purchase agreement. The vehicle has been prepared, detailed, and moved to the handover area. The consumer has, in many cases, made arrangements to return their old vehicle, rearranged insurance, and told people in their life that they are picking up the new car today. The finance office appointment is presented as a routine paperwork step, not the moment when the core terms of the transaction might be different from what was discussed. The deposit is paid. The trade-in, if any, is already processed. The consumer's leverage, their ability to walk away without cost, exists legally but is, at this moment, at its lowest practical point in the transaction.

The lending institution is not the dealership. The consumer's purchase agreement with the dealership said eighty-four months. The lending institution's financing contract says seventy-two. The dealership's finance manager, sitting across the desk from the consumer, is the liaison between the two. The finance manager's compensation, on the standard dealership pay structure, includes a component tied to the financing deal: the difference between the rate the lending institution charges the dealer (the buy rate) and the rate the dealer marks up to the consumer (the sell rate), called the participation or dealer reserve. The finance manager's interest is in completing the transaction. The finance manager's interest is not, structurally, in pausing the transaction to investigate why the term the consumer agreed to two days ago is not the term in the contract on the desk today.

The consumer's leverage, the ability to walk away without cost, exists legally but is, at the moment the keys are on the desk, at its lowest practical point in the entire transaction.

What changed between the purchase agreement and the delivery contract

The answer, on the file this magazine has reviewed, is not fully documented. What the documentary record shows is this: the purchase agreement specifies eighty-four months. The delivery contract specifies seventy-two months. The consumer's communication with the dealership in the interval between the two documents contains no written confirmation of a term change, no amendment to the purchase agreement, and no disclosure from the dealer or the lender explaining the reason for the difference. The consumer's complaint to the Financial Consumer Agency of Canada, filed on the basis that the lending institution's conduct in presenting a contract with materially different terms constitutes a breach of the bank's consumer-protection obligations, has been received, logged, and is pending review. The consumer has also filed a complaint with the relevant provincial motor vehicle dealer regulatory body, noting that the dealer presented financing terms materially different from those discussed at point of sale without written notice or explanation. The regulatory body has acknowledged receipt.

What the complaints will produce is uncertain. What is certain is that the consumer is currently making monthly payments at the seventy-two-month rate, which is higher than the eighty-four-month rate, and will do so for six years. The total additional cost to the consumer, compared to the transaction they understood themselves to be agreeing to, is calculable. It is in the low thousands of dollars over the life of the loan. No individual regulatory body has, as of this publication date, told the consumer what they are going to do about it.

What the country's framework does and does not require

The Motor Vehicle Dealers Act in this province requires Ontario auto dealers to act fairly and honestly in their dealings with customers, and prohibits misrepresentation in connection with vehicle transactions. The Act and its regulations do not specify, however, what documentation is required at point of sale to lock in a financing term, or what obligation a dealer has to disclose in writing when the financing term arranged with a lender differs from the term discussed with the consumer at purchase. The Financial Consumer Agency of Canada's mandate covers the federal bank's consumer-protection obligations under the Bank Act, not the dealer's obligations under provincial consumer-protection law. The FCAC can investigate whether the bank's financing disclosure at the moment of contract signing met the relevant federal disclosure requirements. It cannot address whether the dealer adequately communicated the term change between the purchase agreement and the delivery contract. Two bodies. Two jurisdictions. One transaction. The consumer is navigating the gap.

The federal regulations enacted under the Bank Act require that a consumer credit agreement contain, at the point of signing, a disclosure box showing the principal amount, the annual percentage rate, the total cost of borrowing, and the payment schedule. These requirements apply to the contract the consumer signs. They do not require the contract to match what was discussed before the contract was drafted. They do not require the lender or dealer to flag a discrepancy between the discussed term and the contracted term. They require that the contract, once signed, be clear about what it says. The contract was clear. It said seventy-two months. The consumer signed. The country has fulfilled its disclosure requirements. The consumer has a twelve-month shorter loan than she agreed to at point of sale.

The verdict

The purchase agreement said eighty-four months. The delivery contract said seventy-two. The keys were on the desk. The consumer signed. The country's regulatory framework checked the delivery contract for disclosure-box compliance and found it adequate. The country's framework did not check whether the delivery contract matched the point-of-sale agreement. The country's framework did not require anyone to tell the consumer, in writing, that the term had changed. The country's framework produced two pending complaints, an acknowledgement letter from each, and a higher monthly payment.

The fix is not complicated. Require the delivering dealer to produce, at signing, a comparison of the point-of-sale term and the delivery-contract term. Where they differ by more than a rounding convention, require a written explanation from the dealer, signed by the consumer, acknowledging the discrepancy and confirming understanding before the transaction is completed. One page. One signature. A document that would, on the file before us, have changed everything.

The country has not required the page. The page costs the dealer thirty seconds. The absence of the page costs the consumer thousands of dollars and two pending regulatory complaints. That arithmetic is, on any honest reading, the country's choice.