Closed dealerships leave consumers in a bind

January 19, 2009 7:22:26 PM PST
Hundreds of car dealerships closed in California in 2008 and now car buyers are feeling the pinch because of it. It's tough to do business with someone who isn't around anymore. That's what hundreds of car buyers are finding out.

Kelly Hunter and her husband bought a Dodge Caravan to accommodate their growing family. The Hunters bought it at Redwood City Peninsula Dodge where they traded in another vehicle they had bought at the same dealership.

"And what I was told is that after two to four weeks past, I would receive a rebate of $2,300," said Kelly.

But the money never came and then the dealership went out of business.

Something similar happened to Dustin Hevelone of Brentwood. He traded in his vehicle at California Autos in San Jose. However, that dealership shut down before it could pay off the remaining balance on his trade-in. Now his lender is after Dustin for the money on a car he no longer has.

"Where do I go? Where do I go to collect this payment or how do I go and find a business that isn't around?" said Dustin.

In all, the Department of Motor Vehicles estimates at least 480 car dealers in California closed last year. The Center for Auto Reliability and Safety says that is causing problems for countless car buyers.

"Consumers are desperate for relief when car dealers go out of business and leave them in a lurch," said Rosemary Shahan with the Center for Auto Reliability and Safety.

The Legislature last year passed a bill by Senator Alex Padilla of San Fernando Valley. It won't help all victims, but it calls for up to $5 million for consumers who traded in their vehicles to dealerships that never paid off the loan.

"It is the consumer bailout. We need a consumer bailout," said Shahan.

The bailout is funded by a one-dollar tax on car dealers for every new or used car they sell. The DMV has collected $465,000 for the fund since October, but none of that money can be made available right now.

"Nobody's been appointed to dole out the money to victims," said Dustin's attorney Scott Kaufman with California Lemon Lawyers.

Governor Arnold Schwarzenegger, Attorney General Jerry Brown, Assembly Speaker Karen Bass, the Senate Rules Committee, and the Department of Consumer Affairs were all supposed to make those appointments. None made those appointments in time to meet the January 1 deadline, and now it could be several months before the money can be distributed.

Unfortunately for Dustin, he won't qualify for that money anyway because he traded in his car before the July 2008 cutoff.

"I just want to pull out my hair and it's just something that shouldn't happen," said Dustin.

Dustin plans to sue the dealership.

Kelly's situation is also not covered by the new law.

"I don't know what to do so that's why my husband told me to contact 7 On Your Side," said Kelly.

We talked to a representative of Chrysler and within days, Kelly received a check for $2,300.

As for the consumer bailout money, the attorney general's office now says Brown made his appointment in August, but never announced it. The speaker's office says Bass will appoint a qualified candidate in the near future. She is the only left that has yet to make her appointment.