PHOENIX — More used car shoppers are buying from online dealers, but with that growing popularity come growing concerns.
Some buyers have been complaining of very long delays in getting titles to their cars — and some states have taken action.
"I think a lot of the dealers sell cars without titles on hand," says Hyung Choi, a consumer protection attorney with the law firm Choi and Fabian.
He says, too often, dealers aren't giving buyers titles, or proof of car ownership, in a timely manner required by law.
He says that's especially true when it's an online used car dealer.
"There may be a systematic problem with why they can't transfer title and ownership on time," Choi says.
Tempe-based Carvana, and Vroom, another popular online dealer, have faced lawsuits over similar issues.
Carvana stock dropped 97% last year and the company laid off thousands of workers, raising bankruptcy concerns online.
Choi isn't talking about specific businesses but he says he's concerned if any file bankruptcy or go out of business.
"Those can get pretty messy on exactly how do you get the title for the car you bought?" he says.
So, if you're buying online and need to finance the purchase, Choi says you should protect yourself.
Typically, when buying a car, shopping around for a lower loan rate through a bank or elsewhere is a good idea, but Choi says right now, you may want to get a loan through the dealer instead.
"With the current situation going on, I think it's good to let the dealer arrange financing so your rights and the dealership's obligations for you to get the car and get the title are tied into your obligation to make payments under the loan contract," he says.
Choi says the way these contracts are written, if it's purchase and financing in one deal, and you can't get the car or title, you're not obligated to pay the car loan.
But that's not the case if you arrange your financing separately, say through a credit union. That would mean the purchase and financing would be two different deals.
"In those cases, the obligation to pay the loan is independent of the dealer's obligation to give you the vehicle or title to the vehicle," Choi says.
It's one protection to consider if buying online.
In most other car-buying situations, it's still good to get a financing quote before you go to the dealer. That way, it's not part of the car price negotiations and you have options for the dealer financing rate.
In a statement to us, Vroom says:
"Vroom is committed to creating the best customer experience possible, which includes delivering customer titles and registrations on time. Over the last year, our focus on evolving our titling and registration, through improved technology and processes, has resulted in significant improvements in customers receiving their titles and registrations on time, which puts us further on the path of our goal of becoming best-in-class in this category."
Vroom also sent a graphic saying that 98% of customers received their registration before the expiration of their initial temporary tag in October 2022.
In a statement to us, Carvana says:
"Carvana's title and registration department works hand-in-hand with local DMV offices across the U.S. to make titling and registering vehicles easier for consumers. Some of our efforts include:
- Working with more states to allow electronic signatures for vehicle registration, making it possible for customers to sign registration documents from a device and eliminating the need for mailing documents.
- Collaborating with the federal government and National Highway Traffic Safety Administration (NHTSA) to clarify the rules and regulations currently surrounding electronic signatures.
- Working with state DMVs and online DMV vendors across the U.S. to digitize vehicle registration, enabling DMVs to process paperwork more efficiently and with less paper waste.
- Collaborating with states to lengthen unnecessarily short registration-filing deadlines, giving drivers a more reasonable timeline for obtaining vehicle titles and registration."
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