What Happens If My Car Dealership Goes Out of Business?

What Happens If My Car Dealership Goes Out of Business? Here we explore your rights, warranty options and next steps to safeguard your investment.

A lot of car dealerships in the US are going to close. More than 80 franchise dealerships went out of business and closed in 2024. Additionally to mention the many smaller, privately owned used car businesses that went out of business.

If you just bought a car. You paid for a car, and you might buy one. You could be thinking about what would occur if the car dealership went out of business.

Here is a quick summary of what happens with the car’s warranty, financing, and other aspects of it. We also give you some tips on how to keep your investment safe.

Why Are So Many Dealerships Closing?

The auto industry is currently going by way of a tough time. A high rate of interest, expensive inventory along with shrinking profit margins have all made it harder for dealerships to stay in business.

The flooring costs are the monthly costs that the dealership has to pay for every car which is stored on a lot. It is like paying interest on a big credit card bill. These costs add up quickly when dealerships can’t sell cars fast enough.

Many car brands are having trouble. Nissan, Ford, and Stellantis, the parent company of Jeep, Dodge, Ram, and Chrysler, have all said they have lost money. Toyota dealerships are even keeping cars for longer than usual, like months.

High Prices Are Pushing Buyers Away

During the pandemic, a lot of dealers raised the prices of popular models, sometimes by $10,000 or more. This short-term, profit-driven plan didn’t work. Dealerships that depend on high markups are having trouble getting customers now that people are more aware of prices.

What Happens to the Cars in the Lot?

When a franchise dealership closes, like Ford, Toyota, and Honda. The cars usually go back to the company that made them. Immediately following that the maker either sells them at auction or sends them to other dealerships in the area.

Things are a little different for people who sell cars on their own or used cars. To get their money back, their lenders often take the cars back and sell them at auction. The cars don’t disappear; they just move to a different place.

If You Recently Bought a Car

As long as you got a car and put down a deposit, you don’t need to worry. You talk to the owner or the lender to make sure that your payment and title are taken care of properly.

What Will Happen With Your Warranty?

The good news is that your factory warranty will still protect you even when the merchant goes out of business. The manufacturer not the dealership is giving this guarantee. Any approved service shop can fix your car and do work under the warranty.

This could be different if you got an extended warranty and service plan from the dealership. Take a close look at your papers. If the guarantee is from a different company, you should still be covered.

What If You Financed Through the Dealership?

A lot of car shops don’t hold your loan. They can get you loans by working with banks and other lenders.

That means that your loan agreement is generally safe if your dealership goes out of business. As usual, you keep making payments to your loan.

The process is a little different if you got the loan from a “buy here, pay here” store. To make sure you keep up with your payments, you need to get in touch with the person or organization that is now in charge of your debt. This could be a lender or a debt collection service.

What If You Need to Trade-In Something or Wait for Paperwork?

If your dealer shuts down while you are trading in your car and transferring the title that you should move quickly. Confirm with the DMV in your state to be sure the move of your title moved smoothly.

You should keep all of your paperwork, like the bill of sale, any financing paperwork, and any messages from the store. Talk to the lender about it if you still owe money on your trade-in.

You can file a report with the attorney general or the consumer protection office in your state if you think there is fraud or bad management.

How This Affects Car Buyers

While dealership closures can create headaches, they also put more power in the hands of consumers.

Dealerships are now offering larger discounts, lower financing rates, and more incentives to sell inventory. Buyers can frequently haggle several thousand dollars off the MSRP and obtain lower loan rates.

At the same time, the used car market has become more appealing, with many drivers preferring to buy old vehicles outright rather than take out big loans.

What You Can Do to Protect Yourself

Here are some smart ways you can be ensure that your purchase is safe and give your peace of mind:

Do some study on the dealership before you buy something. Look for reviews, licenses for the business, and maker groups.

I promise that all of your papers will be safe. Keep things like the warranty information, the bill of sale, and the finance papers safe.

Don’t worry if the dealer shuts down. You can get in touch with the manufacturer directly for warranty.

Last Thoughts

It is true that dealership closings can be annoying but sometimes they can be very bad. It looks like your loan, insurance, and ownership rights are safe at this point.

Take action: You should read your paperwork and know your rights. If you need help you may contact the manufacturer or the police.

Right now, buyers have control over the market. Making sure that you know what’s going on and that your car and money are safe is what you do.