Question: I traded in a car to a car dealer, but the bank never sent them the title after the dealer paid off the outstanding loan. Now the car dealer is threatening to cancel the deal. What can I do?

December 28, 2005

Hi Tony

Came across your website and wanted to run a question past you. I live in NY state and recently purchased a new car from a dealer nearby in CT. I had a trade-in and they agreed to pay it off as part of the deal. Fine - we did all the paperwork and I left with the new car.

A month later, the car dealer called wanting the title to the trade-in. I never had the title since the bank owned it, and I referred them back to the bank. The bank gave them a lien release, however, did not have the original title or copy of one either.

The dealer called me back a few weeks later demanding I provide them a title. We argued for a few weeks and I told them it's not my problem. They said the DMV refused to give them the title. Finally, I agreed to contact the DMV and ask them to issue me a replacement title, which I would send to them after I received it.

All of this back and forth has taken four months. The car dealer sold the trade-in at auction, however, they couldn't complete the transaction because there is no title. Obviously, the dealer is stressed.

In the meantime, I am now waiting for the reissued title to arrive from the DMV. Now the dealer called today and is threatening to "unwind" the deal since I can't provide the title. This whole transaction has been a very negative experience.

Can the car dealer really unwind the deal? Since they signed an agreement to pay off the loan (and did), and they have possession of the vehicle, is it really possible that the DMV would refuse to issue them the title even with proof of payoff? Is the dealer incompetent?

Aside from waiting for the title to arrive, then moving it on to the dealer, is there anything else I should be doing? Appreciate your time and guidance. Thanks!

Sean T.

Answer:

Hi Sean,

This sounds like a really weird deal. Of course, once you get the replacement title all this aggravation should go away.

The bank that financed the trade-in should have the original title, unless the original selling dealer never sent it to them. This is unlikely since the bank had some kind of lien document.

It is the car dealer who arranges to have the lien put on the title for the lending institution, and then they forward the title to the bank in exchange for the funds. The lien is usually put right on the title, then after it is paid off the bank signs off the lien and gives the title to whoever is supposed to get it.

It wouldn't hurt for you to contact the Office Manager at the original selling dealer and explain the problem. Perhaps they can look up the deal in their files and shed some light on the problem. You should also contact the bank who held the lien. This is probably where the problem is. They probably misfiled the title and still have it somewhere.

You may also want to verify that the new dealer did indeed pay off the old payoff...just to be sure!

As far as them unwinding the deal, that is going to be very difficult at this point since you are now making payments on the new car. They would have to pay off the new loan only to end up with a 4 or 5 month old used car. It doesn't make any sense at this point.

It would probably be a good idea to furnish the new dealer with a copy of the replacement title application or receipt so they know you are doing your part to get it for them. At this point communicating with the right people at the dealership - either the Office Manager or the title clerk or both will probably go a long way in settling them down.

All my very best...

Tony Iorio