Beware of buying used cars from out-of-state sellers

Beware of buying used cars from out-of-state sellers

In recent weeks we have received multiple complaints from people who have purchased used vehicles from sellers in distant states and then discovered that the vehicles were damaged or defective.

A court in one state (state “A”) cannot exercise jurisdiction over a seller in another state (state “B”) unless the seller did something to seek business from persons in state A. Advertising specifically directed at persons in other states might be sufficient. A car dealer in state B who is just across the state line and whose point of sale advertising is visible in state A is probably subject to jurisdiction there, particularly if they regularly do business with customers in state A and register vehicles with state A's motor vehicle registration authorities. Advertising in print and broadcast media that is ordinarily viewed in state A may be enough. The ordinary website that a car dealer maintains may not be if it does not specifically invite distant customers. These issues tend to be very fact-intensive.

Consider also who is financing the transaction. A national finance company that does business in state A is subject to jurisdiction with respect to customers that live in state A. If the dealer arranges the financing, the finance company is subject by law to claims and defenses that you have against the seller (dealer). This gives you some recourse, although you will almost certainly have a lawsuit on your hands and may damage your credit in the process. If you arrange your own financing, it isn’t subject to claims and defenses at all, and you have to repay the debt even if you got nothing in return.

Car dealers are familiar with these rules, and may be taking advantage of them to dispose of wrecked, flood-damaged, or defective vehicles to unsuspecting consumers in other states.

Persons contemplating transactions with distant car dealers need to consider what assurance they have that the transaction will be satisfactory and what happens if the transaction proves unsatisfactory. We do not recommend that you look for bargains across the country. At a minimum, (1) hire a disinterested and qualified person in state B to thoroughly examine and report on the vehicle before purchasing it, including not only driving it but running a full diagnostic and putting it on a hoist and examining the underside (or do so yourself if you are qualified), and (2) allow the dealer to arrange financing. Have the vehicle examined after you have purchased it and received it in state A is not sufficient.

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