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Car buyers to get new protections on their trade-ins

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Car buyers who trade in old clunkers will get new protections after Jan. 1, when a law takes effect that requires auto dealers to pay off all liens on used vehicles.

Gov. Arnold Schwarzenegger signed the bill, SB 95, sponsored by Sen. Ellen Corbett (D-San Leandro), which gives dealers 21 days to pay any balance owed on used vehicles and prohibits them from reselling the cars until the title is cleared.

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Corbett said the law is needed because dealerships have been going out of business without paying off loans, leaving original car owners legally liable for the debt.

‘Many consumers across the state found themselves in dire fiscal straights through no fault of their own,’ Corbett said. ‘This law will give consumers confidence that they will be protected when they purchase or trade in a vehicle.’

According to Corbett’s office, 120 new-car dealerships and 416 used-car dealerships went out of business in California in 2008. Closed dealerships sometimes fail to pay off liens and also do not honor warranties and service contracts that consumers have paid for in advance.

Corbett’s bill also increases a dealer’s annual license fee by $25 and hikes the fee for an auto broker’s endorsement on a dealer’s license. A portion of the new revenue will be used by the California Department of Motor Vehicles to pay for investigations of allegations of illegal activities by car dealers.

-- Marc Lifsher

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