Under the Hood: How Dealers Commit Title Fraud on Consumers

The Expert Podcast

Common Misconception on Car Title Problems

• Many consumers assume buying from a licensed dealer ensures title security, but title fraud schemes, particularly with used car dealers, can pose serious risks.

Understanding Floor Plan Fraud

• Dealerships often finance their car inventory through a line of credit, known as a floor plan. This means banks hold titles until vehicles are sold and loans are repaid.
• Dealers sometimes fail to repay the loan after a sale, leading to title issues for buyers who cannot register or legally own the car.

How Floor Plan Fraud Unfolds

• Dealers may use customer payments to cover operating expenses instead of clearing the vehicle’s loan, leaving the title with the bank.
• Buyers may receive temporary tags that expire without obtaining a permanent title, particularly problematic if the dealership closes.

Real-Life Example: Massachusetts Case

• In a recent case, 25 buyers were affected when a dealer used fraudulent tags and failed to release titles, leaving customers without legal ownership or registration.

Protecting Yourself from Floor Plan Fraud

• Request the dealership to show proof of title before completing any transaction.
• If they can’t produce the title, consider delaying payment until they can present it.
• If a dealer hesitates or cannot provide a title, it may be a sign of financial trouble and a risk for potential fraud.

Additional Tips

• Financing through your own bank can provide an added layer of security.
• Remember, even without a title, you remain obligated to repay any loan on the vehicle.

Avoid Red Flags

• A dealer unwilling to produce or unable to obtain a title may indicate a financial issue or a potential scam.

Closing Advice

• Stay informed to protect your hard-earned money from title issues and potential fraud.