Understanding Your Rights: What to Do When a Car Dealer Fails to Pay Off Your Trade-In Vehicle
When you purchase a new car, you may trade in another vehicle to get a discount on the new one. If your previously owned vehicle is not paid off, the dealer must take care of that within a certain amount of time. If they do not, you could face penalties and other consequences from the lender. Because of this, if the dealer fails to pay off your trade-in vehicle on time, then you may be able to get damages from them.
Does a Dealer Have to Pay Off A Vehicle Trade-In?
Yes, under California Vehicle Code Section 11709.4, a dealer is required to pay off a trade-in or an agreed upon amount within 21 days of the transaction. This agreement should be presented in a written document between the buyer of the car and the dealer. However, even if there is not a written agreement, the dealer must abide by California law and pay off the trade-in within the required time period.
Why Doesn't a Dealer Pay Off a Trade-In Vehicle?
There are multiple reasons that dealers do not pay off trade-in vehicles.
The Dealer Is Waiting on the Buyer's Financing for the New Car
In some cases, the dealer may be waiting for financing for the new car sold to the consumer to be finalized. The dealer may not want to pay off the trade-in until the new car is financed. This protects the dealer in case the buyer does not ultimately receive financing for the new car.
The Dealer Doesn't Have the Money
If the dealer accepts a trade-in without the financial ability to pay it off, they may delay the process. They may be waiting on funds from other sources or anticipate that they will sell other vehicles to pay off the trade-in. In any event, they are violating California law by failing to pay off the trade-in on time.
H3: The Dealer Wants to Sell the Trade-In Before Paying It Off
If the dealer is low on funds, they may want to sell the trade-in vehicle before paying it off. Their goal may be to resell the trade-in for as much as or more than is owed on the vehicle. They may utilize this process as long as they comply with California law and pay off the vehicle within 21 days.
The Dealer Forgets or Makes a Mistake
Sometimes dealers simply forget to pay off trade-in vehicles. This type of mistake can be seriously detrimental to their own business as well as the new car buyer's credit. The dealer may owe the buyer damages even if their failure to pay off the trade-in was an accident.
Issues that Arise If the Pay Off Does Not Happen on Time
There are multiple problems that can arise for all parties involved if the pay off of the trade-in vehicle does not occur on time.
The Lender May Become Aware of the Trade-In
If the dealer fails to pay off the trade-in, the lender will become aware of the trade-in contract with the dealer. This may be against the buyer's policy with the lender. If the buyer is found to have violated the lender's contract, there may be negative consequences that go beyond a hit on the buyer's credit report.
The Lender May Repossess the Vehicle
If a payment is missed, the lender may also repossess the vehicle from the dealer. Since the lender still technically owns the vehicle, they can take possession of it for failure to remain current on payments or breach of contract.
The Lender May Report Missed Payments to Credit Bureaus
The lender will likely report the person who traded in the car as being late on payments. This will create a long-lasting blemish on the buyer's credit report. If the dealer is found to have caused damage to their credit, the dealer may have to pay statutory damages as well as additional compensation.
Liability May Remain on the Person Who Trades In The Vehicle
If the trade-in vehicle is still in the new car buyer's name, then any tickets and other liability incurred under the tag or title may be applied to that individual instead of the dealer. The dealer may try to avoid liability by waiting to pay off the trade-in and keeping the new car buyer's name on it as long as possible.
Will the Dealer's Failure to Pay Off My Trade-In Affect My Credit?
It is entirely possible that the dealer's failure to pay off your trade-in vehicle will have a devastating effect on your credit score. If payments are missed, your lender may notify all three credit bureaus (Experian, Equifax, and TransUnion) when you become 30, 60, and 90 days late.
The reported late payments will cause a substantial drop in your credit score. In fact, missed car loan payments can result in a credit score drop of more than 100 points.
This could also prevent you from obtaining other financing opportunities. If you are trying to get another car loan, personal loan, mortgage, or other credit, the missed payments on your trade-in vehicle will cause a problem.
What to Do After Trading In a Vehicle to Protect Yourself
When you trade in a vehicle, you should maintain contact with the lender and reserve access to your account until you know it is paid off.
You should take the following steps to protect yourself after trading in a vehicle:
- Contact the dealer in writing to make sure payments are being made on time.
- Contact your lender to ensure they know the dealer should be making payments.
- Send the lender a copy of your written agreement (contract) with the dealer.
- Make any payments that you think the dealer has missed.
If you do not think that the dealer is maintaining their part of the deal or they have missed payments, then you should immediately contact a consumer auto fraud attorney. You need someone on your side who understands California Motor Vehicle Code Section 11709.4 and who will protect you.
What to Do After Trading in a Vehicle If the Dealer Doesn't Make Payments
You need to protect yourself as much as possible if the dealer does not seem to be making payments on time or paying off your vehicle pursuant to California law. Here are some steps you can take if you trade in a vehicle and the dealer doesn't comply with your contract and law:
- Contact the dealer to find out why payment wasn't made.
- Find out if and when a payment will be made on the trade-in vehicle.
- Contact your lender to explain the situation.
- Request that your lender does not make a negative report to the credit bureaus.
- Contact a consumer auto fraud lawyer right away.
The longer it takes to pay off the trade-in, the worse the consequences will be for all parties involved.
Can I Sue a Dealership for Not Paying Off My Trade-In?
Yes, the dealer's failure to pay off the trade-in vehicle in violation of your agreement is a breach of contract. It is also against California law. California has several vehicle codes and consumer protection laws that protect you against this type of fraud. You have a right to damages from the dealership if they fail to abide by your contract, violate California laws, and damage your credit score.
Can My Credit Report Be Fixed If the Dealer Doesn't Pay Off the Loan for My Trade-In Vehicle?
It's possible to fix your credit after a dealer fails to pay off the loan for your trade-in vehicle. However, the steps you will need to take depend greatly on the facts of your situation.
The Fair Credit Reporting Act (FCRA) is a consumer protection law that protects people from inaccurate or misleading credit reporting. The FCRA may provide you with rights to remove any negative credit reporting related to your vehicle trade-in not being paid off.
There is a very specific procedure that must be followed to possibly remove these items from your credit report. It's best to contact an auto fraud and credit reporting lawyer to help you with the process.
Your California consumer protection lawyer can help you:
- Gather evidence showing that the dealership should have made payments on the trade-in vehicle or paid off the loan
- Prove that you were not responsible for the payoff of the vehicle
- Show that the information on your credit report is inaccurate and misleading
- Negotiate with the lender to remove certain information from your credit report
- Challenge information on your credit reports with the three major credit bureaus (Equifax, Experian, and TransUnion)
The goal is to help you remove inaccurate information from your credit report so that your score reflects the appropriate information. This is extremely difficult, and the lender and dealership may fight your claims. It's important to work closely with your consumer protection attorney to navigate this process.
Is It a Crime for the Dealership to Not Pay Off My Trade-In?
While failing to pay off a trade-in is against California law, it is not a crime. It is illegal under California's vehicle code as well as against the terms of your contract.
If payments for your trade-in are not paid, you will need to contact a consumer law lawyer. Your attorney can contact the dealership and their attorney to explain that you intend to hold them to the terms of the contract. Unfortunately, without pressure from an attorney, many dealers will ignore consumers.
How Much Money Is My Case Worth?
If a dealer fails to pay off your trade-in, you may be able to get compensation for your damages. Your losses may amount to thousands of dollars depending on how much your car loan was worth and how badly your credit has been damaged.
There is no way to know exactly how much money you can get from a failure to pay off a trade-in vehicle lawsuit. However, you can get compensation for:
- The amount of money the dealer should have paid on the trade-in
- Any monetary losses you have had as a result of the dealer's actions
- Missed credit opportunities due to a decrease in your credit score
The dealership may be responsible for any losses that you experience as a result of their failure to pay off or make payments on your trade-in.
Contact an Auto Consumer Rights Lawyer
Making a deal with a dealership can land you in hot water if they fail to pay off your trade-in pursuant to California law and your agreement. They should be held accountable for their actions. Attorney Paul Mankin will review your case, gather necessary information, and work to protect your consumer rights.
Call Law Office of Paul Mankin, APC at 800-219-3577 for a case consultation today.