Sure, you're making your payments. But is your car dealer?

There's a little known problem that anyone buying a car should be aware of. That is, anyone buying a car who trades in their old model as part of the transaction.

These days, car dealerships, as we all know, are as cash-strapped as anyone else, and so sometimes, people will trade in their autos, which aren't yet paid off, with the idea that the dealership with pay off the balance on their loans.

Chances are, if you've done this or are doing it, everything will be fine; but you should be aware that in some instances, especially in the last several months, dealerships have declined to pay off that loan.
In fact, in some instances, people who have bought a car have received a phone call or letter alerting them that they haven't been making their payments. It's a six of one, half-dozen of the other kind of scenario. On the one hand, the repo man can't take possession of a car you no longer drive or own. But on the other hand, you can wave bye-bye to your credit score.

A program to help California car buyers avoid that fate was supposed to get started this year, but not surprisingly, given the state of the economy (and in particular, California's grim economic status), it's been put on hold.

That leads to another problem you should be aware of. If you've bought a used car that still has an unpaid loan attached to it, it could indeed still be repossessed. That recently happened to Travis Gevedon, who had his car taken away at 4 a.m., as Charleston, South Carolina's Post and Courier recently reported.

Consumer Reports last month had a helpful article on its blog about what to know when buying a car from a dealership. It suggests you insist that the dealer obtain a permanent vehicle registration instead of letting you drive away with a temporary one. Also, check the paperwork before you buy and make sure the dealer has a lien release or a title with no lien holder listed, the group suggests.

Last fall, my wife and I bought a slightly used Subaru without any problems (that we know of) for her and the kids to drive around in, but when my own car goes someday, I have to admit, walking aimlessly across the Ohio countryside is starting to look pretty good.

Geoff Williams is a freelance journalist and the author of C.C. Pyle's Amazing Foot Race: The True Story of the 1928 Coast-to-Coast Run Across America (Rodale).
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