If you think you’ve been ripped off by a car dealer and are interested legal help, click HERE for a free consultation.  The Marshall Law Firm will let you know if we can help. Otherwise, read on for information about common schemes seen in car sales.

Buying a car can be confusing.  Apart from buying a house, this may be the most complicated transaction people undertake without the help of a lawyer.  While most people understand the general terms of a car deal, there are many details people may not understand or pay attention to.  It is in those details that some shady dealers will take your money.

“Dealer fraud,” as it is commonly called, refers to the deceptive and illegal practices employed by car dealerships during the sales process. Whether the fraud happens during the early stages of the negotiation (i.e. misrepresentation as to the cars accident history, title, characteristics, attributes) or after the buyer has picked a vehicle and is in the financing stages of the purchase (i.e. illegal yo-yo financing scams), many dealers engage in these unlawful practices on a daily basis.

Dealers have more access to information about the vehicles being sold than consumers do.  As a result, consumers are left with no choice but to believe much of what the salesman and dealer tell them, and hope that it is true.  In reality, however, honest, hard-working people are commonly taken for a ride by dealers that will say almost anything to close a sale quickly.

There are an endless number of scams that fall under the category of dealer fraud. The following are some examples of the more common dealer fraud scams:

Failure To Disclose Frame Damage or Accident History

California consumers are entitled to complete disclosure of whether a vehicle previously sustained material damage that was repaired or whether the vehicle still has unrepaired damage. The California Vehicle Code defines material damage as any of the following:

a.    the cost of repairs is greater than 3% of the MSRP or $500 (whichever is greater, including cost of parts & labor at the repairer’s cost).

*Note: The above formula excludes the cost of replacing certain damaged or stolen components if they were replaced by the installation of new original manufacturer’s equipment. However, any damage overall that is greater than 10% of the MSRP is considered material.

b.    the vehicle’s frame or drive-train was damaged;

c.    the vehicle was damaged during theft;

d.    the vehicle’s suspension was damaged.

Dealers are also required to provide consumers with written disclosure of previously existing, but repaired, material damage either before the sale is finalized or at some point before the vehicle is delivered to the buyer. Also, any damage to the vehicle (whether material or not) that the dealer knows has not been repaired must be disclosed in writing.

Finally, and perhaps most significantly, dealers must not mislead or lie to consumers if asked about the vehicle’s repair or accident history. In other words, dealers are obligated to give consumers truthful answers to their questions and must not attempt to deceive them in any way.

Failure To Disclose Vehicle’s Prior Use

If a vehicle was previously used by the dealer as a rental, loaner, lease or service vehicle, the dealer must clearly disclose such use in any advertisement or sale. Also, the dealer cannot call such vehicles as “new.”

Failure To Disclose Vehicle’s Salvage Title Or Lemon Law Buyback Title

A dealer is obligated to disclose that a vehicle has been in a wreck and has a “salvage title” or “junk title.” A vehicle is deemed “salvaged” if it has been “wrecked, destroyed, or damaged to such extent that the insurance company considers it uneconomical to make repairs to the vehicle and the vehicle is not repaired by or for the person who owned the vehicle when the damage occurred.”

Dealers must also disclose whether a vehicle has a “lemon law buyback” title. The lemon law buyback title is used to designate vehicles that were defective and repurchased by the manufacturer. In short, if someone had a lemon law case and persuaded the manufacturer to refund their money and take back the vehicle, then the manufacturer labels the bought-back vehicle as a “lemon law buyback.” Dealers often purchase these bought-back lemons and attempt to resell them without disclosing the fact that these vehicles are or continue to have one or more persistent defects that impair the vehicles’ safety, use or value.

Odometer Fraud / Mileage Rollback

This scam perhaps immediately comes to mind when one envisions a dealer engaged in deceptive practices. Mileage rollback cases, also known as Odometer Fraud, involve a dealer making false representations to unsuspecting purchasers about the actual mileage of the vehicle despite being aware that the vehicle’s odometer has been rolled-back or modified. Or despite the dealer having knowledge that the vehicle’s odometer was reset/replaced and proper legal notice was never provided.

Yo-Yo Financing Or Spot Delivery Scam

The Yo-Yo financing/Spot Delivery scam occurs when a dealer lets a buyer take a vehicle home, claiming that it is now his, but before financing has actually been approved. As a result, the unknowing purchaser takes the car home, mistakenly believing he owns it. And soon after, the dealer calls the buyer asking him to return the car or demands that the parties “redo” the contract because financing could not be secured. After the sale is rewritten, the buyer is left with an extremely high APR.

Dealers will typically use this scam to prey on consumers with credit problems. It is not uncommon for the dealers to make outlandish claims to consumers about how they will certainly be approved for financing at unbelievably low rates, knowing that nothing could be further from the truth. Buyers need to be wary of these financing tactics and make sure that all sales terms are finalized before driving the vehicle off the lot.

Advertising Fraud (“Bait & Switch”)

False and deceptive advertising is another fraudulent tactic used by dealers. Among other prohibited acts, a dealer must not disseminate false or misleading advertisements that list a vehicle for sale at a price at which the dealer never intends to sell the vehicle. These scams are used to lure unsuspecting buyers in to the dealerships. Once the prospective buyer steps foot on the dealer’s lot, the dealerships will typically fabricate various falsities throughout the negotiation process to wriggle their way out of holding up to their end of the bargain. Don’t let this happen to you. Dealers are also prohibited from advertising a vehicle as being “new” when it is in fact “used”, among being prohibited from engaging in various other “bait and switch” tactics.