I wake up this morning and my car is gone so I called the police to tell them its stolen. They advised me it has been repossessed but I told them I have no loans with any bank on the car.
This is a scenario that happens often and it can happen a few different ways but the most notably way is called a straw purchase. Someone sells you a car and holds a small note for the balance(while still making payments themselves to a finance company) , gives you the car but never transfers title or registration. This is very popular in places where the influx of illegals may be higher than normal, giving someone without papers a way to drive a car as the normal channels are not doable at this moment in time. Another popular reason for this is to find someone willing to hold a few thousand on the car accepting payments from a third party without knowing the seller himself has payments.
Almost always the seller has a balance due to a finance company and is behind on payments, they figure if they put the car in your hands, the bank will not locate the car and not be able to successfully repo the car. The fact of the matter is that any good skip trace company can find straw purchases in their sleep but many times skip companies aren’t good, so the seller will just pocket your payments. So essentially you will be paying off a car that you will never be able to obtain title or register even after you are done paying these people.
What do you mean? Isn’t that illegal?
You finish paying the car and ask seller to transfer the title and registration but they never do. You call the police and the police tell you it’s a civil matter. You should have checked the car before buying if it had any liens, had the seller make a copy of the front and back of the title free and clear. While we never recommend straw purchases, if you do, make sure to get a document stating how much is owed, that he will apply your payments or even allow you to take over and pay the bank direct as well as add you on the insurance so at least if later you do go to court for this civil matter you will have some kind of proof.
What happens after the car is repossessed?
There is a 99% chance that the balance owed will be far too high for it to be worth getting back, not to mention the finance company will not allow you to get the car back, they will only allow the actual registered owner of the car to get it back. If this should happen and you have all the documentation, a small claims suit is about the only chance you have to get your money back in this type of fraud. There is also a good chance the seller is broke and even with a win, you will collect no money. It might just end up being a lesson to stay away from straw purchases at all costs.
Straw purchases exist between friends, family and other outsiders just like you that get caught up in a jam that ends up a total loss.