Dealer Fraud

GAP Insurance is also known to the public as GAP Waiver or GAP Addendum. It is an abbreviation for Guaranteed Asset Protection. In case your insurance company declares your vehicle a total loss from accident or theft GAP Insurance will pay the difference between the ACV (Actual Cash Value) your insurance company determines they will pay and what is owed to the bank on your vehicle. An easier way to explain this is that GAP Insurance will pay your negative equity (difference between your vehicles ACV and what is owed to the bank) so that you are not responsible to pay the bank, potentially thousands of dollars, on a vehicle you are no longer able to drive. Most GAP Insurance companies will also cover your insurance deductible and may give you additional money to use as a down payment on a new vehicle.

Fraudulent practices in the used car department increase as new car sales are slowing down. Car dealers today use dealer fraud just to keep the money flowing.

According to some predictions by the end of the year the US automakers will drop to less than a 50% share of the market in US new car and truck sales. It should be mentioned that sales figures are dropping not only for the Big Three but for virtually all makes. That’s why consumers should be more careful now if they decide to visit a local car dealer and purchase a used car.

One of the newest dealer scams include the tire care package that some dealers are packing into your monthly payment, sometimes without the buyer even knowing it. The tire care package is really not much more than just a scam when the consumer pays the car dealer for tires that he might (or might not) need in the future.

Negative equity scam complaints are also increasing. This happens when the dealer informs that your trade in vehicle is not worth what you owe on it “but don’t worry, we’ll pay off your trade in anyway”. What they don’t tell you is that they are jacking up the price of the car they’re selling you too.

Another common dealer fraud is the Gap Insurance when the dealer sells you a high priced guarantee. Generally the dealer promises that if your car is stolen or wrecked and your own insurance won’t pay it off, then they’ll put money toward the payoff too.

The packing scam happens when the customer is quoted an inflated monthly payment. As soon as the customer accepts the monthly payment amount the dealership starts to add such accessories as alarms, service contracts, GAP insurance, paint/fabric protection, window etching, low jack and others. This is done mainly in order to reach the inflated monthly amount.
If you intend to buy a car remember that all these accessories are optional and will be paying extra for the accessories. If the dealer makes you believe the accessories are included with vehicle and are mandatory walk away from the deal.

At the height of the ether, the customer is “t.o.’ed” (turned over to the Dealership Finance Manager). This person’s job is to close the deal and maximize the profit in the process. If done really well, the customer will never know how bad it really is.

Much like passing the baton in a relay race, the smoother that the Turnover is executed, the less likely it is that the customer will expect what is about to happen next. At this point, the customer actually thinks the hard part is over with and that all they have to do is sign some papers. After all, that’s what the sales person said they were going to do next. Actually, the selling process is still going on. The customer has just arrived at “part two”.

The F & I Manager can also be called a “Business Manager” or something similar. The reality, however, is that they are just another sales person in the chain. Their job is two-fold: first, to get all the paperwork signed; second, to sell (or pack) soft add-on’s into the deal. This is where knowing the customer’s background can be extremely useful. If the customer is married, credit life and disability insurance become much easier to sell (”gosh, you wouldn’t want the bank to come and take your car and leave your wife/husband stranded if something suddenly happens to you, would you?” is a question that is most effective when asked right in front of the other spouse). If the customer had a trade in with “negative equity” (a phrase invented by the car sales business), it is easy to convince them that they really do need Gap insurance.

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In the event of “packing” the customer is quoted an inflated monthly payment. If the consumer accepts this amount, the dealership adds accessories to the purchase contract to reach the inflated quoted price. The accessories may include alarms, service contracts, GAP insurance, paint/fabric protection, etc. The customer should know that the accessories are optional and that they’re paying extra for the accessories. Often the accessories are represented as “included” with the vehicle.

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

When you are buying a car your car dealer will try hard to persuade you to purchase an insurance policy with your car. This insurance policy includes the gap insurance, which covers the difference between what the car is worth and the amount you still owe on it. For example, the car is worth $20,000 but you still owe $24,000. In the event your car is a total loss, the gap insurance policy will cover the $4,000 difference. Another common type is the credit life insurance. This insurance will pay the balance of your loan if you die before you’ve been able to repay it.

Sometimes these policies do not make sense for consumers. Make sure, you clearly understand what you’re purchasing. Also consider the opportunity to decline the offer and shop around for better prices.

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

Whitehall Discovery Ford owner/manager Tony Nielsen was sentenced to jail for felony fraud. The former owner of the dealership has confessed that earned more than $300,000. He had defrauded hundreds of customers an extended warranty scam and failure to pay off loans on traded-in cars.  Nielsen owned and Discovery Ford located at operated 3001 W. Holton-Whitehall in Whitehall Township from April 2005 through August 2006. Starting November 2006 the dealership had a new owner and was named Whitehall Ford.

The investigation of this case took more than a year and was very complicated. During the investigation the state police had to interview more than 400 people and review all the financial documents of the dealership.  According to authorities the business of the dealership owner began to falter about three years ago and he started to keep customers’ payments for extended warranties without buying the policies, and failed to pay off the outstanding loans on traded-in cars.  The dealership also failed to forward customers’ payments for “gap insurance” to cover the difference between the value of a car totaled in an accident and the amount owed on a new car.

The state police started the investigation in August 2006 when a customer of the dealership contacted them and informed that he had taken a vehicle to another Ford dealer for service and learned the car never was registered for an extended warranty. Investigators quickly found Nielsen’s dealership had failed to forward money, in most cases $2,000, paid by customers for the warranties.

Nielsen declined the opportunity to speak at the court. The attorney of defendant argued for leniency, taking into consideration that the former dealership owner was making efforts to pay complete restitution to his victims.

Nielsen, 43, was sentenced to jail for 10 months. He is eligible for work release, but if he gets one, it will be only for 48 hours a week. The defense requested Nielsen get extra time off jail in order to work at an existing job in the area or to continue flying around the country conducting “tent sales”. The judge vetoed this request of defendant. Moreover, the judge ordered that Nielsen perform 100 hours of community service in the County and placed on 30 months’ probation period.

Pursuant to the order of the Judge Nielsen will also be responsible to pay full restitution to his victims and $78,052 to Universal Warranty the insurance company that covered the extended warranties. 

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[ To Learn more our services and areas of practice, please visit our website at

www.DealerFraud.org]