June 27, 2023

How long does a car dealer have to pay off the loan on a trade-in?

Dear Consumer Ed:

I live in Georgia and just traded my older car for a newer one from a local dealership. It’s been three weeks, and my trade-in has still not been paid off. The salesman had assured me that the payment would be sent next-day mail to the lienholder. How long does a Georgia car dealership have to pay off the loan on a trade-in?

Consumer Ed says:

There is no time frame set by law for the dealership to pay off the loan on a trade-in, but there may be consequences for the dealer if it delays payment once your new loan has been funded. Remember–until the dealer pays off your old loan, you will remain responsible for maintaining insurance and making all payments on your old vehicle. As a result, if your new car purchase includes trading in a car with an unpaid lien balance, be sure to get a promise, in writing, from the dealer regarding the trade-in payoff date. Be aware that if your next payment is due before the dealer agrees to pay off the loan, your payment will not be made on the due date unless you elect to make that payment.  Follow up with the lender to be sure that the payoff was actually made.

Trading in a vehicle is a convenient option for some consumers but comes with significant risk if the dealer fails to pay off the loan. When done correctly, it allows consumers to leave their trade-ins at the dealership and be responsible for only one payment to one lender. When done improperly, however, consumers are stuck with two car payments and a trade-in vehicle that may be in the possession of the dealership. In worst-case scenarios, some dealerships have sold the trade-ins before the loans are paid off or failed to pay off the trade-in loan entirely. 

If you find yourself in a situation in which the trade-in loan is not paid, contact a private attorney immediately. You can also contact the Georgia Attorney General’s Consumer Protection Division by visiting consumer.ga.gov or by calling 404-651-8600 or 1-800-869-1123 (toll-free in Georgia). Failing to deal with the issue could lead to damage to your credit score and a potential lawsuit against you from the company that financed the trade-in.

Submit your own question to Consumer Ed.  Remember…we do not give legal advice. Always consult a lawyer about legal issues.

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