If a retail installment contract for dealer-arranged financing is not approved, what action must be taken?

When a retail installment contract for dealer-arranged financing is not approved, returning the customer's trade-in is the appropriate course of action. This is based on the principle that the sale is contingent upon the approval of financing. If financing cannot be secured, the agreement to trade-in the vehicle is no longer valid, and the dealer must return the trade-in to maintain fairness to the customer.

Failing to return the trade-in could lead to legal complications or customer dissatisfaction, as they originally intended to keep their vehicle until the financing was confirmed. The return of the trade-in also helps ensure compliance with consumer protection laws, which require transparency and fairness in such transactions.