There are several well-known scams that one must be cautious to avoid when in the market for a vehicle. Perhaps the oldest scam involves the odometer reading of a vehicle. Sometimes, car dealers do not accurately disclose a vehicle's odometer reading in an effort to persuade a purchaser that a car is "less traveled" than it actually is. This also makes it so that the car can be sold at a greater price, typically by a dealer that misadvises a buyer that the car is newer than it really is.
Misrepresentation or Nondisclosure Unlawful
There are Federal and State laws making misrepresentations/
nondisclosure with respect to a vehicle's odometer reading unlawful and actionable. The Federal Odometer Act is one of them, which provides for up to triple damages and attorneys' fees and costs for a wronged, prevailing consumer. California's Consumers Legal Remedies Act is a California law that prohibits unfair and deceptive practices by dealers such as making misrepresentations as to a car's characteristics. A consumer prevailing under the Consumers Legal Remedies Act can recover actual and punitive damages, as well as attorney's fees and costs.
Other scams to avoid involve deceptive marketing, such as advertising a used vehicle as "Certified" when it never was. This practice is typically intended by a dealer to inflate a vehicle's selling price by misstating that it is of superior quality and reliability as a result of its certification. The Consumers Legal Remedies Act similarly prohibits this practice and offers the same remedies to a wronged consumer as described above.
Bad Credit Buyers Beware
Last, a common scam for buyers with sub-prime credit histories involves a dealer's effort to "lock-in" a purchaser to a sale with an APR that is substantially higher than for which the dealer knows he can get the buyer approved. The underlying motive for this scam is based on an arrangement with one or more banks that the dealer works with to finance its customers. If a dealer knows it can approve financing for a buyer at 21% APR, but instead tells the buyer that he or she only qualified for 25% APR, this is an actionable misrepresentation under California consumer laws. You might wonder why a dealer would prefer to sell the vehicle at a higher APR? The reason is that the backdoor arrangement between the bank and dealer results in a "kick-back" of some of the "extra" APR points that the Dealer was able to successfully add to the sale. For example, if there is a 4% premium sold on a 21% APR, making the contract reflect a 25% APR, then the Dealer might receive a 2% kick-back from the bank each time the buyer makes his or her monthly payment. All of the above scams are driven by a dealer's effort to maximize profit as much as possible.
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