Boat U.S. - January 2008 - (Page 30) boatsmart CONSUMER PROTECTION BUREAU Trade-in Traps to Avoid a statement specifying that the dealer is responsible for paying off the loan on the trade-in by a specific date, usually no more than two weeks after the deal is consummated. Even so, the owner should go one step farther and verify with the lender that the loan has been paid off in full. This can take a minimum of seven to 10 days for verbal confirmation, but could take as long as a month for a written lien release. “Many times, the consumer will just sign a power of attorney” enabling the dealer to sell the trade-in, Addington explains. This means that the owner gives the unsigned title, or the boat’s registration papers in nontitling states, to the dealer, who is thus given the authority to act for the owner when the trade-in boat is sold. Dealers obtain financing, also called “floor planning,” for the boats they have in inventory. In the case of a trade-in, floor planning gives the dealer the funds to pay off the loan. In the past year, many major manufacturers have experienced substantial drops in new boat sales figures. The reverse of the proverbial high tide that floats all boats can also be a severe low tide that pulls dealers down with it. Addington says the slowdown in boat sales has her worried. Tough economic conditions could make it tempting for some cash-strapped dealers to wait as long as possible before satisfying loans on trade-ins. Consumers trading in boats need to understand that giving a dealer power of attorney to sell a boat does not absolve them of the loan obligation. While anyone can make payments on a loan, regardless of whether they’re the borrower, at the end of the day, the person whose name appears on the loan agreement is liable for the loan and this is the person the bank will look for when payments don’t come. A few years ago, the Broward County, FL, Consumer Affairs Division informed BoatU.S. of an ongoing investigation involving a Dania boat dealer who failed to satisfy loans on at least five different trade-ins. Pressure from the county agency convinced the dealer to finally pay off the loans, in some cases nearly a year late. Meanwhile, owners of the tradedin boats said that the dealer’s actions dam- When an old boat gets traded in for a new one, the only things left behind with the old owner should be happy memories, not an unpaid bank loan. Sad to say, the excitement of trading in Old Faithful for Bigger and Faster can overshadow important details, like verifying that the trade-in’s loan has been satisfied, says Charm Addington, vice president of BoatU.S. Finance and Documentation. “Usually, people are so caught up in the new boat that they assume everything’s been taken care of with the old one,” she says. “There’s a lot of trusting going on,” she said, when boat owners include a trade-in when purchasing another boat. Addington says people who trade in boats assume that the dealer will pay off their boat loan, but that sometimes doesn’t happen. Their first inkling that something is amiss comes in the form of a late payment notice from the lender or inability to obtain financing because of bad credit. Even though an owner relinquishes possession of the boat and uses its value as part of the basis of a bargain to purchase another, this doesn’t eliminate the owner’s obligation for the old loan. To avoid problems, Addington recommends writing into the purchase agreement 30 BoatU.S. Magazine January 2008
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