A recent story in The Wall Street Journal’s Marketwatch highlights the growing problem of car dealerships that fail to forward consumer payments. During the economic downturn, more dealerships are failing to pass on consumer payments for taxes, title fees and other costs. In some cases, dealers are refusing to fulfill their obligations to pay off the remaining balance on trade-in cars, making consumers responsible for thousands of dollars in hidden costs.
Although car dealer fraud is not a new phenomenon, the economic situation has contributed to these activities. According to figures cited by the news story, the California Department of Motor Vehicles has seen the number of open cases against dealers for failing to transfer customer payments double since the beginning of 2007.
Why do car dealerships fail to pass on consumer payments? While a small percentage of dealerships may actively withhold customer payments out of a desire to commit fraud, in times of economic difficulty, plummeting cash flow may contribute to a number of these cases. If a dealership finds its flow of ready cash dwindling, anxious creditors may freeze the dealership’s funds.
Given this problem, a strange Catch-22 arises for California car buyers. Although many troubled dealerships are offering incredible discounts for new and used vehicles, these very same dealerships are the ones most likely to be unable to forward your taxes, title fees and other costs. Thus, a great sticker price could deliver a nasty surprise after the sale is complete.
For struggling dealerships, this situation can lead to a downward spiral as concerned consumers stay away from deals offered by troubled car sellers, which chokes off their cash flow and leads to the dealers being unable to pass on consumer payments.
If a dealer fails to pass on the state taxes and title fees, the consumer must pay those fees off before being able to operate the vehicle on California’s highways. As bad as that situation can be, a worse fate awaits those who trade in a car that they have not fully paid off. In that case, a car dealership is supposed to take over the payments on the trade-in vehicle as part of the sales agreement. However, if a dealership closes its doors, the customer may watch their credit rating unravel as the payments on the trade-in car go past due.
If you believe that an auto dealership did not properly forward your payments, please contact the Law Offices of Howard D. Silver to discuss your situation with an experienced California used car fraud attorney. For a free consultation and more information, call (855) 341-2611.