It really can happen to anyone – even someone who is pretty hip when it comes to cars. Hell, it recently happened to me! 
About six weeks ago (the date’s importance will become apparent in a minute) I went car shopping with a good friend of ours. She was interested in a convertible Toyota Solara that was for sale on the lot of a local – and higher-end – used car lot. The car itself was not the problem. Low miles, great condition, as advertised. It checked out – and my friend negotiated a fair price for it. She drove the convertible home with her dealer 30 day tags that very day. But when a month had gone by by and she hadn’t received her actual tags – or her title – she went back to ask how come. Usually, you get your permanent tags within a couple weeks or so – and the title paperwork should be handled within a few days of sale. Most dealers handle all this for you – just as this dealer promised to do. That’s when the proverbial cat leapt out of the bag.
Turns out, this used car lot is also a consignment lot – a fact which they neither advertised nor disclosed.
Now, there is nothing shady or unethical about consignment lots. What is a consignment lot? It’s a place that sells cars on behalf of their owners. You have a car you’d like to sell, but you don’t want to deal with tire-kickers or the paperwork. A consignment lot handles all that for you – plus puts your car on their lot, where it will probably get seen by more people than it would parked in your driveway. In return, you either pay a fixed fee, or a commission based on a percentage of the sales price, when the car actually sells.
Again, nothing shady or unethical about any of this – as such. Consignment lots can be a great way to sell-off your old car, when you’d prefer not to sell it yourself and aren’t looking to trade it in on a new car.
But there are some issues with buying a car this way that a prospective buyer ought to know about – and more, has a right to know about. And which the dealer/consignment lot has an obligation to put on the table. 
Enter the problem. Because this dealer didn’t.
This car my friend bought? The dealer didn’t actually have the title to it. So they could not transfer it to her. The car was not only still technically the legal property of the person who gave it to the consignment lot to sell on their behalf – it had a bank lien on it. It was not paid-off. The title could not be transferred until the lien holder had been paid off.
These facts were never mentioned to my friend during the transaction. Probably, the dealer figured they could get the paperwork sorted out quickly and no one would be the wiser. And no harm done.
But harm could have been done.
Since the dealer- the consignment lot –Â didn’t have clear title to the car, technically, the car was not their legal property to sell. If, say, the price my friend paid was not sufficient to pay off the actual owner and the lienholder and one or both declined to sign off the title, my friend could have found herself out the money – and without the car. She’d have had to sue – or threaten to sue – the dealer/consignment lot. A huge PITAS, no matter how it turns out. Or, let’s say she had an accident a week after she bought the car. The fact that she wasn’t technically the legal owner could have resulted in serious headaches with her insurer – which assumed it was insuring her car and not some other person’s car.
Luckily for my friend, it turned out ok. Six weeks after she handed them a cashier’s check for the sales price, they finally handed her the signed-over title to what is – at last – her car.
For the first six weeks, at least, it wasn’t. 
I felt had. Probably as much as my friend did – only more so, because she had relied on me to suss out any cheesiness. This time, one slipped under the radar. As OJ might say, it happens. I’ve bought (and sold) dozens of vehicles over the years – and I know to ask to see a title with no liens on it before any money changes hands when you’re dealing with a private party seller. And also, to make sure that the person representing himself as the seller is also the legal owner of the vehicle he is trying to sell (or at least, that the title he has is signed-over already by the legal owner).
But at a dealership – a higher-end store, with no “consignment” signs anywhere – well, who’d a thunk it? I freely admit, I didn’t.
Point being: Assume nothing. In fact, assume the worst. It may be cynical to adopt that attitude, but it’s also the best way to avoid getting the short end of the stick.
Throw in the Woods?
I’ve bought 2 vehicles, a car and a motorcycle, both used, from a dealer and I was treated well both times – could be because I researched the true value of these vehicles – research is necessary when going to a dealership.
I probably just lucked out, because I’ve accompanied two friends to a dealership when they bought a car, only to watch them be approached by these salesmen with every hair in place, fake tans and jewelry like they’re wise guys – when I look up the value of the car they bought on the internet later that night, they overpaid by almost $3,000 even keeping TTL in mind.
Lots of people driving older cars will have to deal with these people though, given that the gov is gonna start pushing E15. That level of ethanol will kill older cars – I wonder how many people driving older cars will learn that the hard way, and be locked into payments on a car they wouldn’t need but for bureaucratic meddling.
http://thehill.com/blogs/congress-blog/energy-a-environment/249857-epas-four-gallon-minimum-mandate
Carfax may be good, but not perfect. I know a guy who could not get the proce he should have for his Miata because Carfax said the airbags had tripped even though they had not.
Yeee! Did you notice in that top picture of car dealer Shecky Spilker he is holding the cigar the wrong way?!
The big mistake is not getting the “signed” non-liened title when you pay. Never do this with a dealer or an individual. It is so much easier to buy new car that I do not know if I will ever buy used car again.
The same thing applies to motorcycle titles too. It seems there are a lot of bikes for sale with no title, lost titles and title “problems” these days. I was recently considering a 1979 RD400 Daytona, a fairly rare 2-smoker, that had already had some restoration done on it. The owner advertised it as having a clear title. But when we got down to talking turkey it turned out the title was actually from out of state in two people’s names, signed by one owner, with an affidavit and bill of sale from the other owner. A quick call to the license bureau made me lose interest faster than that RD could turn an 1/8 mile.
Thanks Eric. I’ve bought 14-15 cars in my life so far, most of them from private sellers, but it’s been a while since I’ve bought one. I’m kinda rusty and the market seems to be getting more dangerous, as per your description. I was just about to buy a used car for one of our teenagers from a guy who is from out of state, but who is now living here with his girlfriend and selling her car for her. You reminded me that I’ll have to see her license and title before buying. I just don’t remember things being so hair-raising in the past. Not only is the housing market messed-up (multiple mortgages and who knows who actually owns them), but now it’s shakiness about cars as well. What’s next? Scared to buy a pair of jeans at Wallymart? Maybe.
I once traded in a car that I still owed money on and the dealer did not pay off the loan, I went to the dealership and was given the run around, it was only after I stood outside the dealership and informed everyone who entered that they had shafted me, that they decided to rectify the problem.
An excellent and creative answer! Bravo!
That’s a common problem with used car dealerships that specialize in selling to people with credit issues who have no other options (Drive Time is an example). My daughter traded in a car at one of these dealerships, one that still had a lien on it and for which she still owed nearly $4000 in payments. The dealership took almost SIX WEEKS to pay off the loan balance, during which time the lien holder threatened my daughter with legal action if she didn’t pay her loan off in full by the end of the first calendar month. Only when she threatened to go after the dealership to whom she traded the vehicle did they get off their arses and take care of the problem.
Lesson Number One: If your credit is FUBAR, you’re better off saving up your dough and paying cash for a hoopty until you can save up enough to make a decent-sized down payment on something better from a reputable dealership. Patronizing these last-resort scumbagships is only going to get you into deep trouble and have you overpaying for a PoS car at loans charging in excess of 20 percent interest.
Lesson Number Two: Don’t f*** up your credit.
Carfax is not to be relied upon, I have found out not all accidents get reported there, so while its not going to hurt you to get one, its not that reliable. Auto check is supposed to be a better source, but nothing beats learning how to check out the car yourself and have a mechanic go over it. I did this with a jaguar I bought used, cost me a couple hundred, but the first one we did find that it had been in some accidents but never reported to car fax. A good inspection uncovered that.
Hi Steve,
Yup- exactly.
My mistake was focusing on the car’s condition (and sales price)… and neglecting to think about the title paperwork. The fact that it was a dealer caused me to let that one slide this time. Never again!
With every Spring flooding and the multiple hurricanes endured each season with their drenching floods, we will once again have water soaked vehicles.
A lot of these end up being sold out of state so that their titles can be laundered. The NW seems to be a dumping ground for these vehicles, but I’m sure that they end up other places too.
Keep and eye out for wet floor boards and rust under the carpet, and signs of mud in out of the way places, like under the dash and under the car. Odd smells from the ventilation system is a sure sign, fully cycle the heat and air.
Not all issues, make it to CARFAX.
Make the effort, do your homework, and trust your experienced instincts.
Good hunting… Tre
Yes indeed. I believe they go under the name of “salvaged title” don’t they? Have seen that up here.
In Michigan anytime a car is totaled it’s supposed to have a salvaged title, but there are all kinds of loopholes. My wife totaled one of her cars and the insurance company paid it off. I bought it back for $400 and fixed it up and they didn’t change the title at all.
I’m sure that both of my work hoopties were totaled. Minor front end collisions but enough to set off the air bags. Fine with me I picked them up for a song and a dance and they have served me well.
I do remember the auctions being full of cars for a while that where obvious flood damage cars. I don’t know how they get over on their title work, but they do. I would rather have a car with light front end damage than one that was flooded. Electrical work is just not something I want to get into at all if I can help it.
Flood damage is a rat holes worth of misery waiting to bite you in the ass. I’d stay away too.
Actually ‘Mot’,
They don’t come up as that..”salvaged title”. The interstate processing and other means, ‘launder’ the title.
Good to point this out. On the lighter side of things we can always watch Kurt Russel in ‘Used Cars’ for a chuckle.
Absolutely! Especially the scene where the model’s dress gets caught on the hood ornament! ;-j
Yes sir! But my favorite is “Marshall Lucky”.
http://www.youtube.com/watch?v=xu8wssjb3CA
Penthouse model Cheryl Rixon.
http://en.wikipedia.org/wiki/Cheryl_Rixon
We have a hot car commercial spokesperson in my area. Megan Gunning.
http://www.philadelphiaspeaks.com/forum/suburbs/23333-cherry-hill-dodge-girl-megan-gunning.html
Hilarious movie, great actors. Laugh till my sides hurt. The out of control car with a stiff at the wheel. I never tire of that scene.
If she hasn’t already done so, I hope your friend has contacted the Commonwealth AG’s office about this dealership. They need to be compelled to fully disclose the nature of their operations to prospective buyers.
I wonder if the carfax would have shown the lien? Did you check?
It might have.
We didn’t run the Carfax; probably ought to have.
Live – and learn!
I’m an old fart so I’ve seen lots of shenanigans pulled when vehicles are involved. My motto is simply this: I will write a check or count out cash and will hand it to the person who I have just witnessed signing the title and is prepared to hand it to me as I hand them the check or cash. Otherwise, it’s no go.
wow, thanks for sharing eric, i have bought and sold a few used cars too and never stumbled across this.
i’m just glad it worked out for your friend.
You bet – and, me too!