The Expert Podcast

Uh oh, here we go again—another dealership barred from selling vehicles over title problems. Let's take a look. This dealership in Kansas had an $87,000 default judgment for complaints about the dealership failing to provide title to buyers. In addition to that, they failed to pay off the outstanding loan balance on trade-ins, resulting in consumers having two car payments and no titles. This is a big deal, and here's a big red flag: the dealership allegedly (this is all alleged at this point, there's no proof) sold a vehicle that they didn't pay off to a protected consumer without paying off the trade-in.

This is an often overlooked reason why dealerships have title problems. If you take in a trade-in that has a lien on it—let's say it's a 2019 Toyota Camry and somebody owes $20,000 on it—you're supposed to pay off that $20,000 loan. But what if you say, "Well, I'm not going to pay it off right away because that $20,000 is real money coming from my bank account?" What if I sell that car to somebody else, don’t pay off the loan right away, let them drive it, and then eventually, when I get the money, I'll pay it off? But what if you never get the money? What if you use that $20,000 for payroll or for rent or for some advertising? Now, the person who bought the car paid you whatever they paid for it—maybe they paid you $25,000 for that car—and you got that money, but you didn’t pay off the $20,000 loan. So, you’re like double dipping on that car. It's called being out of trust.

A lot of dealerships do it when they run into money problems because it’s an easy way to get some extra financing without having to go to a bank. You already got the financing; it’s somebody else’s car loan. Now, if you're the person who traded it in, you have a problem because your car loan is not being paid. You might get late payments; it’s going to hurt your credit. Or if you're the person who bought the car, you can’t get the title because some other bank is holding a title to a car you paid cash for.

So, this is a very serious problem of not paying off trade-ins. Again, it's alleged at this point with this particular dealership, but we get calls all the time from people who bought a car and never got the title, and they found out there’s a lien on it at another bank that was never cleared. We get calls a lot of times from somebody who traded in a car and found out that their lien never got paid off. So anytime you’re doing a vehicle transaction, buying or selling, make sure if there are any liens involved that they get cleared from the title record. Even if you show that it was paid, the bank getting the check for it doesn’t clear it from the title record unless proper documents are signed and submitted to the DMV.

A lien release is as important as a title, sometimes more important. Dealerships a lot of times play fast and loose with titles. Anytime you see a dealership having a title problem, the first red flag in your mind is: is it a lien release problem? Is it a lien release default from that dealership? If you look at that option first, it might point you in the right direction of solving that title problem.