Dealer Fraud

This is false. Although leasing offers lower payments and may allow you to drive more car initially than you might otherwise be able to afford, buying that car at lease-end adds additional cost and makes the total cost of the lease-then-buy scenario greater than if you had simply purchased the car at the beginning. Of course, if the convenience of having low initial payments is worth the extra cost to you, then that’s your decision. Just don’t let a dealer convince you that the extra cost doesn’t exist.

Used cars may be wrecked, re-built and re-sold legally to unsuspecting buyers! A clean title and bill of health can even be acquired by the used car seller and the used car buyer may never know the car had been wrecked and/or “totaled” in an accident!

The only way to ever know a car’s true condition is to have a good independent mechanic check it out before you buy.

A flood car is one that has been caught in a flood and underwater then salvaged and cleaned up for re-sale to unsuspecting car buyers and even used car dealers! Consequently, you cannot even trust that the title held by the used car dealer is legitimate, even though, by law, the title of a flood car is supposed to state that the car has been under water.

In essence, you cannot trust what the used car dealer knows so you must inspect used vehicles thoroughly yourself or have a good mechanic do it. Check under the hood for corrosion and look for water lines indicating how high the water level may have reached during a flood. Also, check under the dashboard, seats and floor mats for signs of dirt and/or sand.

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.

Your options are not as limited as you may think in this situation.  This situation is created when a dealer performs a “spot delivery,” which is a sometimes risky venture on everyone’s part.  Essentially, the dealer obtains your credit report (with your permission), and you and the dealer agree to terms for a vehicle that you want to purchase.  The dealer, wanting desperately to sell you a car, will often just delivery the vehicle and “guess” at the finance rate.  If the dealer gets it wrong and the lender requires different terms (which might include more money down, a higher interest rate, and/or a shorter term loan), then they guessed wrong and have to give you the bad news.  The letter you received in the mail is referred to in the industry as a “10-day letter,” because a provision in the letter allows the dealer to rescind the contract within 10 days if they are unable to obtain financing on your behalf.  When you receive this letter or phone call, you may be getting set up for the “yo-yo contract,” which is a type fraud where the dealer delivered the vehicle at terms that you thought were favorable but the dealer acted in bad faith.  In this instance, the dealer may have already sold the vehicle you traded in., and then you get the call telling you they need another $1,000 or more down in order to get you financed.  Now you are stuck - either agree to whatever the dealer offers or return the car and be without transportation because they sold the car you traded in.  This type of fraud can be difficult to prove and will most likely require professional or experienced assistance, and the worst part is that it is very inconvenient for you because of the transportation situation.  Your best defense is to act quickly to get this resolved.

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

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]

Sooner or later the cost issue comes up. To take the “sting” out of the discussion, many dealers will focus on monthly payments and avoid all price discussions. When asked what it costs, many times the answer will be another question like “what kind of monthly payment were you looking for?” This switch to payments is best when it’s done very smoothly, so the customer never realizes they left the cost issue entirely and may never get back to it. Oftentimes, the sales person will leave it up to the Closer or the Finance Manager to handle the price issue and try to stick to the payment topic alone. This has the advantage of keeping the less experienced sales person from costing the dealership money that the Closer or Finance Manager can make for the house (i.e., the Dealer).

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

We saw a resurgence of this scam in 2005 and 2006. It typically increases when interest rates go up, and fewer people qualify for loans as lenders tighten their belts. A straw purchase traditionally refers to handgun sales. When one person buys a handgun for a person who is ineligible to own one, it’s called a Straw Purchase, carrying stiff penalties. That’s how the Columbine High School student shooters got their guns. With car buying, the dealer tells you that with your horrible credit score, you can’t qualify for a car loan so you need to get a co-signer, plus they tell you that it will help build your credit again. No problem, Grandma will co-sign the papers for you. The dealer knows your horrific credit score could not possible ever qualify for a loan, even with a co-signer. Grandma is easily duped by the dealer during the paperwork shuffle, tricked into signing as the primary borrower, and 2 weeks later you find the dealer did not process a co-sign loan, the entire loan is in Grandma’s name! This does not help your credit, even though you are paying the monthly payments, because the loan is in grandma’s name, and the car dealer lied to you. State laws are vague but I hear some states like Texas have laws against Straw Purchases on cars.

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