Dealer Fraud

In order to avoid becoming a dealer fraud victim, one should have certain knowledge about the most common dealer scams. In this blog we will discuss the situations when a car dealership cancels the purchase contract and the options and rights you have in those cases.

• If the dealership cancels the contract within 10 days, you get your down payment or trade-in back.
  

The purchase contract requires that the car dealer return to you 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 has already sold your trade-in, and will offer you the value of the trade-in as listed on the purchase contract. The conditions of the purchase contract do 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,

(3) what the car dealer received when it sold your trade-in.

• The car dealer cannot charge you for using the car you purchased from them.

For instance, it cannot charge you for the miles put on the car during the 10-day period. However, you are responsible for any kind of damage to the car during the time it is in your possession.

• The car dealer cannot cancel the contract after the 10-day period has expired.

If a car dealer tries to do this, you should clearly state the car dealer is no longer entitled to cancel the purchase contract, and ask the car dealer to send you a letter explaining why they think they can still cancel the purchase contract.

Spot Delivery is a description which refers to the dealer placing a consumer in a car “on the spot”, to get the sale, only to “yo-yo” them back at a later date for additional funds. Spot Delivery scam happens to unsuspicious consumers throughout the United States. If you find yourself in this situation, the chances are good that you have legal remedies available to right this wrong.

•    Remember that if you have signed papers, you own the car, regardless of whether the vehicle has been financed.

•    Your credit was good otherwise the dealer would not have delivered the car to you at the price you agreed to pay.

•    A finance document showing payments, interest rate, deposit and other financial items is a binding contract, giving you specific legal rights.

•    You own the car subject to making payments only. The dealer cannot change that once you take possession.

•    Keep all copies of your paperwork and anything else that is somehow associated with the sale (including calendars, photographs, and advertisements). If the finance manager asks for your papers at any time for any reason, refuse! Keep these documents in a safe place, not the car.

•    If you are called back to the car dealership for signing additional papers, either do not go or do so in a different car than the one you bought.

•    Have a friend or spouse drive you and witness whatever is being told to you. This will prevent the dealer from taking your car as hostage, an all too common happening.

•    If a dispute arises with the dealer over the contract and the dealer demands the car is returned, park it in a garage or remote location until the matter is resolved, to prevent it from being taken against your wishes.

•    Organize a timeline of everything that happened from the time you thought of purchasing the car until the car was taken away. Try to remember the specific names of dealership personnel and any statements that were made to you during conversations with the sales and finance staff.

•    Keep track of all monies you had invested into the purchase, including registration, insurance, down payment and trade. Never pay cash and always get a receipt!

If you believe you are a victim of a Spot Delivery scam and wish to discuss it with an experienced dealer fraud attorney.

Rewritten Contract/Backdating

A customer often won’t qualify for financing under the terms of the first purchase contract and may be required to increase a down payment, APR, etc. to qualify for a loan. Then the dealership has the customer sign a second contract with the new terms but backdates it with the date of the first contract, sticking the customer with financing charges for a period during which the contract wasn’t yet in effect. In addition to misrepresenting when the customer takes the obligation of the new contract, a backdated contract often violates the single document rule because another form, usually called “Acknowledgment of the Rewritten Contract,” has the actual date when the contract was signed. In addition, many customers aren’t informed that they may opt to cancel the contract and return the new vehicle and have the ,  and trade-in vehicle refunded, rather than signing a second contract with less favorable financing terms.

Forgery

Car dealers may forge the customers’ signatures on subsequent contracts that change the terms of the original signed contract in case the customer refuses to sign the new one. Among other commonly forged documents are: credit applications (with fraudulent representations about income, etc.), as well as buyer’s disclosure forms and guides in order to prevent buyers from reading their buyers’ rights and/or information that may cause them to reconsider their purchase decisions).

Sticker Price

The car code states that a dealership cannot sell a new vehicle for more than sticker price (also known as the manufacturer’s suggested retail price, or MSRP) unless there is a dealer addendum sticker disclosing itemized costs above MSRP physically affixed to the car. Inflating the cash price of a vehicle – as in the case of a negative equity deal often results in selling a vehicle for higher than the MSRP, while also affecting the amount charged for taxes, licensing & registration and finance charges.

In our previous blogs we have already presented some tricky questions that may lead to dealer fraud. Below are three more questions and the most preferable ways of answering them in order to avoid becoming a dealer fraud victim.

1. “What were you hoping to get for your trade?”

This may be an honest question, but why tell the price first? If you say you want $10,000 and the car is really worth $12,000, you’ll give the dealer a $2,000 present. It’s essential to have a realistic idea of what your trade-in is worth and let the dealer throw out the first number. Don’t get confused in case he/she offers a ridiculously low price; this may be a dealer tactic to make you think the car is worth less than it is.

So you’re better give an answer like: “Let’s see what you come up with. Make me an offer.”

2. “Can you hold on a few minutes while I check the computer/talk to my manager/make a few calls/do whatever?”

Some dealers will try to prolong the negotiating process as long as possible in the hopes of wearing you down or confusing you with even more numbers. Set a fair time limit for negotiations and when half an hour is left, tell the dealer you need to leave and will be back tomorrow. This will likely speed things up greatly. Just ask the sales rep what his hours are tomorrow, and then go home, get a good night’s sleep, and return to the dealership well rested and well fed. You’ll be in a much better mental state to negotiate.

Give an answer like: “I have to leave in X minutes. I’ll come back tomorrow and we can conclude the deal in case we can’t finish up by then.”

3. “What can I do to get you to buy this car today?”

The answer that the sales rep hopes to hear is: “Get the monthly payment under $X,” “Get the down payment under $Y,” or “Give me $Z for my trade”. Then they will focus on it and close the deal: “See, I got the payment under $X, let’s sign the papers.”

Try to give an answer like: “Give me a fair price and a fair offer for my trade, and I’ll buy this car today.”

Many of you have probably received postcards in the mail or phone calls urging them to buy auto warranties, but many of these unscrupulous companies simply take money from consumers and leave them with little help when repairs are needed. Read our blog to avoid these car scams.

1.   Step 1
Avoid companies with little history in the auto business. If the company goes out of business, you will have to pay for your own car repairs.

2.  Step 2
Stay away from any dealership that claims that you must buy a warranty in order for your financing to be approved. This is a common  car scam.

3.    Step 3
Say “no” whenever your car salesman tries to pressure you into buying an extended warranty or tells you that you will not be able to buy an extended warranty later.

4.    Step 4
Avoid scams by keeping your personal information private. Don’t give out bank-account details or Social Security numbers over the phone. Never give credit-card numbers to warranty companies unless you’ve contacted the company and are positive of whom you are speaking to.

5.    Step 5
Never make a down payment before you see the full written warranty and its terms.

6.    Step 6
Be particularly wary if you are a senior citizen. Some companies target seniors with scams involving high-pressure sales calls and mailings.

7.    Step 7
File a report with the Federal Trade Commission or the Better Business Bureau if you feel you have been ripped off or targeted by a scam. Also, you should report the scam to the United States Postal Service if it involved mail.

To secure yourself from car dealership tricks, you should learn dealer scams. In this blog we will discuss the situations when a car dealership financed contract may be cancelled.

• If you buy a car that is financed through the dealership, the dealer has a right to cancel the contract, but only if you are notified within 10 days of the date on the purchase contract.

It is based on the language of the purchase contract. Look at your purchase contract. That’s the long yellow document containing “RETAIL INSTALLMENT SALES CONTRACT” note at the top. Turn to the back of the purchase contract, and find the box with the “Seller’s Right to Cancel” note. It is at the bottom of the second column.
Car dealers are in the business of selling vehicles to consumers, not financing cars that consumers buy. So, this box advises you that after signing the purchase contract and leaving with the car, the dealership is going to find a finance company or bank to buy your contract. It gives an auto dealer the opportunity to find someone to buy your purchase contract. Most of the time this is not a problem. However, if the car dealer cannot find someone to buy your purchase contract, it can cancel the purchase contract. But, the car dealer must notify you within 10 days of the date on the purchase contract. If it does not, then the purchase is final and may not be canceled.

• If the car dealer exercises his/her right to cancel the purchase contract within 10 days, you are not required to sign a second contract to purchase that same car.

Let us repeat this. A car dealer cannot force you to sign a second contract. If the car dealer cancels the purchase contract within 10 days, you are obligated to return the car, and the car dealer must give you back any down payment or trade-in that you gave with the purchase.

Spot Delivery usually occurs when a dealership allows a consumer to drive the vehicle home from the dealership even though the sale is not complete. If the customer decides to finance the vehicle at the dealership, the car dealer most often does not get a banks acceptance while the consumer is there at the dealership. Car dealer lets the buyer know that he/she can take the car home while the dealer’s finance department is arranging the financing.

Spot delivery is not illegal in most states. Dealers are well aware of this and use the situation to implement various scams.

One of these auto frauds happens when the dealer asks the car buyer to sign a new revised contract that has increased the payments. Dealer knows that most of the car buyers will agree to sign a new contract after he/she has grown accustomed to the car, perhaps is proud of the new purchase and has shown it to friends and family. Also, the consumer will probably agree to bring more money for a down payment.

Certain consumer rights statutes may be violated taking into consideration why the dealer got the consumer to come back in. These dealer tactics are also known as “yo-yo” scams because the dealer sends you out and pulls you back in like a yo-yo.

Keep in mind, that if a dealer can’t manage to obtain financing on the terms previously agreed upon, you can refuse to agree to new terms, and can cancel the deal. In this event, the consumer is entitled to whatever down payment or trade-in vehicle that they gave to the dealership with no amount to be withheld.

Buying a new or a used car is not always easy and fun, as you should always watch out for dealer scams. There are car dealers who work trying to get that deal from you no matter how much it costs. If you are not careful enough you will pay a lot of money and in the end get a piece of junk. You may end up buying a used vehicle which is worth its price because it was involved in an accident and the problems are masked so you the buyer are not aware of the problems.

Very often car dealers push you into buying the car today. Do not fall for this dealer trick. In fact it is a common practice for car dealers, who will tell you that they can’t “promise this car will be here tomorrow.”

Another common dealer fraud is including a lot of fees and extras you don’t need to the vehicle you intend to buy. This is simply a scam to get you pay more down payment or add more to your loan agreement. The dealer will probably tell you that “everybody pays this fee, it is standard procedure.” Do not believe him.

When you are trying to bargain on a used car to get the price down a car dealer will probably use a sentence “I am loosing the shirt off my back.” It’s a common practice for salesperson used for many years. However the truth is he probably took the car in on trade and did not pay anything to the party who did the trade.

During the car negotiations of the car deal customers get to know a number of terms, such as purchase price, options, down payment, trade-in credit, monthly payment, interest rate, loan term, and balloon payment. All these elements of a car deal lead to confusion or fraud. It is difficult for the customer to focus on all of the terms mentioned by the car dealer. If the customer focuses on one of the terms he will probably miss all the others and car dealers know this.

Distraction is an art that many car salesmen study diligently. For example, many people have become a victim of dealer fraud by focusing on just monthly payments. You will be able to avoid car scam and to get the best deal if you separately handle your financing and trade car. This simplifies the negotiation and leaves you able to focus only on the best purchase price for the vehicle.

There are several important things you should do before you enter a dealership and start shopping for a new car. One of the most important things to do is determine your budget. Come up with a maximum monthly payment allowance, and a maximum down payment that you will not go over. When you know exactly how much you can afford to pay for a vehicle you will look only at vehicles that are in your budget. Think ahead! You may be financing for 3-4 years and you probably don’t want not be able to pay other bills because of your car payments.

Also consider your trade-in. If you still owe money on your old vehicle then you should contact your bank and get your pay off. Also find out what the fair market value is for your trade-in vehicle. Remember that the dealership will never pay the fair market value for your vehicle. Make sure you are not upside down on your car loan.

If you can’t afford a new vehicle, then you should consider a good used one.