How do I Recognize Car Dealer Fraud?

10 Questions About Car Fraud 1. How do I recognize false advertising?

Take any ads with you to the dealer. Check the window sticker and the VIN. The window sticker lists standard features of the car, add-on accessories and an itemization of price. A motorcycle will have “hanger tags” with price information. The sticker should tell you what you are getting. But occasionally, it is false, such as listing phantom airbags, inflated towing capacity, ABS brakes or hidden items. Always keep the sticker with your purchase documents for reference. If the salesman can’t find the vehicle you saw advertised, or tries to bump up the price or terms, you may be the victim of a “bait & switch.”

2. What is "odometer fraud"?

It is illegal to change the odometer or to falsify the odometer disclosure, which should accurately reflect the miles driven since leaving the factory. Before the days of car computer systems, the odometer was a simple mechanical device that was quite easy to tamper with. Nowadays it’s harder to rollback the odometer, but not impossible. More commonly, the dealer will simply misstate the number on the contract and/or odometer forms. Make sure the paperwork matches the dashboard figures.

3. What are finance terms?

Unless you are paying cash for the car, the dealer is selling two separate things: (1) the wheels & steel, and (2) the means to pay for it. Remember that each of these is a separate profit maker for the seller and their profit comes out of your pocket. To avoid “sticker shock” dealers often hide the finance terms. Too many car buyers pay more attention to the color of the vehicle than they do to the interest rate. This is a big mistake. Finance terms include interest, fees, late charges and other costs of credit. Ask what range of interest rates the lender is offering. It may not be enough to ask for the “best rate” you can get. Sometimes the dealer will get a small kickback for getting you to accept a higher interest rate than the bank’s lowest terms. Never sign a contract with finance terms left blank.

4. What should I focus on more, the amount of the monthly payment or the price?

You need to look at both. You must be able to comfortably afford the monthly payments for the entire term of the loan but you must also compare the price to the MSRP. Know what you are actually paying for this car. Dealers like to lower the monthly payment by stretching out the term of the loan. Think about it. If you don’t intend to be driving the car in 6 years, do not enter into a 6 year loan. Avoid this common trick and do your own math.

5. What about leasing?

Leasing is often more expensive in the long run. At the end of making the payments you have no trade-in, nothing to show for it. Early termination charges can be an unpleasant surprise if you find you want to trade-in the car before your lease is up. It is not as simple as a daily car rental. Consumers frequently complain about hidden excess mileage or wear and tear charges, when they get a whopping bill at the end of the lease. Our advice is: Look before you lease!

6. What is "lemon-laundering"?

The lemon laws really started to have a big impact in the 1980s. Beginning about that time, manufacturers had a glut of returned lemons on their hands. They sold them without disclosure. California was one of the first states to enact a law prohibiting this practice. Now these cars must be resold with a specific disclosure form and title branding.

7. Can they make me come in later and re-sign documents at a different price?

The small print in your contract might say that the deal is “conditional” upon approval by a lender. However, that doesn’t mean you have to agree to new terms they dictate to you, if you are willing to just give the car back then and there. If you left them a trade-in vehicle you may be entitled to get that back as well. But this is where it gets messy. You might be caught in what is known as a “yo-yo.” Don’t be forced into new terms you cannot afford.

8. What if I bought a car “as is” and find out later it’s a wreck?

“As is” used car sales do impose an extra burden of “buyer beware.” You should have an “as is” car checked out by an independent mechanic before you buy. However, that doesn’t mean the dealer can outright lie to you. Even an “as-is” sale can sometimes be rescinded for fraud.

9. What about buying a former rental car?

In California, the fact that a used car was bought from a rental fleet like Hertz or Budget must be disclosed to the next purchaser. Most people would not buy a prior daily rental (sometimes called a “PDR”) or else they would pay somewhat less. On the whole, people just don’t take as good care of rental cars as they do their own. This is material information the next buyer would like to know.

10. What’s a certified used car?

Manufacturers and their dealers increasingly sell cars as “certified”. Programs vary somewhat between manufacturers. The concept is that the manufacturer has trained its dealers to go through a list of items to be checked out, possibly repaired and warranted for resale. We hear a lot of complaints about so-called “certified” cars that have in fact not been properly checked out or repaired, or have even been in previous accidents. Certified used cars almost always carry a premium price. When it is not a premium product, there may be fraud involved.


These questions and responses DO NOT constitute legal advice. They are intended to provide general information to improve your consumer literacy and give a broad understanding about how the marketplace works in the areas discussed. Consumer protection laws differ in different states. Even in California laws frequently change through legislative amendments, developing case law, and sometimes the effect of overriding federal regulations. Your legal rights and remedies will depend on your particular circumstances, documents and evidence. If you have further questions, just give us a call.