Dealer Fraud

In car auctions there is a large fleet of former rent-a-cars from major rent-a-car companies and very often dealerships will get their used vehicles from auctions. These vehicles are driven by numerous different people, who have different habits. Sometimes, people who rent the cars tend to abuse these vehicles and treat them in ways they would not treat their own car.

This is why rental cars are of lesser value than other vehicles of the same brand and the same age that were owned by an individual. The law in a few states requires car dealers to disclose in writing the fact that a vehicle was a rental. However, in the states where there is no such law, car dealers typically hide this information, or even misrepresent the vehicle’s history in an effort to make the sale.

In some car dealerships these vehicles are labeled as “Program Vehicles”, which gives the customers the impression that the vehicle history is of some higher quality. The fact that the vehicle has a previous rental history is material, because consumers will probably not buy it if they known this fact. The failure of the dealer to disclose this information to the buyer is auto dealer fraud.

Spot Delivery usually occurs when a dealership allows a consumer to drive the vehicle home from the dealership even though the sale is not complete. If the customer decides to finance the vehicle at the dealership, the car dealer most often does not get a banks acceptance while the consumer is there at the dealership. Car dealer lets the buyer know that he/she can take the car home while the dealer’s finance department is arranging the financing.

Spot delivery is not illegal in most states. Dealers are well aware of this and use the situation to implement various scams.

One of these auto frauds happens when the dealer asks the car buyer to sign a new revised contract that has increased the payments. Dealer knows that most of the car buyers will agree to sign a new contract after he/she has grown accustomed to the car, perhaps is proud of the new purchase and has shown it to friends and family. Also, the consumer will probably agree to bring more money for a down payment.

Certain consumer rights statutes may be violated taking into consideration why the dealer got the consumer to come back in. These dealer tactics are also known as “yo-yo” scams because the dealer sends you out and pulls you back in like a yo-yo.

Keep in mind, that if a dealer can’t manage to obtain financing on the terms previously agreed upon, you can refuse to agree to new terms, and can cancel the deal. In this event, the consumer is entitled to whatever down payment or trade-in vehicle that they gave to the dealership with no amount to be withheld.

Car Buyers should remember that used carshave an unknown history of ownership. The best used car buy is the one that has been well taken care of and well maintained.

Thus, if the customer is wise enough, the he/she often asks the salesperson questions about the vehicle’s history. Virtually every response is that the vehicle has never been damaged or in any previous accidents.

The truth is, the salesperson rarely ever knows whether what he  is saying is in fact true. Every vehicle goes through some inspection by the service department of the dealership when it is first brought into the dealership. Most trained technicians can identify certain damage to a vehicle by noting re-painting, welding, or even replacement parts. However, this information is never passed on to the sales force of the dealership, nor is any record of these findings maintained. Therefore, the salesperson is really not the person with knowledge of the vehicle history, yet will answer the questions a consumer asks with the answer the consumer wants to hear so that he or she can make a sale. Remember, they almost always paid on a commission basis. If they tell you the vehicle is damage free and they are wrong, their conduct is considered dealer fraud.

The dealership can be an overwhelming place for most of the car buyers. Some of the customers rely on the car dealer to get the best deal for their car. However, relying on the dealer to help you with the terms of your contract is a bad approach to purchasing a vehicle; because you will probably pay much more than necessary simply because you don’t understand what is being said.

Here are a few of the most common dealer tricks used to make more profits from unsuspecting consumers:

Leasing over Purchasing a Vehicle
Car dealers will tell you that leasing is a better deal than purchasing, and will promise you a low monthly payments. Sounds good at first but as always there are loop holes. Most importently the car ealer don’t explain you that there are the long contracts and stiff penalties for ducking out early on your lease! Among other things like limited mileage allowances, and hefty repair costs with additional charges for every mile you go over your contracted limit. Now you may say that a mere .10 to .20 cents a mile isn’t much but they will quickly add up!

Only a 2-3% APR on the Lease
The dealer will only give you half the calculation in the interest rate. When in actuality you must multiply the 2-3% by 24 to get the actual interest rate. The dealer will quote you the lease money factor, instead of the complete rate to get you to feel you are getting a better deal.

Many consumers become the victim of this dealer fraud, because car dealers know that most of the consumers are happy with just knowing they can get out of their lease early and not suffer the penalty. However the truth is many of our choices have consequences. Thus, when you sign a car lease agreement you are simply locked in. Of course you can terminate the lease early, but whenever the lease is terminated you will suffer heavy consequences.

The best way to avoid getting scammed by the dealership and being on the short end of the stick, learn all you can about leasing before you sign any agreement or even go to a dealership. Remember that the dealer makes profit form a lease or a sale of the vehicle, so they will tell you what you want to hear just to get you into the deal. Always ask questions to the dealer. Never sign anything until you understand everything, especially figure out how the dealer came up with those numbers and most definitely ask them to show you how they got there. Never sign the agreement because the dealer is putting pressure on you. Take some time to think it over and get more information before making any decision.

There is nothing worse for a consumer than falling for an auto sales scam. The purchase of the vehicle is one of the most important purchases and if you fall for the scams of a car dealer you can loose a lot of money. However with a little bit of information you can avoid auto sales scams. Following are 5 important tips you can use to avoid auto dealer fraud.

1. Always go into a dealership with a strong understanding of how much you can afford for monthly payments. Remember, that a car dealer wants to sell you a car and make a profit and will often try to get you to spend more.

2. Watch out for predetermined monthly payments. It’s a common tactic for dealerships to plaster a sign on the vehicle windshield advertising a low monthly payment for the car. This makes a customers believe like they are getting a good deal. However, when you add up the total cost you find you are actually overpaying. This is why you should always have the total cost calculated before signing any document.

3. One of the oldest scams is a classic bait and switch. The car dealer will give you a great price break on the car up-front only to load up his profits by adding a lot of unnecessary extras such as extended warranties, gap insurance plans and special paint sealants. Avoid it by declining any extras.

4. “This deal is only good for today.” This is a common dealer trick and is designed to get you to buy today. The truth is car dealer is afraid that if you leave the dealership and think the deal over you will never come back again. Dealership will still be willing to sell you the car and make you a deal tomorrow.

5. You can negotiate any price. Never get to thinking that the terms of the sale are final. It is good for you to know that any price is negotiable at a car dealership.

When you go to the dealership to buy a new car you should remember that everything is negotiable. Most car buyers become a victim of dealer fraud and different dealer tricks because they do not know how to negotiate. A car is a major purchase and especially during the crisis, each consumer needs to get the most value out of their money.

Remember that you will be dealing with salespeople who have most likely been trained to negotiate the best deal for the car dealer and not for you. If you do not know how to negotiate or are not comfortable with negotiating, then the chances increase for you to being scammed by a car dealer.

The main problem is that most car buyers most are not prepared when they go to a dealerships. Some of them don’t know what they want, how much they want to spend, what a good interest rate on a loan is, or what add-ons they may want. The best way to avoid dealer fraud is prepare and know all this information before going to look for a car. If you are not well informed, then a car dealer can easily use any one of Car Buying Scams on you.

Another good thing to do is being confident enough to stand firm with what you want. Never let a car dealer to convince you to spend more money by trying to sell you an upgraded vehicle. So remember, that the more knowledge of buying a new car you have, the easier it will be for you to negotiate the best deal you can on a new car.

When you are shopping for a new or used car you want to get the best deal and best value that is possible. It is important that you know how to avoid car dealer fraud and dealership scams to get the best deal. Following are a few tips on how to avoid car dealer fraud, you which will help you to negotiate a better deal from the sales staff.

Do Some Research
The best thing to do before buying is doing some research on the make and model that you are most interested in. Try to find out as much as you can about your car you intend to buy, including:
Pricing - Shop around for the best price.
Cost of Ownership - Don’t end up buying a car that you can’t afford to drive. Check out the costs of Maintenance, Gas Mileage, Sales Tax, Depreciation, etc.

Don’t Buy Based on Monthly Payments
Always determine how much you can afford to pay each month, before entering the dealer’s lot. Car dealer will probably ask you this question the first. Also, do not let the dealer handle your financing. Dealers use financing process to scam you and make profit. Always try to have a pre-approved loan before you go into the dealership.

Know When to Walk Away
Sometimes you can avoid car dealer fraud by simply not making the deal. Remember, you can always find a better deal if you spend a little more time and will save on your car. So, if you think that the dealer is trying to scam you just politely excuse yourself and leave.

Often ads of car dealers advertise “Program Cars“. Usually “Program Cars” are called as “Smart Cars,” or “Factory Official Cars” or “Factory Demo’s” in the advertisements of the car dealers. These vehicles are usually one or two year old with 30,000 miles or even less on them.However, the truth is about 25% of “Program Cars” are lease returns, about 70% are rental cars (cars from Hertz, Avis, etc.) and a small percentage of “Program Cars” are cars actually driven by factory officials, and a few of them are “Buy Backs” or “Lemons!” In fact, it is a common practice for car dealers to resell the “Lemons” back to the car dealers!

You can get a good value on a “Program Car,” because car dealers can usually buy them “on the money!” But if you think to buy one of these vehicles you should first get a Free CARFAX Record Check. You will need the make, model and ID number of the car for this. Make sure the car doesn’t have a problem history.

It is very important for the car buyer to realize that even if the car dealer sells you a vehicle at dealer cost or “invoice,” the dealership is still making money.

Dealerships receive a so called “holdback” from the factory on each new vehicle sold. On a vehicle that stickers for say $30,000 the “holdback” could be as much as $800 to $900! Holdback is given to car dealers by the manufacturer, usually on a quarterly basis, to help them offset the high cost of financing inventory.

Rarely will a car dealer negotiate any part of the “holdback,” nor should they. Afterall, we must allow the dealers to earn enough profit to keep them in business.

However, knowing this, don’t be afraid to offer the dealer a couple of hundred over invoice. It’s a good deal for you, and it’s to the dealer’s advantage to take such a deal.

Just make sure you go in prepared! Study the information on this web site, and get at least 3 or 4 Free Price Quotes at New Car Price Quotes! If you do you’ll come out just fine.