DESPITE being left in the lurch by a major used car dealership, purchasers are still being advised to make all car payments on vehicles purchased there.
A key technicality in who actually collects on the auto loans used to purchase vehicles from the dealer is why.
All 65 of Tricolor Auto Group’s locations are shutting down as the dealer files for bankruptcy[/caption]
Houston locals found the Chimney Rock Road padlocked[/caption]
Some drivers’ cars are still inside, either being worked on or after being traded in[/caption]
Customers have received essentially no communication from Tricolor on what to expect moving forward[/caption]
Earlier this month, used car dealership franchise Tricolor Auto Group filed for Chapter 7 bankruptcy, leaving customers to its 65 locations across the southwestern United States wondering what to do next.
The answer many reached was to simply not make their car payments, citing Tricolor’s treatment of them and how unfair it is to be expected to make payments per usual.
“Why should I have to pay for a vehicle that, if they’re going to breach the contract and not contact anybody and leave everybody high and dry, why should we have to do the same?” questioned Houston local and Tricolor customer Christopher Pickens when speaking to local ABC affiliate KTRK.
However understandable Pickens and other customers’ frustrations are, experts advise against stopping payments on a purchased vehicle due to a key technicality in who the lender actually is.
“No matter what anybody says – you should keep paying the loan, and here’s why. If you got a car from one of these dealerships – Tricolor being one of them – your loan is not with a dealership. Most likely, it’s with a financial institution,” explained automotive expert Brian Moody.
He also emphasized the importance of keeping paperwork, since it’s what makes an agreement binding even in cases like Tricolor’s where the dealership has since closed down.
For people like Pickens who traded in a used car, this is incredibly important, as it could be the only thing that stops the trade from “damaging [his] credit” as he waits for his payment from Tricolor on the car.
In addition to getting legal help, those in a situations like Pickens’ “need to call the lender right away and show them the paperwork and tell them what’s happened,” per Moody.
Tricolor Auto’s official website doesn’t offer any information on the status of payments for used car trade-ins, but asks that customers continue making their car payments as usual.
As of Tuesday, the Texas Department of Motor Vehicles was investigation 157 complaints related to Tricolor Auto per KTRK.
In addition to the Texas DMV’s investigation into complaints, Tricolor is also being investigated for fraud by one of its biggest lenders.
During a company presentation earlier this month, Fifth Third Bank CEO Timothy Spence said there appears to be significant fraud in the paperwork Tricolor used to secure a loan from the financial institution.
The collateral file used to support the borrowing base in Tricolor’s warehouse facilities and audited financial statements were specifically mentioned as indicators of large-scale fraud.
Tricolor’s Chapter 7 filings saw it claim more than a billion dollars in liabilities while being in possession of somewhere between $1 and $10 billion worth of assets.
What to do if a dealership closes
If you recently bought a car or motorcycle from a dealership that suddently closed, you may feel anxious about how that affects you.
When you finance a new car or motorcycle or need warranty repairs done at an authorized dealership, a sudden closure can make some people think they’re out of options or worry their car will be repossessed.
If you’re in a situation that sounds like that, here are a few things you can do after receiving an official notice:
- Notify the bank hosting your loan of the closure to make them aware. If the financing is done through the dealership itself, it’s important to contact the dealership or your salesperson to ask how to keep up your payments. Many dealerships will send the lien (the title and registration that will only be released to the buyer after the debt is paid) to a financial institution to keep.
- If the dealership cannot be contacted through traditional means, most states allow drivers to apply for the title and registration through the DMV.
- If you leased a car from a dealership that went out of business, instructions should be sent as to which dealership to bring your vehicle to when the lease expires. If not, contact the dealership.
- A factory warranty through the manufacturer will be honored at any other authorized dealership. However, an extended warranty through the dealership may not be honored at other repair shops, so it’s important to seek that information from the dealership as soon as possible.
Source: Consumer Law Group
Tricolor Auto Group did not immediately return The U.S. Sun’s request for comment.
In addition to Fifth Third Bank, several other major financial institutions have significant exposure to the brand which could cause losses.
JPMorgan has nearly $200 million of exposure, while Blackrock has invested $90 million into the company. Barclays is also financially involved with the company.
DEALERSHIPS DYING OUT?
In addition to Tricolor closing its 65 locations across Texas and California, many other auto groups have had to shut down this year, such as AutoCanada all but fully pulling out of the American market.
Other dealerships are facing problems of a more political nature, such as the state of New York’s ongoing battle with Tesla to strip its ability to bypass traditional auto dealers.
Yet arguably no dealership brand has been hit harder than Harley-Davidson, with even a thriving location set to close up shop imminently amidst major changes in senior leadership.
