ANOTHER major car dealership chain has closed down all of its locations after filing for bankruptcy.
The move comes amidst accusations of fraud amounting to hundreds of millions of dollars.
The used car retailer has locations across the Southwestern United States[/caption]
The brand is being investigated for major fraud[/caption]
A vast majority of Tricolor’s employees are left in limbo[/caption]
Texas-based Tricolor Auto Group officially filed for Chapter 7 bankruptcy in Texas court on Wednesday.
August saw the company begin preparations for Chapter 11 restructuring, which would’ve allowed it to continue operations, but recent discoveries merited this change in direction.
As the third-largest used car dealership in Texas and California, the company has more than $1 billion in assets and liabilities across 25,000 total creditors.
The bankruptcy move comes just one day after Fifth Third Bank warned of alleged fraudulent activity at the company.
Fifth Third revealed its discovery of this alleged activity on Tuesday, explaining it was related to a $200 million asset-backed loan held by Tricolor.
Two people “familiar with the matter” say a particularly close area of focus in the investigation is whether or not the company pledged the same collateral on multiple loans, per the Financial Times.
The bank has confirmed it is working with law enforcement on the matter, expecting to take a $170 to $200 million impairment charge for the loan.
The United States Justice Department is also investigating the matter.
A currently unidentified bank will be taking control of the company following this latest filing.
Amidst these investigations, 90% of Tricolor’s workforce is on temporary leave, and will learn in October who could return to work after the unidentified bank fully takes over per an HR document obtained by Univision Dallas.
Tricolor’s bankruptcy could also cause losses for other banks, such as JPMorgan, which has nearly $200 million of exposure to the brand.
Other financial institutions involved with the company include BlackRock and Barclays, the former having invested $90 million into the brand.
The company’s primary customer base consisted of low-income Hispanic individuals in the Southwestern United States, providing them with auto loans in addition to selling them used vehicles.
Tricolor viewed this demographic as a market opportunity to serve “invisible” workers in need of cars who may not have access to bank accounts or other forms of credit due to various legal reasons, according to Tricolor Holdings.
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
In June, the company claimed it had disbursed more than $5 billion in loans to these buyers, who it claims had been “left behind by mainstream financial providers.”
Tricolor also served customers with little-to-no credit history, who are in financially similar situations to the company’s primary market.
DEALERSHIP DOWNTURN
Tricolor’s closure is only the latest to be announced, with many other major auto groups and iconic dealer locations taking similar action.
The Kunes dealership group recently closed down one of its most beloved Stellantis-brand dealer locations in Oregon to merge with others in the group.
June saw AutoCanada put 13 of its 17 total locations up for sale for a total of roughly $60 million, effectively confirming its exit from the American market.
Several other iconic dealership locations from big-name auto groups shut down in 2024, citing everything from economic strife to mismanagement.
