Don’t let a dealer take you for a ride!
When you’re purchasing a new or used vehicle, you want everything to go smoothly. A great deal of money is set to change hands in such a transaction, and you don’t want to find yourself on the wrong side of a bad contract or price gouge. You also don’t want any part of a vehicle that has been intentionally misrepresented by the dealer. While the vast majority of dealerships are reputable, there are a small number of them that skirt the rules. If you’re prepared to keep an eye out for these top 10 auto buying scams, you’ll save yourself a lot of heartache and money in the long run.
Please keep in mind that we at Car Deal Experts are not attorneys. Hence, if you require more in-depth information, you should contact a consumer attorney to answer your questions.
#1: You get less trade-in credit than they claim
If you’re planning to trade in a car that’s involved in an upside-down loan (where you owe more than the car is worth in cash), the dealer might claim that the value they’ll give you is the same as what you own. However, there is a value the dealer has in mind, and it can be less than the money owed. This is called negative equity. Unscrupulous dealers might compensate for this by inflating the cash price of the car you want in order to cover over the change in trade-in value given. If this causes the dealer to sell the vehicle for more than the advertised price (more on this below), then they may be violating the law, even if the dealer tells you what they’re doing. If you suspect this is what’s happening, check with an attorney to be sure.
#2: Pumping up monthly payments
Here’s where it pays to know what your car should cost and to arrange financing before you go into the dealership. Why? It’s because some dealers may quote you an inordinately high monthly payment amount. If you sign off on it, then the dealer may load up your vehicle with extras you didn’t necessarily order in order to fill the gap between “should cost” and “does cost.” If the dealer tries to tell you that these accessories weren’t optional when they actually are, you know you’re in trouble.
#3: Backdating a new contract
Let’s say you failed to qualify for the terms on your first auto loan financing contract. The dealer has you come in at a later date to sign another contract with the higher down payment, APR, etc. But here’s the trick: the new contract is backdated to the date you’d signed the initial contract. In this scenario, you are effectively charged for a period of time when the contract was not actually in force. A lawyer can advise you as to whether or not this is misrepresentation on the part of the dealer. Not only that, but a backdated contract may violate the “single document” rule (more to come). Consult your lawyer to be sure. Keep in mind that a dealer only has 10 days to tell you they want to change or cancel a contract. In either case, you the consumer have the right not to sign a new contract if you don’t want. You can return the new car, get your down payment back and have any trade-ins returned to you and be none the worse for it, save for the wasted time.
#4: The single-document rule
This is why auto loan contracts are so long. In some states, laws exist that require that all documents a consumer signs in relation to an automobile loan be included in one contract. No separate documents signed after-the-fact are permitted, regardless of their purpose. Some examples might include trade-in forms or hold check agreements.
#5: Hold check agreements
Not everyone can pay the whole down payment when the contract is signed. That’s why some dealers allow deferred down payments via installment. These must be itemized with both amount and date of payment. Unfortunately, some dealers ask consumers to sign hold check agreements, where the consumer writes post-dated checks that will be cashed later. This creates a provision not included in the original contract, and hence it violates the single-document rule in some states. Ask your lawyer.
#6: Charging more than advertised
If the sticker price at the dealership (or a media ad) states one price for a car, you cannot be charged more by the dealer for the same vehicle with the same features. Even if the dealer attempts to add optional extras but doesn’t tell you they’re optional, they’re selling for more than the advertised price. This causes you to pay more in taxes and fees than you should have to, so be sure to consult your lawyer.
#7: ¿Habla Ingles?
California Civil Code §1632 states that if a lease/purchase is negotiated in Spanish, then the contract must be provided to the customer in Spanish before they sign the English translation. Chinese, Vietnamese, Tagalog and Korean have the same requirements. Check with your lawyer for the law in your state. If the dealer doesn’t comply, you may have the right to back out of the deal.
#8: Full disclosure on used cars
Was that used vehicle you’re eyeing ever
- involved in an accident that caused significant damage?
- a rental or trade-in?
- a lemon law buyback? (Ask your lawyer about lemon laws in your state)
- guilty of having an inaccurate odometer?
If so, the dealer is required to inform you of this.
#9: Is it new or used?
You might think this would be obvious, but a demonstrator vehicle used by the manufacturer or dealership is often listed as “new” on a contract. This is sometimes true of vehicles that were returned because financing fell through for a previous consumer. Your dealer is supposed to tell you this, so if they don’t, ask them!
#10: The whole “certified used” thing
This makes it sound as if the used vehicle has passed through some rigorous inspection program that is supposed to guarantee it’s in good, working condition and free of significant damage. But some dealers have affixed the “certified” stamp on vehicles that have visible accident damage. Get a CARFAX report on the VIN to be sure, and check with a lawyer for more tips on this.