Update

[Brian Kirby]

There are, indeed, as Eddie says, some lessons in this story.

First lesson, I think, is not to identify individuals, or businesses, on open forums before all of the facts are known.

Second lesson, for dealers, is that they should review their present policies in respect of taking in part-exchange vehicles in advance.  They should first have, at the very least, a guaranteed delivery date on the new vehicle, but preferably wait until it is actually on their premises.  I say this because, if anything proves how vulnerable these arrangements are to what Harold McMillan famously called "events", it is surely this case.  It is not a matter of honesty, though I would argue good judgement comes into it; it just that the period of time between placing an order, and delivery of the ordered vehicle, contains risks for both parties to the contract, that neither can control.  In this case, the outcome has - sort of - been benign.  However, a number of caveats arise.  First, had the van not been taken in so early, the buyer would probably not have panicked as they did when it emerged that there was a supply difficulty.  Second, had the buyer's original van actually been sold to a new owner, it would not have been available to recover at any price.  Third, a trade in is, in effect, a deposit with, in this case, a "face value" somewhere in the region of 60% of the total contract value.  An additional cash deposit seems also to have been taken, which can only have contributed to the unease about the dealer's intentions when things went wrong.  Fourth, such a trade in is part payment under a contract for the sale of a new van.  However, that contract can only be fulfilled when the new van is delivered.  In this case, the contract became frustrated by the decision of the manufacturer to withdraw the vehicle from production, placing the dealer in the position of having to rescind the contract, when he is obliged to place the buyer back into the position he was in before the contract was made.  The dealer is very lucky, in this case, to have been able to do this by retrieving the buyer's property.  Had he not been able to do so, he would have been liable not just to return the agreed trade-in value, but to meet the full cost of buying an acceptable and comparable replacement van, at whatever was the then market price.  He could have been heavily, and quite unnecessarily, out of pocket.

The third lesson is for buyers, to consider very carefully the position into which they place themselves when agreeing to such suggestions by sellers.  The main risk for the buyer, at any time in the economic cycle, but especially on the shoulder of a recession, is the possibility that the dealer may fail financially before the new van is delivered, possibly taking all of that 60% deposit value with him.

I would therefore argue that a wise dealer, who must be presumed to understand better than his customer the uncertainties of his business, should never propose taking a part exchange in advance of delivering the new vehicle, unless he has put in place measures to protect his customer's financial interests.  The part exchange vehicle can be offered for sale on the dealer's forecourt, but it should not be assigned to him until he has an agreed sale on it.  That gives him the early access to sell that he seeks.  If a sale is completed, the balance of the contracted trade-in price, less an agreed sum as cash deposit, should be returned to his client.  That would give his client the value of their previous property, and with it reasonable protection against his bankruptcy, while leaving him in no worse position financially than with any other client.  If the dealer is still nervous, though I cannot see why he should be, he can arrange for the balance to be deposited, at his expense, in a mutually acceptable solicitor's escrow account, to be released back to him on delivery of the new van.  His residual risk is to be unable to sell the trade-in for the sum he anticipates.  However, that risk is inherent in accepting any vehicle as a trade-in, and would be somewhat ameliorated by the above suggestion, since the dealer would gain early access to sell the van.

Such an arrangement would be transparent, relatively risk free to both parties, and would place all client - dealer relationships onto the same footing.  Such an arrangement would surely better than the present muddle, that could so easily, under only very slightly different circumstances, have ended in court.

[Patricia]

As usual Brian has posted a very sensible and well considered reply. I think that the most important aspect of this whole saga is the fear of vulnerability of bankrupcy which a dealer may experience through no fault of their own. A relative of mine dealt with a respectable company for many years, each invoicing the other for work or services performed. Through no fault of their own the other firm went bankrupt owing many thousands of pounds to my relative making that company a creditor. In turn my relative's firm at that time had outstanding invoices owing of several thousand pounds to the company being liquidated. This money had to be paid by law - the full amount despite being much less than that being owed to them. By the time the Inland Revenue and banks had had the money owing to them there was none left for any of the ordinary creditors.

 

It certainly does not seem to be fair but this scenario is more and more likely in these stressed financial times and it will always be the small innocent customer who will pay the price.