Dealer Fraud

Before a curbstoner can screw over a buyer, they must have a junk car to sell. These cars are typically obtained at the low rent auto auctions held at wrecking yard and towing company impound lots. These cars are then “prepped” for sale despite the numerous mechanical problems.

From there, many of these cars are placed on eBay, AutoTrader, AutoMart, and many other sites. These scammers use many other scamming methods while conducting their online sales with affinity fraud being one of the more popular techniques. Another popular technique is using low-resolution photos. Poor quality photos can easily hide cracked windshields, dents, rust, faded paint, and scratches.

The auto industry and their dealers are rife with scams and fraud and the potential buyer needs to be armed with the knowledge of how these scams work and how to avoid them. There are many dealers that run reputable businesses and can get buyers into a vehicle without using fraudulent means, but there are always those individuals or companies that are looking for ways to take consumers for a ride. The state of California, San Diego and Los Angeles in southern California in particular, is home to many of these scam artists. Even smaller states have their share of fraud cases and attorneys there are as busy as lawyers in the larger California market. If you are fortunate, you won’t be a victim of one of these disreputable dealers, but it is wise to be aware of potential scams before you head to the dealer. Here are some tips on dealing with auto fraud.

People with bad credit are often the victim of fraud at dealerships. They are easy prey, often due to the fact that they believe they cannot get financing. The worst offenses usually occur in the finance office, where the potential buyer often lets their guard down. One way to lessen the chance of being scammed is to show up with no trade and to have your financing done through your bank, with a bank draft in hand.

One of the most common frauds committed by car dealers and one that attorneys see frequently brought to them is the advertising fee scam. Dealers slip into the contract an advertising fee. Often times the advertising fee is on the factory invoice. Dealers add in a second advertising “fee” which becomes pure profit for them. The way to avoid it is to simply ask that it be taken off the contract. If the dealer tells you that the factory doesn’t charge them an advertising fee, have them show you the invoice. If there is no fee on the invoice, which is unlikely, it is okay for the dealer to charge between 1% and 3% of the Manufacturers Suggested Retail Price or MSRP for an advertising fee. If it does not appear on the invoice, then the fee is completely negotiable. If it does appear on the invoice, then that is a case of dealer cost and is not negotiable.

This is when the dealership advertises that the price of the car is lower than the MSRP. What you don’t realize is that the fine print says that the prices include rebates. All this means is that the rebate that you were offered doesn’t exist because it was already calculated in the ad. Avoid this fraud by ignoring it or requesting it in writing that states the rebate is in addition to the price of the car.

Buyers of used or certified pre-owned vehicles sometimes mistakenly believe that they have no protections under the law when things go wrong with their purchase. They may have the misconception that only buyers of new vehicles have the protection of legal recourse in the event of dealer fraud. This is simply not true!

Know your rights, and take the right steps to protect them. If you have purchased a certified used vehicle and suspect you have been the victim of car dealer fraud, contact a dealer fraud lawyer for consultation.

A certified pre-owned vehicle is a used car that is run through a dealer’s inspection. If it passes the inspection, the dealer gives it a “certified” designation that extends the original warranty period.

A used vehicle is a car or truck that has been previously owned and still covered under the original factory warranty.

When it comes to used or certified pre-owned cars, consumers have the protections of California federal warranty law. There is a presumption period under state law that, within the first 18,000 miles or 18 months the vehicle should be taken back by the manufacturer if a certain number of defects arise.

When you purchase a used or certified pre-owned car, you rely on the dealership’s representation that the vehicle is in working order. You have the right to expect that the dealer will disclose any material issues about the condition of the car, including any history of accidents, repair or damage, as well as information about prior status as a lease or salvage vehicle.

Dealers have an affirmative duty under the law not to hide material facts about the vehicle from consumers. Concealment of important facts is fraud.

The dealer is supposed to provide accurate information about the car, even if you don’t ask. When this does not occur or you are given false information, you may have a fraud claim against the dealer.
Whether it is a fraud situation, it may be the manufacturer, dealer or both of these that may be held responsible.

Dealers have no motivation to take a car back once you’ve left their lot. Once you sign the paperwork and drive away, you’re on your own.

If you purchased or leased a new or used car and discovered problems with it that the dealer failed to tell you about at the time of purchase, you should contact a lawyer immediately.

Dealers are required to disclose certain information to purchasers. Fraud occurs in a variety of ways, such as failing to inform you of prior accident history or telling you about any body parts that were replaced or painted over. If a dealer sells you a car that has non-OEM replacement parts, after-market parts or tires that are the wrong size or design for the vehicle, this is also vehicle fraud.

California State law protects consumers from vehicle fraud by requiring a dealer to repurchase, replace or repair the vehicle. In some instances, parties may agree on a cash settlement to pay for car repairs, which may include repair work supervised by the manufacturer’s representative.

When a dealer takes a car back, their insurance only covers a certain percentage. This means that they have to classify the car as a lemon. As a result, dealers have no motivation or incentive to resolve your problem. By having experienced attorney will make them pay attention and make sure they comply with the law. Complaining to the dealership on your own rarely will get you the results you need or justice you deserve.

Rental car fleets typically sell their cars when the manufacturer’s warranty expires. They are usually sold at auction and bought by major dealers. Everyone has seen the television commercial in which tourists in Hawaii abuse their car with the punch line “it’s only a rental.” Amusing, but not if you buy one without having the history disclosed to you. California requires that the rental history shall be clearly identified as such. Failure to do so may be fraud.

The more you know about the car, the better. Ask questions. Get an independant mechanical inspection before you purchase. The Vehicle Code requires that dealers post notices telling the purchaser that they may, at their own expense,” have the vehicle inspected by an independent third-party either on or off these premises.”

You have the right to it and there are many mechanics who will come out to the lot to do the inspection. If the dealer balks; first, its against the law, and second, its probably a sign of things to come.

Payment or deal packing is fraud because of the uneven bargaining power in the exchange. You are not given the opportunity to make an informed decision about whether each add-on item is something you really wanted. You often end up paying more than a package is worth, because you are not given the price of each item and allowed to comparison shop.

Many add-ons are not covered under the manufacturer’s warranty. If things go wrong, you’re out of luck. To make things worse, add-ons might even void parts of your vehicle’s original warranty!

Besides payment packing or deal packing, dealers can engage in a number of other unfair or fraudulent practices:

A California Law provides a myriad of reasons to justify rescinding a contract to purchase or lease a new or used automobile. Basically, California allows an automobile purchase or lease agreement to be rescinded if it is based upon fraud, mistake, or significant non-disclosure or concealment. The basic concept is that there must be a “meeting of the minds” in order for a contract to be valid.

A contract that is put in writing tends to eliminate significant “he said-she said” arguments over what exactly was agreed to, since the significant terms of the contract are usually contained in the writing. California law requires that the contract have no blank spaces when signed, and that the consumer receive a copy of any contract after signing.

However, California provides consumers with vast protections against misrepresentations that are made during the negotiations for the purchase or lease of goods or services. Further, there is no requirement that the salesperson intended to make a misrepresentation; the fact that a representation was made during the negotiations which in fact is not true is all that is required.

Some examples of misrepresentations, which would justify rescinding the sale, may include the following, especially if more than one of them is present:

• The inaccurate representation that the vehicle (or other consumer product) is new, when in fact it is used or reconditioned (if your “new” vehicle had several hundred miles on the odometer, it was not likely a “new” vehicle);
• Any inaccurate representation concerning the quality or benefits of goods or services (this would usually cover anything told to you by the finance or sales manager, including how mechanically sound the used car is, how much you’ll be protected by the service contract, that the finance rate is the best available, etc.);
• Significant non-disclosures of information required to be disclosed (such as the fact that the vehicle was a “demonstrator,” was previously totaled due to body damage or flood, has a salvaged title, was a previous “lemon law buy-back”, was involved in an accident involving damage to the frame, and a whole host of other problems which should have been disclosed but were not.
• Often, used car dealers will attempt to persuade you that you bought it “As-Is“, and therefore whatever problem you are experiencing is your problem. However, this is not true with respect to most problems discovered soon after the sale, since the buyer’s decision to buy “As-Is” was usually based upon some representation made about the vehicle that proves not to be true. The most basic of these misrepresentations concerning the mechanical condition of a used vehicle center on the requirement that the DMV requires all dealers to have a basic safety check performed on the vehicle to verify that the vehicle is safe to operate on the road, as it has such basic safety features as brakes, brake lights, turn signals, lights, etc. Invariably, this “safety” check is described by the salesperson as the service department having gone over the entire vehicle with a fine tooth comb, and found it to be in superior mechanical condition good for at least another 100,000 miles.
• The most egregious examples of misrepresentation can be found at any used car dealership catering to individuals with bad credit, who are often persuaded to buy pieces of junk for over-inflated sales prices and interest rates. These poor individuals think no one else will sell them a car, so pay large down-payments on useless vehicles so they can get to work and pay their bills, only to find out their car payment money is being spent making repairs to a vehicle that should be retired, with the end result that the car gets repossessed, and, you guessed it, sold to the next poor individual with poor credit.

The above are just a few examples of facts which would justify rescinding a sale, and you are encouraged to call us for a consultation.

Odometer fraud is one of the oldest forms of auto fraud. Consumers are clearly willing to pay more for vehicles with lower mileage, thus creating an incentive to rollback the mileage on odometers. Odometer fraud can be accomplished in various ways: physically repositioning the numbers, changing the mileage reading electronically, replacing the entire odometer, and/or disconnecting the odometer. Dealers sometimes orally misrepresent the mileage and put the odometer reading on the trip meter.

To avoid this practice, you should closely read the odometer. The average person drives approximately 12,000 miles per year. Is the mileage on the vehicle way below the average? You may want to ask the dealer to explain why. You should also get a vehicle history report. You can get summary title reports from service providers such as: Carfax (www.carfax.com), AutoCheck (www.autocheck.com), and CarFraud.com (www.carfraud.com). The history reports usually include information on vehicle mileage. A major discrepancy between the mileage reported and the actual mileage could signify fraud (especially if the actual mileage is lower than previously reported).

If you suspect that you have been a victim of this type of fraud, you may wish to contact the DMV and/or consult with an attorney who specializes in auto fraud.

Unfortunately you did not really read the small, fine print which states “subject to financing approval”. Now if you do not agree to pay a larger down payment and higher interest payments the car dealer may say “we will report the car as stolen!” Too much time has gone buy so you cannot cancel the deal and your trade-in has already been sold! A variation on this fraud is the dealer calls you a few days after you have driven the car off the lot without a signed finalized finance deal in hand and says he can lower your monthly payments if you sign a new contract but he actually ends up raising your annual percentage rate thus charging you more by spreading your payments over a longer period of time!