A Risk in the UK Automotive Market
Recent events involving GVE London* have brought renewed attention to a longstanding concern: the potential pitfalls of ‘Sale or Return’ (SOR) agreements. This incident is not isolated. At CMA, we are investigating traders whose conduct has ended in dispute or financial loss – raising critical questions about the protections and rights of vehicle owners and purchasers alike.
‘Sale or Return’
A SoR agreement is, in principle, straightforward. A vehicle owner entrusts their car to a motor trader who undertakes to sell the vehicle on their behalf. Upon sale, the owner receives the proceeds, less the trader’s agreed commission. This method can be attractive to sellers, as dealers often offer access to a broader market, financing options, and the perceived reassurance of a warranty for potential buyers.
However, the simplicity of SOR can obscure significant risks.
The Risks of Entrusting Your Vehicle to a Third Party
Once a vehicle is handed over, commonly with keys and documentation, the owner relinquishes direct control. Problems arise when traders, for various reasons, fail to transfer sale proceeds back to the original owner.
The trader may claim financial difficulty or cash flow issues as the cause of non-payment. Whether or not dishonesty is involved, the consequences for the vehicle owner can be severe.
Where funds are not returned, owners may contact law enforcement. Yet, these cases can present challenges for police. Is the vehicle stolen? Are the proceeds of the sale subject to ‘theft’? Or is this a civil dispute, ‘no crime’, requiring the parties to be directed to the courts?
If the crime is recorded, this may result in a “Lost or Stolen” (LoS) marker being applied to the vehicle on the Police National Computer (PNC), a step that can create additional issues both for the buyer and police when the vehicle is later located or flagged during use.
Legal and Practical Complications
In the event of a dispute, questions of ownership become contentious. Both the original owner and the purchaser are likely to claim title to the vehicle, often with competing and understandable justifications. If an insolvency practitioner is appointed following the dealer’s financial collapse, further uncertainty may arise about rights to proceeds or the status of the sale.
In these circumstances, resolving ownership and recovering value can become both time-consuming and legally complex.
A Cautionary Note
While SOR agreements offer convenience and access to dealership services, they also expose vehicle owners to real and significant risks if not properly structured and documented.
Those considering this method of sale may wish to bear the following in mind:
- Ensure clear, written contractual terms are in place
- Understand where the sale proceeds will be held
- Consider escrow arrangements or other financial safeguards
- Seek legal advice where appropriate
- Use of an auction house or main dealer sale/part-exchange
More information, related case law and examples can be read here.