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AUTOS: PROTECTIONS FOR CAR BUYERS WHO
TRADE-IN THEIR CARS
Vehicle Code Sections 11604, 11703, 11705, 4456.3, 12200
Effective July 1, 2008
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.
In addition, some dealers also fail to remit to the state license and registration fees paid to the dealer by consumers. This results in the consumers being unable to register their new vehicles.
In yet other situations, some dealers who sell vehicles on consignment for consumers fail to pay consumers the sale proceeds.
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.
To accomplish the above, this new law created the Consumer Motor Vehicle Recovery Corporation (CMVRC), which will administer a restitution program for motor vehicle consumers. The law requires the Department of Motors Vehicles (DMV) to charge dealers a $1 fee on each vehicle they sell or lease. Dealers may not pass on this fee to consumers. DMV is required to transfer the fees collected to the CMVRC. Starting July 1, 2008, consumers can apply to the CMVRC to recover losses of up to $35,000 per vehicle for unpaid trade-ins, registration and license fees, or consigned vehicles.
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