Power Booking: Car Dealers Pay the CostSunday, September 20th, 2009
I have noticed an increase in lenders suing car dealers for what is called “power booking.” Power booking occurs when a dealer misrepresents to a lender the type of equipment installed on a vehicle. For example, a dealer might tell a lender that a car has leather seats, power windows and locks, and cruise control, when in fact the car does not have any of the equipment. A dealer might do so to convince the lender that the collateral for the loan is more valuable. This is not usually necessary when a car buyer has great credit, because the lender would finance purchae of the car even if the car did not have the optional equipment. However, when a buyer has less-than-perfect credit or other issues which might prevent her from buying the car, a car dealer might inflate the car’s value to convince a lender to finance the deal. If the buyer later defaults on the loan, the lender then learns (after repossessing the vehicle) that the vehicle was not as represented. When the economy is soft, the lender might choose to sue the dealer to recoup money lost as a result of the consumer’s loan default.