How to Protect Yourself After the Trade-In


What can you do to protect yourself from trade-in trauma, you ask? Not much, said Al Caruso, commander of the state Department of Motor Vehicles’ special investigations units in Orange and Riverside counties.

The best protection, he said, might be for the consumer to sell the old car in a private transaction instead of trading it in. That can cause other problems, however. Caruso said there has been an increase in car thefts in which people arriving at a private seller’s home to test drive a car have simply forced the owner out of the car and driven off in it.

Ideally, a car buyer with a balance owing on an older car would pay it off before offering it as a trade-in, but that requires more cash than most car buyers have.


Short of that, Caruso said, car buyers with trade-ins that need to be paid off by the dealer should:

* Contact the legal owner of record--the bank or finance company that made the loan--and tell them that the car has been traded in and who the dealer is and ask for notification if a payoff check doesn’t arrive in time for the next scheduled payment.

* Obtain a copy of a “Notice of Release of Liability” from the dealer or a local DMV office, fill it out and send it to the DMV in Sacramento. The dealer is supposed to send in the form, but doing it yourself ensures that it gets done and that you are no longer legally responsible for the vehicle--just for the loan.