Dealer Fraud

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.

There are several things you should know and consider before you decide to trade in your car. Learn the most common scams and dealer tricks the car dealers may try to use when you trade in your car.

Generally, used car dealers make 2 to 3 times more in profit from the sale of used car trade ins than they do from selling new cars. When you trade in your car the dealer offers you much less than what your old car is worth, because he knows that most consumers have no idea what is the value of their car.

In case the car dealer pays what your used car is worth, he will later raise the selling price of your new car. The dealer will try to add a lot of add-ons and extra fees to the price of the car you’re buying.

Some consumers think that they you will save some time when you trade in your car at the dealership. However, the truth is it’s better to spent just a little bit more time to sell your car yourself and get an easy $300 to $1000 more for it. Beside you will be able to avoid the trade-in vehicle scams of the dealer.

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.

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.

Remember that you may be able to get a much higher price by selling your current vehicle yourself rather than trade-in. Most often when you trade in your old vehicle at a dealership you get below wholesale Blue Book for your old car. Which is even worse the car dealer could confuse you about exactly what you are getting. For example, you may bargain with a dealer to get a higher price for your trade-in vehicle, but not realize that the purchase price of the new vehicle is also being raised.

1. If you consider buying a new car the best time to do it is around Christmas time because with not many of people are looking to buy a new car, and it forces dealerships to up their sales strategies. It’s easier to get a good deal when car sales are down and dealers want to make profit.

2. Never bring your old car to the dealership as a trade-in. The dealership often fails to make payments for the loan of your trade-in vehicle on time. You may become a victim of dealer fraud and be responsible for a great deal of late fees to the bank. If you do decide to bring a car in that you owe money on, get it in writing from the dealership that they will pay the balance on the car within 10 days.

3. Research on the internet new car prices, dealer incentives, and the best rebate offers before going to the dealer. The more you know the hard it will be for dealer to scam you.

4. Always have a copy of your credit report when going into a dealership. It will help you to get lower interest rates on your car loan, as well as prevent credit score scam.

If you are thinking about buying a new car and are confused about the terms and are concerned about being switched into a vehicle lease, use the following tips:

1. Remember that when you lease a car, you are actually borrowing it and not buying. The lease may seem to be less expensive at the first sight but there are often many hidden fees which make the lease more expensive. There are hidden fees for excess mileage and wear and tear to the vehicle. Also if you lease a vehicle that has a lease allowance of 25,000 miles a year and at the end of the year you have additional 10,000 miles you will be penalized.

2. One of the reasons the lease of the vehicle can be more expansive is the fact that you are paying for the use of the vehicle and you will own nothing at the end of the contract. Furthermore at the end of the lease you don’t have a trade-in vehicle. Many car dealers trick customers by telling them that they can trade in a lease at lease end and receive credit. This is simply a dealer trick used to scam you.

3. If at the end of the lease you have any outstanding obligation such as mileage penalty, condition penalty, unpaid lease payments, then these are often rolled into your next vehicle purchase or lease.

4. To avoid dealer fraud don’t sign any documents on the spot at the dealership. First ask the dealer to take the lease or purchase contract home and carefully read it.

If you believe you have become the victim of lease fraud or you have any questions about your contract contact a qualified dealer fraud attorney.

Dealer Trade payoff scam usually happens during ads for big sales, when many car dealerships promise that they will pay off your trade no matter how much you owe. However, the truth is it’s one of the opportunities for car dealers to trick you into financing more through them. What the dealer does is paying off the amount you own for your trade-in and then they add this amount to your new loan.

On the other side the car dealership takes your trade-in vehicle and you may have little or no idea what they actually gave you for it. It is much easier for the dealer to scam you if you are a payment buyer. The car dealer simply gets the payment where you want it and you are set for the deal. Car dealers know that most of their customers don’t trouble themselves with calculations and this makes the job of the dealer even easier. Sometimes the dealer will try to use this scam with a lease.

You should really watch out for this scam next time you consider buying a new car. Carefully read each line of your contract before signing and make sure to know exactly how much is your trade-in worth and the amount the dealer will pay for it.

Like most of the common dealer tricks this scam also works on misdirection. This dealer fraud occurs when the car dealer gives you what you want on one end of your deal while taking it out of you on the other. For example, the dealer gives you a break on the purchase price of your new car but then give you less for your trade-in vehicle. Or they give you a great deal on your used car and new car but the terms of your financing are not the best. If you want to get a good deal on your new car you have to understand all three points of the sale: terms of financing, price of your used car and price of the car you are buying.

Often a customer will not qualify for financing upon the terms on the first contract. The customer may be required to increase a down payment, higher APR, etc. in order to qualify for a loan. The dealership has the customer come to sign a second contract with the different terms but backdates the second contract with the date of the first contract. This affects the finance disclosure laws in that the customer is being charged interest for a time period in which the contract is not yet in effect, etc. In addition to making a material misrepresentation regarding when the customer takes the obligation of the new contract, a backdated contract often also violates the single document rule  because another form (usually called Acknowledgment of Rewritten Contract) has the actual date when the contract was signed. Further, many customers are not told that they do not have to sign a second contract, instead they can choose to cancel the contract and return the new vehicle and have the down payment and trade in vehicle refunded. Finally, a dealership only has 10 days to tell you they want to make changes to the contract or cancel the contract. After the 10 days, the dealership cannot change the deal.