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Auto Dealer Fraud

Buying a car can be an exciting experience. But, its crucial to be aware of the potential for fraudulent activity at auto dealerships.

Auto dealer fraud describes deceptive and unlawful practices used by car dealers. It can happen at any stage of the vehicle purchase process, including:

  • Advertising
  • Negotiating vehicle pricing
  • Financing

FindLaw's Auto Dealer Fraud section offers information on:

  • Frequently asked questions about auto scams
  • How to enforce your rights if you experience this type of consumer fraud
  • Tips for buying a used car
  • And more

Auto Fraud and the Law

State and federal consumer protection laws prohibit deceptive sales practices. These laws and regulations cover automotive transactions.

In most states, the attorney general or equivalent consumer affairs agency oversees and enforces deceptive business practices. Many states have enacted the Uniform Deceptive Trade Practices Act (UDTPA). This law protects consumers from misleading advertising and other deceptive sales practices.

The Federal Trade Commission (FTC) is the governing agency tasked with protecting consumers. Specifically, the Federal Trade Commission Act is the primary federal law that outlaws unfair and deceptive sales. For motor vehicle sales, this law regulates:

  • False advertising
  • Mandatory sales and financing disclosures
  • Handling consumer complaints and issues
  • Other aspects of vehicle purchases

Common Types of Auto Dealer Fraud

Auto dealer fraud can happen at almost any stage of the vehicle buying process, from advertising to signing the sales contract. Here are some common situations that can give rise to auto dealer fraud:

Improper Vehicle Invoice Price Inflation

The invoice is the amount the dealer pays the manufacturer for the vehicle. An example of improper invoice price inflation is adding charges to the invoice figure when those charges were originally included in the invoice price (like "destination" charges).

Bait and Switch

This is a form of deceptive advertising where a dealer lures car buyers by advertising one vehicle at a certain price. Then, they tell the consumer that the particular vehicle is no longer available and use aggressive tactics to sell a different, more expensive vehicle. In some bait-and-switch scenarios, the dealer may try to sell the advertised vehicle at a price higher than the advertised price.

Add-On Concealment

This practice hides the addition of optional "add-ons" during the negotiation process. It can also entail hiding the costs of add-ons but including them in the final purchase price. Add-ons include warranties, service contracts, and maintenance programs.

Vehicle Trade-Ins

This happens when a dealer intentionally undervalues and underpays for a trade-in vehicle.

New Dealer Returns

This involves selling a vehicle as "new" when someone returned it to the dealer due to a defect or mechanical problem. Lemon laws require dealers to post a sticker on any lemon buyback identifying it as a defective vehicle.

Salvaged and Flood-Damaged Vehicles

In used car sales, a dealer fails to disclose that a vehicle was designated as salvaged after an accident. This also applies to vehicles with flood damage.

Odometer Tampering

In used car sales, odometer rollback is when a seller tampers with the odometer to conceal the vehicle's actual mileage.

Avoiding Fraud and Scams at Car Dealerships

Being well-informed is the best way to defend yourself against auto dealer fraud. A few ways to protect yourself from scams and fraud when buying a car include:

  • Carefully review contracts and documents before signing. Clarify anything you don't understand. Make sure everything is in writing. Spoken guarantees can be difficult to enforce.
  • Research the dealership or seller before. Check customer reviews on Google, Yelp, and other online platforms. Look for dealerships with BBB Accreditation or an A+ rating.
  • Look for dealerships accredited by the National Independent Automobile Dealers Association (NAIDA) or the American International Automobile Dealers Association (AIADA).
  • Watch out for warning signs of bad business practices, including high-pressure sales tactics, vague information, and unrealistic claims and promises. Trust your intuition.

Enforcing Your Consumer Rights

If a dealership or car salesperson scammed you, you can enforce your legal rights.

One step you can take is to contact the dealer. Many states require consumers to contact the dealer first and allow them to correct the problem before they can file a lawsuit. Contact the dealer in writing and describe the issue and how you would like the dealer to fix it.

You can also file a complaint with the state agency that protects consumers' rights in vehicle purchases. In most states, this is a consumer protection division of the attorney general's office. In some states, it's a separate agency that handles explicitly auto dealer complaints.

You can also report fraud to the FTC and file a complaint with the Better Business Bureau (BBB).

If you aren't successful with the methods above, consider contacting an attorney with experience in consumer law for more help.

Hiring a Consumer Attorney for Auto Fraud

If you suspect a dealer or has engaged in auto dealer fraud or deceptive practices, you may want to contact an attorney to discuss your legal options.

consumer protection attorney in your area can review the facts and help determine if you have a valid fraud claim. They will tell you the next steps for your situation and advocate for your consumer rights.

Learn About Auto Dealer Fraud

You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help

Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.

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