Dealer Fraud

In some cases, where a customer’s income or credit history is not sufficient to finance a vehicle purchase, finance companies will accept the contract if there is a second individual – a “co-buyer” or “co-signer” – who also signs the contract. The abuse occurs, however, when co-signers are misled about the responsibilities they are accepting. Some customers are told that the co-signer is merely being used as a “reference” and has nothing to do with the car.

Statements like these are false. In the event that payments are not made, the co-signer’s credit can be affected, debt collection efforts can be made against the co-signer, and the co-signer can be sued for the payments that are owed. In short, the co-signer is equally responsible for making the payments on the vehicle. Only sign a contract as a co-signer if you are prepared to accept these responsibilities.

If you are a co-signer and were misled about your responsibilities, consider taking the following steps:

· Get a copy of your credit report to make sure that there are no negative references on your credit as a result of the loan;

· Contact the finance company, explain the fraud that has occurred, and try to get your name off the loan;

· If this doesn’t work, talk to the buyer and see if the loan can be refinanced to take your name off the financing;

· If you find that your credit has been negatively affected, get legal help.

Another fraudulent practice employed by some unscrupulous salespersons is to charge the customer for insurance that the customer did not want. There are various types of insurance that could be included in a contract. The most common are: vehicle insurance, credit insurance, and GAP insurance (debt cancellation contract).

Make sure you closely examine the STATEMENT OF INSURANCE, the APPLICATION FOR OPTIONAL CREDIT INSURANCE, and the OPTIONAL GAP CONTRACT sections of the contract. If you find that you have unknowingly purchased insurance, immediately contact the insurance provider (there should be some documents referring to the insurance policy included with the sales contract). You can usually cancel such policies and be refunded for the remaining period of your contract. Contact the dealership and immediately demand a refund of any amounts you paid. If you do not get any response, send a letter with your complaint to the General Manager. If none of this works, get legal help.

Another form of auto fraud is the practice of quoting a lower interest rate than the rate that is ultimately included in the contract. This tactic is intended to make the customer believe that they are getting a better interest rate than they really are. A higher interest rate by even one point could end up costing the customer hundreds, even thousands, of dollars over the life of the loan.

To avoid this practice, make sure the ANNUAL PERCENTAGE (APR) box on the contract accurately reflects what the dealer quoted you. You may also wish to ask the dealer what the Buy Rate is. The Buy Rate is the rate at which the dealer can get a vehicle financed. Any rate above the Buy Rate means that the dealer can make more on the sale. Most reputable finance companies do not allow the dealerships to impose an APR that is more than 3 percentage points over their buy rate.

Many auto scams begin with a super-low price on a specific repair job. The shop reels in a customer with an advertised special on brakes then finds ways to pad the work order with several other repairs. For instance, imagine you might see an advertisement for a great deal on a tune-up. So you take your car to the repair shop to take advantage of the special. Once there you’re told, “You need this, this and this.” This is very similar to a bait and switch scam. The only difference here is that you’ll probably receive the great deal on the tune-up. You could also pay $500 for repairs you hadn’t anticipated or thought you needed.
A $699 car repair job can mushroom to almost $3,000 so fast it isn’t funny. Your mechanic will find so many things wromg with your vehicle that you’d think it’s beyond repair. This would be a great time to get a second opinion before authorizing repairs.
Some repair shops charge customers for parts that don’t end up in your car. Other shops make the repair but do such a poor job that the customer has to bring the car back three or four times. To add to the insult you’ll be asked to pay each time you bring your car back due to the repair shop’s negiligence.
If you think you’ve been a victim of an auto repair scam, report the shop to your state attorney general’s office and local consumer protection agency. File a complaint with the Better Business Bureau. Don’t let it go.
Gather up all paperwork, receipts, work orders, written estimates and warranty information from the repair shop. The more documentation you have, the better.

Any car dealer should be very knowledgeable about the cars they sell but the successful ones use the information selectively. Michael Royce, of BeatTheCarSalesman.com, has sold several million dollars worth of American and import cars and trucks and received numerous dealership honors in Southern California. He says the customer’s emotional state is key to the rep, and that most buyers get a thrill from driving a new car. Ergo, test drive.
Royce also says that special price or clearance sale stickers are like red flags — or red capes — to bulls. “The promise of a bargain price is designed to create a sense of urgency, the feeling that if you don’t grab this special sale price right now, it will forever disappear. Lots of buyers fall for that.”
Other tactics include allowing a customer to take home a car for the night, where they can see it in their driveway or garage. Again, this elicits an emotional response. Even a joke or shared chuckle does more than light up the car dealer’s eyes. He knows he’s got you on his side and the odds of a sale improve.
Advice? “Analytical buyers pay less for their new cars than emotionally-charged buyers,” Royce says.

Sales Meetings at Dealership
This is usually a morning pep rally where management pumps up the sales staff, tells them what iron (a vehicle) has the spiff’s (cash bonus to the salesman who sells it first), and other promo’s.

Meet and Greet the Customer
“Lot lizards” (salespersons) are generally required to pounce on the customer the minute he steps foot on the lot but, of course, by using businesslike polite language and introductions.
Tip: Make no mistake about it. Their only goal is to sell you a vehicle for the most they can get out of you. Salespersons are paid on commission … the higher the price they get you to pay, the more money they make.

The Pre-Approval Sale is geared towards people with poor credit.
The dealership hires an outside marketing company that sends thousands of letters to people according to their FICO score, which is a person’s credit rating.
Usually, the dealership will mail letters to people with FICO scores between 500 and 650 (which is quite low).
The letter will come to the consumer and will have a check attached to it saying the customer is pre-approved for a loan amount of $19,995 for example, and they need to call ABC Motors immediately to lock in their loan approval.
Sometimes there will be a hook involved in the letter, such as a free gift for coming into the dealership.
These sales are also very profitable because the dealership personnel will totally control the customer, and basically tell them what kind of car they can buy.
They will “stuff” the customer in whatever car provides the dealer with the most profit, as well as con the customer into thinking they have to buy the back end products - like an extended service contract, life, accident and health insurance, etc.
This sale works the same way for fresh bankruptcy customers.
Since bankruptcy is a matter of public record, dealerships love to target fresh bankruptcy customers. These people just went through a bankruptcy, so they are most likely embarrassed, depressed, and are desperate to start over and re-establish their credit.
Again, the dealership controls the sales process and sells high-profit cars at full price or more - with lots of back end products.