Auto dealership closures shock car buyers with unpaid liens

[marmar]

AP via Yahoo!:



Folding dealers shock car buyers with unpaid liens
By DON THOMPSON, Associated Press Writer


SACRAMENTO, Calif. – The national wave of auto dealership closures has come crashing down on thousands of people who are on the hook for used-car loans that dealers were supposed to absolve.

When a car buyer still owes money on a vehicle he is trading in, the dealer promises to pay off the outstanding loan, then resells the vehicle. But as more dealers go out of business, some are sticking consumers with the bill. Lenders can then go after the previous owner who thought the debt was paid, or repossess the car from the new owner who assumed it came with clear title.

"It's devastating for people when it happens because they have two car payments and they can't afford them," said Rosemary Shahan, president of Consumers for Auto Reliability and Safety, a Sacramento-based nonprofit that lobbies on behalf of vehicle owners. "Their credit is destroyed for no fault of their own because the dealer defaulted."

Regulators in California and other states, including Florida, Iowa and Washington, are seeing a surge in consumer complaints. They warn the problem is sure to grow this year because of the deepening recession and continued trouble in the auto industry.

About a quarter of all car buyers are vulnerable because they still owe money on their trade-in or lease when they buy another vehicle, according to industry tracker Edmunds.com. It's become more common for a driver to owe money on a trade-in as people stretch their car payments over six or seven years to make them more affordable. .......(more)

The complete piece is at: http://news.yahoo.com/s/ap/20090201/ap_on_bi_ge/dealer_defaults

[Muttocracy]

1. wait, does the original owner get the car itself back? nt

[BlooInBloo]

2. Whaaa??

[ferrous wheel]

3. That seems very strange. In my state nobody can get title to a car

until all liens have been satisfied. I must be missing something here...

[RC]

4. Isn't there a breach of contract here?

There has to be something in writing at the time of the deal.

[TacticalPeek]

5. This, campers, is ye olde financial fabric unraveling.

Caveat emptor, caveat venditor.

[MrModerate]

6. This can't be legal . . . the previous owner (at least in my experience) . . .

contractually transfers the vehicle to the dealership. I'd think the lienholder would only be able to get in line with the dealership's other creditors. And repossessing it from the subsequent purchaser? I don't think so. They must be using bullyboys to intimidate the new purchaser or stealing the cars off the streets at night.

[Skink]

7. Robbery.