Common Bad Auto Dealership Practices

Joshua Charles Anaya

Written by

Fraud Lawyer - San Diego, CA

Contributor Level 7

Posted over 1 year ago. Applies to California, 1 helpful vote

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1

Trade-in Overestimation:

Sometimes a dealer agrees to value a trade-in vehicle at the balance due on the trade-in vehicle, leading the buyer to believe he will not owe anything on the trade-in. Instead, dealer values the vehicle at its actual value, usually below the balance due on the trade-in, and adds the difference to the cash price of the vehicle. As a result, the customer pays more in sales tax and registration. Prior to going to the dealership, research the trade-in value of your trade-in vehicle online at Kelley Blue Book online or Edmunds.com. Also, contact your finance company ask what the payoff balance on your trade-in vehicle is.

2

Changes to the Advertised Price, Additional Mark Up and Extras:

A dealer cannot legally sell you a vehicle for more than the advertised price, so pay attention to this. Sometimes dealers add "mark up" to their vehicles by using an addendum sticker to the Manufacturer's Suggested Retail Price (MSRP). They do this to start the negotiations above the MSRP. Don't fall into this trap. Always start the negotiations at MSRP or Edmunds.com's actual vehicle price Dealers do not make much money on the sale price for new vehicles, so they really try to push add-on items such as an anti-theft system, an extended warranty, leather seats, etc. They will add these on the vehicle price or monthly payments without telling you. You do not have to get any of these extras. Further, if they tell you not to worry because it is already in your monthly payment or it is free - do worry, because it is not free. You are always paying for it. If they insist that it is free, then ask them to confirm this in writing.

3

Failure to Disclose Material Facts about a Vehicle:

A dealer has an affirmative duty to tell you certain "material facts" about a vehicle, whether or not you ask for them. This includes disclosing if a vehicle was a "lemon law" buyback, a prior rental, a prior salvage or had been in an accident that required major repair work such as frame or suspension damage.

4

Violating the "One Document" Rule:

The law requires that all obligations of both parties be contained in one single document. However, dealerships try and get around this by having customers sign trade-in forms (where customer agrees to pay any difference between the trade-in value), hold-check agreements (where a dealership signs an agreement promising not to cash a deposit check until after a certain date) and attempting to "backdate" contracts.

5

Failure to Provide a Contract in Your Own Language:

If you negotiate a contract primarily in Spanish, Chinese, Vietnamese, Tagalog or Korean, a dealership must provide you with a translation of the contract before you sign the English version. Failure to do so is against the law.

6

Selling a Used Car as "New":

If a vehicle was used as a demonstrator or was purchased and returned for whatever reason, it cannot legally be sold as "new."

7

"Certifying" Defective Vehicles:

A certified used vehicle is a refurbished vehicle that has undergone an inspection and received certification from a manufacturer or dealer. In theory, they guarantee that the vehicle is in good working order and come with an extended warranty. However, in many cases, dealer certification is covering up the fact that the vehicle has frame damage, is a former salvage or has any other number of deficiencies.

8

Lumping License Fees and Registration/Transfer/Titling Fees:

The law entitles a vehicle purchaser to a refund for any overpayment of License Fees paid, which is why the law requires that the selling dealer correctly states, separates, and itemize the License Fees due on Line 2A and the Registration/Transfer/Titling Fees due on Line 2B of a vehicle purchase contract. A failure to include the amounts due on both Line 2A and 2B is a violation of the Automobile Sales Finance Act. Despite this, a dealer will sometimes lump together the License Fees and Registration/Transfer/Titling Fees all onto Line 2A of the RISC. As a result, the buyer will not know the actual amount of the License Fees, and will not know if he or she is entitled to a refund.

9

Backdating Contracts:

If you sign a contract and later, a dealership asks you to come back in and sign a second contract, this contract cannot be dated the same day as the first. If it is, the contract is "backdated," which is illegal.

10

10 Day Right to Cancel:

The backside of your contract provides that after the you sign the contract, the dealership can cancel it within 10 days if it notifies you that it wants to cancel, because it was unable to find a finance company to purchase your contract. This only applies to the dealership, not you. You do not have the right to cancel. If the dealership does not notify you of its intent to cancel within 10 days, then the contract is binding on both parties. You can hold the dealership to that contract if you want. You should make your payments under the contract directly to the dealership. Any threats to report the vehicle stolen or repossess it would be illegal. If the dealership cancels within 10 days, you do not have to sign another contract. You can return the vehicle and get your money back.

11

Changes to the Price of Extras in the Second Contract:

When a dealership presents to you a second contract to sign, often the price of the vehicle or the annual percentage rate will go down. The dealership is doing this because the finance company is telling the dealership that it will only finance up to a certain amount. To offset the amount they are losing on the price of the vehicle, the dealership will sometimes tell you that you have to pay more for a service contract or GAP insurance than you did on the first contract, or it may tell you that you have to purchase one of these items. This is illegal, and the dealership is not allowed to do this. If you think you have been the v

Additional Resources

If you think you have been the victim of auto dealership fraud, contact the attorneys at Rosner, Barry & Babbitt, LLP. for a free consultation. 800-4NOLEMON

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