A Car Dealer Scam To Avoid

Unfortunately there are too many car dealers willing toinventory and is paid-off when a car is sold. For most
commit scams and illegal activities. Not all dealers aredealers they could not or would not want to keep 150
bad but, the actions of a few have left a stain on thecars on their lots without floor plan (if those 150 cars
industry resulting in the perception among theaveraged a cost of $20,000 each the dealer would
American public that every car dealer is a scammer orneed to tie up $3,000,000 in their inventory). So, when I
an out-right criminal. I know this is not the case, but Ibought my Eclipse I took out a $20,000 loan from a
also know that there are plenty of bad car dealersbank. That bank pays the Mitsubishi dealer $20,000 on
praying on consumers so as The Auto Insider I wantmy behalf for the car. Then the car dealer is
help protect you from a prevalent car dealer scam,responsible to pay the floor plan bank their money. This
Title Fraud. It has been around for years and I recentlyis usually done within 2 or 3 business days.
read a story about a dealer committing this scam inEvery day ethical car dealers payoff their floor plan
the San Diego Union-Tribute. The story details thelenders for the cars they sell, but remember I was
penalties a now defunct Mitsubishi dealer in Escondidounlucky enough to do business with the San Diego
California received for being found guilty for the crimescammers and they decided to delay paying off their
of title fraud. The news article describes how the twofloor plan lender so they could use the $20,000 from
dealer principles have been found guilty ofmy loan for their own purposes. Now, you may not
misdemeanor counts of failure to transfer ownershipcare that a bank is getting scammed, but you are in
of vehicles. Only one owner showed up to the courtdanger too. When a dealer plays with the title of a car
date and he was sentenced to 1 day in jail, 3 yearsthey sold they must 'fudge' some paperwork to
probation and ordered to pay $40,000 in restitution.ensure they do not get caught in the scam (a dealer
The second owner, who failed to appear, has had acaught doing this could lose the ability to have floor
bench warrant issued for his arrest. This Mitsubishiplan and be put out of business). Typically they will
dealer had 32 complaints against them and the guiltydelay the registration of the car (a dealer does not
verdict followed a 10 month investigation.register cars until they are sold). So in the example we
A Dealer commits title fraud for two main reasons,used lets assume that they do not register my car so
desperation or greed. Today there are a surprisingthey can use the $20,000 they received from my car
number of car dealers who are having trouble payingloan and now that dealer has put me in a very
their staff and their bills forcing them to makedangerous position.
desperate decisions like committing title fraud. When aImagine if I am in an accident, no fault of my own but
dealer is desperate title fraud is appealing because it ismy car is damaged and I'm hurt badly enough to need
remarkably easy to do and offers immediate andmedical attention. The accident is not my fault but
substantial amounts of money, so of course it alsowhen the insurance company for the person who hit
attracts the extremely greedy car dealers. A carme finds out that my Eclipse is not registered, that
dealer can commit title fraud in two ways, when yougives them the legal right to deny my claim because
trade a car in and when you purchase a car froman unregistered car does not have a legal right to be
them.on the road. So the at fault driver's insurance company
I want to use a typical car deal to show you how arefuses to pay for my medical needs or the damage
car dealer commits title fraud with your trade-in. Let'sto my car, all things they would have paid for had my
assume I am doing business with the crooks fromcar been insured. To make matter worse, my
Escondido and I just traded-in a 2004 Volkswageninsurance company does not pay me anything
Passat. I bought the car 3+ years ago and I have 10because they are voiding my coverage for driving and
months of payments left at $375 per month. As partunregistered car! Now my medical expenses along
of the deal they give me $14,000 for the car. Now I stillwith the cost to repair the Eclipse come out of my
owe $3,750 on the Passat so the dealer is puttingpocket which could easily total $75,000 to $150,000 or
$10,250 towards the purchase of a new car and theymore!
will pay off the remaining $3,750 I owe to the bank forSo, a dealer not handling your title properly can be a
the Passat, a very typical car transaction. In mostbig problem, yet it is an easy scam to avoid. If you
states by law the dealer has between 3 to 5 businesstrade-in a car to a dealer and the dealer is responsible
days to complete the deal by paying off my oldfor the payoff call your trade-in's lender and let them
Passat's bank.know that they should expect a payoff shortly from
This is standard car dealer business but some dealers(name the car dealer). Also, it is not a bad idea to write
use a scam so they can hold your trade-in's title andthat lender a letter to state when you traded in their
use that money for themselves. They might wait acar, what the total trade-in value was and when you
month, two months or maybe plan on never paying thegave the car dealer possession of that lender's car.
$3,750 to the Passat's bank. A dealer does this soThe bank will appreciate this information, they might
they can use that money without permission, interestcontact the dealer to alert them to their knowledge of
free. And while they commit title fraud their customer'syour situation and this would greatly discourage a
credit gets damaged. Who do you think is responsibledealer from committing this scam on you. And if the
for the $3,750 still owed on the Passat in our example,dealer is foolish enough to attempt this title fraud the
you guessed it.... ME! A car dealer pulling this scam willinformation you gave to the trade-in's lender will help
do a great job of lying to the lender and customer toprevent that bank from looking to you for any future
put off having to pay off the trade-in for as long aspayments and not damaging your credit status.
possible.Now, if you have a loan with a bank for a new car I
The other way a car dealer can hurt you byrecommend calling that lender the day after you take
committing title fraud on the car they sell to you. Usingpossession of your new car and inform them that you
the San Diego crooks again for my example; let's say Iare in possession of the car and ask them when your
went in and bought a new 2007 Mitsubishi Eclipse SEfirst car payment will be due. While on the phone go
Coupe from them for $23,500. I put $3,500 down and Iover information like your name and address to be
am financing the remaining $20,000 plus interest, taxsure everything is correct. A car dealer trying to
and tags, over six years. Another simple,commit this scam will often put incorrect information on
straight-forward car transaction and I stroke them thebanking documents to mislead the bank to delay their
$3,500 check, sign all the paperwork and drive away inanticipation of payment. During your phone
my hot little sports car, everything's great right? Sorry,conversation with the lender make note of the people
remember I made the mistake of buying my Mitsubishiyou spoke with. By making this phone call you are
in Escondido so instead of completing the transactioncemented your business relationship with that lender
(with the California DMV and the bank I have my loanand if there is a problem in the future you have
with) in 3-5 business days, you guessed it, they decidealready established an ownership time-line. And finally,
to pull a scam and not properly issue a title and notcall your insurance carrier to ensure that they are
complete all the associated paperwork.aware that you are in possession of a new car and
When a dealer does this they can delay paying off mythat any funds that have been paid to them to insure
new Mitsubishi to their floor plan company. You see,your old vehicle are now applied to the new one.
virtually every dealer uses floor plan to stock their lotWhen this information is confirmed make note of it,
with inventory (I only know of two that don't). Floor planyou want to know that you have insurance in place
is a program that allows a dealer to have cars on theirwhen you are driving that new car. Taking these
lot that they have not yet purchased. The dealer usesprecautions can go a long way to helping you avoid
a lender to that provides 'a loan' that enables theserious troubles and financial losses in the future. When
dealer to stock a large number of cars on their lotyou are buying a car you need to be smart and be
without tying up huge amounts of money. The lendercareful!
receives interest payments from the dealer for their