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Auto Dealer Fraud FAQ

Consumer protection laws protect you from scams and other consumer fraud. There are specific protections for car buyers, including auto dealer fraud and lemon laws.

This page answers common questions consumers have about auto dealer fraud. Learn about what qualifies as auto fraud, how to enforce your rights, and more.

What is auto dealer fraud?

Auto dealer fraud describes deceptive and unlawful practices used by automotive dealers at almost any stage of the vehicle purchase process, from advertising to vehicle pricing negotiation and financing terms.

Examples of auto dealer fraud include:

  • "Bait and switch" advertising practices
  • Deceptive inflation of vehicle prices
  • Failure to disclose information about a new vehicle or used vehicle's history
  • Making false or misleading claims about a vehicle's warranty, including extended warranties, implied warranties, and service contracts
  • Misrepresentation of the vehicle's condition or value

How does a bait and switch occur?

Bait and switch is a form of false or deceptive advertising where a car dealer lures potential buyers by advertising a vehicle at a certain price. The dealer then tells the customer the particular vehicle is no longer available before using aggressive tactics to sell a more expensive car, or something similar to the original vehicle for higher than the advertised price.

What must used car dealers disclose about a used vehicle that is for sale?

In most states, car dealers must disclose whether a used vehicle:

  • Incurred significant damage in an accident
  • Sustained damage by flood or fire
  • Has been designated salvaged or totaled

What is a mileage rollback?

Mileage rollback, or odometer rollback, is a form of auto dealer fraud. This occurs when someone alters or rolls back a used vehicle's odometer, which indicates the total miles driven on the vehicle, to display a lower number than the vehicle's actual mileage.

How do auto dealer fraud cases differ from lemon law cases?

Although both involve motor vehicles, auto dealer fraud cases differ from lemon law cases. In auto dealer fraud cases, improper tactics used by a car dealer during the vehicle sale process are the focus. In contrast, lemon law cases arise from problems or defects with the vehicle itself.

What is the difference between a lemon and a lemon law?

In short, a “lemon" is a defective vehicle. Most lemons are new cars, but some used cars, leased vehicles, and motorcycles can also be lemons.

States set their own definitions for what they consider a lemon, but a vehicle often meets the criteria for a lemon if both of the following apply:

  • It has a substantial defect covered by an express warranty that occurs within a specific period after the purchase
  • It continues to have the defect even after a reasonable number of attempts to repair the problem

To qualify as a lemon, the defect has to affect the car's use, value, or safety. For example, faulty steering or transmission that slips would qualify a car as a lemon.

Lemon laws are a type of consumer law that upholds the consumer's right to get fair value and use of the vehicle purchased. Most states' lemon laws require the manufacturer or dealership to issue a replacement vehicle or refund the consumer's purchase.

Do lemon laws vary by state?

Yes, lemon laws differ by state. Each state's lemon law statutes vary in what they cover, vehicle criteria, and what constitutes a reasonable number of repairs.

The Magnuson-Moss Warranty Act, which provides a basis for consumer rights including lemons, is considered the federal lemon law.

Should I contact the dealer if I think a salesperson committed fraud when I bought a car?

You may have to. In many states, either you or your attorney must contact the auto dealer and allow them to try to correct the problem to your satisfaction before taking any legal action for possible auto dealer fraud.

Most car sales involve a contract. This contact should be in writing. It should allow you to clearly illustrate the problem—for example, the dealer's failure to disclose certain financing charges. You must also state what steps you would like the dealer to take to resolve the problem, like a partial refund of the vehicle purchase price.

How do I file a complaint on a dealership for auto fraud?

First, contact the car dealership. Most states require you to report the issue and request a resolution before escalating the issue or pursuing legal action. Make all requests in writing and keep a detailed record of all repair attempts and conversations.

If the dealership does not resolve your issue, you can file a complaint with your state's consumer affairs agency, which is often part of the attorney general's office.

You can also pursue a lawsuit with help from an attorney.

Can I file a lawsuit for auto dealer fraud?

In most cases, yes. If you recently purchased a vehicle and suspect the dealer may have committed fraud in the sales process, you can speak with an experienced consumer protection attorney for legal advice. An attorney will evaluate all aspects of your case and explain all your options, including filing a lawsuit for damages. They will work with you to ensure the best possible outcome for your case.

In some states, you must contact the dealer, ideally with a written notice, and allow them to correct the problem before you take legal action. Your attorney may also recommend arbitration, or another informal dispute resolution process, before pursuing a lawsuit.

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