Dealer Fraud

Down payment is the amount paid by the customer that covers a significant part of the actual cost. This amount is deducted from the actual cost and loan is taken to pay the remaining cost. Interest rates on such loans are greatly influenced by the down payment. This situation is true even for cars. However, one needs to be wise while making a decision on how much down payment to be made while purchasing a car.

While buying a car, a customer is expected to shell down at least 20 percent of the vehicle cost towards down payment. This strategy is quite beneficial as it ensures that the buyer is not “upside down”, meaning that the buyer is not owing more than the actual value of the car. Being upside down is not financially beneficial as the buyer would end up paying an amount that is higher than the car worth. Also, the car would have a negative equity or fetch less value when one wants to trade in his old car to a new vehicle. When a customer makes a 20 percent down payment, he would be the one dictating financial terms. In these situations, buying or trade-in of an old car would always be at the discretion of the buyer.

While taking a car on lease, an entirely different strategy works out. “Cap cost reduction” is the term used when down payment is made while leasing out a car. With the intention of lowering monthly payments, many times people make a down payment of at least $3,000. In times of an accident, this down payment is taken as the coverage for the car damage and is not refunded. There is no chance of getting this money even if the customer has a collision and gap insurance. Hence, it is not advisable to put money on the car that is being leased out. Since, leasing does not require any down payment, the amount that was intended for such purpose could be saved in a bank account. Customer would be in a favorable situation if he is ready to make higher payments and roll the drive-off costs into monthly lease payments.

Often a customer will not qualify for financing upon the terms on the first contract. The customer may be required to increase a down payment, higher APR, etc. in order to qualify for a loan. The dealership has the customer come to sign a second contract with the different terms but backdates the second contract with the date of the first contract. This affects the finance disclosure laws in that the customer is being charged interest for a time period in which the contract is not yet in effect, etc. In addition to making a material misrepresentation regarding when the customer takes the obligation of the new contract, a backdated contract often also violates the single document rule  because another form (usually called Acknowledgment of Rewritten Contract) has the actual date when the contract was signed. Further, many customers are not told that they do not have to sign a second contract, instead they can choose to cancel the contract and return the new vehicle and have the down payment and trade in vehicle refunded. Finally, a dealership only has 10 days to tell you they want to make changes to the contract or cancel the contract. After the 10 days, the dealership cannot change the deal.

GAP Insurance, also referred to as GAP Waiver or GAP Addendum, is an abbreviation for Guaranteed Asset Protection. In the event your insurance company declares your vehicle a total loss from accident or theft GAP Insurance will pay the difference between the ACV (Actual Cash Value) your insurance company determines they will pay and what is owed to the bank on your vehicle. An easier way to explain this is that GAP Insurance will pay your negative equity (difference between your vehicles ACV and what is owed to the bank) so that you are not responsible to pay the bank, potentially thousands of dollars, on a vehicle you are no longer able to drive. Most GAP Insurance companies will also cover your insurance deductible and may give you additional money to use as a down payment on a new vehicle.

Buying a used car isn’t easy because it may entail a series of future problems and financial headaches. That’s why a free vehicle history report is an excellent choice for anyone who is  buying a used car. Why? Because it will give you the peace of mind to go ahead with your purchase. For instance, if the car is in such bad shape it’s been given a salvage title, it would be far better to know that before you sign on the dotted line.

Unfortunately, there are many unscrupulous people ready to misrepresent the condition and value of the cars they are offering for sale. The most common of the various used car scams is the odometer rollback. The odometer is a device inside the car which indicates the distance that the vehicle has traveled. You may have seen it as a row of numbers inside the speedometer. One of the main variables in determining the price of a car is mileage.

An average car in the United States travels approximately 15,000 miles per year. So, if you want to buy a used car that was made in the year 2000, you should expect to see about 90,000 miles on the odometer. If it reads 150,000, the car has received heavy usage and may not be worth as much since maintenance costs may be high. But what if the odometer reads only 50,000 miles? In that case, you need to be suspicious. Unless it was owned by an old lady who used it for short neighborhood errands, the odometer may have been tampered with.

Don’t be fooled into thinking that a newer, digital odometer is more impervious to such alterations. All that is required is a laptop computer, the software, some cables and a basic set of instructions. Need an example? Just enter some basic keywords in any Internet search engine like “how to reset odometer” or “unhooking odometer.” You will find that there are dozens of pages with the required information.

An increasingly common car sales tactic is the “spot delivery” or “yo-yo sale”—allowing a buyer to take delivery of a vehicle before the dealer has confirmed that another entity will buy the finance agreement. (Technically, in most dealer-arranged financing, the dealer is the original lender or creditor. The dealer then sells the finance agreement to a third party lending institution). The yo-yo sale involves telling buyers that they are approved for financing on a specific vehicle, having them sign all the paperwork, and allowing them to take the vehicle home. A few days or weeks later, the salesperson calls the buyers and informs them that the financing has “fallen through.” The salesperson tells the buyers that they can keep the vehicle if they agree to pay a higher interest rate or get a co-signer. Alternatively, the salesperson might tell the buyers that they must buy a different vehicle. Essentially, the car dealer tries to rewrite the contract with terms that are more favorable to the dealer and less favorable to the buyer. If consumers express unwillingness to comply with the post-sale demands, then the salesperson threatens repossession or arrest.

However, this sales tactic is illegal. Federal law (as well as the laws of some states) prohibits this type of transaction. The federal Truth in Lending Act, for example, requires clear and conspicuous disclosure of financing terms, including the annual percentage rate (APR). Spot deliveries make the point at which financing begins uncertain, which causes the annual percentage rate (APR) stated in the finance agreement to be incorrect. Moreover, because the dealer is usually listed as the creditor or lender in a finance agreement, financing has not “fallen through.” Instead, the dealer has been unable to sell the finance agreement for as much profit as it wants. Through spot deliveries, dealers are merely attempting to increase their profits by having the consumer enter into a new finance agreement. However, dealers should still be bound to the original sales terms.

When you purchase a car, truck, motor home, motorcycle, or other vehicle from a dealer, they are obligated to provide you with the correct information about the history and condition of the vehicle that you are buying. The failure to do so is referred to as dealer fraud.

Some of the acts that constitute dealer fraud include odometer rollback, the failure to disclose prior accident damage, such as flood damage, the failure to disclose that the vehicle was a lemon law buy-back, and the failure to reveal that the vehicle has a salvage title.

Dealer fraud can lead to serious safety hazards, as well as costly repairs. If you beleve you’ve been a victim of a dealer fraud we suggest that you contact a dealer fraud attorney.

Car dealer fraud is plaguing our country. The tactics being used are so sly that even informed consumers who do their homework are being taken for hundreds, and often thousands, of dollars.

These scams add many millions of dollars each year to the profits of car dealers at the expense of consumers. While some profit is necessary, consumers are being ripped off beyond reasonable need through the sale of useless add-on products and services, the unnecessary markup of vehicle prices, the hidden inflation of loan terms and by other means.

Evidence from recent litigation, industry insiders and consumer complaints show that these fraudulent practices are not restricted to a few areas or dealerships. Further, it is very likely that deceitful trends are spreading as more and more dealerships become part of major conglomerates.

Damage disclosure titles are issued by states when the car has sustained damage as a result of one or more incidents. Salvage titles are issued by the state when an insurance company takes possession of a vehicle as a result of a claim. This usually occurs when a vehicle has been declared a total loss. A rebuilt title may be issued if a vehicle sustained damage and was rebuilt or reconstructed, then placed back on the road. Junk titles are issued when a vehicle is not road worthy and cannot be titled again in that state.

Rental car fleets typically sell their cars when the manufacturer’s warranty expires. They are usually sold at auction and bought by major dealers. Everyone has seen the television commercial in which tourists in Hawaii abuse their car with the punch line “it’s only a rental.” Amusing, but not if you buy one without having the history disclosed to you. California requires that the rental history shall be clearly identified as such. Failure to do so may be fraud.

The more you know about the car, the better. Ask questions. Get an independant mechanical inspection before you purchase. The Vehicle Code requires that dealers post notices telling the purchaser that they may, at their own expense,” have the vehicle inspected by an independent third-party either on or off these premises.”

You have the right to it and there are many mechanics who will come out to the lot to do the inspection. If the dealer balks; first, its against the law, and second, its probably a sign of things to come.

It can be difficult, but not impossible to detect when a vehicle’s odometer has been altered. Here are some tips to help used car buyers detect odometer fraud:

• Ask to see the title and compare the mileage on it with the vehicle’s odometer. Be sure to examine the title closely if the mileage notation seems obscured or is not easy to read.
• Compare the mileage on the odometer with the mileage indicated on the vehicle’s maintenance or inspection records. Also, search for oil-change and maintenance stickers on windows or door frames, in the glove box or under the hood.
• Request a  Vehicle History Report to check for odometer discrepancies in the vehicle’s history. If the seller doesn’t have a vehicle history report, use the car’s VIN to order a  vehicle history report online.
• Check that the numbers on the odometer gauge are aligned correctly. If they’re crooked, contain gaps or jiggle when you bang on the dash with your hand, walk away.
• Examine the tires. If the odometer on your car shows 20,000 or less, it should have the original tires.
• Look at the wear and tear on the vehicle-especially the gas, brake and clutch pedals-to be sure it seems consistent with and appropriate for the number of miles displayed on the odometer.