Why Mechanics Liens Are Not the Best Way to Get a TitleSo you’ve heard me talk many times about mechanics liens and why they are not the way to go about getting a title. Many times, an automotive shop or even a private citizen thinks, “I’ll just slap a mechanic on this car and get a title for it.” It doesn’t work. It’s the worst way to get a title. In the past, years ago, it was a viable opportunity, but nowadays, you definitely don’t want to use a mechanics lien as a way to get a title. This article tells you exactly why. Here’s an article from The Daily Dot.
A Mechanic’s Ordeal With a LienInterviewing a mechanic who works on cars for a living, somebody brought in a car, dropped it off for work, and never picked it up. His ordeal in even trying to get a title was so long-winded and so torturous that he swore he’d never do it again. Here’s why. For many years, an automotive mechanics lien was a viable way for a legitimate automotive repair shop to get paid for their vehicle. Then, about seven or eight years ago, in 2015 or 2016, many automotive shops started to abuse the process. They used it as a way to get a title for their buddy who lost a title they bought on Craigslist.
Abuse of Mechanics LiensThey put ads in the newspaper that said, “Hey, if you need to get a title for a car, bring it to us, and we’ll put through a fake mechanics lien.” Some shops were using it to get titles for cars that they really didn’t work on that much. The privilege given to automotive shops started to become curtailed. Some states stopped it altogether. There was a period of time in Indiana where they stopped and put a hold on all mechanics liens for about 14 months.
Stricter Requirements for Mechanics LiensNow, even in states that allow them, they do what’s called a level three audit on every case that comes through their file. They make sure that the owner signed a repair order authorizing work. They ensure the car was actually auctioned off to the public, not just given to somebody directly. They make sure all the proper procedures are followed. All the right notifications are followed, meaning certified letters must be sent to the lienholder, the owner, and any interested parties multiple times over the course of two or three months.
The Complexities of the ProcessYou have to send out a certified letter, wait 45 days, send another one, wait 30 days, and put an ad in the newspaper announcing that you’re going to auction off the car to the highest bidder. That way, people will come bid on the car—you just can’t give it to one person. It’s a very complicated process. For the most part, even if you are a legitimate automotive shop and you did work on the vehicle, the easier way to get a title is just to go to a court order title.
The Rise of Alternative MethodsIt’s faster and cheaper, and you don’t have to jump through as many hoops. Because mechanics liens were used improperly for so long, all the states’ DMV commissioners have cracked down on them. In fact, the Commissioners have a biannual meeting where they discuss this issue. For many years, they’ve said that half of mechanics liens are fraud, and the other half are scams.
Oversight on Shops Using Mechanics LiensThey now audit the ones that come through and review records for that shop to see how much they have paid in payroll taxes, sales taxes, and permit fees. This gives them an idea of how big the shop is. For example, if Joe’s Automotive reports $38,000 in sales taxes last month, but they are putting through 10 mechanics liens, that raises a red flag.
A Real-Life Case StudyIn this article, a shop owner faced a difficult process. A customer brought in a car, approved a repair quote, and the shop installed a new transmission. Afterward, the customer never came back. The shop had to go through a mechanics lien, which turned into a brutal process taking seven or eight months, costing thousands of dollars. It was rejected twice because it was audited and found to have minor errors.
The Verdict on Mechanics LiensThis article, shared by The Daily Dot, includes quotes from CarTitles.com stating that while mechanics liens are a legal process allowing a shop to recover costs, they are complex to execute and should only be used when absolutely necessary. States require cars to be sold at auction, and in some cases, shops can only keep the money owed for repairs, with anything over that amount going to the state.
Consider Alternative OptionsThink twice if you’re considering a mechanics lien. It’s certainly not a go-to method if you’re not a licensed mechanic or trying to get a mechanic to do it for you on a car that wasn’t in their shop. Even if you are a mechanic, there are better, faster, and more cost-effective methods available today.
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Vehicle Title FraudHere’s another video in our series about vehicle title fraud. A lot of times, it’s difficult to get titles for vehicles that are gray market or imported vehicles. Some of these vehicles are these JDM vehicles, the Nissan Skyline, and some of the other desirable cars that come out of Japan. The Japanese kei trucks are an example, but it could be any kind of vehicle that was originally not manufactured for the US market. These vehicles are desirable because they’re unique, something that people want to have, and they don’t sell them here.
Importation Challenges and LoopholesThe problem is getting these vehicles imported and titled. There is a 25-year exemption for importation, but that may not solve title problems. Sometimes, if the vehicle is newer than 25 years, loopholes are used to try to get around that. However, if you use these loopholes, you run the risk of having legal problems. For example, there was a company called Soho Imports that allegedly defrauded customers by selling JDM cars with fake titles and import documents.
Customs Requirements and Document FraudWhy does this happen? A lot of times, these cars won’t pass through customs even if they qualify for the 25-year exemption. If the vehicle doesn’t have proper documentation or paperwork, it still won’t get through. For vehicles newer than 25 years, they must meet certain criteria, like having airbags and anti-lock brakes. Some sellers fake import documents to bypass these requirements. They might even change the year to make it look older than 25 years.
Consultation and Expert AdviceRemember, you have access to live, one-on-one consultation with the undivided attention of a licensed, certified expert in this subject and many others. We want to listen to your story, hear your questions, and provide expert advice about your options. We’re here to help you understand your situation and guide you through your choices.
The Risks of MisrepresentationDMV fraud often involves altering documents, such as the year on the title, to misrepresent the vehicle. For instance, a client attempted to title a VW Beetle manufactured in Mexico in the mid-2000s. Although Beetles are desirable because they’re cheap, reliable, and easy to work on, this client faced customs and title issues. The suggestion to label it as a 1978 model was problematic because the VIN and part dates wouldn’t match. Misrepresenting documents to government agencies can lead to serious consequences.
Legal Consequences of FraudIn Florida, individuals allegedly faked titles and import documents. They ended up on probation and accepted a plea deal, which saved them from facing more severe penalties. If you’re considering importing a vehicle, ensure all paperwork is accurate and properly completed. Any misrepresentation can lead to revoked titles and legal troubles. Remember, signing documents under penalty of perjury carries significant risks.
The Challenge of Obtaining a Mechanic’s Lien Title for a Vehicle So why is it so hard to get a mechanic’s lien title for a vehicle, and why is it not always the best way to try to get a title? For many years, repair shops, garages, and towing companies have used the mechanic’s lien or towing lien process to get titles for vehicles. A lot of times, they thought vehicles were abandoned and wanted to get a title. They even sometimes took payments from outside parties to go through a fake mechanic’s lien process to get a title. A lot of times, people with title problems will ask, “Can I just put a mechanic’s lien on the vehicle?” or “I’ll just file for an abandoned mechanic’s lien.”
The Purpose of Mechanic’s Lien: A Payment Protection for Repair Shops Here’s the problem: the mechanic’s lien process is a privilege provided to licensed automotive repair shops in order to get paid for work when a customer fails to pay the bill. So, if someone brings in a car to get fixed, then decides they don’t want to pay, the mechanic’s lien is designed to help the repair shop get compensated for their work. However, that privilege is frequently abused—or maybe “expanded” is a better word—to try to get mechanic shops titles for vehicles under questionable circumstances.
Government Response: Tightening the Mechanic’s Lien Process What the government has done, and what different state DMVs have done, is make the process very, very difficult. It’s harder than any other process, such as getting a bonded title or a court-ordered title, because they want to ensure that if a repair shop is using the mechanic’s lien, it’s for legitimate reasons.
Common Cases of Mechanic’s Lien Fraud A very common case of fraud involves repair shop owners engaging in title fraud. This fraud often involves creating fake work orders and records, claiming to be filing a mechanic’s lien, and then using the process to get titles for vehicles that may have been bought at an auction without a title, purchased through Craigslist, or have a lien they want to remove.
Government Oversight and AI Monitoring The government scrutinizes each mechanic’s lien application and audits them. They also use AI and algorithms to monitor shops filing a high number of mechanic’s liens. The government checks the shop’s payroll and sales tax records to estimate the shop’s business volume. For example, if a shop with only one or two employees files more mechanic’s liens than usual, it raises red flags.
Legal Consequences of Filing a Fraudulent Mechanic’s Lien If caught, repair shops involved in title fraud could face severe penalties, including prison terms of up to 20 years and restitution to repay any fraudulent profits. For example, in a recent case, shop owners were charged with creating fake repair orders and selling vehicles illegally, resulting in charges for title fraud.
Mechanic’s Lien: Powerful but Heavily Scrutinized A mechanic’s lien is a powerful tool, but because it’s often misused, it is scrutinized more than any other type of paperwork. If you’re considering using a mechanic’s lien to get a title, it should only be used when someone has brought a car to a shop for repairs, has signed a repair order, and then hasn’t paid.
Alternative Title Methods If you have a vehicle that needs a title and are considering a mechanic’s lien, there are other methods that might work better. Options like a court-ordered title, bonded title, or other procedures are often easier to execute and less scrutinized than a mechanic’s lien. These methods can be found on our website.
Title Caution and Potential ConsequencesThis is why you want to be very, very careful about how you get your car title. If you use a, um, sketchy or illegal method, it could come back and bite you. Here’s a story about a DMV clerk that was selling illegal titles through a DMV scam that she was running, where she had people that were selling these titles to people that didn’t have the right paperwork, and she was making 800 bucks per title. Overall, it was $3 million worth of titles that were processed. This was an auto tag agency in Miami, and there was a stolen vehicle that had, um, lowjack on it, and they found it in a body shop. But they found that there was a title for it—somebody had issued a title for that vehicle. But they tracked it back and they found that this title clerk allegedly had issued the title, and they found a lot of her records for vehicles were for fraudulent titles, and she was making a lot of money.
Consultation Services ReminderIn the meantime, remember you have access to live one-on-one consultation, undivided attention of a licensed certified expert in this subject and many others. We want to listen to your story, we want to hear your questions, and give you expert advisement of your options. We want to tell you what we know about your situation and what options you have. Now back to reading.
Legitimate Title Acquisition AdviceSo anytime you’re looking to get a title for a vehicle, you want to make sure you’re doing it legitimately. You’re not using any kind of fake mechanic’s lien, you’re not doing any kind of tax evasion, you’re not paying somebody to do something illegal because all the titles for these vehicles are getting revoked. So whoever had the title is losing out, and if you were in on the scam, they’re looking at other prosecutions. So make sure that you’re getting your title legitimately.
Importance of Proper DocumentationRemember, a title is a legal government document. You can’t buy one from a company; you can’t download one from the internet. You have to get it from the government. Yeah, they’re going to make you jump through a few hoops, but they do that to protect you as the owner. Because once they give you a title, you don’t want anybody to take it away from you. So, the same way that you have to provide a lot of documentation to get a title, that means no one can get it from you later without the same kind of documentation.
Avoiding Scammers and Ensuring LegitimacySo get your title the right way—do it legitimately. Use the legitimate source. Don’t pay any of these fly-by-night or scammers that are out there trying to sell you titles using some kind of, you know, dubious means. Make sure that whoever is getting a title for you can explain in detail how they’re going to do it, so you know it’s not being done illegally.
Title Problems in Car BuyingSo don’t think just because you buy a car from a licensed automotive dealer that you’re out of the woods on title problems. There’s a very common scheme that some used car dealers, mostly used car dealers, occasionally a new car dealer will do this that will be a financial fraud that will harm consumers. It’s called floor plan fraud, and not many people know this, but dealerships do not own their cars for cash just like you. Dealerships have a car loan.
The Dealer’s LotIf you look at all the cars on a dealer’s lot, for example, if you have, let’s say, 20 cars on a used car lot and each car on average is $115,000, that’s $2,300,000 of cars sitting on that dealer’s lot. Most dealers don’t have $300,000 in cash extra or if they do, they don’t want to have it sitting in their cars. So what they do is they get a line of credit that’s called a floor plan or a floor line, and that floor line finances their vehicles for them. So when they buy a vehicle from an auction, from a trade-in, from who knows where, the bank actually writes a check for that vehicle. The dealership doesn’t, and the bank holds the title just like on your car financing.
Selling the CarWhen the dealership sells the car, the dealership calls up the bank and says, “Hey, I sold that 2020 Toyota Camry, send me the title.” The bank says, “No problem, send us the money.” So the dealership sells the car, takes the money from the customer, sends it to the bank, and the bank sends them a title, and now they can put it in their name.
Cash Flow ProblemsSo sometimes what happens is if a dealership is running short on cash, what they’ll do is this: they will sell you a car, that 2020 Toyota Camry. They take, let’s say, $20,000 from you; you paid for the car. Instead of taking that money and giving it to the bank to pay it off to get the title, they’ll just keep it to pay payroll, pay their rent, pay their expenses, whatever. And now the bank is still holding the title. Now you can’t get a new title registration for your car. It’s called floor plan fraud or being out of trust with your lender, and it creates a problem because you have a temporary tag that runs out. Maybe the dealership gives you another paper tag; next thing you know, the dealership goes out of business.
Real-Life ExampleIn this case, this was in Massachusetts; this is just one example. This happens all the time. 25 people have reported being defrauded by the scheme. 25 people that say reported police determined that Edward Secui, 46, allegedly receives cars on loan from a local auction but does not get the titles until he pays the auction in full. So the auction in this case is the lender. The cars are then sold at the dealership; he completes the sale, takes the payment, attaches fake or forges license plates, and promises the title will be mailed—of course, which they never do.
Victims Left HangingSEC stops responding to the victims and never pays the auction. The purchasers never receive the title, cannot register the vehicle because the auction company still owns the vehicles. They are in the process of repossessing them. So the lender can actually take the car from you even though you paid for it. Now if it’s a small used car auction, they might go through with that. Sometimes if the floor plan lender, the bank that lent the money, is a larger lender like, you know, Wells Fargo or Chase or somebody like that, they might not take a car from a consumer who knows they could legally. They have the right to, but they may just pursue it against the dealer.
Protecting YourselfSo how do you protect yourself against this? What we recommend doing if you’re buying a used car from a dealer, obviously they can’t hand you the title because they’re going to do the registration and title paperwork. Even if you’re financing the vehicle, go through your own bank. Have them show you the title. Just say, “Hey, before I do this deal, show me you have the title.” If they don’t have the title in hand, tell them that you’ll come back and pay for it when they have the title in hand.
Ensuring a Smooth TransactionHere’s what they’ll have to do: they will have to pay that floor plan lender for the car before they get your money, and then they’ll get your money to cover where they got the money from. They might say, “Well, we can’t do that.” Well, guess what? If they can’t do that, if they don’t have enough cash in the bank for one car to cover one car, do you want to do business with them? So if they can’t show you, just flash the title. They don’t have to give it to you; they don’t have to sign it to you to show you they have it in their hand. We don’t recommend buying the car and tell them, “Well, it’s at a floor plan bank.” No problem, go pay it off, get the title here, and then I’ll pay you for the car, or I’ll sign loan documents for the car, whichever you’re doing.
Avoiding Floor Plan FraudYou don’t want to leave that to chance. Remember, we’re talking about your hard-earned cash you saved up for this vehicle, or even if you’re financing the vehicle, your hard-earned cash that you have to pay for it. And don’t think that if the bank doesn’t give a title that you don’t have to pay for the vehicle. If you finance the car through another lender, whether it’s your own bank or through the dealer, that lender you signed a contract to pay off the loan even if you don’t get a title or the bank doesn’t get a title, you still have to pay the loan because they paid the dealer.
Red Flags and Final ThoughtsSo you don’t want to have your money at risk by having a dealer that doesn’t have a title. The dealer might say, “Well, we don’t have the title on hand because it’s at the bank.” Hey, no problem. Just pay off the bank, get the title, and I’ll pay you for the car. If the dealer is unable or unwilling to do that, it could be a red flag that they don’t have that much cash laying around and they’re running tight, which means you know that might be a decision to make or that they’re trying to scam you.
ConclusionSo don’t fall for floor plan fraud. This, you know, is one example of an article where this happened here recently in Massachusetts, but this happens all the time. Dealerships going out of trust, dealerships leaving people holding the bag. This is a way you can avoid it as an informed consumer. If you like this reading, be sure to click on a few others on our channel to see if there’s other information that might be helpful to you about this same subject or maybe even other related subjects that could assist you with your resolution of your issue.
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