Auto Dealer Fraud: What Is It and How Can You Protect Yourself From It?
Last updated on July 19th, 2024 at 10:55 pm
Buying a used or new car is a major investment for most people today, hence the need to get value for money. If you are a customer planning to buy a vehicle, then you must watch out for fraud car sellers conduct.
Auto dealer fraud is any unlawful or deceptive practice used by car sellers with the intention of cheating customers. It is likely to happen at any stage when buying vehicles. You could fall victim to this scam from the advertising to the negotiation or the financing stage.
In this blog post, we will discuss common types of auto dealer scams and how you can protect yourself from them.
Let’s get started!
Introduction to Auto Dealer Fraud and Its Types
Today, scammers have upped their games and become exceptional and thorough when executing their deceptive activities. These activities have been difficult to notice owing to the fact that not many people understand how an automobile works.
The activities of scammers are even more difficult to notice for people who are buying cars for the first time. Here, we will be exposing six common tactics unscrupulous vendors use.
1. Inflating the vehicle’s invoice price
Every manufacturer has a particular amount they charge dealers for their automobiles. However, dishonest vendors inflate the price on the invoice by adding additional charges. Most times, the additional amount has already been included in the invoice price.
2. Not disclosing the vehicle’s past damages
This is a common practice for vendors who sell used cars. They will not disclose damages from accidents that had previously happened to the vehicle, knowing that some customers wouldn’t want to buy it if they had the necessary information.
3. Yo-Yo financing
In yo-yo financing, the dealership allows the customer to take the new wheels home, making the customer believe he/she has secured a loan for the vehicle purchase.
However, after some time, the same vendor calls the customer to inform them that the loan is not approved. Hence, the customer needs to come and sign a new contract. Most times, this new contract comes with less ideal terms and a higher rate.
4. Bait and switch
This type of scam happens when an agent lures customers through an advertisement for a particular car for a certain price, but when clients come for that particular vehicle at the initially mentioned price, they are told that it is not available.
The seller then uses aggressive marketing tactics to get the customers to buy a different car at a more expensive price. The seller may, in some cases, sell the same vehicle but, in this instance, at a higher price than was previously advertised.
5. Selling used car as new
Many people understand that a new vehicle is one that has not been paid for and ridden by another person. However, a seller may falsely represent a recently used vehicle returned to the shop as one that has not been ridden before.
In extreme cases, the vehicle may undergo some refurbishment to falsely make it look like it has not been used.
6. Misrepresenting eligibility
This may not be common like the other scams above, but it is another fraudulent activity that people who want to get vehicles must look out for.
Some unscrupulous agents may misrepresent a customer’s credit eligibility for financing so that they will get the customer to sign an unfavorable term and get them to buy the vehicle at a higher interest rate.
How Can You Protect Yourself From Auto Dealer Fraud?
No one wants to deal with issues, especially when it comes to cars. However, this is not always the case, as many people have been victims of auto dealer fraud.
Here are six tips that can help you protect yourself from it:
1. Take all the time you need
One mistake some car buyers make is trying to rush when buying a vehicle, mostly when that is the first time they are buying one. However, this is a big mistake.
When you want to buy a car, don’t be in a rush. The salesman may want to cajole you to close the deal in a day; don’t buy it. It may favor the salesman if the deal is closed in a day, but you may lose a lot if you do not give yourself time to do the necessary research to ensure you are buying a reliable and safe automobile.
2. Read the warranty
Many buyers want to skip this part, but it will pay if this is taken seriously and with care. Every car goes through wear and tear, and it is important to know what your warranty covers so that you can lay a claim in case something happens.
After reading the warranty, don’t forget to clarify the moments that trouble you with the seller. If necessary, request some adjustments to protect yourself from deception. Don’t forget to get a signed document after the adjustment.
3. Ask a mechanic to help you
Having a mechanic as your wingman is one of the best decisions you can make when you want to buy an automobile from a seller’s shop. A good mechanic has the technical knowledge to know when a car, mostly a used one, is faulty. They can tell you specific problems related to different brands and models and find you the best vehicle based on your needs.
4. Test-drive the car
It is important for you to have a feel of what the vehicle you want to buy feels like on the road. You can request a test drive from your vendor. This should not be a hard request to grant when you leave your verifiable ID with them.
To make sure your vehicle is in good condition, take the mechanic with you while doing the test driving. You should look out for the steering, gauges, brakes, and any unfamiliar sounds while test-driving.
5. Pay through a reliable financial institution
Car sellers make huge profits from customers when they provide their own financing options. Oftentimes they leave their clients with a few options. However, if you have a good credit history with your bank, using it to finance your payment will be more profitable for you.
Banks offer a more sustainable lower rate than most dealerships; plus, when using the bank, you will be in control of the negotiation with car sellers.
6. Watch out for fraudulent sellers
Fraudulent sellers are lurking everywhere, especially online. Their main objective is to profit from unsuspecting victims. However, in the age of the internet, it’s not difficult to learn more about such people. First, read reviews from other buyers. If something feels off, like many good reviews from the same person or no reviews at all, it’s best to avoid purchasing a vehicle from this person.
Another method is to use people’s search engines. You need either the person’s full name, phone number, or address. One of the websites you can use is Nuwber. On this website, you will find a person’s criminal records, judgments, financial records, and other information that will help you understand if buying a car from them is worth it.
Final thoughts
There you have it! Everything you need to know about auto dealer fraud.
Owning your own vehicle is always thrilling, and you probably can’t wait to take your new auto home amidst all the congratulations. However, there’s so much at stake when you want to get yourself a good car.
We’ve introduced you to the basics so you can stay safe when buying the car of your dreams. Equipped with the above-mentioned tips, you can rest assured you will be taking home exactly what you have paid for–a car that won’t give you problems in the long run.
