Dealer Fraud

One of the most popular types of fraud today involves auto insurance, particularly in staged auto accidents.  These scams have become rather sophisticated to a point where they often involve numerous participants.

Auto accidents sometimes turn to be no accident at all, but a staged production by criminals where you are unknowingly and innocently made an actor. Before you take to the road, learn to recognize auto accident scams to help keep away you and your family from becoming victims.

Don’t Be a Victim

All the time try to drive carefully to help ensure your safety and lessen the probability of having an auto accident. In case you are caught up in an accident, take the following fraud prevention measures:

•    Always call the police, regardless of who is at fault or the amount of property damage. Make sure an official police report is filed, even if damage is small. When the report describes the damage to the other car as a “nick” for instance, it helps prevent the other party from collecting damages not resulting from the loss. An exact account of accident details is important when evaluating whether a claim is valid.
•    Count the number of passengers in the other car. If it would be possible, get the name, address and driver license number of all occupants. This helps to prevent paltry lawsuits and claims paid to people who weren’t actually in the car. Take an exact record of what happened for your personal records.
•    Immediately inform your insurance carrier if you are involved in any accident. Maintain the representatives are trained to recognize indicators of fraud and investigate suspicious claims.

If you are a victim of vehicle insurance fraud, feel free to contact an experienced Los Angeles car fraud attorney Hovanes Margarian.

Scam 1: The straw purchase scam

Here a straw purchase means someone purchases an automobile for other people who, due to poor credit, cannot purchase it themselves.

In order to make you buy the car without any hesitation, the car dealer may assure you that you can get a car loan even if your credit record is not very good. Moreover, they will tell you that you can build your credit by using this car loan, and the only way to do this is to find a co-signer for your contract. And next you will find out that the co-signer is not the primary borrower of this loan but the only borrower-your name is not even on the contract.

It is difficult to detect the straw purchase scam. You can avoid it in advance. Remember, never sign contracts separately, as this is a good chance for the dealers to perform the straw purchase scam on you.

Scam 2: The check bounce scam

This scam occurs in case you are using a credit union or an online car finance site. For getting the commission to sell you the car dealer’s financing, the car dealer will refuse your bank draft first and then lie to you using the reason that the online lender always bounces check. So you have to agree with their offer of financing your car purchase, even though that car dealer financing comes with a higher ARP.

Scam 3: The spot delivery scam

A spot delivery scam occurs a few weeks after the car purchase when the car dealer calls you and says that your credit score is too low to have the low ARP you signed on the contract. But in fact there is no problem with your credit score. This is just a spot delivery scam.

The best way to avoid this kind of scam is to use your own financing instead of using the financing that the car dealer offers you. Never give the car dealer any chance to trick you.

The purchase of a new car can be a very tiring experience, especially when you are shopping at a car dealer who wants to trick you to buy a car that is not in your price range, or wants to sell you accessories that you don’t necessarily need. Another common practice for a car dealer can be convincing you to lease even though it really is not the best choice for you. In fact, there is a huge list of car dealer scams and tricks. However, it is still possible to purchase a vehicle and stay clear of all these car fraud. Here are a few tips to use when you shop for a new car.

Remember that there are many dishonest car dealers in the industry who will do anything to increase the purchase price of the car you intend to buy, thus making more profit. So, the best way to avoid dealer fraud is to be prepared with information about buying a new car and this will help you avoid Car Buying Scams.

It is very important to choose the best time for shopping for a new car. First of all try to shop during the week, rather than on the weekend. It will allow the dealer to spend more time on negotiating, because there will probably be a few customers at the dealership lined up waiting to buy a car.

Another good time can be the end of each month and the end of the year. During this time most of car dealers are trying to meet sales quotas and move inventory, so they will be willing to negotiating a good purchase price.

Always keep in mind that the dealer may tell you that he can’t negotiate on the prices. This is probably not true and is another car scam used by the car dealer. If you see that the car dealer is not willing to negotiate, just walk away and try to shop somewhere else.

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.

Are you afraid to buy a used car because you don’t want to become victim of dealer fraud? It is, in fact, possible to buy a used car and avoid all kinds of dealer tricks and scams. One of the most important thing to do when you buy a used car is to inspect it before you purchase. Here are some tips on how to inspect a used car:

• The first thing you should do when you buy a used car is to walk around it and check the body, tires, registration and then scan the interior.
• Never look at the vehicle in the dark.
• Never look at the car in the rain. Water can sometimes mask prior body damage.
• Try to see the car when it hasn’t been started for awhile so the engine is cool.
• If you buy a used car in an area that has really hot climates then you will need to check for blown head gaskets and cracked heads.
• Check the transmission fluid after the car is warmed up, on level ground and idling.
• Always get a vehicle history report before you buy a used car. This is an excellent get information about the car you intend to buy and can help you verify if it has been declared as a salvage vehicle or was flooded.

This lease fraud happens when the car dealer promises the consumer to pay the remaining lease payments on the existing lease if the consumer signs a new lease contract with them. Remember that the offer may be the reason for a number of potential problems.

Most consumers think that the dealer is taking over responsibility for the entire lease when he makes this offer. That’s not what happens. The truth is, they simply take over the rest of the payments and when completed, will return the car to the company that originally leased it to you.

In case you have any problem with the car (i.e. damages, excessive mileage, etc…) the leasing company won’t send the bill to the dealer; they’ll send it to you. Moreover, if the dealer doesn’t pay the remaining payments, or doesn’t return the car, the leasing company will contact you, not the dealer.

Car leasing is a method when you can have the use of a vehicle by financing it. Leasing, typically, differs from buying and the consumer never actually owns the vehicle, but uses it over a set period of time. The length of car leasing contracts can be 12 months, and can last up to 24 months or 36 months.

The person who leases the vehicle is making monthly payments to the owner or the dealership. Car leasing may often be cheaper than car loan repayments. However, the person who leases the vehicle should remember that at the end of the lease the customer will not have over a set period of time. Be aware because there are some car dealers will try to scam you by telling that you will own the vehicle at the end of the lease term. However, at the end of the lease you will be required to pay additional sum.

There are a number of advantages that leasing gives. One of them is that car leasing payments usually work out less per month than car loan repayments. At the end of the lease contract the leaser returns the vehicle to the owner and do not have to worry about the value of the vehicle or the hassle of having to advertise and negotiate a sale. When leasing you don’t need to pay down payments like when you purchase the vehicle. You will also afford vehicles that would ordinarily be out of their price range.

Leasing may be beneficial for both the consumer the dealership, however, there are a lot of dealer tricks and car leasing fraud that will make you pay more and make your leasing contract complicated. So, if you have decided to lease a vehicle then carefully read your lease agreement before signing.

Early Termination

Most leases early termination terms can be very unpleasant for the consumer, particularly if the termination is forced, i.e., the car is totaled in an accident or stolen. Insurance pay-outs, in such cases, often fall far short of the balance due on the lease leaving you holding the bag. Many leasing companies will offer “gap insurance” for only a few dollars a month extra which is a wise investment.

There is a very good reason why it is so expensive to get out of a lease. Consider that your monthly payment is made up of two parts: depreciation and interest. The depreciation payment part is calculated by taking the difference between the cap cost and the residual (the total depreciation over the lease) and dividing it by the number of months.

But we all know that a car undervaluates more rapidly in the earlier years with the biggest hit occurring the day you drive the car off the lot. So when you terminate the lease before you have paid all of the depreciation, you will likely be required to pay the difference between what the car is worth and how much you have paid on the depreciation. This difference is often referred to as the “gap”.

Some lease contracts will stack the deck against you with the terms for early termination. For example, some Nissan Motors leases require the sum of all remaining payments be made before they will release you from the lease. Always read the fine print of the lease contract and understand your exact liabilities for early termination before you sign.

Higher Credit Requirements

Since the expensive car you will be driving for the next 2-5 years belongs to someone else (the leasing company), the owners want to be assured that you will make the payments on time and will not trash their car. The credit worthiness standards, therefore, tend to be higher for leases than conventional loans. In other words, if you have a troubled credit history you may have problems getting approved for a lease.

Insurance Cost

Leasing companies conduce to require higher amounts of insurance coverage than you may normally carry. This could impact your insurance cost considerably. Find out the requirements and then get an estimate from the insurance company before signing on the dotted line.

No Ownership

Mileage Limitations

Almost all leases limit the number of miles per year by imposing fees typically 10 to 15 cents per mile over 15,000 miles per year. If you put a lot of miles on a car, these fees can add up quickly.

Sometimes car dealers sell poorly rebuilt, wrecked or salvaged vehicles. Thus, after the purchase car buyers find that the vehicle is unsafe and moreover it is priced too high. The majority of these vehicles were involved in accidents or floods. Most of the vehicles look good on the surface, but they may have steering problems, defective brakes, inadequately welded parts and overall, poor handling.

Most of the state laws require car dealers to inform customers before purchase if the car has, to their knowledge, a “salvage title” or has been involved in an accident. If a car dealer fails to disclose any such information it is considered fraud.

Make sure to inspect the vehicle thoroughly before buying. Especially, look for the following;

• matching of paint on the outside and inside of the door frame.
• parts of the car should line up with each other and the spaces between the hood and trunk and around the doors are straight.
• flood damage is fairly evident in certain vehicles by the presence of mud or dirt under the mat in the trunk, or moisture under the seats or inside the trunk or hood. There may also be watermarks inside the doors.
• if the car has an out of state title, it may have been moved to another state due to its extensive damage.

One of the things that most customers do not notice is that salesperson at the dealership continues negotiating till the contract is signed. Remember that even if you have clarified all the terms and shaken hands on the deal, the final contract presented to you for signing may be different from what you have agreed. Look thoroughly and you may find out that the terms in the contract are different than those you agreed upon during the long period of negotiations.

Many customers are often mistaken by thinking that the Finance and Insurance (F&I) Department of the dealerships deals with the paperwork only. This is not true. First the person in the Finance and Insurance (F&I) Department will persuade you to agree with monthly payment higher than what your credit status requires and then will try to sell you some extras. This could be done during a friendly talk and you will not even notice how these extras are added to the final contract you are signing.

Be careful not to purchase worthless products such as undercoating, paint sealant, extended warranties, credit and disability insurance and other add-ons.