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AUTOS – TRADE-INS
SB 95 (Chap. 556); amends Veh sections 9262 and 9262.5; adds Veh section 11709.4
Background: Many consumers who trade in their used cars when they buy a new car often owe more money on the trade-in than what the vehicle is worth. 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. If an unscrupulous or financially strapped dealer does not pay off the balance on the trade-in in a timely manner, however, the consumer remains liable for the trade-in while having to make payments for the new car.
Additionally, dealers collect license and registration fees from car buyers, but some dealers fail to submit such fees to the Department of Motor Vehicles. This results in some car buyers being unable to register their vehicles. In yet other situations, some dealers who sell vehicles on consignment fail to pay consumers their proceeds from the sale. 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.
California established a program in 2008 to compensate consumers if a dealer fails to pay off the trade-in, license and registration fees, or sales proceeds from a consigned vehicle. This was done by creating the Consumer Motor Vehicle Recovery Corporation, which administers a restitution program, funded by a $1 dealers are required to pay for each vehicle they sell or lease.
The new law: Expedites the time consumers are to be paid for their losses by:
- Requiring the dealer to pay off the trade-in within 21 days from the date the vehicle is traded-in.
- Prohibiting the dealer from selling, consigning for sale, or transferring ownership in the vehicle purchased or obtained in trade until the pay off has been made.
For more information:
County of Los Angeles Department of Consumer Affairs
B-96 Kenneth Hahn Hall of Administration
500 W. Temple Street * Los Angeles, CA 90012-2706
Telephone (800) 593-8222 (within the County) * (213) 974-1452
Web site: dca.lacounty.gov