Don’t Lien on Me!
Warning. This story requires the reader to hum and sing along. Readers may become better educated car-buyers, but, may have a song stuck in their head for a minimum of 12 hours.
Some…times in our lives, we all have pain We all have sorrow But, if we are wise We know that there’s, always tomorrow
Go ahead — sing it out loud. No one on the train is watching 😉
Lean on me, when you’re not strong And I’ll be your friend I’ll help you carry on….
“Lean on Me” — the immortal classic by Bill Withers. Ranked 208 on Rolling Stones’ list of the 500 Greatest Songs of All Time; it still feels as good today as when it was released 45 years ago. But there are times when you most definitely don’t want to be leaned on; or technically, ‘liened’ on. Like when you trade in a car for a new(er) one.
SO WHAT EXACTLY IS A LIEN?
A lien is a legal “encumbrance” registered on a person’s property to secure a debt the property owner owes to another person/business (commonly a bank/lender). In the case of a car loan, a bank (or finance company) will register a lien against the vehicle giving them the right to take possession of it should the borrower default on the loan and to sell the vehicle to recoup the outstanding debt.
So it’s really important you DON’T buy a vehicle with an outstanding lien! Historically, this was only a concern for consumers buying a car privately because it is illegal for a registered dealer to sell a car with an outstanding lien. But recently, OMVIC, Ontario’s vehicle sales regulator, has encountered a small number of dealers failing to remove liens from vehicles that were traded-in and then selling those vehicles.
“The customers of these dealerships traded-in vehicles that still had money owing on them — loans that were to be paid off by the dealer as part of the financing of the consumers’ new vehicles,” explained John Carmichael, OMVIC CEO and Registrar. “Unfortunately the dealers did not pay off the loans.” In the recent case of a Sault Ste. Marie dealership, the dealer received the monies required from the customers’ banks to pay for their new vehicles and payoff the loans on their trade-ins; however the dealer didn’t pay off the loans. Instead he tried to keep up the monthly payments on his customers’ old loans; and he sold the trade-ins to other customers, even though they had liens on them.
“Financially, it was a house of cards that left all the consumers involved at risk.” If the dealer stopped making payments, (which eventually happened), the banks could demand the money from the customers who had traded in their vehicles and the consumers who purchased the vehicles were at risk of having them repossessed because banks held liens on them.”
In each of these unusual cases, OMVIC took steps to revoke the dealerships’ licences and the consumers, because they bought from a registered dealer, were, or in the most recent case, should be, protected by the Motor Vehicle Dealers Compensation Fund, so “the actual consumer harm is minimal,” which is fortunate.
” …recently, OMVIC, Ontario’s vehicle sales regulator, has encountered a small number of dealers failing to remove liens from vehicles that were traded-in…”
OMVIC wants car-buyers to know that there are early warning signs indicating the loan on a trade-in was not paid. “If a consumer notices a payment is debited from their bank account for a vehicle they have traded-in, they should take immediate action,” urged Carmichael. “They should contact the dealer and their financial institution; if that doesn’t rectify the problem, they should contact OMVIC.” And should a dealer offer to make the monthly loan payments on a customer’s trade-in, rather than pay off the loan in full, consumers should understand this is a huge risk and contact OMVIC immediately.
To determine if a lien is registered against a vehicle, consumers can purchase a Used Vehicle Information Package (UVIP) from Service Ontario, or a vehicle history report from CarProof. Both of these are invaluable tools, particularly when buying a vehicle privately!
HELP FOR VEHICLE BUYERS
The occurrences outlined in this article are rare; the vast majority of transactions with registered dealers go well. But it’s worth noting that only when a consumer buys from a dealer, are they protected by OMVIC and the Compensation Fund. If a consumer buys a vehicle privately and encounter problems, like an unpaid lien, that purchaser would be on their own with little recourse other than to the courts.
But should a consumer encounter a problem arising from a transaction with a registered dealer, they can contact OMVIC’s Complaints and Inquiries Team at 1-800-943-6002 x 3942 for free assistance. Because every now and then, you might just have a problem that they’ll understand and we all need somebody to lean on.
For more information, visit omvic.ca.