Auto dealer fraud is the unlawful and deceptive practice an auto dealer uses during the buying process to get people to buy vehicles. In a majority of states, an auto dealer must tell whether the used vehicle:

  • Was salvaged;
  • Incurred major damage; and/or
  • Had been in a flood.

If the dealer makes misrepresentations or uses fraud/deceit regarding factors like these, they might be held liable for fraud. A common example of this is where an auto dealer claims that a car is new or “barely used”, when in fact it had previously been in a major accident and was salvaged.

Keep in mind that salvaged cars can also be called “rebuilt” cars, if they are adequately fixed and then re-branded by the dealer or previous owner. While there are many ways to run a complete auto history on a car, it is still possible for shady individuals to hide the fact that the car was salvaged.

Also, if you were aware that the car was salvaged or previously damaged, but were simply assured it works now, then it is unlikely you have a case for auto dealer fraud. Instead, the Lemon Law will apply. If you bought your car from a private seller and not a dealer, then you are unlikely to have any other options.

Is a Lemon Law Case Different from Auto Dealer Fraud?

A lemon vehicle has a defect or problem the prior owner withheld from the new owner. Auto vehicle fraud involves illegal tactics, fraud, or deceit used by an auto dealer, rather than the previous owner of the vehicle.

On the other hand, if the auto dealer made misrepresentations regarding the car being a lemon vehicle, they might still be held liable for fraud. An example of this is where the dealer makes misrepresentations about the car’s history and its involvement in previous lemon vehicle-type cases.

What are Common Types of Auto Dealer Fraud?

Auto dealer fraud can come in many forms and can involve many different types of fraudulent schemes. Some of these include:

  • Odometer Rollback: also called mileage rollback, is a common type of dealer fraud. It occurs when a dealer alters the total miles of the car. This is an attempt to make it look like the vehicle has fewer miles than it actually has.
  • Document fraud involves providing a buyer with a false car report history. 
    • You can avoid this by pulling up the car history yourself, as there are many online resources that will allow you to find the car’s full history with little to no cost.
  • Bait and Switch: is another form of fraud. It occurs when a dealer offers one vehicle for sale knowing it is no longer available. 
    • A buyer purchases the vehicle and the dealer switches the unavailable car with a different one. The buyer generally pays a higher price for the second car. 

In other cases, the fraud may relate to other aspects of the purchase or the business transaction. For instance, if the dealer has made fraudulent claims regarding their experience or history as a car salesperson, it might create additional legal issues regarding their liability.

In some cases, any persons can be held liable for an auto dealer fraud case. An example of this is where a dealership is engaging in widespread fraud through the company and among its employees. For instance, there may be cases where the management of the dealership is actually training its sales team to operate fraudulently. In such cases, great legal penalties can be involved, including criminal consequences.

Are there any Legal Remedies for Auto Dealer Fraud?

Auto dealer fraud can result in serious losses for the plaintiff party. In such cases, the legal remedy will typically involve a compensatory damages award that is issued to the non-liable party. The damages will likely cover the losses caused by the fraud. In some cases, additional damages may be issued as well (such as punitive damages in some cases).

Also, many automobile purchases are made in connection with the operation of a business. This is especially true for businesses that rely on delivery or the transportation of goods or any job that requires the car buyer to drive long distances. In such cases, the damages might also cover any business losses that were caused by the auto dealer’s fraudulent conduct.

Should I Consult an Attorney If I Am the Victim of Auto Dealer Fraud?

In many states, a person is required to contact the auto dealer to allow the dealer to correct the problem before they can file a lawsuit. Instead of having to do this yourself, you can hire a local consumer lawyer to contact the dealer on your behalf. Your attorney can also explain to you other ways to pursue a remedy for the fraud, including filing a lawsuit against the dealer.