When someone raises the purchase of a new car, as a general rule, tend to think more about the payment for the election of the new car. Although not everyone is clear the car you want to buy, yes it is true that in one way or another always looking for something that fits more to their taste than to their real needs. To put it another way, though they are few buyers who are clear about the exact model of car to buy, everyone has in mind the body type, the type of mechanical and the equipment that you like. However, the issue of payment is another thing.
Currently, more than eighty percent of the vehicles that are sold in our country finance with any credit institution, either a bank or with the financial entities that some brands have set up for this purpose. When this happens, the customer buys the car and differs from a part or all of the payment in a given period during which it will have to meet a monthly fee that includes a portion that pays off the credit requested and the other party are the interests that are abusive that is currently paid in Spain.
to Finance the purchase of a car
When you buy a car knowing ahead of time that to pay for it will have to resort to a finance company, the client is participating unknowingly in a dual process of sale and purchase which is rarely reported. It is normal that when you sign the credit contract is made quite fast, without reading it carefully and (usually) slightly pressured by the commercial, they do not often explain to the client what you really are signing and that of a practiced way ignores relevant information about the most “delicate” of the finance contract of the car that the client believes to be buying (or on any other movable property is financed).
Who buys the car?
did The customer buy the car or only think to purchase it? Explaining it in a way it is enough, it can be said that the dealer does not sell the car to the buyer but that is what sells to a financial institution, which will pay the car in cash. Subsequently, this financial entity (re)sells the car to the buyer, leaving it obligated to meet on a monthly basis the fee agreed, which is usually a fixed amount throughout the funding period.
The problem appears in the contract that is signed and that no one reads. It is customary in Spain that these financing contracts include a legal tool called reservation domain that (supposedly) keeps the car purchased in the property of the financial institution until the completion of the payment of the fine. However, despite this, it is the customer who pays the insurance, taxes, maintenance… making the reservation domain of Spain in one of the strangest of Europe and also in one of the most inaccurate.
What is the reservation domain of a car?
Looking for among the numerous law libraries there are on the internet, I have been able to verify that there is not a unique explanation and accepted that you define with crystal clarity what is the booking domain. In the case that a good piece of furniture, we can understand that this reservation of ownership is the right of action that on a certain good has a financial institution during the period of repayment of the credit.
having Said that you can only reach two conclusions. The first is that it is time that someone decides to use a legal language adapted to the times. The second is that to understand correctly what is the booking domain should be explained a little better, so then you can go by reading and understanding how it affects the reservation of ownership in our cars and then, at the end, as you will be able to remove your own definition.
legal Persons involved
at this point it should be explained that the Spanish law yes difference between property, domain, and possession. With the little legal knowledge that there are in Spain and with vocabulary that is used about it would be very difficult to be able to explain it in a concise way. Legally, you can say that…
- property is the right to enjoy and dispose of a thing without further limitations than those established by the laws.
- domain is a real right in virtue of which a thing is subject to the will and to the action of a natural or legal person.
- possession is the power of a person over a thing.
If we apply these legal definitions to the relationship that is established between the financial institution and the buyer of a car, can we explain, then, that…
- The property of the car is the customer, who can use the car in accordance with the code of circulation and dispose of it whenever you want.
- The domain of the car is in the part of the buyer but also includes the limitations imposed by the financial institution, among which is the prohibition of changing the ownership of the vehicle.
- The possession is also shared between the client and the financial institution, because both parties have decision-making power on the car.
Legality vs morality vs money
The fact that the financial institutions include this clause can be considered as a abuse from the legal point of view or as a deception from the point of view of companies. In any case, the customer is only left to accept it because it is the same legal texts and business cases which have to be clearly defined in this regard.
From a legal point of view, the fact of including the reservation of title in a contract of sale is totally contrary to the principle of good faith, which determines that the client exercised their rights according to the moral demands and social. Even in the Civil Law determines that good faith is loyalty in the execution and conclusion of legal acts. Because in spite of this, the financial institutions prefer to safeguard their coffers including a clause that attempts directly to repute the client.
In one aspect of companies, studying more so that the content of the contracts, can be analysed in a reservation domain from the point of view of the financial institution, and also from the point of view of the customer.
In regards to the financial institution, there are many credits that among their innumerable expenses, there is one that is called “study” and that refers to the economic capacity that the client has to pay the credit requested. This study “authorizes” financial institutions to delve into any type of file, financial, claim, debt, history, economic and even labour to get the information that will be decisive in whether or not to grant credit to a customer. What I can not understand is that to charge the client for the realization of a study and then ensure the domain of the vehicle. What is not doing two times the same thing?
From the point of view of the client, leaving aside the need to read what you are signing, it is appropriate that the financial institution explain and make clear the terms of the contract to ensure both the correct understanding as the acceptance by the customer. In this sense, the Law is rather clear: in the event that the buyer does not know how to correctly interpret a clause that has not been properly explained or, as is often the case, that has been strategically overlooked can be to declare null and void the financing agreement, which would require in addition to the financial institution to compensate the client with a compensation of damages caused by the culpable breach of the party concerned. In any case, it is also interesting to know that in the current legal framework Spanish, rarely a customer’s tricked manages to win a judgment to a bank.
Paying for the car
once the car is already the property of the client, if the latter have enough time and want to read the contract can be found in addition with a series of clauses are completely legal but that no one has commented anything and that they are sometimes repetitive by the end that I pursue. Therefore, we can say that we are faced with a unending collection of unfair terms.
add-Ons in the financing contract
sometimes the client also signs a life insurance which coincidentally matches the amount financed, and that also coincidentally has beneficiary to the financial institution. Yes, this life insurance does not update the sum insured to the amount remaining in the credit but maintaining the sum insured constant during the entire duration of the credit. This means that if a customer has requested a credit of 20.000€ to be paid in four years and unfortunately died at the age of three, has a life insurance benefits from 20.000€ to the financial institution, even if you already take three years paying and you have less than half of the credit carryforwards. Another deception is very common among the appropriations requested is that financial institution, including, without knowledge of the client, a insurance against non-payment of fees for various reasons (poor health, job loss,…).
absolute Loss of the vehicle
As you can see, the entities of credit allowed many Spanish people think of buying a vehicle that they could never pay cash, however, it seems that these financial institutions are taking an excess of precautions that is really no more than the recruitment of concealed an infinite collection of insurance. But, what happens if it produces a total loss and accidental vehicle?
From a legal point of view it would be logical that once extinguished, the well went out also the rights over it, which in Spanish is understandable to come to be something like this as good as dead the dog is over the rabies, but it is not.
How can this be? Therefore sure that any critical reader will have noticed that in the explanations of property, domain, and possession only speaks of rights of financial institutions on the well-funded, but does not speak of any obligation to you. No matter that a judge determines that the loss has been entirely accidental and that a notary draw up the minutes; despite all the “precautions” and “nuisances” that are taken by the financial institutions, they will continue to demand the payment of the credit to the customer, although this will no longer have the car.
As expected, there will be some case in which this is not so, but that no one sing victory yet because this will happen only in the case in which the client has contracted (and paid) some type of insurance to cover this course. And this is so because if there is something that has taught us the more recent history of Spain, the banker always wins.
When the car is already “paid”
it Is assumed that once the customer has paid the last instalment of the credit already can do with the car what you want, even sell it. No, it doesn’t.
to Cancel the reservation domain
even Though the pay period has completed and the customer has paid promptly all required payments or fully depreciated the credit, you will not be able to sell the car because you requested the credit the financial institution recorded the booking domain in the Mercantile Register of Movable Property of the community in which you have purchased the car. It is the customer who has to request to the financial institution a certificate of having fully paid the credit and, with this document, approach to the registrar of companies to request the lifting of the reservation of ownership, legal act that is not free. By the way, that for some strange reason, will never be the financial institution that lift the reservation of domain.
The full ownership of the car
once the client has obtained the lifting of the reservation domain, yes you will have full ownership, full control and full possession on the vehicle but, in the practical aspect, the only difference is that now yes you can change the ownership of the car.
Any reader who has come this far has had to read a lot of legal definitions relating to Commercial Law and the Civil Code in order to try to understand what is really the reserve of the domain and to reach the conclusion that at the end is only the prohibition imposed by a financial institution to change the ownership of a car financed… This is because it really is as well.
Doing a short but concise of the reservation domain you could say that is a legal tool without own legislation, but case law, that the financial institutions included in the credit agreements and that blocked a possible change of ownership of the car.
A outline of the whole process this tool explained from a practical point of view could be the following:
- The reservation domain is a clause within the contract of financing.
- Avoids the change of ownership of a car financed.
- To cancel it is necessary to first apply for a certificate of cancellation of credit to the financial institution.
- With this certificate must be requested at the Commercial Register of the cancellation of the reservation of title by payment in full (about 20€).
- In fifteen days approximately, you can pick up the document.
although the computer developments of today, the uprising, or cancellation of the reservation of ownership does not can be done via telematics; only face-to-face. In any case it is important to know that with a simple writing we can authorize any other person to perform the process.
Another very important detail is that the reservation of domain, as any legal act registered, never expires. This means if a person wants to sell his car, although he has more than fifteen years and take paid out more than ten, if the landlord did not make the process of lifting in the log, the car will continue to have a burden that will prevent the change of ownership. This detail is also important for a potential buyer, who can certify if the car is free of charges by requesting a report of the vehicle in any office of the DGT or via telematics. This report has a price of 8’30€ and can not be paid in cash.
In this article, we have tried everything concerning the reservation of domain in a way from a practical point of view and has tried to explain it clearly, but if you have something that has not been well explained, or if you have any questions, do not hesitate to contact us.