Buyer Beware: 9 Warning Signs to Help Consumers Steer Clear of Doing Business with a Financially Insolvent Dealer

A number of dealerships around the country are expected to close their doors due to declining new vehicle sales.

With new vehicles sales down by over 16 percent, which translates to over 2 million units, for the first eleven months of the year compared to last year, industry analysts are estimating somewhere between 3,000 to 3,600 dealerships will fold within the next year. There simply isn't enough customers buying vehicles to support the number of dealerships currently in existence.

Being that this is the case, how should consumers safeguard themselves from doing business with a dealership in dire financial straits? Seeing that most dealerships are privately-owned, there is no way the average consumer would have access to a dealer's financial statement. In many cases, there is no advance warning to the employees or the public.

The Bill Heard organization, one of Chevy's largest dealership chains in the country, was still working car deals and servicing vehicles just hours before closing its doors and filing for bankruptcy. On the surface everything seemed normal, business as usual. Even Heard's employees claimed they were uniformed about the financial health of their employer until the doors were closed on September 24. Most of the employees were notified during their lunch hour to secure all of their personal belongings.

If the employees didn't have advance warning, what about the consumers who had dropped their vehicles off for service on their way to work? Adding to that, what about the consumers who traded-in unpaid vehicles prior to the stores closing their doors? Who is responsible for paying-off their vehicles, if the dealer didn't? How are consumers supposed to secure the appropriate paperwork to register their new vehicles with the DMV ( Department of Motor Vehicles)? What about the customers who purchased a vehicle from Heard weeks earlier only to find out now that their trade-in was never paid-off? Now these customers are faced with making two payments, one for the vehicle they're driving and the other for a vehicle they no longer own. Even more important, these customers have a black mark on their credit report for not making a payment to the traded-in vehicle.

In order to avoid dealing with a financially strapped dealership, here are some proactive steps to keep you in the driver's seat before buying or servicing a vehicle.

*Check the complaint status of the dealership, using the Better Business Bureau Web site, www.bbb.org, determining if its accredited by the BBB, if they have resolved complaints filed by customers and how the BBB rates the company. Its to say most businesses will receive some complaints. However, what consumers should look for are the type of complaints, how they were resolved and the like. If the dealer isn't resolving the BBB's complaints, what incentive would the dealer have to resolve his customers?

For instance, if consumers would have accessed the online report of the BBB for Bill Heard Chevrolet of Union City here's what they would have found: On June 12, 2008, this company's accreditation in BBB was revoked by the BBB's Board of Directors due to failure to eliminate or address complaints on file with the BBB.

Furthermore, consumers listening to the local news during Labor Day weekend would have heeded the warning of the Georgia's Office of Consumer Affairs to avoid doing business with Bill Heard stores, which was seeking more than $50 million in penalties from the organization for misleading advertising, forgery and misrepresenting both the value of vehicles and customers' incomes in order to secure car loans.

*Does the dealership have an adequate supply of new vehicles in inventory? With the soft economy, a number of dealers have curtailed the amount of vehicles they have in-stock. However, if a dealer who normally stocks seventy new vehicles, currently has ten vehicles in-stock. This could be a red flag, signaling the dealer may be experiencing financial constraints

*Consider alternative options before trading-in a vehicle which has not been paid-off. If your vehicle isn't paid-off, you should consider selling the vehicle yourself or taking it to a reputable dealer, like CarMax, which purchases your vehicle outright without you buying a vehicle from them. If there is a difference between the pay-off and the amount CarMax appraises your vehicle, you're personally responsible for making up the difference before your vehicle is paid-off. Typically, within forty-eight hours of CarMax purchasing your vehicle, they will provide you with a bank draft, allowing you access to your funds. Obviously, you'll make money off your trade if you sell it yourself.

Furthermore, make sure you know your pay-off, before trading in your vehicle. Contact your loan provider for the most current pay-off.

*Perform a google search, peruse your local business newspapers and visit your local news stations Web sites, seeking stories related to your local area dealerships. In some instances, consumers can find stories alerting consumers of financial problems or issues pertaining to a particular dealer or dealership.

*Provide the finance institution you're currently making payments to with the name of the dealer paying-off your vehicle. By doing this, this minimizes the chance of a customer holding the bag, with two car payments and a blemish and a black mark against their credit. Most trade-ins carrying a balance should be paid-off within twenty days by hte dealer. Stay in touch with the loan officer to make sure the dealer has paid-off the vehicle. If the vehicle isn't paid-off within twenty days or before your next payment is due, this could be a sign the dealer is experiencing financial difficulty.

*Stay away from dealers who insist you must buy today. In this climate of customer service, if there is excess pressure by the dealership staff to buy a vehicle now, this could be a sign the dealer is experiencing financial constraints, too. With car sales being slow, most dealers have plenty of inventory and are willing to work at your pace. There are deals to be had everywhere!

*Consider doing business with a referral, dealer or salesperson you have a personal relationship with. Someone who knows is less likely to let you do business with them if they realize they're running an unscrupulous operation. Can you imagine your church member or bridge partner taking advantage of you?

*Register your vehicle with the DMV (Department of Motor Vehicles). Don't wait for the dealer to register your new vehicle. Most dealers will provide you with a temporary tag for one month, while you're securing the appropriate documents. If you ask the dealer to provide you with the appropriate paperwork with in ten days of purchasing your new vehicle, this will minimize the chance of an unscrupulous dealer or one strapped from cash not providing you the appropriate documents. There are a number of cases where customers have allowed the dealer to apply for their tag only to learn weeks later the store has gone out of business and the vehicle was never properly registered.

*Consider working with a Credit Union. Unless a dealer is offering 0 percent financing, a credit union typically offers competitive rates. Most credit unions will assist you in purchasing a vehicle, minimizing the chance of you being duped. Regardless of the assistance being provided by the credit union you're still responsible to take all necessary precautions, ensuring you have the appropriate paperwork to register your vehicle and that your trade-in is paid-off.

By following the aforementioned steps, this should minimize the chance of you doing business with a dealer experiencing financial strains.