Trade Payoff Scam
Your Auto Loan Payoff
Awaits & Awaits & Awaits...
The trade payoff scam is a tough one that can put you in a serious financial bind. In addition, it can affect your credit for years to come...
This scam actually happened to me and I've seen it happen at multiple dealerships I have worked for. It's a real nightmare!
Here's what I'd like to cover:
What Is The
Trade Payoff Scam?
This whole car dealer scam comes down to the financial stability of the car dealership that you are doing business with. In my years in the car business and the 11 different dealerships I've worked for, only a few have actually been very financially stable.
I don't know what it is about this business, but owners of car dealerships have a tendency to live rather lavish lifestyles and will draw so much money each month that it puts a rather tight financial strain on their dealerships.
What happens with the trade payoff scam is that a dealership will sell you a new car and take your old car in on trade. Simple enough so far, but...
If you have an auto loan payoff due, they will be untimely in making the payoff and in some cases will continue to make your monthly payments instead of making a full payoff.
One dealership I worked for would continue to make your monthly payments until your old, traded in vehicle, was sold. This could take months.
This ties up your credit and could lead to a more serious problem. Obviously, if they can not afford to make the full auto loan payoff, then they must be in a very bad financial state.
This could mean that they are on their way out of business and you could be left with a full payoff due to your old lender.Not Good!
Another way this scam plays out is that your auto loan payoff is not made and they do not continue to make your monthly payments. Guess What?
After your old car payment is 30 days late your credit will get dinged. It's very hard to have this removed from your credit, because your old lender will continue to hold you financially responsible for timely payments of the loan.
What Happened To Me?
I had been working for a dealer for two years and had decided it was time to move on...
I had purchased a newer truck prior to leaving and had traded in my old truck that had an auto loan payoff due.
I relocated two states away and three months down the road I reviewed my credit when I was doing my regular quarterly credit review and noticed that my old auto loan was still reporting a balance.
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I quickly called the lender and found that I still owed money to them for my old truck that I had traded 3 months earlier.
Needless to say, I immediately called my former boss and asked what the problem was. He said that money was a little tight and they had to make monthly payments because he could not afford to payoff my auto loan.
I told him that he needed to figure it out quick and I would give him to the end of the month before I took legal action.
As the month progressed, my auto loan payoff had not been made and I was ready to take action. On the first day of the next month I called the dealership to give one final warning...To My Dismay...
I learned that he had gone out of business the day before. This is a very true story and I could not believe my luck.
I ended up finding out that he had sold my truck a couple of weeks earlier to another dealership. I contacted them and told them that there was still a payoff due and they responded that it was not possible, because they had been given a lien release when they purchased it.
At this point, my boss has now, not only, not made my auto loan payoff, but has committed fraud as well.
To make a long story short, the dealership that bought the vehicle had already sold it to a customer and ended up making the payoff, even though it was not their responsibility.
Take my word for it, it was a nightmare and not knowing if I'd be held responsible for the payoff due was rather stressful.
How You Can Avoid This Scam?
The best way to avoid this trade payoff scam is to only do business with financially secure dealerships.
This can be a little difficult to determine, especially in todays tight economy so:
- Buy from a dealership that has publicly traded stocks. This way you can easily research their current financial state.
- Check with the Better Business Bureau to review any complaints they have received about slow payoffs.
- Buy from a dealership you've done business with in the past. Of course, only if it was a good experience and they made your last payoff quickly.
- Ask family, friends, co-workers, neighbors, etc. where they bought their vehicle and if the payoff was timely.
Please keep in mind that it's not always the "big boys" that have the most financial stability.
If our current economy has proven one thing, it's that even the companies that appear, on the surface, to be financial giants may be functioning on a shoe string budget and one more bad month could spell disaster.
What To Do If Your Auto Loan Payoff Is Not Paid
Call the dealer and demand that your trade payoff be made immediately. Of course, you'll want to give them a reasonable amount of time, like 10-15 days, but after that do not accept any stories.
Here are three great avenues to pursue:
- Threaten to, and if necessary do, go after the dealerships bond.
- Contact your states Attorney Generals office.
- Contact your states Department of Motor Vehicles. Ask for their dealer investigation (or similarly named) unit.
This is certainly not something that you want to drag your feet on. If your trade payoff is not being made, get on top of it quickly or this inconvenience could turn into a full blown nightmare quickly.
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