What is the Non-Acceptance Penalty Rate?

• A. 10%
• B. 2%
• C. 0%
• D. Not more than 5% of the capitalized cost of the vehicle if customer fails to take delivery.

Answer: (D)

When a customer signs a contract but doesn’t take delivery, the fee charged is called the non-acceptance penalty. The important point is that this penalty is not a fixed percentage like 10% or 2%, nor is it zero; it is limited to not more than five percent of the vehicle’s capitalized cost. The capitalized cost is the amount being financed or financed-plus-fees for the vehicle—the price of the vehicle plus any add-ons and financed charges included in the contract.

This cap protects the consumer from an overly harsh penalty while still allowing the dealer to recover reasonable costs associated with the cancellation, such as administrative work and potential financing or inventory losses. For example, if the capitalized cost is $20,000, the maximum penalty could be up to $1,000, depending on the terms. The actual charge can be less than that cap, but it cannot exceed five percent.