The Deal Is Falling Apart? What Can a Dealer Do?
Dealers frequently reach out to TIADA through the Compliance Consultation Service to ask what their options are if a deal begins to fall apart after delivery. Often they want to know when or if they must transfer a title in these situations. As we answer below, dealers only have two options: transfer or unwind.
Dealer Question: Under what conditions must I transfer a vehicle to a customer?
Answer: If a vehicle is sold by a dealer, the title must be transferred into the customer's name, or the deal must be unwound.
In the buy-here, pay-her world, a first or second payment default is a common situation in which a dealer would think twice about transferring a title. In the retail world, a finance company rejecting the deal is a similar situation. So, why transfer when the deal is dead?
The answer is that a sale either has occurred or has not occurred. If a sale has occurred, then the law says that a dealer must collect and remit motor vehicle sales tax as well as apply for registration and title on behalf of a customer. In the situations described above, a sale has occurred. The only way to avoid tax and transfer obligations is to unwind the deal completely - take the vehicle back and return the customer's money.
Thanks to deferred sales tax, BHPH dealers only have to pay sales tax on the down payment amount (and any other monies received). On the retail side, sales tax is likely due in full at the time of transfer. If the lender rejects a retail deal then that dealer is now in the BHPH business. Here, unwinding the deal might be the better financial option, particularly when the TT&L exceeds the down payment amount received. Although, retail dealers might consider utilizing a conditional delivery agreement to avoid some of the headaches associated with being an unintended lien holder.
There certainly are other considerations associated with default and repossessions. However, the rule of thumb is simple: you need to transfer the title or you need to unwind the deal.