There are several state and federal laws that exist which are meant to protect consumers who are about to purchase a vehicle and to penalize dealerships that cheat those customers. Not to be confused by the Lemon Laws which pertain to the sale of defective vehicles, these laws apply to the deception and unfair practices some dealers engage in. Consumers can become a victim of auto dealer fraud at practically any stage of the purchase process. Automotive deceptive ploys and predatory lending practices are plaguing consumers all over the nation. Our firm provides consumer protection against auto fraud.
There are two classification of dealer fraud: 1) Non-disclosure and 2) Affirmative Misrepresentation.
Fraudulent non-disclosure occurs when a salesperson withholds information affecting the desirability or value of a vehicle, for example, failing to disclose a certain vehicle was used for commercial purposes which can considerably reduce the resale value of the vehicle. Affirmative misrepresentations trick the customer with the salesman taking a more active role. A common example includes the rolling back of an odometer by the dealer.
New Car Dealer Scams
Bait and Switch
This all-too common sales tactic is basically a form of deceptive or false advertising in which a customer is lured into the dealership by an attractive price for a vehicle or a promised trade-in value. Once the shopper takes the bait, the salesperson states that the vehicle has been sold, or the offer is no longer available and persuades the shopper into buying a higher priced vehicle. If the dealership will not honor the offer you expected, do your vehicle shopping elsewhere. There are state laws and acts to protect consumers from this fraudulent scheme.
This tactic is basically a "bait and switch" for financing. You've picked out your dream car, completed the paperwork but the dealer tells you that your loan "has not been officially approved yet" but they let you take the car home anyway (don't do it!).
If you do, several things can happen. Days later, the dealership can call you back and tell you that your loan wasn't approved at the interest rate you originally discussed but th bank did approve you at a highter interest rate - meaning, you will pay thousands more than expected. If you try to call off the deal, they say they already sold your trade-in and you're out of luck or they threaten to sue you if you don't agree to the new terms. Be wary especially since the loan agreement probably included a "writ of rescission" stating that you agree to pay the higher interest rate if you did not qualify for your originally discussed lower interest rate. Protect yourself by getting preapproved financing before shopping for a motor vehicle." If you do go to the dealership financing route, ask to see a copy of the confirmation from the finance company.
Unfailing to Disclose New Vehicle Damage
New vehicles can get damaged, even prior to its original sale, perhaps during delivery to the dealership lot or an accident in the parking lot. To address this problem, Pennsylvania has an Act in place requiring the dealer or manufacturer to disclose damage in writing, both repaired and repairable damage, that exceeds $500.00 or 3% of the manufacturer's suggested retail price, whichever is greater. If the dealer fails to comply with this law, the buyer is entitled to seek a refund of the damaged vehicle's purchase price.
This trick occurs when the finance manager of a dealership lies about your credit score stating it is lower than it actually is, meaning you will be paying a higher interest rate which in turn means more profit to the dealership. Unfortunately, many uninformed car shoppers go into dealerships without looking up their own credit score in advance so many take the dealership's word. To avoid this scam, get preapproved for a vehicle financing from a trustworthy lender (your bank) or bring your credit report with you to verify what the finance manager tells you.
Negative Equity Scam
You should never trust a dealer when they tell you that they can pay off your trade-in. Sure, the dealer will pay off the loan but will basically transfer the amount of negative equity onto the new car deal resulting in a higher balance, a larger monthly payment and a longer loan term. You will be simply paying for two cars at once. To avoid this, hold onto your car until its paid off or until you can pay your balance down to get out of negative equity.
At times, a consumer will not initially qualify for financing based on the terms of the original contract. In order to qualify for a new loan, the customer may be asked for a larger down payment or higher APR. The dealer wants you to go back to the dealership and sign a second contract with the new terms and the dealer backdates the second contract with the date of the original contract. This is fraudulent! The customer is being charged for interest for a time period that the contract is not in effect yet. Many dealers do not let the customers know thaty they do not have to sign a second contract.Consumers should be aware that its a better option to simply cancel the contract, return the vehicle and walk away. The dealer is then required to refund the down payment and trade-in vehicle.
Using the Language Against You
Some states require that if a lease or purchase of a vehicle is mostly negotiated in Spanish, that a Spanish translation of the contract must be given to the customer before signing the English version. If that's not possible, a waiver has to be signed stating that the terms of the contract were explained in the customer's language and they fully understood it. Failure to do so gives the customer a right to rescind.