Meet Christine O’Kelly. She just bought a new Kia and traded in her old car. Kia of La Quinta, California sold her a new Sorento and offered her $4,000 for her trade-in. They then took the other $4,000 she owed on her old car and rolled it into the new loan. That was in October. Now she’s getting calls from former employees of the now out-of-business dealership — telling her that she is still responsible for the trade-in and had better come pick it up.
“They told me they didn’t have the money to pay off my car and I needed to pick it up in San Bernardino,” O’Kelly told KESQ. “I was still financially responsible for it.”
She was also told that she has until Friday to pick her car up or it will be sold at auction by the bank that shut down the dealership.
“I’m either going to have to make two car payments on a car I don’t have or it’s going to hurt my credit,” O’Kelly said. “It’s Christmas time. I’m a single mom. I don’t have the money to be making two car payments.”
We did a little research and learned that this problem isn’t unique to Ms. O’Kelly. In fact, California passed a new law that protects consumers from this very situation, according to the Los Angeles Department of Consumer Affairs.
Many consumers who trade in their used cars when they buy a new car often still owe money on the trade-in. The understanding between the consumer and the dealer is that the dealer will pay off the balance owed on the trade-in so that the consumer will incur no further charges.
Typically, however, the sales or lease contract for the new car does not specify any time for the dealer to pay off the trade-in. If an unscrupulous or financially strapped dealer does not pay off the balance on the trade-in quickly, the consumer remains liable on the old contract while having to make payments for the new car.
If a dealer who engages in the above practices goes out of business or files bankruptcy, consumers are unable to recover money directly from the dealers and thus incur substantial financial loss.
This new law establishes a program to compensate consumers if a dealer shuts down or files bankruptcy before paying off the trade-in, license and registration fees, or sales proceeds from a consigned vehicle.
If this has happened to you, and you live in California contact the LA Department of Consumer Affairs or the California Attorney General and ask them about your options. You can also read the full text of the new law, here.
Kia of La Quinta Closure Puts New Car Owners in Corner
[KESQ] (Thanks, Traveler!)