Car Dealers - Not Paying Off - Trade In Loans - People having Cars Repossed and stuck with Old and N

I have worked a lot of years in the car business. So did the majority of the Watergate burglars, which ought to tell you something.

Typically a financially healthy car dealer will pay off a trade-in within ten days from the time you turn in your car to the dealer. Interest accrues daily on car loans and when the transaction on your new car is being finalized one of the many numbers being dangled in front of you is your old car’s payoff priced with ten additional days of interest thanks to a phone call to your lender who tells the dealer what the payoff will exactly be on that given day.

Believe me most dealers want to pay it off before 10 days if at all possible. Though the additional profits are small, picking up a few pennies on the deal by getting the trade-in paid off a couple days early is just more profit to the deal. If the dealership doesn’t get that check to that lender in 10 days they end up having to foot the additional interest which is profit being taken away from the deal.

For anyone who wants to better understand the system of how the majority of all New Car Franchise Dealers work here is a basic break down.

The Factory sells the brand new cars priced based on the make model and options at a wholesale price the same to all dealers. The dealer is required to pay the Factory/Manufacturer for the vehicle the moment vehicle identification numbers are tagged onto the new car rolling off the assembly line. Each vehicle being built rolling off the assembly line has been built to the buying dealer’s specifications. A small size dealer usually has around 150 new cars sitting on the lot at an average cost of around 24,000. This represents an investment of 3.6 million dollars, a medium size dealer typically carries about twice that, and a mega dealer typically carries twice that still.

For most dealers around 99% the luxury of buying 3.6 to 12 million dollars worth of cars in cash on hand is not possible. So they borrow the money from banks or finance companies. A new car does not have a title but a Manufacturers Certificate of Origin. The MSO is shipped to the bank that is loaning the dealer money to purchase the cars from the factory and the car itself is sent to the dealer. The Manufacturer issues a credit against the wholesale price of the car known as hold back finance credit which is designed to cover approximately 90 days worth of interest on the new car the dealer has sitting on his lot. If he can sell it earlier they make a little more money. If they can’t it starts costing them money. A dealer with a medium size inventory might spend upwards of 50,000 a month in interest charges on his inventory.

The second a sale takes place the clock starts ticking on the dealer. The bank that paid the factory for the car typically wants to be paid for the MSO and note they are holding within 72 hours, after that they start charging penalties. The lender who is loaning you the money for this car will not pay the dealer until he can provide the MSO, the bank who has the MSO will not release it before the dealer pays them. The lender who owns the loan on the car you are trading in likewise will not release your title that secures your loan until your loan is paid in full. Additionally the States have different time requirements regarding temporary registrations, usually thirty days and they want all the paperwork on everything before then. The lender who approved you for your loan has extended an approval for 30 days too, likewise if your signed loan agreement and the original MSO is not included with the agreement is not received by then, then the whole process has to start over from scratch, while hundreds of dollars in additional interest has sometimes accumulated on the dealer on the new vehicle and the old vehicle. That’s why dealers push for ten days to accomplish paying everyone. They have to have the cash on hand to buy your title for your trade, pay off the Manufacturers Certificate of Origin on the New Car and pay the state and counties all taxes and fees and shoot paper work to the two different lenders, you, the manufacturer letting them know you are their new customer, which is a process they will collect any incentives they have already also paid out of pocket on your and the manufacturer’s behalf. They also have to get all this paperwork to the state and county. A financially healthy dealer has everything in the mail within 3 to 7 days including all checks.

Right now…there are no healthy dealers.

A word to the wise…let the buyer beware!

Why yes, one of the dealerships I have worked for did employ the Watergate burglars!

Originally posted by unruly1
Spend Spend Spend. Then blame it on the seller.

Seems to me the US population needs somone to manage there money.
Why buy a car and not have then cahs or income to pay for it? We have been looking at houses for sale in the US (we are from Canada) and we are amazed at the sizes of houses!!!

I think maybe it's alot to do with Glutony!

Ever tried cash?

I don't think you understand this thread or what is being posted. People CAN pay for the car.. but lets say a good deal ona car i want is only a deal for 1 week and it's a car for a payment of lets say $250 a month ( pretty cheap/average )

I have 3 months left to pay, a well paying job, money in the bank and can afford to keep paying for the 3 months no problem, but the deal ends this week and after that the payment is at $300 a month for that same car. Thats a great savings and a great deal.

The company offers these deals and promises you they will hold to their promise and pay it off . Thats why people do it because THEY offer it.

You need to re-read some of these posts.

Many people can afford to and it's not POOR people that just trade in cars. Many very rich or just well off or middle class do it too because it' the DEAL of the car that you want but you have to trade in your car to get that deal.

It's very shady and I'm pretty sure even though it would cost you money and time and many a headache you would eventually win out.

Thing that sucks is that it is like having to prove your inosence when the dealer is the guilty one.

Originally posted by ConservativeJack
I read the article it was hard to follow.

This is typical America.

Buy a car you can't afford, and trade it in when you can't pay for it anymore.

Then, get a better, newer car, that you can't afford even more.

My dad traded in a car 3 months early. He could afford the 300$ payment. He could afford a $400 dollar payment actually but there was a deal for a impala for about the same price $310 a month and after that it was regularly like 350$. so he decided to trade in early.

If this happened to him how would it be his fault, when we can obviously afford the payment. We should not however have to keep paying on a car we don't even own.

You are not absorbing the facts you are just stating opinions.

reply to post by LucidDreamer85

My cousin has had this happened to her. I suggested that perhaps she should try contacting the insurance company of the previous car (which she should have if it was financed). Perhaps there is coverage in her policy for a stolen vehicle, because technically it is a stolen vehicle -- stolen by someone who pretended to be a responsible dealer.