Toyota Sues Connecticut Dealership for $5.1M in Missing Cars and Unpaid Loans

Toyota Motor Credit Corporation has filed a lawsuit against a Connecticut dealership group, alleging missing vehicles and unpaid loans totaling over $5.1 million. The legal action underscores the financial risks lenders face when dealers fail to comply with floorplan financing agreements.

Audit Reveals $1.4M in Missing Inventory

According to the lawsuit, filed on April 4, 2024 in the U.S. District Court for the District of Connecticut, a March 27 audit at Stephen Cadillac GMC in Bristol discovered 16 vehicles worth more than $1.4 million were unaccounted for. The dealership group also operates Stephen Toyota.

Floorplan Financing and Out-of-Trust Sales

Dealers typically rely on floorplan financing, where lenders fund inventory and are repaid once vehicles are sold. Until then, the lender holds a lien on the vehicle. Toyota Credit alleges the dealership sold or transferred vehicles tied to these loans without repaying the debt, a practice known as an out-of-trust sale.

The complaint states the vehicles were "sold, leased, transferred, consigned, or otherwise disposed of" without satisfying the underlying debt. The lawsuit further alleges that additional vehicles were removed from the dealership in the days following the audit, bringing the total claimed amount owed to over $5.1 million. This includes more than $3 million tied to floorplan and capital loans.

Legal Action Seeks Damages and Control of Vehicles

The lawsuit seeks damages, control of the missing vehicles, and an order to prevent further transfer of collateral. The loans were reportedly personally guaranteed by dealership president Stephen Barbarino Jr.

A lawyer representing the dealership stated it is working with Toyota to resolve the matter. Despite the legal dispute, both dealerships remain operational. Employees declined to comment when contacted.

Broader Implications for Dealer-Lender Relationships

The case highlights the financial and legal risks lenders face when dealers fail to adhere to financing agreements. It also signals a trend of tougher enforcement as lenders crack down on dealer risk and out-of-trust sales, particularly in a sector under increased scrutiny by the FTC.