Car dealerships have been known to miss payments on trade-ins

Trading in a used vehicle to a dealership is not always as trouble-free as one would hope. For one thing, when you decide to exchange your car to purchase a new one, you will have a rough time getting fair value for your trade-in. 

You may also come across a problem with the pay-off of your used car loan when you opt to trade your car in at the dealership. California law states that car dealerships are required to pay off the balance of your trade-in vehicle.  

If a dealership failed to pay it off before the “pay-off” date, you could be responsible for paying any missed payments on your trade-in that were not part of your sales agreement. 

Are you liable?

Under California Vehicle Code section 11709.4, a dealer has 21 days from purchase to pay off a trade-in vehicle and can’t sell said vehicle until the lien has been paid off. 

The question then becomes: should a seller continue making payments on a trade-in that come due within that 21 day window? The answer is “yes” in order to avoid a late payment which could reflect negatively on your credit.

If your trade-in vehicle is not paid off within 21 days of purchase, you may be liable for additional payments. In this situation, you may have a claim against the dealership. Also, if the failure on the part of the dealership to pay off your trade-in vehicle damages your credit, you may have additional claims, as well as statutory damages.

Unfortunately, there are many instances in which the seller is unaware the dealership has not paid off the loan on their trade-in, sometimes for weeks or even months. Consequently, the owner of the new vehicle may not only run into significant issues with their previous car loan, but with their new loan as well as other financial concerns.

Your next call

Car dealers that misrepresent financial terms or fail in their obligations with respect to the sale of a traded-in vehicle can be sued for auto fraud. In the case of failing to pay off a trade in, should the seller’s credit be negatively affected due to a dealer’s fraudulent actions, the seller can also file a claim for false credit reporting damages.

If you’ve taken your car to a dealership as a trade-in on a new vehicle and, if for any reason the dealer has failed to pay it off per the terms of your sales agreement, your next move should be to contact an attorney who specializes in consumer law, auto fraud, and credit laws.

If you live in Southern California, Attorney Robert Brennan, with offices located in Los Angeles, should be at the top of your list. Call our office today to speak with an attorney about your rights as a consumer.

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