Car Dealership Fraud: 9 Ways to Avoid These Shady Practices


car dealer fraud

Shopping for a new(-to-you) car can be exciting…or downright frustrating. Unless you’re looking to buy online, chances are you’ll be visiting a number of local dealerships to find the best car to suit your needs, wants, and budget.

Many car dealerships know how to treat customers with respect and decency. Others, however, employ downright shady tactics to make a sale – ethics be damned. Learning how to recognize these shady behaviors will save you time and money, and generally make the car-buying process the smooth and exciting experience it should be.

Car Dealership Horror Stories 

Sold! (But Not to You)

During his car search, Sean Coffey found a Honda Accord at a local dealership in Berkeley, California. As every car buyer should do (but often doesn’t), Coffey elected to have a pre-purchase inspection done prior to signing on the dotted line.

The inspection cost Coffey $75 (which is slightly below the average cost of car inspections), but while the process was underway, the dealership sold the car out from underneath him.

Coffey claims his “salesman was apologetic, but it sounded like the manager did it, and was par for the course with his approach.” After all, why wait and see what the inspection would uncover when another customer was willing to buy the car as-is?

Coffey’s recommends would-be car buyers write out a contract to buy the car contingent on it passing a pre-purchase inspection or not requiring repairs over a specific cost. “That way,” he says, “if there are bigger expenses, you can either walk away, or renegotiate the price.”

Mileage Mayhem

When Quoted’s Alyssa Connolly decided to sell her car, she started to reach out to local dealerships, only to discover that no dealer would buy it because the Carfax report flagged it as having incorrect mileage. Her dealership’s service department, she discovered, had misdocumented the car’s mileage, changing “1xxxx” miles to “2xxxx” inadvertently – clearly a huge discrepancy when reported to Carfax, and one that other dealers would assume was fraudulent.

Though the mileage was corrected during a subsequent service, the accurate alteration was never submitted to Carfax. During her attempt to sell her car, Connolly visited the service center and was given a corrected service history, signed by the manager, who documented the mileage issue as “human error.”

Still, other dealerships refused to purchase the car from Connolly at a market value corresponding to its proper mileage, and Toyota Customer Service put the burden of correcting the Carfax report on Connolly – with the added information that it could take upwards of one year for Carfax to correct the error, despite her lease ending within two weeks.

Connolly again returned to the Toyota dealership and was told that no attempt had been made to correct the error with Carfax and that she could sell it back to them – at a price well under its market value. 

Connolly’s takeaway from the frustrating experience? Check the service records after every service and immediately bring attention to anything inaccurate or misreported. 

odometer car speeding

Keys, Please

Kirk Herzog visited a local dealership in Van Nuys, California, and was greeted by a kind employee who asked him about his trade-in. Herzog handed his keys over so the staff could take a look at the vehicle and provide him with an estimate of its value.

While he waited, a salesman showed Herzog what cars were for sale, all of which were out of his price range, even after being told the estimate of his trade-in. The salesman ignored Herzog’s budget and continued showing him cars out of his price range.

“I told him that since he was trying to sell me what he wanted me to buy and not what I wanted to buy that I wanted to leave,” Herzog says of the experience. The dealership again ignored him, refusing to give him his keys back as salesman after salesman walked over, trying to pressure Herzog into making a purchase not within his budget.

Finally, Herzog demanded his keys back and “ran out.” If you’re in the market for a new car, “Never, ever give them your keys,” he says.

Cash or GTFO

After someone crashed into me and totaled my truck, I was in the market for a new used car. Though I had a small bit of cash thanks to my insurance payout, I still needed to finance any purchase.

I went to a local car lot, desperate for a cheap car to get me back and forth to work. The place looked like the perfect setting of a crime film – dimly-lit and unwelcoming. Still, I wanted to consider all my options.

The inside of the dealership’s small office was cold and uninviting, and no one really seemed interested that I was there. After finally getting someone’s attention, I was told that the dealer only sold cars to customers who could buy a car in cash right then and there.

While they very well may have been a legitimate business, something seemed off about the situation, and I followed my gut and soon left.

9 Tips to Spare Your Sanity from Shady Car Salespeople

Dealing with a shady dealership may be frustrating, but it’s not impossible – and you may very well walk away with exactly the deal you wanted, especially if you show up prepared.

labor day car sales 2017

1. Have a Trusted Mechanic Inspect the Vehicle

Have a car inspected by a mechanic you know and trust to check that the vehicle doesn’t require expensive repairs. An inspection “will also address any aftermarket illegal modifications such as illegal window tint or exhaust,” says Matt Pinsker, a Judge Advocate in the U.S. Army Reserves, adjunct professor of criminal justice at Virginia Commonwealth University, practicing traffic defense attorney, and former prosecutor. “This can save you a lot of money on legal fees down the road.”

2. Do Your Own Research

Even if a dealership isn’t out to cheat you, a Carfax report you’re handed may be out-of-date or otherwise inaccurate. Show up to the dealership with a solid idea of the fair market price of your trade-in and any vehicles you’re considering buying. Shop around, too! One dealer’s markup may be substantially higher than another’s.

3. Check the VIN

Ask your local police station to verify a car’s VIN, or vehicle identification number, to ensure it matches the vehicle you’re planning on looking at – and that it’s not stolen property. The VIN will be displayed in numerous locations on the car, too; Pinsker recommends making sure the number is the same in each location. (If it’s not, that’s a sign that the car is using parts from another of the same model and likely had extensive body work done.)

4. Don’t Negotiate by Monthly Payment

Instead, Pinsker says to negotiate the “out-the-door price which includes the fees, licensing, taxes, etc.” This will prevent the dealer from adding any hidden expenses afterward. If you’re trading in your current vehicle, include its estimate in your negotiations, but “walk into the dealership with a print-out of the vehicle’s KBB or NADA value in your pocket, as well as any other comparable offers of the vehicle elsewhere.”

5. Prearrange Your Financing

Car dealerships generally earn a commission for helping you finance a car purchase, so it’s often a good idea to show up to a dealership armed with a written pre-approved loan from a trusted lender. Not only will it serve as a point of comparison with the dealership’s financing options, but, if the loan’s agreeable enough, you won’t have to pay the dealership’s finance reserve.

Some unscrupulous dealerships will demand you pay extra for financing a vehicle through other means. If this happens, “walk away immediately,” says John Mavrianos, co-founder of Motovise.com, a used car inspection service. If you do finance through the dealership, Mavrianos warns, “There are many small tricks shady dealers use to increase the money they make on financing so always double check all the numbers on your contract.”

6. Bring a Friend

Pinsker recommends bringing a friend or family member along with you to a dealership to discourage a salesman from pressuring you too much. The extra set of eyes and ears can also serve to point out any flaws in a deal or vehicle.

7. Hold Those Keys Tight

Dealers will often make excuses to ask for your keys and will be reluctant to give them back until you’ve made a purchase. The shadiest of them will, according to Pinsker, “misplace” your keys for a while, until you’ve either purchased a car or, like Herzog, had enough.

The record wait before one of Pinsker’s clients could get his keys back from an unscrupulous dealer? Two and a half hours before the keys were “found.”

8. Get Everything in Writing

Pinsker seconds Coffey’s recommendation to get any agreements in writing, from purchase contracts pending a satisfactory inspection to agreements that any necessary repairs be done prior to signing. Pinsker cites the perfect example for establishing a paper trail: “The dealer promised to take care of a scratch in the paint, but after the car was purchased, refused to do so unless paid $250 while simultaneously telling the buyer that normally he charges $350, and was giving my client a special.”

Document. Everything. (It’ll save you frustration and money in the long run.)

9. The Ultimate Trick to Overcoming a Shady Car Dealership: Walking

Remember that the dealer can’t make a sale unless you permit it. Knowing when to walk away keeps all of the power in your hands during the car buying process, so if at any time you feel uncomfortable with the way a negotiation or conversation is going, start walking.

In my personal experience, demonstrating your willingness to walk away will give you the leverage to get the deal you want – whether it’s a lower price or the dealer agreeing to make repairs before you sign on the dotted line – or it’ll just get you away from a bad situation altogether.