What Are Common Ways Dealers Cheat Consumers in California?

There are many unscrupulous car dealers in California all too willing to take advantage of consumers and cheat them. The best thing you can do to protect yourself from their tactics is to educate yourself. Below is valuable information regarding how car dealers cheat you that will help you avoid becoming a victim of auto dealer fraud.

California Buyers

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Dealers engage in a number of bad practices that violate California law. It is important to be aware of these tactics so you do not become a victim of fraud:

Chances are you found your car dealer by searching for a car on the Internet. A dealer cannot legally sell you a vehicle for more than the advertised price, even if you didn’t see the ad, so pay attention to this. If you are buying a new vehicle, the dealer is required to post a Monroney label with the Manufacturer’s Suggested Retail Price (MSRP). Sometimes dealers add “mark up” to their vehicles by using an addendum sticker to the MSRP. This has become very common since the Covid pandemic. Dealers do this to start the negotiations above the MSRP. Don’t fall into this trap. Always start the negotiations at MSRP or Edmunds.com’s actual vehicle price. If you are buying a used vehicle, take a screen shot of the advertised price. Bring it with you to the dealership to make sure you don’t get overcharged. If you are buying a used vehicle, read the description of the vehicle. Does it tell you how many owners there were or how the vehicle was used in the past? If the dealer tells you to e-mail for today’s price, send the e-mail and save the price you get. If the dealer puts a link to a Carfax or Autocheck in their ad, click on it and see (a) if it is actually for the advertised vehicle and (b) if it provides any useful information about the vehicle’s past.

Dealers do not make much money on the sale price for new vehicles, so they really try to push add-on items such as an anti-theft system, a service contract, nitrogen in the tires, etc. They will add these on the vehicle price or monthly payments without telling you. You do not have to get any of these extras. Further, if they tell you not to worry because it is already in your monthly payment or it is free – do worry, because it is not free. You are always paying for it. If they insist that it is free, then ask them to confirm this in writing. Dealers are required to give you a breakdown of what your monthly payment is with and without additional products. Make sure you read that form before you sign it and the contract to buy the vehicle. When the dealer told you what your payment would be, was it based on all the additional products included in the disclosure form? If you don’t want the additional products, tell the dealer and don’t sign the disclosure form and contract.

Sometimes a dealer agrees to value a trade-in vehicle at the balance due on the trade-in vehicle, leading the buyer to believe he will not owe anything on the trade-in. Instead, the dealer values the trade-in at its actual value, usually below the balance due on the trade-in, and adds the difference to the cash price of the vehicle. As a result, the customer pays more in sales tax and registration. Prior to going to the dealership, research the trade-in value of your trade-in vehicle online at Kelley Blue Book online or Edmunds.com. Also, contact your finance company ask what the balance and payoff on your trade-in vehicle are before you go to the dealership. Then pay attention to what the dealer puts on your contract.

A dealer has an affirmative duty to tell you certain “material facts” about a vehicle, whether or not you ask for them. This includes disclosing if a vehicle was a “lemon law” buyback, a prior rental, a prior salvage or “total loss”, or had been in an accident that required major repair work such as frame or suspension damage. Be sure to ask the dealer if the vehicle was in an accident or has any other problematic history. If the dealer employees tell you they don’t know, ask then for the results of their inspection of the vehicle. Also ask for permission to take the vehicle to your own mechanic for an inspection.

California law requires that all obligations of both parties concerning the total cost and terms of payment in a vehicle sale be contained in one single document. However, dealerships try and get around this by having customers sign trade-in forms (where customer agrees to pay any difference between the trade-in value), hold-check agreements (where a dealership signs an agreement promising not to cash a deposit check until after a certain date) and separate promissory notes when you are deferring your down payment and not paying it on the day of purchase. Before signing your contract, look to see if it has all the agreements you made about when and how you are going to pay for your vehicle.

If you negotiate a contract primarily in Spanish, Chinese, Vietnamese, Tagalog or Korean, a dealership must provide you with a translation of the contract before you sign the English version. Failure to do so is against the law.

If a vehicle was used as a demonstrator or was purchased and returned for whatever reason, it cannot legally be sold as “new.” If the odometer reading on your “new” vehicle seems high to you, ask the dealer why the vehicle has so many miles on it.

A certified used vehicle is a used vehicle that has undergone an inspection and received certification from a manufacturer or dealer. In theory, they guarantee that the vehicle is in good working order and comes with an extended warranty. While manufacturers seem to like to compete about how many points they inspect, take a look at the inspection checklist to see if they count each tire as a single point or some other means on inflating the number of points being inspected. Dealers are required to give you a completed inspection checklist that shows you the results of the inspection. Many dealers, however, perform the repairs and then check the box on the list that everything was fine. That is misleading and, depending on what they covered up, may be illegal. Additionally, in many cases, dealer certification is covering up the fact the vehicle has prior body or frame damage, is a former salvage, or has any other number of deficiencies. There is no industry standard for what qualifies as “certified”, and the definition varies from manufacturer to manufacturer and dealer to dealer. Make sure you ask for the checklist and any repair orders associated with the certification process. If a dealer doesn’t want to show you, then you probably don’t want to buy the vehicle.

The law entitles a vehicle purchaser to a refund for any overpayment of Vehicle License Fees paid, which is why the law requires that the selling dealer correctly states, separates, and itemizes the Vehicle License Fees due on Line 2A and the Registration/Transfer/Titling Fees due on Line 2B of a vehicle purchase contract. A failure to properly separate and disclose the proper amounts due on both Line 2A and 2B is a violation of the Automobile Sales Finance Act. Despite this law, many dealers add the fees together and disclose then on Line 2A of the Contract. As a result, the buyer will not know the actual amount of the License Fees, and will not know if he or she is entitled to a refund. Some dealers also charge fix amounts on all their contracts that are not related to the actual amounts due.

The backside of your contract provides that after the you sign the contract, the dealership can cancel it within 10 days if it notifies you that it wants to cancel, because it was unable to find a finance company to purchase your contract. This only applies to the dealership, not you. You do not have the right to cancel. If the dealership does not notify you of its intent to cancel within 10 days, then the contract is binding on both parties. You can hold the dealership to that contract if you want. You should make your payments under the contract directly to the dealership. Any threats to report the vehicle stolen or repossess it would be illegal. If the dealership cancels within 10 days, you do not have to sign another contract. You can return the vehicle and get your money back. If the dealer asks you to come back in and sign a new contract, that is entirely up to you. If it is a better deal for you, and you want to keep the vehicle, then you should feel free to sign a new contract. But be careful when you do – often times dealers change multiple numbers on the contract while telling you something different. If you are asked to sign a new contract, make sure you read it to know whether you want to agree to the new terms.

When a dealership presents to you a second contract to sign, often the price of the vehicle or the annual percentage rate will go down. The dealership is doing this because the finance company is telling the dealership that it will only finance up to a certain amount. To offset the amount they are losing on the price of the vehicle, the dealership will sometimes tell you that you have to pay more for a service contract or GAP insurance than you did on the first contract, or it may tell you that you have to purchase one of these items. This is illegal, and the dealership is not allowed to do this. The dealer may also tell you that now you have to buy an additional product in order to get the deal financed. Again, this is illegal.