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The Auto Fraud Epidemic
What You Don’t Know Can Hurt You. We Can Help
The term “auto fraud” can basically be defined as any
misrepresentation on behalf of a dealership (or warranty, financing
or insurance company) during a new or used vehicle sales or lease
transaction. This can include everything from non-disclosure of
prior accidents and odometer rollback, to deceptive advertising
and financing practices, to simply putting incorrect dates on documents.
Have you been cheated? We invite you to take advantage of our auto
fraud information resources to find out.
It Can Happen to Anyone. Has It Happened to You?
Take
our Auto Fraud Quiz
Auto fraud happens all the time, but most victims aren’t even
aware they’ve been defrauded. With this in mind, we’ve
provided the following Auto Fraud Quiz. While it by no means covers
the full range of improper dealership practices, it may help you identify
whether you’ve experienced any of the more common schemes, while
providing a better sense of your legal protections.
Was your “new” car really new?
1 Did you buy a new car from a dealership?
2. Does your purchase contract state the car was “new”?
3. Was the mileage on the odometer greater than 100 miles when you
initially purchased it, or did the vehicle exhibit any signs (scratches,
etc.) that suggested that it may have been previously driven?
If you answered yes to each of these questions, your “new”
car may actually have been a demonstrator (“demo”) model
or what dealers refer to as an “unwind,” a vehicle previously
sold by the dealership then returned, typically because financing
fell through. Dealerships are required to disclose if the vehicles
they sell are used, demos or “unwound” vehicles.
Has your contract been backdated?
1. Did you purchase your vehicle from a dealership?
2. Did you sign more than one purchase contract for the vehicle?
3. Do all of your purchase contracts bear the same date, even if
they were signed on different days?
If you answered yes to each of these questions, your purchase contract
may be improperly backdated. Backdating occurs when a dealer has
the customer sign more than one contract for a vehicle – typically
because the dealer can’t get financing under the terms of
the original contract. The dealer then backdates the second contract,
with the new terms and conditions, to match the date of the first,
sticking the customer with financing charges for a period during
which the contract wasn’t yet in effect.
Has any of your paperwork been forged?
1. Are your monthly payment and interest rate as shown on the bill/statement
from the lender different from the amounts listed on your purchase
contract?
2. Were you asked to sign a second contract changing the terms of
the original contract – and did you refuse to do so?
3. Did you get a copy of your credit application, and is your income
accurately stated?
4. Did you sign a credit application with blanks?
If you answered yes to either of these questions, your purchase
contract may have been forged at the dealership. Dealerships sometimes
forge the signature of customers on subsequent contracts that change
the terms of the original signed contract, especially when the customer
refuses to sign off on the new terms. Other commonly forged documents
include credit applications, buyer’s guides and disclosure
forms.
Is your “Certified Pre-Owned Vehicle” damaged
goods?
1. Were you told by the dealership that your vehicle was a “Certified
Pre-Owned Vehicle”?
2. Do you suspect that your Certified Pre-Owned Vehicle may have
been in a prior accident? (For example, does it appear to have been
repainted, had body work done, or have non-factory parts?)
3. Does a CarFax
report for your Certified Pre-Owned Vehicle show that it was
previously registered as a rental or demonstrator vehicle?
4. Has the dealer or manufacturer refused – or been unable
to – fix your Certified Pre-Owned Vehicle while under warranty?
Some dealers falsely advertise used vehicles that have suffered
previous accidents, structural damage, etc. as “certified”
vehicles. The unfortunate result is that the customer is misled
into paying a premium price for a damaged used vehicle.
Was the dealership mark-up on your vehicle disclosed to
you?
1. Did you pay more than the MSRP (manufacturer’s suggested
retail price) for your new vehicle?
2. Did the dealership clearly disclose the MSRP on your new vehicle
prior to the sale?
3. Did the dealership clearly disclose each additional item for
which you were charged that was not included in the MSRP?
4. Did the dealership clearly disclose to you the amount of “added
mark-up” you were paying above MSRP?
5. Were all of these disclosures – MSRP, additional costs
above MSRP, and added mark-up above MSRP – put in writing
and displayed on a window sticker attached to the vehicle?
The vehicle code states that a dealership cannot sell a new vehicle
for more than sticker price (a.k.a. the manufacturer’s suggested
retail price, or MSRP) unless there is a dealer addendum sticker
disclosing itemized costs above MSRP physically affixed to the car.
Did the dealer disclose the ‘negative equity’
on your trade-in?
1. Did you purchase your vehicle from a dealership?
2. Did you have a trade-in?
3. Did you still owe money on your trade-in?
4. Is the net trade-in listed on line 6C of your contract greater
than or equal to 0?
5. Did the dealership tell you your trade-in was worth one amount,
but a different amount appears on your contract?
By law, any negative equity on a trade-in must be disclosed by the dealership
to the customer. The term “negative equity” describes
a situation where a dealership customer owes more on his/her vehicle
than its current trade-in value. (For example, if someone owes $2,000
on his or her car, but its trade-in value is only $1,500, then that
person has $500 of negative equity on the purchase contract.) A
common dealership trick is to offer to “pay off” the
negative equity on a trade-in, then simply roll the amount owed
into the new vehicle price – sticking the customer with increased
financing costs and fees.
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