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Watch out for auto dealer fraud allegations

On Behalf of | Oct 11, 2023 | Auto Dealership Law |

You no doubt put a lot of blood, sweat and tears into building a successful auto sales business in California. That last thing you need is for a disgruntled consumer to levy false accusations against your company, placing your personal and professional reputation at risk, and possibly ruining your business. The more you know about auto dealer fraud allegations ahead of time, the better able to protect your interests you’ll be.

In the auto dealer industry, fraud can occur at various stages of interaction between a car company and its customers. You must be honest in advertising and service, all the way through the closing of every deal. There are several types of auto dealer fraud that may compel a consumer to file a complaint; avoiding allegations from the start is the best way to deter legal problems.

Auto dealer fraud occurs when you alter invoices

The price you pay for a vehicle to sell on your lot is on the invoice. You cannot adjust the document to show a higher price. This is known as “price inflation,” which is a type of fraud.

If you’re advertising a specific vehicle, it must exist and be for sale

Many auto dealers have run into serious legal problems in the past for conducting bait and switch schemes. If your company is advertising a particular vehicle in the hope of gaining foot traffic, the vehicle in question must be for sale on your lot at that time. It is fraudulent to draw in customers by advertising a vehicle, then telling them it is no longer available, followed by an aggressive sales pitch for other cars on the lot.

Don’t take advantage of a customer’s ignorance for a trade-in

You could wind up facing fraud charges if you undervalue a vehicle that a customer has offered you in a trade in. Many people lack the knowledge necessary to determine a fair value for their car or truck. An auto dealer must offer and pay a fair price for trade-ins.

A vehicle advertised as “new” must be new

Someone can file an auto dealer fraud complaint against you for listing a returned vehicle as “new” for sale on your lot. Perhaps a customer purchased a vehicle and returned it a few days later because of a mechanical issue. Because it had left your lot and final sale documents were signed, it can only be sold as a pre-owned vehicle. If you list it for sale again as “new,” you are committing fraud.

There are numerous other types of auto dealer fraud, some of which apply to used car sales, as well. The bottom line is that avoiding legal problems is much easier to do if you stay updated on California auto sales laws and regulations and make sure that your company is compliant. It’s also wise to retain support, so that assistance is readily available if a legal issue arises.



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