If you believe a recent used vehicle purchase may have involved fraud by the dealership, an experienced auto fraud attorney with Betz & Port, P.A. may be able to assist you with a civil lawsuit against the dealership, as well as reporting the fraud to the appropriate authorities to consider criminal charges. Call (763) 645-8738 to schedule a consultation and learn more about your legal rights and options.
Of the various types of auto dealer fraud, title washing may be the most unfamiliar to many consumers and also the most challenging to identify. However, this type of fraud could put the buyer and others in significant danger. Understanding what it is and the elements that comprise it can be crucial to avoiding falling victim to this type of car scam in Minnesota.
Title washing is when someone illegally alters or conceals a vehicle’s problematic history to make it seem more valuable than it is. They may be concealing a variety of things, including:
All of these statuses, also known as title brands, significantly reduce the vehicle’s value. In most cases, the title brand also reduces the vehicle’s safety and may affect its functionality as well.
Washing a car’s title requires a few core elements. These elements require some time, effort, and money, but once completed, the dealership can sell the vehicle with a “clean” title and avoid disclosing any issues the vehicle may have, if the buyer is unaware of how to detect this fraud.
The key elements of washing a car’s title include:
The sale of a vehicle with a washed title causes financial harm to the buyer, including significant repair costs, a decreased vehicle value, or a vehicle that cannot be resold due to others being aware of the washed title. In a worst-case scenario, the buyer may also be liable if they are in an accident in the vehicle, causing significant injury to themselves, their family, and others.
Most people are unlikely to be able to recognize a washed title simply by looking at it. This is what dealers count on when engaging in this kind of fraud. However, there are signs that even an inexperienced buyer can look for to do their due diligence and try to ensure that they are not buying a vehicle with a washed title. These signs include:
These are not all the possible indications that a car’s title has been washed. The experienced attorneys at Betz & Port, P.A. strongly recommend that used car buyers thoroughly examine a vehicle, view its history report, take it for a test drive, and have an experienced, knowledgeable mechanic inspect the car before making a purchase.
Title washing is not the only kind of fraud that an auto dealer may engage in. Other types of auto dealer fraud may not carry the same dangers as washing a title, but they can still cause significant financial harm to the buyer, and in some cases, may also still present a physical danger on the road.
A vehicle’s odometer indicates how many miles the vehicle has been driven since its manufacture. The higher the mileage, the greater the potential for problems, whether due to the vehicle’s age or significant wear and tear resulting from high use. Most odometers “roll over” at 999,999 miles, which means that the mileage may then read 500,000 when it is actually 1,500,000.
A dealer may simply fail to disclose that the odometer has “rolled over.” However, they may also actively manipulate the odometer by rolling it back. This can mean that the vehicle’s odometer reads 900,000, and they change it to indicate the car’s mileage is only 100,000. While this does not necessarily present any safety issues, it does make the vehicle appear to be in better or newer condition than it truly is.
This is a common form of deceptive advertising, where the dealership advertises a particular vehicle at a specific price. When a buyer comes in and expresses interest in that vehicle, the dealership claims that vehicle is no longer available, then uses aggressive tactics to sell the buyer a different car at a higher price. Even if there is nothing wrong with the vehicle, this particular auto dealer scam manipulates the buyer into spending more money on a car they did not want. In some cases, the dealer may be willing to sell the buyer the vehicle advertised initially, but at a higher price.
Yo-yo financing, also known as spot delivery, is a tactic employed by some dealerships to entice buyers into high-interest loans. The dealership allows the buyer to take the vehicle home before financing is approved, with the promise of a “great deal” such as an extremely low interest rate. Then, a few days or weeks later, the dealership calls the buyer and informs them that the financing fell through, they did not qualify for the low-interest rate, or they need to put down a larger down payment. The buyer is then forced to return to the dealership and agree to a new loan that does not have the favorable terms promised initially. The terms are often much worse, and in some cases, the contract terms may be changed after the initial agreement was signed. This can lead to disputes and confusion over what was initially agreed to. This auto dealer fraud counts on the buyer becoming emotionally committed, and undermines both the purchasing process and consumer trust.
Minn. Stat. § 325F.662 requires used car dealers to provide an express warranty in writing to the buyer. What this warranty covers and for how long depends on the vehicle’s mileage. Warranty fraud may include failing to provide the required written warranty or refusing to honor the warranty. Additionally, because warranty coverage is based on the vehicle’s mileage, an odometer rollback or washing the title (if the dealer also misrepresents the mileage) may also constitute warranty fraud.
Sometimes the buyer still owes on the vehicle they currently have when buying a car. As part of the deal for trading in that vehicle, the dealership will often promise to pay off the existing loan. Then, they do not follow through on that promise, leaving the buyer on the hook for both the new loan on the car they just purchased and the remainder of the loan on the vehicle they traded in. This can ruin the buyer’s credit rating, lead to harassment from the lienholder, and make the buyer responsible for taxes on the vehicle after it was traded in.
A similar tactic occurs when the vehicle being traded in is worth less than what is owed on it. Called “negative equity,” the dealership will offer more than the car is worth as trade-in value, but then add the debt owed on the traded-in vehicle to the loan for the vehicle being purchased. In this case, the existing loan is paid off, but the buyer is still responsible for it in the new loan, often without realizing it.
The Office of the Minnesota Attorney General explains the state’s lemon law, which covers new and lightly used vehicles purchased or leased in Minnesota. When someone is successful in a lemon law claim, the vehicle is repurchased by the manufacturer or dealership. Lemon laundering is the resale of such a vehicle. In some cases, the lemon may even be labeled as a certified pre-owned vehicle. Reviewing the vehicle history report may reveal that the car is a lemon.
Add-on concealment can consist of hidden fees, such as dealer benefits, processing fees, or documentation fees, or optional extras such as service contracts, GPS tracking, paint or fabric protection. These add-ons are rarely required and often useless or not provided, despite the buyer being charged for them. In some cases, they may not even exist. The dealer may claim that they are required or that they will result in a lower monthly payment, or try to hide them by pressuring the buyer to sign the contract without reading it or using an electronic device for the buyer’s signature, which only provides a place for the signature and does not allow the buyer to see the contract.
Dealers are required to truthfully disclose the used vehicle’s history, including any accidents it was involved in, flood damage, major mechanical issues, odometer tampering, lemon or salvage status, or if it was previously a rental car. Failing to disclose these details is another kind of auto dealer fraud.
While some dealerships will overvalue a trade-in and add the existing loan debt to the newly purchased vehicle’s loan, others will undervalue trade-ins. They may make a low-ball offer, misrepresent the trade-in’s condition by pointing out minor flaws or nonexistent issues to justify their lower appraisal, or use psychological tactics such as pressuring the buyer so they feel like they are getting such a good deal on the car they are purchasing that they accept the trade-in offer without careful consideration. By undervaluing a trade-in, the dealership pays less for it, and can sell it for the higher value later. This allows them to increase their profit, sometimes significantly.
Used auto dealers can be very good at deceiving potential buyers, but there are things a buyer can do to protect themselves from auto dealer fraud. While these actions are not foolproof, they can significantly reduce the chances that the buyer will fall victim to an auto dealer scam.
Consider taking the following actions before purchasing any used vehicle from a dealership:
All of these strategies can help protect consumers from auto dealer fraud.
Title washing is a federal crime and is also a criminal offense in Minnesota. If a buyer falls victim to this or other auto dealer fraud, they may be able to recover damages that include:
If the fraud resulted in the buyer driving an unsafe vehicle and having an accident, they may also be able to recover damages in a personal injury case, such as medical expenses, lost wages, diminished quality of life, and loss of consortium.
Title washing and other auto dealer fraud put everyone at risk and can cost buyers who fall victim to these scams tens of thousands of dollars. Holding deceptive dealers accountable for their manipulative practices is imperative. Not only does it ensure that you receive the compensation you are entitled to under the law, but it also makes those dealers known so that others do not also fall victim to their tactics. At Betz & Port, P.A., our experienced auto fraud attorneys may be able to assist you with gathering the required evidence, filing the appropriate reports and court documents, and representing you in court to recover your damages. Call (763) 645-8738 to schedule a free consultation and review your case.
