If the Dealership Goes Bankrupt, The Car You Sold May Come Back to Haunt You
Did you just sell your car? If the dealership you sold your car to goes under because of the economic crisis, you may find that you’re still on the hook for that car loan:
The national wave of auto dealership closures has come crashing down on thousands of people who are on the hook for used-car loans that dealers were supposed to absolve.
When a car buyer still owes money on a vehicle he is trading in, the dealer promises to pay off the outstanding loan, then resells the vehicle. But as more dealers go out of business, some are sticking consumers with the bill. Lenders can then go after the previous owner who thought the debt was paid, or repossess the car from the new owner who assumed it came with clear title.
"It’s devastating for people when it happens because they have two car payments and they can’t afford them," said Rosemary Shahan, president of Consumers for Auto Reliability and Safety, a Sacramento-based nonprofit that lobbies on behalf of vehicle owners. "Their credit is destroyed for no fault of their own because the dealer defaulted."
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