Dealer Fraud

Through any stage of the vehicle purchase process, from advertising to signing the purchase contract, the consumer may become a victim of auto fraud. Following are some common situations that may be considered to be auto fraud.

Bait and Switch is a form of false or deceptive advertising, when the dealer sells the advertised vehicle at a price higher than the advertised price.

Improper inflation of the vehicle’s invoice price happens when the dealer makes additions to the invoice figure, when those charges were originally included in the invoice price (i.e. destination charges).

One of the most common auto frauds is the new dealer returns. This scam occurs when the dealer sells a vehicle returned to the dealer because of a defect or persistent mechanical problem or a car returned shortly after purchase for some other reason as a new vehicle.

Consumers may become a victim of vehicle trade-in scam when the dealer undervalues and underpays for a car buyer’s trade-in vehicle.

One of the most profitable scams for the dealer is concealing the inclusion of certain optional “add-ons” during the negotiation process, or the costs of those add-ons, but including those add-ons in the final vehicle price.

Recently a Los Angeles car dealer has sold a car to an older adult without any information given to the sales person. The car dealer did not ask older adult neither about monthly income nor even social security. The purchase contract included a high dollar amount car payment and low monthly income from the older adult. When the family members found this out they tried to exchange car for lower payment. However, they were denied. The bank was not able to do anything either. Auto Sale took advantage of the older adult. The car dealer did not handle the sale correctly.

The dealer has the right to cancel the contract if you buy a car that is financed through the dealership only if it notifies you within ten days of the date of the purchase contract. This is mainly based on the language of the purchase contract. Carefully examine your purchase contract. At the top of the yellow document it says “RETAIL INSTALLMENT SALES CONTRACT”. Turn to the back of the purchase contract, and find the box that says “Seller’s Right to Cancel.” It is at the bottom of the second column.

Remember that car dealers are in the business of selling cars to consumers and not financing cars. According to this box on your contract after you sign the purchase contract and leave with the car, the dealership is going to find a finance company or bank to buy your contract. So, the car dealer has the opportunity to find someone to buy your purchase contract. This is not the main problem most of the time. However, the car dealer has the right to cancel the purchase contract if he is not able to find someone to buy your purchase contract. In this case, the car dealer is required to notify the consumer within 10 days of the date on the purchase contract. If the dealer fails to do so, then the purchase is final and cannot be cancelled.

Pursuant to the purchase contract the car dealer is required to return to you all consideration 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 and later you decide to return the car you purchased, the car dealer is required to give you back both the $2,000 and the trade-in.

In the event when a car dealer has already sold your trade-in, he may offer you the value of the trade-in as listed on the purchase contract. The language of the purchase contract does 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, you should tell the car dealer that he is required to give you whatever is the highest value for your trade-in out of the following:

• the value of the trade-in that is listed on the purchase contract,
• the fair market value, or
• the price the car dealer received when it sold your trade-in.

The car dealer is required by the purchase contract to return to you all consideration (i.e., everything) given for the purchase, included 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.

There may be times when your car dealer may tell you that it already sold your trade-in, and you can be offered the value of the trade -in as listed on the purchase contract. On the other hand the language of the purchase contract does not appear to give the car dealer this option. The return of the trade-in, thus, is being required. 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, or (3) what the car dealer received when it sold your trade-in.

It is based on the language of the purchase contract. Look at your purchase contract, where a there is a long yellow document that says “RETAIL INSTALLMENT SALES CONTRACT” at the top.  After turning the page back of the purchase contract you can find the box that says “Seller’s Right to Cancel.” It is at the bottom of the second column.

Car dealers’ business is to sell cars to consumers, not financing cars that consumers buy. So, this includes an advice that after you sign the purchase contract and leave with the car, the dealership’s next step is to find a finance company or bank to buy your contract. Thus the car dealer is given an opportunity to find someone to buy your purchase contract. Most of the time this is not a problem. In case, if the car dealer cannot find someone to buy your purchase contract, the purchase contract can be canceled. But, if the car dealer doesn’t not notify you within 10 days of the date on the purchase contract, then the purchase is final and cannot be cancelled.

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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