Dealers Must Transfer the Title or Unwind the Deal
TIADA received several questions about last week's video, most of which were about first payment defaults. When a customer fails to make the first (or second) payment, and the dealer repossesses the vehicle before applying for title and registration, does the dealer still have to transfer the vehicle? YES.
We must emphasize the point- if a retail sale is made, then the dealer must apply for title and register the vehicle in the name of the customer. Period. A sale has been made if a person pays money in exchange for receiving a vehicle.
The only way to avoid paying for title and registration is to unwind the deal. “Unwind” means that the customer brings back the vehicle and the dealer returns all of the money that the customer paid for the vehicle. If you unwind the deal, then a sale did not occur.
Failing to transfer title on time is a surefire way to get in trouble with Texas DMV. For BHPH dealers who take advantage of deferred sales tax, not transferring title will result in accelerated sales tax coming due on the entire contract amount. Imagine if, after the customer didn't even make the first payment, then on top of the cost of repossession, you have to pay sales tax on the full contract price!
Again, you must apply for title and registration in the name of the customer if a sale was made. This includes sales where the customer defaults on the first payment and the vehicle is repossessed. This is likely the least expensive option, especially for BHPH dealers. Title and registration are cheaper than 6.25% sales tax on the entire contract amount. They are also less expensive than a Texas DMV fine.
LINK: The Deal Is Falling Apart, What Can a Dealer Do?