When a customer engages you as a broker, you may collect a deposit. However, Vehicle Code Section 11736 limits the deposit to a maximum of 2.5 percent of the selling price of the vehicle. This is a hard cap — you cannot collect more than 2.5 percent as a deposit, regardless of what the customer might be willing to pay.
Let’s put numbers to that. If the expected selling price of the vehicle is $40,000, the maximum deposit you can collect is $1,000 — which is 2.5 percent of $40,000. If the vehicle is $60,000, your maximum deposit is $1,500. These limits exist to protect consumers from losing large amounts of money if the brokering arrangement doesn’t work out.
Regarding refunds: if you fail to locate or deliver the vehicle as specified in the brokering agreement, or if the deal falls through for reasons not attributable to the customer, the deposit must be refunded. The specific refund terms should be spelled out in your brokering agreement. Be clear upfront with the customer about what happens to the deposit in various scenarios — if the deal closes, if it doesn’t close, if the customer changes their mind. Ambiguity in the brokering agreement about deposit refunds is a recipe for complaints and potential enforcement action.
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📌 Scenario A customer asks a broker to find a specific SUV and gives the broker a $2,000 deposit on a vehicle expected to cost $50,000. The maximum allowable deposit is $1,250 (2.5% of $50,000). By accepting $2,000, the broker has violated VEH §11736. Even though the customer voluntarily offered the extra $750, the law sets the maximum at 2.5%, and the broker is responsible for knowing and complying with that limit. |