Dealer Fraud

Title fraud is on the rise because of the current recession and is often the result of poor business management on the dealer’s part. It mostly happens when dealers on the verge of bankruptcy, without enough money to keep operations going, can’t pay off the liens on titles for the vehicles they’ve purchased and sold. Surprisingly, a lot of car dealers don’t technically own the vehicles they sell. They borrow money from financiers, called “flooring agents,” to pay for them. Once a dealer sells a car paid for by a flooring agent, he or she is supposed to pay off the agent to get the title — or clear the lien on the title — and pass it on to the buyer. The problem arises when the car dealer doesn’t pay off the loan. In such cases, car buyers will come back to pick up their license plates and title, only to find that they aren’t available and the dealer is nowhere to be found.

The same applies to trade-ins. The dealer is supposed to pay off the lien on a trade-in, but either is unable to pay or pockets the money and shutters the business after pulling this stunt a number of times. As a result, the trade-in’s original owner is left with a car payment on a vehicle he or she no longer owns, and the new owner, who bought the trade-in with a title that has a lien on it, now technically owns nothing.

Warning Signs

As a warning sign of this auto scam may serve a dealer who says he/she doesn’t have a title but can get it.

How to Protect Yourself?

Always ask to see the title and examine it carefully. If the dealership owns the car or is honest, it will have the title on hand or be willing to produce it. If it doesn’t or won’t, then something’s not right. Remember also never to trade in a financed car with a balance left on the loan. If you can’t pay it off for any reason, insist that the dealer put in writing that he will pay off the trade-in within 10 days. If the dealer is trustworthy, he/she shouldn’t have a problem with this request.

If you are already a vitim of dealer fraud, don’t delay to turn to a qualified dealer fraud attorney.

Rewritten Contract/Backdating

A customer often won’t qualify for financing under the terms of the first purchase contract and may be required to increase a down payment, APR, etc. to qualify for a loan. Then the dealership has the customer sign a second contract with the new terms but backdates it with the date of the first contract, sticking the customer with financing charges for a period during which the contract wasn’t yet in effect. In addition to misrepresenting when the customer takes the obligation of the new contract, a backdated contract often violates the single document rule because another form, usually called “Acknowledgment of the Rewritten Contract,” has the actual date when the contract was signed. In addition, many customers aren’t informed that they may opt to cancel the contract and return the new vehicle and have the ,  and trade-in vehicle refunded, rather than signing a second contract with less favorable financing terms.

Forgery

Car dealers may forge the customers’ signatures on subsequent contracts that change the terms of the original signed contract in case the customer refuses to sign the new one. Among other commonly forged documents are: credit applications (with fraudulent representations about income, etc.), as well as buyer’s disclosure forms and guides in order to prevent buyers from reading their buyers’ rights and/or information that may cause them to reconsider their purchase decisions).

Sticker Price

The car code states that a dealership cannot sell a new vehicle for more than sticker price (also known as the manufacturer’s suggested retail price, or MSRP) unless there is a dealer addendum sticker disclosing itemized costs above MSRP physically affixed to the car. Inflating the cash price of a vehicle – as in the case of a negative equity deal often results in selling a vehicle for higher than the MSRP, while also affecting the amount charged for taxes, licensing & registration and finance charges.

In our previous blogs we have already presented some tricky questions that may lead to dealer fraud. Below are three more questions and the most preferable ways of answering them in order to avoid becoming a dealer fraud victim.

1. “What were you hoping to get for your trade?”

This may be an honest question, but why tell the price first? If you say you want $10,000 and the car is really worth $12,000, you’ll give the dealer a $2,000 present. It’s essential to have a realistic idea of what your trade-in is worth and let the dealer throw out the first number. Don’t get confused in case he/she offers a ridiculously low price; this may be a dealer tactic to make you think the car is worth less than it is.

So you’re better give an answer like: “Let’s see what you come up with. Make me an offer.”

2. “Can you hold on a few minutes while I check the computer/talk to my manager/make a few calls/do whatever?”

Some dealers will try to prolong the negotiating process as long as possible in the hopes of wearing you down or confusing you with even more numbers. Set a fair time limit for negotiations and when half an hour is left, tell the dealer you need to leave and will be back tomorrow. This will likely speed things up greatly. Just ask the sales rep what his hours are tomorrow, and then go home, get a good night’s sleep, and return to the dealership well rested and well fed. You’ll be in a much better mental state to negotiate.

Give an answer like: “I have to leave in X minutes. I’ll come back tomorrow and we can conclude the deal in case we can’t finish up by then.”

3. “What can I do to get you to buy this car today?”

The answer that the sales rep hopes to hear is: “Get the monthly payment under $X,” “Get the down payment under $Y,” or “Give me $Z for my trade”. Then they will focus on it and close the deal: “See, I got the payment under $X, let’s sign the papers.”

Try to give an answer like: “Give me a fair price and a fair offer for my trade, and I’ll buy this car today.”

There are a significant number of cases in which dealers represent to consumers that a car was not previously wrecked.  The consumer then buys it based on the representation.  Naturally, mechanical problems occur, and the consumer takes the car in for repairs.  Only then does the consumer learn of the prior wreck. To avoid this situation, you should pay attention to the following:

Carfax or Autocheck Reports - Dealers normally run reports from Carfax and/or Autocheck to determine whether either of those databases lists any prior wreck of or damage to a vehicle they intend to sell.  An honest dealer would pass on the reports if they indicate prior damage.  If he/she failed to do, a dealer fraud attorney will use this fact later in favor of his/her client. Some dealers even advertise the availability of vehicle history reports.

Certified Preowned Vehicles – Buyers feel good about buying what car dealers call “certified preowned vehicles,” because consumers believe that the vehicles have been thoroughly inspected by one or more mechanics.  If the inspections actually occurred and the car dealer passed on to the consumer all the information disclosed during the inspection, then this process is surely beneficial.  However, if the certified preowned vehicle was seriously damaged, and that was not disclosed to the consumer, it is likely that the dealer knew about the damage and simply did not disclose it.

Superior Dealer Expertise - A car dealer should know, much better than the vast majority of consumers, how to look at a vehicle and determine whether it is a  wrecked car or not.  A car dealer may usually do so without the extensive inspection underlying a certified preowned vehicle.  Therefore, if prior damage and/or shoddy repairs would be apparent to a typical car dealer, such could indicate that a car dealer knew of the damage or repairs prior to sale.

Car dealers usually ask key questions for diverting your attention and maximizing their profit. Knowing these questions and refusing to take the bait will help you stay in control of the negotiations and get the best deal. Below are some of these tricky questions and the best ways of answering them and thus avoiding various dealer tricks.

1. “What kind of monthly payment are you looking for?”

In some cases, this question doesn’t presuppose any upcoming vehicle scam. If you’re looking to buy a $50,000 car on a budget of $300 per month with a $1,000 down payment and no trade-in, the dealer will know right away that you’re wasting his time. In any case, it much better to negotiate based on the cash price of the car and not the monthly payment.

Before negotiating on any car, do a little math: Start with the sticker price of the car, add in 15% for taxes and finance charges, subtract your down payment, and divide by 36, 48 and 60 to get a rough idea of monthly payments. Also don’t forget that your vehicle insurance premiums may go up as well. Can you really afford this car? If you can’t, you might want to respond by asking what a lease payment would be like. (Leases offer lower payments, but may also have mileage limits and require you to give up the car at the end of the term.)

So the most proper answer in this case is: “Let’s negotiate a cash price, and then we can figure out what the monthly payments will be.”

2. “Are you going to trade in your old car?”

Many people rely on the cost of their trade-in to offset the price of the new car - but negotiating with a trade-in just complicates matters and gives the unscrupulous dealer yet another set of numbers to manipulate. Remember, the value of your old car isn’t going to change in the time it takes you to hammer out a deal. If you intend to use your trade-in as a down payment, you should have an idea of what it’s worth. Still, it’s important to take one thing at a time - and the first thing is to negotiate the price of the new car.

Your answer to this question should be something like: “I haven’t decided yet. Let’s figure out the price of the new car first.”

Payment packing is one of the most common of the car buying scams. It is the act of presenting much more inflated monthly car loan payments to customers during negotiations.

This act actually becomes illegal once:

• A credit report has been obtained
• The sale price has been disclosed
• The term of the loan has been disclosed
• The finance rate has been disclosed.

How to avoid payment packing?

All the tricky games may easily be avoided by asking them to:

• Disclose the sale price
• Disclose the total amount financed
• Disclose the term
• Disclose the estimated finance rate

By having car dealers disclose all of this upfront, they have to give you an accurate payment or they risk a visit from the Department of Motor Vehicles or the Attorney Generals Office.

An even easier way to avoid becoming a payment packing scam victim is to arrange your own auto loan. By arranging your own financing you’ll not have to negotiate payments at all, because you’ll essentially be paying cash.

Buying a car means that you will own the vehicle when you finish making payments on it.

Leasing means that there is a period of time – the lease period – when you’ll be making monthly payments on the car and at the end of the lease period you will not own the car (unless you make a large payment to own it). Plus, if you want to return the car before the lease period is over, you’ll have to pay a big penalty (an “early-termination fee”) to do that.

Customers routinely fall into auto scam when car dealers lead you to believe that you are purchasing when you are really leasing (and vice versa). Among other misrepresentations is telling customers that you will own the car at the end of the lease. This is far from reality because almost all leases require you to make a large payment at the end of the lease in order for you to own the car.

What you should do?

• Read carefully and make sure you understand the entire written contract. If you want to buy a car, make sure the contract you are signing doesn’t include the word “lease” in it. It seems easy and obvious yet many customers are easily tricked at the dealership. Bring a friend if you are not sure.

• Don’t allow dealers to pressure you into a lease if you want to buy.

• Shop around and make sure you fully understand what your obligations are to avoid becoming a dealer fraud victim.

Most people hate going car shopping because they have heard so much about the innumerable car dealer scams. In this blog you may learn about some seemingly innocent, but rather witty dealer scams.

Today Only Price Car Dealer Scam

This car dealer scam works till you are at the car dealer, but have not bought a new car yet. The dealer will give you a great price and will tell you that the price is only good until the end of the day. This car dealer scam will make you think it is a great deal and end up buying the car without checking what other car dealers have to offer for fear of missing out on the great price they offered.

Throw It In Car Dealer Scam

For sweetening the deal and softening you up on price the dealer will offer to give you extras like floor mats, window etching, fabric protection and other accessories. This largely practiced scam will slow down the price issue negotiations and take your attention away from the price and make you feel that you got something of value.

The Puppy Dog Car Dealer Scam

The dealer will allow you to take the car overnight. The idea is to get you to experience ownership for a much longer period of time than a test drive.  Then you can see the car in your garage or driveway, your neighbors can see it, your friends see it, and you start to form an attachment to the car and end up buying.

Best Price Matching Car Dealer Scam

If the car dealer doesn’t manage to sell you a car while you are there, they will tell you just before you leave to visit other dealers that they will match or beat any price that you will get anywhere.  By this time, you are most likely sick and tired of looking around and dealing with car salesmen and various scams that you will take their offer.

Title washing is used by car dealers for “washing” the vehicle’s bad history in order to conceal from the buyer that it had a salvage title because of severe accident, flood or other damage. Title washing incidents reached their outbreak after hurricane Katrina when many car dealers got stuck with excess of flood-damaged vehicles.  Title washing is also applied to “clipped” vehicles with the back and front coming from different cars, or rather of what was left of them after a crash. So, a wreck is sold at the price of a good car.

Title washing scam results from the lack of a unified law regulating vehicle documentation in all the USA states. Many people who bought used cars are already car title washing scam victims.

So how is title washing done? A car that was totaled by the insurance company is assigned a salvage title, which is often called “branding”. Then it may be repaired and driven, but its resale value lowers, along with the possibility to sell it. As a result, the car is transferred to states that do not recognize the current title and is assigned a new, clean tile. Title washing erases the branding and the car’s value rises, and now it is easier to sell. Remember that title washed vehicles can be sold not only by car dealers but by individuals as well.

To avoid title washing perform VIN number check and get vehicle history report for revealing the truth about the car’s title. Once a car is assigned a salvage title, the information is added to the computer database of services providing vehicle history reports. These records remain in the there even when the car is transferred to other states.VIN number check protects not only from title washing but also from many other used car flaws, for example salvage title, odometer rollback or a flood damaged car.

When buying a new car, people most frequently turn to car dealers as to the most knowledgeable and trustworthy people to buy a car from. However this is not always the case. Some car dealers are simply dishonest and use really mean scams for tricking you. So one should be extremely cautious to avoid becoming a dealer fraud victim. Today we will discuss the The Payoff  Your Loan Scam and try to reveal the related  dealer tricks.

This is when the dealer offers to pay off the balance of your current car loan no matter how much money you still owe. It is a common sales strategy. When the average buyer hears this, they think that by purchasing a new car with a new dealership, they will automatically owe no more money on their current car. That couldn’t be further from the truth. What really happens is that the car dealership does help you get out of your current contract, however they are normally forgetting to tell you how high your fees are going to be for breaking the lease agreement with your old dealership. So now you will have to pay fees that are in the thousands to compensate for it. You will also not be able to refinance for a new car until those fees are paid. Of course the dealership can add the cost on to your contract with them at a substantially higher rate. The sole reason why the dealership agrees to this deal is because they want to get more money off of your current car. They aren’t really doing anything for you at all. The dealership will also give you far less than the car is worth on the trade in. This car scam works because they will up your monthly fees, and then sell your trade in for more money than it’s worth. The dealership will then extend your monthly payments in order to conceal extra year of payments.

To avoid this car dealer scam, you have to ride out your current lease until the end. If you are really determined to get a new car, then you should try selling your current car on your own. Possibly make a deal so that the buyer pays much down and takes over the lease payments. Make sure you get legal documents so you don’t end up with bad credit from someone who decides not to pay. Also make sure the buyer carries enough car insurance.