Dealer Fraud

Scenario: You go to trade in your car and find out its worth less than the money you have outstanding in payment and the car dealer sells you gap insurance at double the price it should cost.

Avoid this scam: If your car is worth less than the money you currently owe on a loan then you should purchase Gap Coverage, if your car gets wrecked or stolen you will only get the money its worth not the money you owe and this could end up with you having no car and a large loan still to pay not to mention any excess fees that may also apply. Gap Coverage will protect you in this instance, which can be purchased from many online sources.

Watch out signing for this option when renting a vehicle. The small, fine print on the contract may add up to 50% more to the price of the rental! Some rental salespeople may not even tell you that it is an option and they may not tell that this option may not be all that necessary as they would like you to think.

Because it is an option, the costs cannot be regulated by the government. Sometimes paying for this option just duplicates the coverage you already have on your existing car insurance so you may not even need the extra added protection unless your current car insurance does not cover you in rental cars.

This is a typical car deal to show how a car dealer commits title fraud with your trade-in. Let’s assume that one is doing business with the crooks from Escondido and he just traded-in a 2004 Volkswagen Passat. He bought the car 3+ years ago and he has 10 months of payments left at $375 per month. As part of the deal they give him $14,000 for the car. Now he still owe $3,750 on the Passat so the dealer is putting $10,250 towards the purchase of a new car and they will pay off the remaining $3,750 he owe to the bank for the Passat, a very typical car transaction. In most states by law the dealer has between 3 to 5 business days to complete the deal by paying off his old Passat’s bank.

This is standard car dealer business but some dealers use a scam so they can hold your trade-in’s title and use that money for themselves. They might wait a month, two months or maybe plan on never paying the $3,750 to the Passat’s bank. A dealer does this so they can use that money without permission, interest free. And while they commit title fraud their customer’s credit gets damaged. Who do you think is responsible for the $3,750 still owed on the Passat in our example, you guessed it. ME! A car dealer pulling this scam will do a great job of lying to the lender and customer to put off having to pay off the trade-in for as long as possible.

One of the most recent car dealer ploys is Mandatory Arbitration.

Mandatory Arbitration or Conflict Resolution: This ploy sounds reasonable at first, but be very cautious…

After everything else has been agreed to, the sales person asks you to sign a “Dispute Resolution” or “Conflict Resolution” agreement. The sales person tells you it just says that if a problem occurs, you agree to settle through arbitration and not take the car dealer to court.

Although arbitration can certainly be a reasonable option, the fine print is where the problems lie.

The agreement may well say that the car dealer chooses the arbiter… and/or that you pay the entire arbitration fee (regardless of who wins)… and/or that you cannot appeal the decision but the car dealer can. It also often includes a clause that you can’t participate in any class-action lawsuits against the dealership — no matter what they do!

So, make sure you read any arbitration agreements before you sign them to make sure they are fair, and show them to your attorney.

In fact, we recommend that you ask the car dealer whether or not they require an arbitration agreement BEFORE you look at any cars. If they do require a dispute resolution agreement, check out the fine print first, and if it has the provisions we’ve just described, shop elsewhere.

Many sleazy car dealerships require these agreements because they’d get sued frequently without them.

You must always be wary when buying a used car. Some consumer groups believe that approximately 10 to 12% of the used cars sold have some kind of hidden damage, and worse yet it is estimated that more than a million cars each year are sold which have been totaled and thereafter rebuilt and sold as if they had not sustained any damage. Obviously, therefore, it is best to have any car that you are contemplating buying be inspected by an independent mechanic not related with the dealership that you are dealing with. Dealers will often maintain that they had no knowledge of the prior history of the vehicle and therefore could not disclose to you any damage. They are partially correct in that because titling laws vary significantly from one state to another and there are numerous titling scams, the result of which is that even a totaled car, which may have been branded as being a salvaged vehicle, can be retitled in another state. Thereafter through means of different auctions the vehicle can wind up in a state far away with a dealer who ultimately sells it not being aware of that prior history. Nevertheless, people in the industry state that dealerships which buy vehicles at auction usually know if the deal is too good to be true, and that being the case that the vehicle has undergone some form of extensive damage.

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[ To Learn more our services and areas of practice, please visit our website at www.DealerFraud.org]

You should also be aware that the Kelly Blue Book, which has long been held up as the ultimate authority on the value of used vehicles actually publishes two separate guides, one for dealers which lists the wholesale prices of the vehicles, and one for consumers which only lists retail prices and therefore really is not nearly as accurate as to what you may be offered by the car dealer. Remember that the Kelly Blue Book is designed for people who are in the business and therefore will be slanted towards providing the edge for the dealer rather than for the consumer. Perhaps a better way of determining the value of your car is looking at local newspapers’ classified ads to see what vehicles similar to yours are being sold for, bearing in mind, however, that you will not be selling your car to the dealer at retail on your trade-in.

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[ To Learn more our services and areas of practice, please visit our website at www.DealerFraud.org]

Have you purchased a Late Model Used Car with Mechanical Problems or Prior Accident Damage?

Many unsuspecting consumers purchase from car dealers used vehicles that are represented to be one owner vehicles but are in fact prior daily rental vehicle, (cars used as rental cars by car rental firms). Many of these cars have prior accident damage or mechanical problems.

Under California Law an auto dealer has the legal obligation to identify and disclose former taxi cabs, rental vehicles, publicly owned vehicles, insurance salvage vehicles and revived salvage vehicles at the time of and prior to sale. Additionally, many consumers are unaware at the time of purchase that many used cars have significant prior collision damage. Under California Law a dealer has and obligation to perform a legal sufficient safety inspection of all used cars offer for sale and must perform repairs or disclose collision damage revealed by the inspection. Unfortunately there are Auto Dealers who ignore the Law. Contact our firm if you believe that you have been the victim of non-disclosure in a vehicle sale or have purchased a vehicle with a history of prior collision damage.

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[ To Learn more our services and areas of practice, please visit our website at www.DealerFraud.org]

Leasing is an important profit center for dealers and a frequent area of automobile fraud. Often this involves abuses as to the terms of the lease, such as the amount exchanged for trade-in, down payments, or rebates; higher capitalized costs than represented; manipulation of residual values; exorbitant early termination penalties; and even deception about whether the transaction is or is not a lease. If your lease terms are confusing to you, and you think you have been deceived, contact us.

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[ To Learn more our services and areas of practice, please visit our website at

www.DealerFraud.org]

Purchasing a new or used automobile

Tip 1: Make friends with a mechanic
A mechanic can be your best friend when it comes time to purchase a car. More than anybody else, a good and experienced mechanic can tell you the specific problems to watch out for when buying a particular brand or model of a car, and can also tell you which cars are relatively hassle-free. Based on what type of car you are looking for, your needs for the car could widely vary. Once you know the type of vehicle you want, twenty minutes talking to a friendly mechanic can help you determine the best manufacturer.

Tip 2: Arrange for financing through your bank or credit union
Whenever possible, you’ll want to seek financing approval from your bank or credit union before shopping for your car. Banks almost always offer a substantially lower rate than what a used car dealership will offer. If you have a prior lending history with your bank and are in good standing, you can usually receive up to 90 per cent financing. Car dealerships make huge profits by providing their own financing to auto buyers, so they want you to borrow from them. By securing an auto loan through your bank for an amount you can afford before purchasing a car, you’ll find yourself in far more control when negotiating a final price.

Tip 3: Ask for a copy of the warranty, take it home and read it
Many used car dealers are notorious for providing “dealer warranties.” While the big print in these documents promises comprehensive coverage and prompt service for the vehicle you buy, it is the small print that dealers refer to when something actually does go wrong with your car. The phrase “wear and tear items not included” is a common one in dealer warranties, and one you will hear over and over again if your car begins to have problems.
Remember that car dealers are always trying to increase the final sales cost of your car through add-ons and features. A dealer warranty is often pitched as a vital add-on by the car salesperson, but unfortunately, when push comes to shove the true value of the warranty is sometimes questionable. Make sure you clarify exactly what is covered with the car salesman. If your concerns are not explicitly answered in the warranty, ask for a signed, authorized amendment from the dealer with the correct wording that you are seeking.

Tip 4: If necessary, amend the warranty to protect yourself from Lemon fraud
After you have satisfied yourself that you are getting adequate repair and maintenance coverage for the price of your warranty, you’ll want to make sure the following statements are somewhere on the warranty:
If these statements aren’t on the warranty, insist that they be added, acknowledged and signed by an authorized representative of the dealership.

Tip 5: Take it for a long spin
Leave a copy of your driver’s license with the dealer and take the car out for a while. Drive the car in multiple road conditions: city streets with heavy traffic, highways with open spaces, straight and curvy roads, and hills. Test the brakes, steering, features, air conditioning and gauges. If you can arrange it, pick up your new friend the mechanic and bring his highly trained ear along for the ride. Let him take a look under the hood. If he likes what he sees, and you have faith in his judgment, then you are probably in good shape.

Tip 6: Don’t be in a rush
Above all else, don’t let a car salesman rush or cajole you into a one-day, stop and shop sale. Avoid impulse buying. It is to the salesman’s benefit, and only his benefit, if the sale happens quickly. It is to your benefit to do as much research as possible to insure you purchase a safe and reliable vehicle. You should be prepared to spend at least two weeks doing adequate research before making a used car purchase.

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