Dealer Fraud

*Rolling back the odometer.
*Not disclosing that the car is a “lemon buyback” that the original owner returned for a refund.
*Not disclosing that the vehicle has a “salvage title.”
*Not disclosing that the vehicle used to be a rental, a demonstrator or was previously sold and  returned.
*Quoting a lower price than the one on the contract, or charging you for features you were told  were free.
*Contracts that are incorrectly dated, forged or not provided to you.

Victims of used car fraud should go to the dealer first to ask for a refund or exchange (or any service you’re entitled to under a contract or warranty). If the dealer won’t play fair, you may have to file a lawsuit to get your money back. You have three years from the day you bought the car to bring such a claim. In a used-car fraud lawsuit, you can recover what you paid for the car and all of its repairs, any money you paid for alternative transportation and other costs caused by the lemon, attorneys’ fees, and anything else the court thinks is fair. In cases of extremely illegal behavior by dealers who knew better, you may be able to get punitive damages, which are designed to punish wrongdoers financially, as well.

When you decide to purchase a used vehicle from a California dealer, you will (or should) always see an “As-Is” sticker in the window.
The dealer can possibly sell you the car As-Is, but you are still legally entitled to certain “minimum” standards of operation for the vehicle. The following is a list of what you can ask when purchasing the vehicle (or shortly after purchasing the vehicle), to ensure you’re getting what you’re legally entitled to.

* Do all headlamps work (and high/low beams work)?
* Do brake lights work (including the middle-3rd light)?
* Do tail lights work?
* Do side markers and turn signals work?
* Does the rear license plate illuminating light work?
* Do the backup lights work, and do they work automatically when the vehicle is placed in reverse?
* Is the proper voltage getting to every light?
* Does the parking brake work properly?
* What is the condition of all brakes?
* Do the wipers work?
* Does the horn work?
* Is the fuel cap OEM or of a compatible grade?
* Do all the seat belts work and are they in good condition?
* Do the tires have “legal tread” of 1/32nd tread?
* Does the odometer work properly?
* Does the vehicle have a theft deterrent system? If so, does it have a siren, or it is just lights/horn?
* Does the vehicle have two license plates?

Most reputable dealers will inspect these items prior to you every seeing the vehicle. Occasionally, they may only inspect prior to you taking delivery of the vehicle. In any event, those above listed items should work and if they don’t then the dealer will fix them.
If there are issues and you need to consult an attorney, you will need all of your purchase paperwork. Additionally, if you are going to claim there is something missing or inoperable, then the vehicle will need to be inspected by a licensed shop, preferably a dealer of the make of the vehicle. You want to have a good “document trail” to present to the dealer or to an attorney.

You may be required to do so. In many states, you (or your attorney) must contact the auto dealer and give them an opportunity to correct the problem to your satisfaction, before taking any legal action for possible auto dealer fraud. This contact should be in writing, and should clearly illustrate both the problem (i.e. the dealer’s failure to disclose certain financing charges), and what steps you would like the dealer to take to resolve the problem (i.e. a partial refund of the vehicle purchase price).

One of the auto industry’s dirty little tricks is the practice of lenders giving kickbacks to dealers for charging high interest rates for the car loans. A good example of this would be when a buyer has been qualified for an 8% loan rate, the dealer can, and will in most cases, attempt to charge a higher rate.

Many dealers will tell you they have a 12% rate available (a lot of consumers do not know better) and will jump at the deal just to get credit and drive away in a new or used car. Your $20,000.00 automobile over a 60 month period would have had a $433.56 payment at an 8% rate but now because you signed your loan agreement for a 12% rate you payment will be $475.64. Guess who get the extra $42.09 per month? You guessed right, the dealer who suckered you into the additional rate of interest.

To get the best possible deal on a new or used car or truck, knowledge and information is your best bet. Knowledge is always power in these cases. Dealer scams such as the increased interest rate, packed payments and other common little tricks can quickly remove any savings that you thought you were receiving. Learn how to calculate you own monthly payments, use the internet to your advantage and learn how to negotiate with dealers.

After receiving a lawsuit, the Dealer will often investigate what happened by talking to each of the people involved in the sale. These interviews can be video recorded, tape recorded, or other notes made. It is not unusual for the employees to be asked to write down everything they can recall about the deal, step by step, in as much detail as possible, in order to aid in the defense of the lawsuit. Sales persons, and F & I people, may actually keep a diary of their deals and potential customers, too.

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

The sales person calls the attention to all the attributes of the new(er) car and all the negative aspects of the old(er) car while working the deal. All the usual factors are in play: mileage, age, options, equipment, plus the usual personal factors that are customer-specific. The idea is to get the customer so bind up in the idea of getting the new car, and how much it will improve their life, the envy of others, family harmony, their peer reputation, etc., that they lose track of the numbers in the deal. This is called putting the customer in the ether. The deeper the ether, the higher the gross profit on the deal. The objective at this stage is to get the customer firmly committed to the deal. That is why getting the customer to say “yes” is so important at this stage of the sales process. Part of that “yes” psychology is getting the customer to sign their name to a worksheet or other form of early commitment. Something, almost anything, has to be signed by the customer before the Turnover takes place.

This also means that some sort of payment amount must be agreed to before the Turnover. It often starts with the sales person presenting three numbers written on the worksheet. It often looks something like this:

700/-0- down 600/1k down 500/5k down

The numbers don’t necessarily have anything to do with reality. What the sales person often says when presenting the numbers is something like “with no down payment, your monthly payment is going to be about $700. If you put $1,000 down, I can get your payment down to $600. But if you really want to pay less each month, then I have to have $5,000 down on the financing.” The psychological motive is, obviously, to “scare up” as much down payment money as possible by putting a huge monthly payment right in the customer’s face.

Notice that the sales person may have said nothing at all about how long the loan will be for. The customer doesn’t know if they are talking about a 3 year loan, a 4 year loan, or a 5 year loan. The absence of that information gives the F & I department more flexibility to determine what the interest rate and price will end up being, and just how much of the “soft add-on’s” they can pack into the deal’s numbers. Of course, this high monthly payment shock is where the customer often has their first stroke. Soft add-on’s are things like credit life insurance, disability insurance, Gap insurance, rust-proofing, fabric protection, paint protection, etc. The idea is that the sales person creates the room in the monthly payment for these things to be packed into the deal by the F & I department after the Turnover.

Of course, the sales person often has no real intention of ending up with a $700 monthly payment, but they know that if they start out with a “500 - 400 - 300″ set of numbers, there will be less chance of landing the customer on a higher number in the first place. By presenting the “700 - 600 - 500″ numbers, the sales person has already conditioned the customer to expect that the monthly payment is going to be much higher than they thought. Having accepted that as the reality of the situation (after all, the sales person deals with these numbers every day so they must be right), the Dealer now has more room (and leverage) to actually end up with a higher number.

Once a payment number has been agreed to (usually with the customer initialing or signing the worksheet number that they go along with), the customer is ready for the Turnover.

When you have to land the customer on a car but  you don’t find out what they want, the customers will wander around the lot, poking their head into every car, test driving who knows what, until hours have gone by and nothing has been accomplished. The dealer wants to hold back all of that by asking the customer what kind of car they are interested in, sedan, mini van, sports car, pickup truck, or whatever. Next,figure out if the customer likes a particular make, Ford, Chevy, Chrysler, whatever. Find out what color the customer likes. Surprisingly, many customers buy by color and style first and the model second.

As for the used cars, many dealers prefer the sales person take the customer on a test drive, rather than let the customer drive it off the lot, conspicuously “for insurance purposes”. In reality, if the car malunctions during the test drive, the sales person can feign the malfunction on their own lack of product knowledge, if they can’t conceal the malfunction completely. Test drives are usually done on an established route that the sales person is familiar with. That can help avoid road and traffic issues that can bring out a car’s problems. Bad shocks can be harder to detect if you avoid certain road surfaces. If a warning light lights up on the dash, or the fan doesn’t work on high speed, the sales person is trained to quickly point out that it will be fixed before the customer takes delivery.

Many customers have a trade in that they want the dealer to buy. It’s obvious that dealers buy at wholesale and sell at retail, but there are many things that the dealer can do to make the trade in look like it’s worth much less than it really is. First and foremost, a great number of people really don’t realize what their car is worth. People usually do the appraisal by someone other than the sales person who is working the deal. There are two benefits to the Dealer occur: Firstly, when the number comes back, the sales person can blame the low-balled number on someone else while he/she builds more rapport with the customer (it’s me and you against “them”). Secondly, since the appraiser is regarded as an “appraiser”, there is an instant credibility given to the resulting number. Of course, anything and everything that could possibly be wrong with the car, even if only suspected,  the Dealer presumes an expensive repair is needed. Also, no matter what the trade in is, you can always count on the Dealer saying that this car just isn’t a hot seller that’ll be easy for the Dealer to retail or unload.