Lien Releases Are The Reason Behind Title Problems

  • 4 min read

Here’s another dealership barred from selling vehicles over title problems, let’s take a look. An article from KWCH talks about this dealership in Kansas that had an $87,000 default judgment for complaints about the dealership failing to provide titles to buyers. In addition to that, they failed to pay off outstanding loan balances on trade-ins resulting in consumers having two car payments and no titles. 

This is a big deal and here’s a big red flag. The deal, allegedly this is all alleged at this point, is they sold that vehicle that they didn’t pay off to a protected consumer without paying off the trade-in. So this is an often overlooked reason why dealerships have title problems. If you take in a trade-in that has a lien on it, let’s say it’s a 2019 Toyota Camry somebody owes $20,000 on it. So you take in that trade-in, as a dealership you’re supposed to pay off that $20,000 loan, but what if you say well I’m not going to pay it off right away because that $20,000 is real money coming from my bank account. What if I sell that car to somebody else, don’t pay off the loan right away, and let them drive it? And then eventually when I get the money I’ll pay it off, but what if you never get the money? What if you use that $20,000 for payroll or for rent or for some advertising? Now the person who bought the car paid you whatever they paid you for the car, maybe they paid you $25,000, and you got that money, but you didn’t pay off the $20,000 loan.

So you’re like double dipping on that car. It’s called being out of trust. And a lot of dealerships do it when they run into money problems because it’s an easy way to get some extra financing without having to go to a bank. You already got the financing, it’s somebody else’s car loan. Now, if you’re the person who traded it in, you have a problem because your car loan is not being paid. You might get late payments. It’s going to hurt your credit. Or if you’re the person who bought the car, you can’t get the title because some other bank is holding a title to a car you paid cash for. So, this is a very serious problem of not paying off trade-ins. Again it’s alleged at this point with this particular dealership. But we get calls all the time from people that bought a car and never got the title and they found out there was a lien on it at another bank that never got cleared. We get calls a lot of times from somebody who traded in a car and find out that their lien never was removed. So anytime you’re doing a vehicle transaction buying or selling, make sure if there are any liens involved that they get cleared from the title record. Even if you show that it was paid to the bank getting the check, but it doesn’t clear it from the title record unless proper documents are signed and submitted to the DMV. 

So a lien release is as important as a title, sometimes more important. And dealerships a lot of times play fast and loose with titles. Anytime you see a dealership having a title problem, the first red flag in your mind is, is it a lien release problem? Is it a lien release default from that dealership? And if you look at that option first, it might point you in the right direction of solving that title problem.

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