Auto Dealer Fraud

In 2023, Americans bought an estimated 35.9 million pre-used vehicles and 15.6 million new ones, signaling a revival of car purchases that dipped with the pandemic.

An increase in demand for used and new vehicles, however, usually bodes well for unscrupulous auto dealers who swindle billions of dollars each year from unsuspecting buyers.

In this article, we take a deep dive into car dealer fraud, specifically discussing how you could identify it and protect yourself.

Common Auto Dealership Frauds to Guard Against

If you are not careful, car dealers can really take you for a ride.

Some of the ways you could get duped include:

Misleading Advertising

Dealerships can mislead buyers by exaggerating or concealing information in their advertisements.

Bait-and-Switch Scams

This is a tactic sellers frequently use to attract footfall.

For instance, they may advertise a fast-selling model at a rock-bottom price. But when you go over to check it, you will find it is no longer available. The truth is, the seller never had the car in the first place. The ad was only a bait to get you to visit their dealership.

Additional Fees

Sometimes, auto dealers could add extra fees and charges to the negotiated price, which you will only find out when signing the papers.

Hiding Defects and Accidents

Deceptive sellers may deliberately hide critical information about major defects, accidents, and repairs to prevent buyers from negotiating the price.

Odometer Fraud

Some dealers could manipulate the odometer to reduce the mileage and sell the vehicle at a higher price.

Trade-In Fraud

This happens when you bring your car to trade in for a new one. Fraudulent salespeople could substantially undervalue your old vehicle, preventing you from getting a reasonable price deduction from your new purchase.

In some cases, sellers could over-value your used car, giving you the false assurance of securing a good deal. However, they will add the extra valuation amount to the purchasing price of the new vehicle, leaving you worse off in the end.

Financing Scams

Auto dealers could make it seem like you have a lower credit score than what you actually have. This allows them to sign you up for car loans at higher interest rates.

Adding “Extras” Without Buyer Consent

To increase their sales commission, unscrupulous salespeople could add unnecessary accessories, warranties, options, and extras without your prior consent.

Detecting Car Dealer Fraud: 6 Signs to Watch

The elaborate fraudulent tactics deployed by dealerships could make any buyer anxious about purchasing a vehicle. However, you can avoid many of these scams by watching out for the following red flags.

1. Too-Good-to-Be-Real Offers

When looking for bargains, always keep in mind that heavily slashed prices could mean a bait-and-switch scam or a lemon.

2. Vague Information

Is the dealer unable to provide the vehicle history report? Are they avoiding questions about accidents and repairs? If so, they are likely hiding critical details that could deter buyers or drive down the price of the car.

3. An Unusually Low Mileage

Does the mileage appear suspiciously low, considering the vehicle’s condition? If the answer is yes, there is a high chance the odometer is altered.

4. Undue Pressure

Is the salesperson in a hurry to close the deal? Unreasonable urgency is a sign that the seller is trying to prevent you from properly inspecting the car or vehicle information.

Genuine dealers who have nothing to hide should not worry about you taking the time to assess the car.

5. Undisclosed “Extras”

Has the seller added extra service contracts, options, and accessories that you didn’t request? This type of practice is a telltale sign of an untrustworthy dealer.

6. Undiscussed Terms

Dishonest sellers often sneak in extra terms to the agreement that were not disclosed during negotiations.

How Can You Protect Yourself Against Dealership Fraud?

Here’s how to outsmart deceitful auto dealers and safeguard your interests against unethical selling practices.

Research in Advance

When you have done your homework, unscrupulous actors have little chance of misleading you.

For instance,

  • Research the market price of the specific model you are interested in purchasing. Get an estimate of your current vehicle, too, if you are hoping to trade it in.
  • Find out your credit score before applying for a loan.
  • Shop around for borrowing options to secure a good rate and terms.
  • Learn more about dealerships you are unfamiliar with—visit their website and read buyer reviews published on verified third-party platforms. You can also reverse search an auto dealer’s contact number on Nuwber to find out if they are who they claim to be.

You are bound to notice a red flag if the dealer is linked to deceptive or unethical practices.

Call Before You Visit

Contact the seller on the day you visit them to ensure the specific car they had advertised is still available. This will help you avoid bait-and-switch scams.

Ask Questions

Gain as much clarity as possible about the vehicle’s condition, price, and selling terms. For instance, check what the price includes and whether there are additional charges or fees. Inquire about prior accidents, defects, and damages, and ask to see repair reports.

Test Drive

How a vehicle looks and how it performs on the road are two entirely different things. So, take the car for a test drive before closing the deal.

Check the Vehicle History

When you are purchasing a pre-owned car, checking its vehicle history report is essential to learn more about its title details, liens, previous owners, and how it was used. The report will indicate accidents, repairs, service history, and odometer readings, too.

These are all critical information for you to understand a vehicle’s condition and its true market value.

Arrange an Independent Inspection

Getting the vehicle checked by an experienced mechanic is important, especially when purchasing a used car.

It is best to walk away if the dealer doesn’t allow it.

Read the Agreement

To ensure you don’t get duped by dishonest salespeople, take the time to review the agreement before signing. Seek clarity on areas you are unsure of, and get the dealer to put down in writing all terms discussed in order to prevent misunderstandings.

Final Thoughts

Frauds are rampant in auto dealerships across the US. So, using your best judgment is critical when purchasing a vehicle, whether used or new.

If you come across unethical, misleading, or illegal practices, always report them to the FDA and the local police.