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.

It never ceases to amaze us how cunning some car dealers are — they seem to constantly think of new ways to take advantage of car buyers. One of the most recent car dealer ploys is Spot Delivery.

Spot Delivery: You’ve chosen the car you want, filled out all the paperwork (including the car loan application with the car dealer’s finance department). The car dealer tells you that although your loan hasn’t been “officially” approved yet, you can drive the car home anyway.

Don’t.

Here’s what can happen if you do: A few days later, you’ll get a call from the car dealership saying your loan wasn’t approved at the interest rate you discussed. However, you were approved at a higher rate.

This means that you’ll likely pay thousands of dollars more than you expected.

Further, if you try to call off the deal, the car dealer will either tell you that they already sold your trade-in so you have no options, or they simply will say they’ll sue you if you don’t agree to the new terms.

The worst part is that you probably are stuck, because the loan agreement included a “writ of rescission,” which means that you agreed to pay a higher interest rate if you did not qualify for the loan at the original, agreed-upon rate.

Be careful. And don’t take your new car home from the car dealer until all the i’s are dotted and the t’s are crossed.

Car dealer sold a car to an older adult with no information given to the sales person. Dealer did not ask older adult about monthly income or even social security. Contract consist of a high dollar amount car payment with low monthly income from the older adult. Once family member found out they tried to exchange car for lower payment but was denied. Called bank but bank can not do anything. Auto Sale did not handle the sale correctly. Auto Sale took advantage of the older adult

At this point the sales person will return and escort the customer to their newly purchased car. With all the paperwork signed, the car Dealer doesn’t want the customer to linger (they might take the time to read what they just signed). This is the emotional “high” of the transaction for the customer. They think they have just “beat the house” on their hard-won deal and they are ready to strut out of the dealership and drive off into the sunset. The Dealer wants to encourage that. There is a psychological aspect to putting the car over the curb and the Dealer knows that if the customer figures out what happened to them and refuses to take delivery, the odds are that they will have to “unwind” the deal sooner or later (i.e., “back out the deal”, cancel it, rescind it). That’s the last thing the Dealer wants to do. In fact in California there’s a “no cooling off” period so the sooner the Dealer gets you to drive off with car, the better.

The Dealer’s staff has just worked for 3 or 4 hours to package the deal and get it signed, sealed, and delivered. They made no small amount of money in the process. To unwind the deal would mean having to start all over again with some other customer and lose the profit that they just “earned”. That’s a nightmare for any car dealer. They’d rather work the next deal on the next customer than have to work this deal all over again.

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The purchase contract requires the car dealer to return to you all consideration (i.e., everything) given for the purchase. This includes your trade-in vehicle. If you gave a $2,000 down payment and a car as a trade-in, the car dealer must give you back both the $2,000 and the trade-in when you return the car you purchased.

Sometimes a car dealer may tell you that it already sold your trade-in, and will offer you the value of the trade-in as listed on the purchase contract. The language of the purchase contract does not appear to give the car dealer this option. It requires the return of the trade-in. However, if the car dealer does sell your trade-in, at the very least, you should tell the car dealer that it has to give you whatever is the highest value for your trade-in out of either (1) the value of the trade-in as listed on the purchase contract, (2) the fair market value, or (3) what the car dealer received when it sold your trade-in.

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You trade in your old car which you still owe money on, and the dealer is supposed to obtain a payoff figure and payoff the loan for you and add that payoff amount to your new car purchase. But something horrible happens. Two months later your are shocked to hear the new car dealer did not pay off your old car loan as promised. With this scam dealers effectively pay you less for your trade than they promised or steal it altogether. When the bank calls, YOU are responsible for the loan, not the dealer. The car loan is still in your name, until the dealer pays it off. As far as the bank is concerned, they have a loan with YOU, not a dealer and it’s in your name until paid off. Now your credit gets dinged with late payment alerts from your bank. Sue the dealer, the judge will ask to see your contract with the dealer obligating them to pay off your old car loan. Of course there is none.

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Acar dealer might say, “We can get you into this car for only $389 a month.” Probably true, but how? In some cases, the car dealer may have factored in a large down payment, or may have stretched the term of the loan out to 60 or 72 months.

Focus on the price of the car rather than the monthly payment. “Never answer the question, ‘How much can you pay each month, Stick to saying, ‘I can afford to pay X-dollars for the car.’”

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Many people view buying a car as one transaction. It’s not, and dealers know this. “There’s really three transactions rolled into one — the new car price, the trade-in value, and the financing. The dealer sees all three as ways to make money.

Treat each of these as separate transactions, and negotiate each one. If you get a new car for $200 over invoice, but only receive $1,000 for a trade-in car that’s worth $2,500, you haven’t done as well as you could.

You need to manage all parts of the process by doing research ahead of time. It’s very important that buyers not think of the dealer’s finance department as their loan agent. The car dealer is not required to find you the best rate, and might add to the number by serving as the middleman.

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Bone-Us Scam: About a week after you drive home with your new car, the car dealer calls you up and says "Great news! We were actually able to get you into a better loan with a lower monthly payment and less APR! Just stop by our dealership when you get a minute, and resign the papers to get your lower payment."
You go down to the car dealer to re-sign the paperwork, and this is where a huge red flag should shoot up for you: You notice that they changed your loan from 48 months to 60 months, or even 72 months. What they did in reality was INCREASE the APR on you not lowers it like they lied. Then to mask their crime, they spread out the loan over more months, which lower the monthly payment, tricking you into thinking you are saving money when you’re getting ripped off. Yes there are people out there who believe the car dealer and think they are actually paying lower APR. This does not even pass the common sense test either and here is the crucial point: With most lenders, if you increase the number of months in the loan, the APR goes UP, not down, just look at their rate card! Make sure you point that out to them. The salespeople who pull this scam sometimes make buyers re-sign the paperwork and don’t give them copies, and the buyer finds out later on the car dealer lied about the "reduced APR".
How to avoid the scam: If they call you later, say "No thanks, I like my payment the way it is." Tell them to fax or email it to you in writing first to review it for unexpected changes. Better yet don’t answer the phone. Want a lower rate? Refinance your car loan, or send extra principle monthly, it has the same effect.

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A former Bartow car dealer has been sentenced to more than 11 years in prison for defrauding a bank with false applications for financing.

John C. Giovanetti, 52, will also have to make restitution of more than $1 million to SunTrust Bank.

A jury Monday convicted him on eleven counts of wire fraud, bank fraud and one count of conspiracy.

An indictment said Giovanetti, the former owner of Big Oaks Buick Pontiac GMC, Inc. of Bartow, was responsible for having his employees fax falsified applications for financing to SunTrust Bank.

This was accomplished, prosecutors said, by requesting financing for vehicles no longer in Big Oaks possession.

It resulted in Giovanetti illegally receiving $3.5 million from the bank.
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