This is standard car dealer business but some dealers use a scam so they can hold your trade-in’s title and use that money for themselves. They might wait a month, two months or maybe plan on never paying the $3,750 to the Passat’s bank. A dealer does this so they can use that money without permission, interest free. And while they commit title fraud their customer’s credit gets damaged. Who do you think is responsible for the $3,750 still owed on the Passat in our example, you guessed it…. ME! A car dealer pulling this scam will do a great job of lying to the lender and customer to put off having to pay off the trade-in for as long as possible.
The other way a car dealer can hurt you by committing title fraud on the car they sell to you. Using the San Diego crooks again for my example; let’s say I went in and bought a new 2007 Mitsubishi Eclipse SE Coupe from them for $23,500. I put $3,500 down and I am buy here pay here atlanta the remaining $20,000 plus interest, tax and tags, over six years. Another simple, straight-forward car transaction and I stroke them the $3,500 check, sign all the paperwork and drive away in my hot little sports car, everything’s great right? Sorry, remember I made the mistake of buying my Mitsubishi in Escondido so instead of completing the transaction (with the California DMV and the bank I have my loan with) in 3-5 business days, you guessed it, they decide to pull a scam and not properly issue a title and not complete all the associated paperwork.
When a dealer does this they can delay paying off my new Mitsubishi to their floor plan company. You see, virtually every dealer uses floor plan to stock their lot with inventory (I only know of two that don’t). Floor plan is a program that allows a dealer to have cars on their lot that they have not yet purchased. The dealer uses a lender to that provides ‘a loan’ that enables the dealer to stock a large number of cars on their lot without tying up huge amounts of money.
The lender receives interest payments from the dealer for their inventory and is paid-off when a car is sold. For most dealers they could not or would not want to keep 150 cars on their lots without floor plan (if those 150 cars averaged a cost of $20,000 each the dealer would need to tie up $3,000,000 in their inventory). So, when I bought my Eclipse I took out a $20,000 loan from a bank. That bank pays the Mitsubishi dealer $20,000 on my behalf for the car. Then the car dealer is responsible to pay the floor plan bank their money. This is usually done within 2 or 3 business days.