What car buyers should know if dealers or manufacturers become insolvent.
Your car dealer has filed for bankruptcy, the ordered vehicle hasn't arrived yet, the down payment has been made, or the loan is already running. Whether you'll see your money again depends primarily on how you paid and whether the vehicle has already been delivered. If you financed the purchase with a loan arranged by the dealer, you can argue non-delivery to the bank and refuse to make payments. Rogert & Ulbrich will review your case and enforce your claims against the insolvency administrator, bank, and manufacturer.
Retailer insolvency: Why the timing of the handover is crucial
With the filing for insolvency, the retailer generally loses control of their assets. Initially, the insolvency court usually appoints a provisional insolvency administrator; after the proceedings are opened, the insolvency administrator takes over the management. They decide which outstanding contracts will still be fulfilled. For you as the buyer, this means: your purchase contract is not automatically invalid, but your claims compete with those of all other creditors.
If the purchase agreement has not yet been fully performed by both parties, the insolvency administrator has a right of election under Section 103 of the German Insolvency Code (InsO). He can fulfill the contract and deliver the vehicle if it is available and the insolvency estate benefits from this. However, he can also refuse performance. In this case, you are only entitled to a claim for damages due to non-performance, which is a standard insolvency claim under Section 38 of the German Insolvency Code (InsO). Such claims are typically settled at the end of the proceedings at a rate that, in practice, is often in the low single-digit percentage range.
Therefore, three scenarios must be strictly distinguished: The vehicle has already been handed over and paid for. The vehicle has been ordered and a deposit paid, but not yet delivered. Or the purchase was financed through a loan arranged by the dealer. Each of these situations leads to different rights and obligations. Anyone who confuses them risks losing money or missing deadlines.
Are you unsure of your legal position? Have your purchase agreement, payment receipts, and financing documents reviewed before the insolvency administrator takes action.
Vehicle handed over and paid for: Secure ownership and request vehicle registration certificate part II.
Once you have received the vehicle and paid the full purchase price, you generally become the owner (§ 929 BGB). The insolvency administrator cannot then add the car to the insolvency estate. Should they nevertheless attempt to do so, you have a right of segregation under § 47 InsO. The purchase itself is thus secured. However, one risk remains that many buyers underestimate: the vehicle registration certificate Part II, colloquially known as the vehicle title.
Dealers often finance their vehicle inventory through banks or manufacturer-backed banks. These institutions require the vehicles to be transferred to them as security and retain the vehicle registration certificates, Part II. If the dealer defaults on their financing, the financing bank may contact you and demand the return of the vehicle. Whether you are protected against the bank depends on the principle of good faith acquisition under Section 932 of the German Civil Code (BGB). The Federal Court of Justice requires that the buyer request to see the vehicle registration certificate, Part II. According to established case law, this is a minimum requirement for good faith acquisition. Anyone who has taken possession of the vehicle without inspecting this document is in a significantly weaker position.
Therefore, request the vehicle registration certificate Part II immediately in writing from the dealer or the insolvency administrator if you have not yet received the document. Secure the purchase contract, handover protocol, and all proof of payment. These documents prove that you have paid the purchase price in full and are legally in possession of the vehicle. Additional rules apply if there is suspicion of fraud, for example, if a vehicle has been sold multiple times. You can read more about this at [link to relevant information]. Car buying and selling fraud on site.
Is your vehicle registration document still missing? Don't wait for the dealer's bank to contact you. Clarify your ownership status now.
Down payment made, vehicle not delivered: The most painful case
If you have ordered and paid a deposit for a vehicle but haven't yet received it, you're in the worst-case scenario. If the insolvency administrator rejects the order, your deposit becomes a standard insolvency claim. You must register this claim with the insolvency administrator within the deadline specified in the opening order (§ 174 InsO). If you miss the deadline, a subsequent registration is possible, but it incurs fees. And even with proper registration, you'll usually only receive a fraction of the amount back.
However, there are exceptions that you should definitely check. If you made the down payment by credit card, you can initiate a chargeback procedure with your card issuer due to non-delivery. Card companies set deadlines for this, which are usually 120 days from the date of the charge or from the agreed delivery date. A bank guarantee or an escrow account into which the down payment was paid also protects your money from creditors. And if the purchase was financed through a bank recommended by the merchant, the bank bears the insolvency risk. More on this in the next section.
Another pitfall lurks with repayments made shortly before bankruptcy. If the merchant quickly refunded your deposit even though they were already insolvent, the insolvency administrator can challenge this payment. Payments made within the last three months before the insolvency application are contestable under Section 130 of the German Insolvency Code (InsO) if you were aware of the insolvency. In cases of intentional creditor disadvantage, the right to challenge payments extends even further back under Section 133 of the InsO. Anyone who knew about the financial difficulties and received the money may have to return it.
Down payment made and no delivery in sight? Check chargeback, guarantee and financing options before simply registering your claim in the table.
Financed car purchase: When you are allowed to refuse to make loan payments to the bank
Buyers who financed their vehicle through a loan arranged by the dealer are in the strongest position. In this case, the purchase agreement and the loan agreement constitute a linked transaction under Section 358 Paragraph 3 of the German Civil Code (BGB). An economic unit is presumed if the dealer provides the financing himself or if the bank uses the dealer's assistance in concluding the contract. This is the standard case if you arranged financing at the dealership, whether through a manufacturer's bank or a credit institution with which the dealer collaborates.
The consequences are governed by Section 359 Paragraph 1 of the German Civil Code (BGB), the so-called "piercing the defenses" principle. You can raise any objections against the bank that would entitle you to refuse payment to the dealer. If the dealer fails to deliver the vehicle, you are not obligated to pay the purchase price (Section 320 BGB). This very objection is effective against the bank: you are entitled to refuse loan payments. The bank, not you, therefore bears the dealer's insolvency risk. Payments already made can be reclaimed in certain circumstances, particularly if the purchase agreement is rescinded. Whether this is successful in a specific case depends on the contract terms and the timing of the payments.
The right to raise objections has limits that you should be aware of:
- de minimis threshold: For financed payments under €200, the recourse does not apply. This is practically irrelevant when buying a car.
- Priority of subsequent performance: In case of defects, you must first demand rectification or replacement. Only if this fails or is no longer possible due to insolvency may you withhold payments.
- Own loan without dealer involvement: If you took out the loan from your bank without the retailer's involvement, the economic unity is lacking. In that case, you must continue making payments and claim damages from the retailer.
- Form and justification: Do not stop making payments without explanation. Explain to the bank in writing what objection you are basing your decision on. Otherwise, you risk reminders, loan termination, and a negative entry in your credit report.
Further information about your rights vis-à-vis banks can be found on our page about Banking law for consumers.
Are you paying installments for a vehicle that was never delivered? Have it checked whether there is a linked transaction before you transfer the next installment.
Warranty, manufacturer's guarantee and leasing: What still applies after insolvency
Your warranty claims for defects are directed against the seller (§§ 434, 437 of the German Civil Code). If the seller is insolvent, claims for price reduction, damages, or refunds after rescission of the contract become insolvency claims with the well-known low recovery rates. You will practically only receive a repair if the insolvency administrator continues the business and fulfills the contract. In the case of a financed purchase, a defect also opens the way for recourse to the seller: If subsequent performance fails due to insolvency, you can rescind the purchase contract and refuse further installment payments to the bank.
In this situation, the manufacturer's warranty is significantly more valuable. It is an independent contract between you and the manufacturer (Section 443 of the German Civil Code) and is unaffected by the dealer's situation. You can make warranty claims at any authorized service center. Check the warranty terms and conditions, adhere to maintenance intervals, and document any defects early on. For vehicles with known recurring problems, such as... Tesla defects or at too short a range for electric cars, there are often further claims directly against the manufacturer.
Lessees are usually less affected by a dealer insolvency. The leasing company remains the owner of the vehicle, the lease agreement continues unchanged, and payments are still due to the leasing company. Maintenance, warranty work, and the return at the end of the contract are then handled by a different partner dealership. Disputes primarily arise during the return process when damages and the residual value are assessed. We explain what to consider in this regard below. Lease and rental car return.
Vehicle defect and the dealer is gone? Secure your warranty claims and check your options for canceling the contract before deadlines expire.
Manufacturer insolvency and the agency model: Why direct buyers are in the front row
It's not just dealers who are getting into trouble. Manufacturers, especially newer electric car brands, have also had to file for bankruptcy in recent years. Here, it depends on who you signed the purchase contract with. In the traditional authorized dealer model, the dealer is your contractual partner. They are obligated to deliver even if the manufacturer becomes insolvent. If they cannot deliver, your claims are directed against them, not against the insolvent manufacturer.
Unlike the agency model, which Tesla has used from the beginning and which other manufacturers in Europe have adopted, the dealer only acts as an intermediary; the purchase contract is made directly with the manufacturer. If the manufacturer becomes insolvent, your down payment or advance payment places you directly among the creditors. There is no intermediary dealer who is obligated to deliver the product. Therefore, it is all the more important to avoid making large advance payments when buying directly and to arrange financing through a bank recommended by the manufacturer to ensure that the manufacturer's right to object to the sale is upheld.
Regardless of the distribution model, the following precautionary measures have proven effective:
- Limit down payment: Do not make large down payments without a bank guarantee or escrow account. The remaining purchase price is only due upon delivery.
- Choose payment method: Pay deposits by credit card or finance through a bank recommended by the retailer. Both offer recourse options that a bank transfer does not.
- Vehicle registration certificate part II: Have the document presented to you and handed over to you upon delivery. Without this inspection, a bona fide purchase is jeopardized.
- Note the deadlines: File insolvency claims within the registration period and respond to letters from the insolvency administrator.
- No hasty repayments: Only accept refunds from a demonstrably struggling retailer after legal review. Otherwise, you risk insolvency clawback.
- Use the manufacturer's warranty: Handle defects through the warranty instead of relying on the guarantee of the insolvent retailer.
Ordered directly from the manufacturer and they've filed for bankruptcy? Find out now what claims you have against the manufacturer, bank, and card issuer.
Rogert & Ulbrich – Your lawyers in automotive and banking law
Rogert & Ulbrich has represented car buyers against dealers, manufacturers, and banks for many years. Dr. Marco Rogert and Tobias Ulbrich, along with their team, have handled over 40,000 cases and filed more than 25,000 lawsuits, ranging from the emissions scandal and Tesla defects to cases of fraud in car purchases. Dr. Marco Rogert is regularly interviewed by national media outlets such as Focus Online regarding buyer rights in dealer and manufacturer insolvencies. An overview of our work can be found at [website address]. Automotive.
We verify your ownership status, secure the vehicle registration certificate (Part II), register your claims in the insolvency proceedings, and enforce your right to object to the financing bank. We negotiate out of court with the insolvency administrator, bank, and manufacturer. Where an agreement cannot be reached, we will represent you in court. Our multilingual team also assists you with purchases from foreign dealers or manufacturers.
Is your retailer or manufacturer insolvent, is your down payment gone, or is the bank still demanding payments? Get in touch and secure your rights.
