If You Are Buying a Car, Beware of Auto Dealer Fraud

Posted On September 23, 2016 In Helpful Information

Mortgage fraud is only one of many ways scammers target vulnerable consumers. Car dealerships also take advantage of those in desperate situations with fraudulent tactics. Salespeople will target folks with poor credit, the disabled, the elderly and those with a poor grasp of consumer protection laws. Here is how you can spot these auto dealer fraud scams and avoid being ripped off.

The Top Five Auto Dealer Fraud Scams to Avoid

1. Bait and switch rebates: Car dealership scams will sometimes offer numerous rebates to attract potential buyers to their lots. In reality, this is deceptive advertising because the dealership knows that most of the people who show up will not be able to use these rebates. For example, a vehicle will be advertised at a reduced price of $25,000. What the salesman does not say, is that the rebate is only for members of the military. Without the rebate, the vehicle is $26,000. A prospective buyer would not find out that they do not qualify for the rebate until it is almost time to sign for the car. After spending hours in the finance office going over paperwork, vulnerable buyers are exhausted and ready to sign for the vehicle anyways.
2. Misrepresentation and non-disclosure fraud: Used car dealerships may fail to specify if vehicles were rental cars or involved in collisions so they can sell at the normal market value. In other cases, the car warranty may be expired. Scammers may also tamper with the odometer to make the vehicle look like it has fewer miles, or sell a used vehicle as new. See if it is possible to run a vehicle history report using the car’s vehicle identification number.
3. Spot delivery scams: This is more commonly known as the ‘yoyo financing scam’. Dealerships that allow consumers to buy on the spot before completing financing may entice potential buyers with lower credit scores. After the buyer leaves the lot with a new car, the scammer may call back a week later and say that the paperwork is incomplete or the financing fell through. Buyers will be called back into the dealership to sign paperwork for new monthly payments and higher interest rates. This is an especially disastrous scam for people trading in vehicles for lower monthly payments on new cars. People in this situation may find the dealership has sold their cars within hours of driving off the lot, and they are now at the whim of higher interest rates and monthly payments for new vehicles.
4. Fake credit score scams: Dealerships may misrepresent the credit history of buyers to sucker them into higher interest rates and monthly payments. For example, a buyer with a credit score of 680 is told by the dealership his or her score is 550. Scammers will use this trick to tell buyers they do not qualify for the deal they were originally told about, and instead have to pay much more. The way to get around this scam is to show up with a printout of your most recent credit score. Keep in mind, you get one free credit report from all three credit bureaus once a year.
5. Predatory lending: Predatory lending is a growing problem in the used car industry. These loans will have super-high interest rates, long repayment terms and be hidden with fees. Predatory lenders sometimes advertise vehicles with extra features, but sell cars that lack the said features. In addition, predatory lenders will use some of the scams we have already mentioned.

Our Attorneys Can Help You Fight Auto Dealer Fraud

Texas does have consumer protection laws that can help the victims of auto dealership scams. If your vehicle is new, you may have protections under the Texas Lemon Law. Under some circumstances, the Texas Lemon Law allows you to receive a refund or replacement vehicle.

The Texas Deceptive Trade Practices Act can also offer protections. Victims of car dealership fraud should call an attorney to explore what options might be available.

The Texas personal injury attorneys at Mike Love & Associates, LLC can look over your vehicle or leasing paperwork and help you develop a strategy for recovering from acts of fraud.