Dealer Fraud

This arises in a transaction that includes a trade-in vehicle when more is owed on the trade-in vehicle than the actual cash value of the vehicle. Generally, a customer is led to believe that the dealership is valuing the trade-in vehicle at the same amount as what is owed (thus the customer won’t owe anything on the trade-in.) In reality, the secret actual cash value (the value the dealership is really giving the trade-in) is less than the amount owed. The difference is added to the cash price of the new vehicle (or the capitalization costs of a leased vehicle.) By inflating the cash price or cap costs of the vehicle, you the customer are illegally paying more in sales tax and registration. The dealership may also be violating the laws related to selling a vehicle for the advertised price (a dealership may not sell for more than advertised price.) A similar illegal practice may occur when a lease balance is paid off. These are still illegal practices even when the customer is told what is happening.

Often a customer 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 quality for a loan. The dealership then 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 making a material misrepresentation of 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 can opt to cancel the contract and return the new vehicle and have the down payment and trade-in vehicle refunded, rather than signing a second contract with less favorable financing terms.

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The vehicle code states that a dealership cannot sell a new vehicle for more than sticker price (a.k.a. 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 (see above) often results in selling a vehicle for higher than the MSRP, while also affecting the amount charged for taxes, licensing & registration and finance charges.

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

Few things are more aggravating in the purchase of a vehicle than to find out that it has sustained prior material accident damage. It is illegal to sell a new vehicle with any unrepaired damage, any structural damage or even if repairs were made costing more than 3% of the vehicle’s value. Vehicles sold as Certified Pre-Owned vehicles, meanwhile, must live up to the dealership’s advertised certification standards. It is always illegal to sell an unsafe vehicle, and if you asked specific questions about a vehicle, new or used, the dealer is obligated to provide truthful responses (to the best of his knowledge).

So, for example, if you ask a car dealer whether a vehicle has been in a prior accident and the dealer, that misrepresentation can be auto fraud. Likewise, if a dealership fails to disclose material damage, even if previously “repaired,” this can also be fraud.

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