Many consumers who buy a new car still owe money on the car they're trading in. The situation is usually handled by the dealer agreeing to pay off the old loan, the cost of which might be folded into the new car price. No problem a year ago, but it's a bigger issue now. With 5,000 dealers closing their doors last year, some of those old loans aren't getting paid off. Consumers who bought new cars are finding out they're still on the hook for the old car loans, and in some cases, if another consumer has already bought the trade-in from the dealer, the bank will repossess it.
Complaints about such practices are rising, but there isn't much a buyer can do: if the dealer has gone bankrupt, mere scraps are rewarded to most folks in the scrum of creditors. Most states have insurance bonds against these kinds of losses, but they might pay as little as $5,000, which is barely enough to cover one default.

Ohio, Virginia, and West Virginia have restitution funds. California -- exceptionally victimized by the practice because of the number of cars sold in the state -- is creating one that will be fed by a $1 fee on every car sold, but it isn't operational yet. In the meantime, used car buyers should ask to see the car's title to ensure it's clear. And for all buyers, in good times and especially in bad, caveat emptor.

[Source: MSNBC]

I'm reporting this comment as:

Reported comments and users are reviewed by Autoblog staff 24 hours a day, seven days a week to determine whether they violate Community Guideline. Accounts are penalized for Community Guidelines violations and serious or repeated violations can lead to account termination.

    • 1 Second Ago
  • 2015 Toyota Highlander
    MSRP: $29,765 - $44,140
    2015 Jeep Grand Cherokee
    MSRP: $29,995 - $64,895
    2015 Honda Accord
    MSRP: $22,105 - $33,630
    2015 Honda Civic
    MSRP: $18,290 - $26,740
    2015 Mazda Mazda3
    MSRP: $16,945 - $25,545
    Share This Photo X