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.

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.