Auto Dealerships Are Surprising Car Buyers with Unpaid Liens

Some car buyers are shocked to learn they have to cover the bill for unpaid liens on trade-in vehicles that dealerships were supposed to pay off. This is becoming more common as auto dealers are going out of business and leaving auto loan responsibilities with the previous owner.

Why Liens Are Not Paid

Unpaid loans on trade-ins are not being paid off by dealers. Individuals are trading in their vehicles with the understanding that the auto dealer will pay off their loan, only to learn once a lender contacts them that nothing was paid. As a result, the lender demands payment, which leaves the previous owner with two car payments.

New car owners are catching the blame too. Unfortunately, new car owners are being approached by lenders after purchasing a car they assumed came with a clear title. What’s worse is if they can’t pay the additional loan, the car will be repossessed.

How Can Dealerships Be Made Accountable?

Unfortunately, it seems that not much can be done to hold car dealers accountable for their end of the agreement. While a few states have programs requiring that dealers post insurance bonds to repay victimized auto buyers – and California is introducing legislation that would require dealers to prove they have paid off a vehicle’s lien in order to transfer the title – individuals in most states must pay or try to sue.

So if you’re thinking of trading in your car, it may be better to pay off the debt first to avoid being responsible for two car payments later. And if you’re buying a car from a dealership, make sure the car has a clear title before signing on the dotted line.

Are you frustrated or in a similar situation with two auto payments? How would you handle it?