Warning For Anyone Planning To Trade RVs

[HBarlow]

I'm not a member of Escapees, the organization for full-time RVers but occasionally browse on their website and post less frequently.

Recently there have been two significant threads on the Escapees Discussion Forum reporting a financial disaster that has occurred when trusting RVers have traded a motorhome with an outstanding loan balance for a newer motorhome. Both incidents occurred with the same Alabama dealer using the same credit union but it could happen with any dealer anywhere.

What happened in each case was the buyer traded in his or her motorhome for a newer one and signed a purchase contract and new loan agreement borrowing enough money to pay off the balance on his existing loan and financing the balance of the new motorhome. The buyer took possession and drove away happily thinking all was well.

After the transaction was completed the RV dealer closed his doors and went out of business, probably under a mountain of debt. The dealer did not use the proceeds of the customer's new loan to pay off the loan balance on the trade-in and, in a previous transaction, did not pay off the balance of a prior loan on the motorhome that was new to the buyer but had been traded in by another customer.

I know this may be confusing but in summary the end result is the buyer has a new used motorhome with a loan and the dealer did not provide a title to his lender to secure the loan. Worse, the dealer had taken the motorhome in on consignment and sold it and neither the registered owner or his lender were paid for the unit so no title will be forthcoming. EVEN WORSE, the dealer sold the unit the new customer traded in and it is in the possession of an unknown new owner without a title. The new customer is still responsible to the lender for the remaining balance of his old loan.

This scenario may have cascaded including many more who traded in used RVs or purchased used RVs, some may not know it yet, some others may be simply enjoying their new to them RV and may be making no payments to any lender.

All this happened because that dealer was in financial trouble and the new buyers innocently assumed the dealer would meet his obligations. Many of us have traded in a car, truck, or RV with a small unpaid loan balance trusting the dealer to pay off the original loan and went away happy.

When sales are good this is probably an acceptable risk. In a time when RV sales are very slow and some RV dealers, RV manufacturers, and even RV lenders are in financial trouble, buyer beware!!

 

[CKelley1]

this happened to a dodge dealer in albuquerque and a lot of customers now have two payments

 

[Jumbo Jet]

What does all the paperwork that these new owners possess state?

Have we made null and void all contracts?

 

[HBarlow]

Unfortunately the documentation doesn't matter much in a situation like this. The dealer who is usually a corporation and the money are gone and several lenders have legal claims to being repaid the loan money they advanced. The cheated customers and their lawyers can pursue the dealer in court for years into the future but if the dealer corporation didn't own the land and buildings and his inventory has already been repossessed by the lenders there is likely no recourse.

Cars, RVs, boats, and other products are routinely sold with new and old loans and the titles aren't delivered for weeks afterward. Lenders know and accept this and they are protected by the fine print when things go bad.

When the dealer transacting the deals is reputable and financially solvent it works great but a dishonest or financially troubled dealer can abscond with the funds and each of a long string of customers is left holding the bag. A very bad position to be caught in.

Situations like this can't occur when transacting real property sales via a title company or a closing in an attorney's office because purchase money is provided in cashier's checks or certified funds and legal ownership and possession transfer only after payments are distributed.

 

[KKaminski]

Is that the Bernie Madoff RV dealership???



Sounds a lot like his "transactions"



If I was ever offered a sweet deal and the dealer couldn't provide the title at the same time as cash is produced, I'd run like he&& from there.

 

[HBarlow]

Is that the Bernie Madoff RV dealership???

Sounds a lot like his "transactions"

If I was ever offered a sweet deal and the dealer couldn't provide the title at the same time as cash is produced, I'd run like he&& from there.

That sounds like common sense but the truth is the buyer almost never gets the title at the time of purchase unless he is buying from a private owner who has the clear title in hand.

The practice I described above is very common except that this dealer, unknown to his customers, was teetering on the edge of insolvency. The dealer probably thought he was "just borrowing" the money for a few days or weeks and as soon as his sales improved he'd catch up and pay off the trades. It didn't happen and lots of people were left holding an empty sack. The dealer had probably been in business for many years and probably didn't set out to defraud anyone. He probably got caught up in a situation with debts and current obligations spiraling out of control and lost it.

 

[Jumbo Jet]

According to one of our Congressmen, the honorable thing for the dealership owner to do would be to hang himself.

As things worsen, people are going to start to die. There are enough crazies out there that aren't very happy with other people screwing the little man that is working to pay his way!

 

[Ramtough]

What does all the paperwork that these new owners possess state?



Have we made null and void all contracts?

You have a valid contract. Trading does not relieve you of the responsibility to pay the first loan if the dealer dosen't. Your purchase agreement with the dealer makes you an unsecured creditor of the dealer AKA screwee.



It is very difficult to get a title on a dealer trade, especially for a new vehicle. Given the money involved, the best way I can think of to make sure you don't take a bath is to have transaction handled by an attorney acting as trustee, similar to a real estate deal. If the attorney takes your money, he's committed a felony, will loose his license and you may have recourse through his professional liability insurance or bar association. For me, the cost would be well worth it. In this environment, banks don't trust anyone, including long standing customers. Why should we as custmers be any different?

 

[LBARTLETT]

this happens in the farm equipment business when dealerships get into financial trouble, it's also presently happening in the living quarter horse trailer business, lot's of small companies/dealerships in trouble, if the secured creditor ever wants to and does pull the plug anyone caught in the trade is an unsecured creditor in a bankruptcy proceeding, the best (but not 100%) way to protect yourself is to deal with a large reputable company, good advice to all H Barlow, thanks for bringing this to everyone's attention