Under the Hood: How Dealers Commit Title Fraud on Consumers
Download MP3Common Misconception on Car Title Problems
- Many consumers assume buying from a licensed dealer ensures title security, but title fraud schemes, particularly with used car dealers, can pose serious risks.
Understanding Floor Plan Fraud
- Dealerships often finance their car inventory through a line of credit, known as a floor plan. This means banks hold titles until vehicles are sold and loans are repaid.
- Dealers sometimes fail to repay the loan after a sale, leading to title issues for buyers who cannot register or legally own the car.
How Floor Plan Fraud Unfolds
- Dealers may use customer payments to cover operating expenses instead of clearing the vehicle’s loan, leaving the title with the bank.
- Buyers may receive temporary tags that expire without obtaining a permanent title, particularly problematic if the dealership closes.
Real-Life Example: Massachusetts Case
- In a recent case, 25 buyers were affected when a dealer used fraudulent tags and failed to release titles, leaving customers without legal ownership or registration.
Protecting Yourself from Floor Plan Fraud
- Request the dealership to show proof of title before completing any transaction.
- If they can’t produce the title, consider delaying payment until they can present it.
- If a dealer hesitates or cannot provide a title, it may be a sign of financial trouble and a risk for potential fraud.
Additional Tips
- Financing through your own bank can provide an added layer of security.
- Remember, even without a title, you remain obligated to repay any loan on the vehicle.
Avoid Red Flags
- A dealer unwilling to produce or unable to obtain a title may indicate a financial issue or a potential scam.
Closing Advice
- Stay informed to protect your hard-earned money from title issues and potential fraud.