The Basic Forms of Auto Sale Fraud: Scams, Tricks, and Loopholes

Buying a used car can be nerve-racking. Not only are you not sure about the quality of the vehicle, but you also have to deal with high-pressure sales techniques and potentially unscrupulous tactics from car dealers.

By law, used car dealers must follow the Federal Trade Commission’s (FTC) Used Car Rule, which applies in all states except Maine and Wisconsin.

The Used Car Rule is intended to stop auto fraud by requiring that dealers disclose information about the vehicle for sale. While nearly all used car dealers follow the letter of the law, there are plenty of tricks and scams that potential used car buyers need to be aware of.

The basic forms of auto sale fraud are misrepresentation, false advertising, add-ons, overcharging and undervaluing. We will look at each in detail and then examine your best options if you’ve been the victim of car dealer fraud.

Most Common Auto Dealer Fraud Types: Misrepresentation and False Advertising

One of the most common types of car dealer fraud is misrepresentation or false advertising, when the dealer fails to disclose or deliberately hides required information about the vehicle from the buyer.

You should always run a Vehicle History Report (VHR) or “Carfax” report before buying a used car to protect yourself from misrepresentation and false advertising.

A VHR will tell you the vehicle’s previous owners, accident history, odometer readings at the time of sale, and whether the particular make and model has been labeled a lemon and eligible for manufacturer buyback under Lemon Laws in your state.

Odometer Rollbacks

Odometer rollbacks are the oldest trick in the automobile dealer fraud handbook. The VHR will tell you the odometer reading at the time the dealer purchased the vehicle.

If the numbers on the car and the VHR don’t match up, the dealer is likely trying to fool you into buying a vehicle with more miles on it than you want.

Previously Damaged Vehicles

One of the most common car sale frauds involves quickly selling a vehicle that was recently involved in an accident. If the vehicle was in an accident and sold to the dealer within the last six months, the chances are good it will still have a clean Carfax report because the accident has not been reported and filed yet.

Use the information in the VHR to contact the previous owner and ask them if the car was involved in an accident before being sold to the dealer.

If you purchased a used car with a “clean” VHR only to later discover its accident history, you have a valid basis for a claim against the dealer.

Bait and Switch

A “bait and switch” is the most basic form of false advertising, when a dealer lures customers in with the promise of one vehicle at a low price only to pressure them to buy a more expensive vehicle once they’re on the lot.

Bait and switch also means selling the advertised vehicle for a higher-than-advertised price or switching the advertised vehicle for one with a lesser value. If the price on the contract is not the price advertised or the one you agreed to, the dealer is probably trying to pull a bait and switch.

State consumer protection laws forbid these dishonest tactics, and if you were the victim of a bait and switch you have a claim against the dealer. However, an ounce of prevention is worth a pound of cure.

Before going to a dealership in search of a too-good-to-be-true price, check reports and complaints with the Better Business Bureau to see if they have a history of using bait and switch tactics.

Most Common Auto Dealer Fraud Types: Add-Ons, Overcharging and Undervaluing

While misrepresentation and false advertising conceal important information about the vehicle, add-ons, overcharging and undervaluing are auto dealer fraud types that usually occur at the time of sale or after you’ve already signed the purchase contract.

Hidden and Unnecessary Add-Ons & Fees

Car dealers typically disclose add-ons in the “supplemental sticker” or “addendum,” placed on the car window next to the manufacturer’s sticker. The supplemental sticker looks very official to discourage potential buyers from disputing the add-ons, but nothing on it needs to come with the car.

Add-ons offer high profits for the dealer, but they may not be necessary or even wanted. One common car dealer fraud is to conceal pricey add-ons during the sale, only to have them pop up at the signing.

There are many add-ons that are either not necessary or much cheaper to get outside the dealership.

Examples of add-ons that do nothing except benefit the dealer are:

  • Rust protection
  • Nitrogen-filled tires
  • Paint protection
  • VIN etching

If you see an add-on you don’t understand, ask for clarification. Be wary if the dealer insists that a particular add-on is “mandatory.” The only mandatory changes you have to pay when buying a used vehicle are taxes, title and registration fees and the manufacturer’s destination charge, all of which should be factored into the car’s price.

Warranties and insurance packages are “mandatory” add-ons that dealers will sometimes sneak in at the last minute during the signing process. You are not obligated to purchase a warranty or an insurance package no matter what the dealer says.

Overcharging and Undervaluing Trade-Ins

Overcharging for used cars and undervaluing trade-ins are among the worst forms of car sale frauds because consumers have limited recourse once the sale is final. Legally, car dealers cannot sell a car for more than its advertised price; however, they can charge as much as they like for any other unadvertised vehicle.

Be persistent and ask to see the advertised car at the advertised price. If the dealer tells you it’s no longer available, you should walk away before getting pressured to buy a more expensive vehicle.

Buyers looking to trade in their vehicles should be especially careful as undervaluing trade-ins is a regrettably common occurrence. Do not accept the first offer you receive for your trade-in. Spend some time getting estimates from different dealerships. Check the value of your vehicle on Kelley Blue Book and Edmunds before accepting an offer.

The reason that buyers must be diligent with paying too much for a used car or receiving too little for a trade-in is that, once the sale is final, they have very little recourse. Simply paying too much or accepting too little is not by itself a basis for a claim. The rule of thumb is caveat emptor, or “buyer beware.” You will generally not have a claim against the dealer for overpaying or underpaying unless they engaged in another fraudulent practice during the sale such as false advertising or misrepresentation.

What to Do If You’ve Fallen Victim To Auto Dealer Fraud

As we’ve seen, there are many types of fraud. If you’ve been the victim of one or more of them, it’s time to take action and get compensation.

File a Claim Against The Dealer

The first step in filing a claim against a car dealer for fraud is to obtain form K-35 Consumer Complaint Form from your state’s consumer protection office or DMV. Print and fill out two copies; file one with your state’s DMV Consumer Complaint Center and the other with the dealer.

Be sure to include copies of all the paperwork involved in the sale and provide your contact information. While you’re waiting for your claim to be processed you should also file a complaint against the dealer with the Better Business Bureau.

Contact an Auto Fraud Lawyer

If you’ve been a victim of car sale frauds, it’s important you file a claim; however, you may also need legal representation to get the financial compensation you deserve.

Proving fraud can be challenging, which is why you should obtain as much documentation as possible and contact an experienced auto fraud lawyer.

The Robinson Lemon Law Group, LLC reaches settlements in an average of 55 days. If you’re looking for a lawyer to represent you in a Lemon Law or auto fraud case, contact us for a free evaluation today.

Source: FTC’s Used Car Rule