Dealer Fraud

Many customers are unable to pay the entire down payment at the time the purchase contract is signed. Dealerships will allow customers to make down payments in payments (called deferred down payments). The code recognizes these types of payments and requires that deferred down payments be itemized, including the amount and date due for the deferred down payments. However, rather than disclosing deferred down payments are required by the code, dealerships will have customers write checks for the deferred down payments and then agree not the deposit the checks until an agreed upon date. As part of this transaction, customers are made to sign a hold check agreements that states what date the checks will be cashed and also have additional provisions regarding any returned checks, thus creating obligations that are not included in the single document (purchase agreement.)

The following is a list of auto dealer activities which may signal possible auto fraud in your automobile transaction for either purchase or lease of a vehicle in California.

• Selling you a vehicle that was previously repurchased from a prior owner as a lemon without full disclosure to you
• Selling you a vehicle that was previously salvaged as a total wreck without full disclosure to you
• Selling you a vehicle that had previously been used as a rental vehicle without full disclosure to you
• Failing to provide you with a written contract in the language in which you negotiated the transaction, specifically in Spanish, Vietnamese or Tagalog as well as certain other languages specific,
• Prematurely selling your trade-in vehicle and then later trying to undo the transaction
• Improperly calculating the negative equity on your trade-in
• Switching you from a sale to a lease without full disclosure
• Charging more than the advertised price for the vehicle
• Failing to disclose to you the vehicle history including records of all substantial accidents causing considerable damage

There may be many other improper acts committed by the dealer, which may not constitute fraud by themselves. Nevertheless, if one or more of these types of behaviors occur they may indicate that there is something improper about the transaction and you should be very wary about signing any documents without further review and understanding of the transaction

At this point the sales person will return and escort the customer to their newly purchased car. With all the paperwork signed, the car Dealer doesn’t want the customer to linger (they might take the time to read what they just signed). This is the emotional “high” of the transaction for the customer. They think they have just “beat the house” on their hard-won deal and they are ready to strut out of the dealership and drive off into the sunset. The Dealer wants to encourage that. There is a psychological aspect to putting the car over the curb and the Dealer knows that if the customer figures out what happened to them and refuses to take delivery, the odds are that they will have to “unwind” the deal sooner or later (i.e., “back out the deal”, cancel it, rescind it). That’s the last thing the Dealer wants to do. In fact in California there’s a “no cooling off” period so the sooner the Dealer gets you to drive off with car, the better.

The Dealer’s staff has just worked for 3 or 4 hours to package the deal and get it signed, sealed, and delivered. They made no small amount of money in the process. To unwind the deal would mean having to start all over again with some other customer and lose the profit that they just “earned”. That’s a nightmare for any car dealer. They’d rather work the next deal on the next customer than have to work this deal all over again.

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

The Automobile Sales Finance Act (AFSA) provides that all obligations of both parties in a transaction must be contained in a single document (which explains why purchase agreements are so long in the auto industry). Often, however, dealerships will have customers sign additional documents, such as trade-in forms stating that the customer agrees to pay any difference between the value of their trade-in vehicle and the amount owed on that vehicle. Or, the dealership will agree to make payments on a trade-in vehicle but not include the trade-in vehicle in the purchase agreement. Another example is a “hold check agreement” whereby the customer agrees to pay additional money towards the down payment on a later date. Each of these documents violates the one document rule.

Also be cautious of the trade-in price being offered to you inasmuch as this represents a dealer’s greatest potential profit on the transaction. Because it is difficult to determine the value of the trade in vehicle, even by resorting to such things as the Kelly Blue Book and web sites and information to help you determine the price of your used vehicle, most consumers will be willing to accept a lower trade-in than what the vehicle is actually worth. Psychologically, once you are tempted to buy that new car your resistance has pretty well been lowered and you are more likely to accept a bad deal in your trade. The dealer will lead you to believe that they are actually providing a service to you by taking your old car off your hands. One way to get around this is to agree on the trade in price before negotiate for that new car so as to avoid getting caught in such a trap.

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

Many people view buying a car as one transaction. It’s not, and car dealers know this. "There’s really three transactions rolled into one — the new car price, the trade-in value, and the financing,The car dealer sees all three as ways to make money."
Treat each of these as separate transactions, and negotiate each one. If you get a new car for $200 over invoice, but only receive $1,000 for a trade-in car that’s worth $2,500, you haven’t done as well as you could.
"You need to manage all parts of the process by doing research ahead of time, It’s very important that buyers not think of the dealer’s finance department as their loan agent. The car dealer is not required to find you the best rate, and might add to the number by serving as the middleman."

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