Auto Sales Fraud

The Scheme

Auto sales fraud is as old as the car itself.  Schemes can be simple or more complex, but in either case it will take more than a good kick to the tires to figure out whether the deal you’re being offered is really worth taking.  Be wary of these common scams:

The dealer fails to tell you about prior accidents and damage.

The dealer covers up the fact that the vehicle was salvaged and rebuilt, or that it was a rental.

The dealer may negotiate the terms of a contract orally in one language and then ask you to sign a contract containing additional terms in another language.

Packing the contract: When you’re negotiating the purchase of a car, most of the haggling happens as a conversation between you and the dealer.  You discuss whether you want a GPS system included, what sort of audio system you need, whether you want the extended warranty or any special insurance coverage, etc.  When the time comes to sign the written contract, you expect it to lay out exactly what you discussed with the dealer.  But instead, the contract is full of “extras” that you didn’t want.  You sign without carefully reading the contract, and commit yourself to high monthly payments. 

Yo-Yo financing scams: You drive off the lot a proud owner of a new car, and spend the next two weeks showing off your purchase to friends and coworkers.  Then one afternoon you get a call from the dealership saying that the bank called, and your financing fell through.  Now to keep the car you have just two options – either make a higher down payment or agree to a higher monthly rate.  You don’t want to have to return the car that all of your friends have been hearing about, so you feel compelled to agree to the new terms.

Help For Consumers

Experts recommend having a strategy in place before stepping on the lot.  Consumer Reports is a nationally-recognized authority on car buying.  Check out their advice for new cars at http://www.consumerreports.org/cro/cars/guide-to-new-car-buying/0702step0.htm

For used car purchases, visit http://www.consumerreports.org/cro/cars/guide-to-used-car-buying/0703_new-car-buying.htm

The Better Business Bureau also provides advice to consumers in the market for cars: http://www.bbb.org/alerts/article.asp?ID=433

Californians have a new “bill of rights” that provides them some specific protections when in the market for a new or used car.  Read about these protections here: 
http://www.dmv.ca.gov/pubs/brochures/fast_facts/ffvr35.htm

Once you’ve purchased a car, you may get into a dispute with the dealer or the manufacturer over the terms of your contract.  If you’ve purchased a car that’s still under the original warranty,  you can turn to the Consumer Mediation Services Program for informal, free mediation of the dispute.  Visit: http://www.nmvb.ca.gov/mediation.htm

If informal mediation doesn’t work, the manufacturer may offer to resolve disputes in an arbitration process that is more formal than mediation but less rigorous than court.  You can always decline to accept the decision that comes out of the arbitration process and take the matter to court, but if you accept the decision, the auto manufacturer is bound by it.  You’ll get a decision in 40 days.  Find out whether the manufacturer of your car participates in a state-approved arbitration process at this website:  http://www.dca.ca.gov/acp/arbprocess.htm

You may also choose to contact the Department of Motor Vehicles (www.dmv.ca.gov) to register a complaint.