One of the areas car dealer fraud occurs most often is that car lease fraud. Even with the economy going down car dealers manage to arrange for financing for car leases. Some customers think that car lease is less expensive, however at the end they found out it to be much more expensive.
The commonly used lease fraud is the “bait and switch.” This happens when the dealer makes a consumer believe that he is buying the car when in fact he is switched into a lease. Often dealers will trick consumers by telling that they need to sign for a lease “for a short time” to let interest rates come down. They usually promise to change the deal to a purchase in a few weeks. However, when the consumer comes back to the dealership the salesperson who negotiated the lease with him is nowhere to be found and no one at the dealer is interested in changing the consumer into the promised purchase transaction.
Car dealers have a number of reasons why they prefer to put you into a lease and not to a purchase. The main reason is that car dealers often get bonuses from leasing companies and manufacturers to put consumers into leases instead of purchases. Another thing is car dealers know that lease contracts are confusing for customers and allows dealers to add a lot of higher hidden fees and payments.
Do you know any vehicle dealers at all, or this stuff you pulled from the Internet?
Reputable dealerships who sell and lease vehicles for GM, Chrysler, Ford, Honda, etc., have too much to lose by engaging in the type of behavior you describe because they are not employed by the manufacturer; they are independent business owners whose business and livelihood is jeopardized by crooks and fraudsters.
Under state law in some jurisdictions (if not most), failure to read a contract before signing it does not relieve the signer from liability on the contract, so READ THE CONTRACT BEFORE YOU SIGN IT. The customer has the right – and the responsibility – to read the terms of the proposed written lease or purchase contract before signing it. You would be surprised at how many people do not even ask for time to do so. However, too many people just want what they want, regardless of the cost, the terms, or the financial implications of their decisions, and so they sign whatever documents are required so that they can get that car or truck or SUV or whatever and drive off.
Then, when they can’t make their payments, they cry “fraud” – slandering the names of the dealership, the HONEST sales people who handled the transaction, and the company – when the truth is that they just never bothered to inquire, ask questions until they understood, or reasonably evaluate the implications of what they were doing. Then, they want someone else to get them out of it because it turned out to not be a good deal.
You also have to understand that leasing came up, in part, because people wanted the prestige of being able to drive a new car every two to three years, particularly a more expensive car than they could reasonably afford if they had to buy it – i.e., put 20% down and make payments, or drive an older car longer, save their money and buy a car outright for cash.
Car dealers do NOT make more money or get bonuses for defrauding people; they lose money, and they lose business if their customers are not happy and satisified.
I have never advocated that those who act carelessly in signing off lease or purchase documents should be allowed to break their promise just because they feel like it. However, the cases that I deal with involve much more then carelessness – they involve fraud. It’s one thing to charge a high price and high interest to a guy who does not ask but it is another thing to lie, cheat, conceal and omit facts to make extra money on a deal. If you are second guessing me then you are second guessing the fact that I make a living setting these cases straight. So would you presume that when I get involved in a case the dealerships hand over money just because even though they did not commit fraud? I think not. So let us agree on the fact that yes some people just get into bad deals but others get defrauded and those are the cases I handle.
Now as far as profitability to the dealership – Dealers make MORE money by defrauding. Everyone makes more money by defrauding. It’s the nature of life. Now let us look on the overall dynamics in couple ways. From the dealership owner’s perspective – if he can defraud 100 people a year and make $5,000 on each then he will have made $500,000 extra. Who will know about the fraud? Only 5-6 out of the 100 unfortunately. Theoretically if all those individuals hired me then I would make the dealership handover let’s say $10,000 on each case. Outcome – they still net profit. As far as negative publicity goes – most people do not do anything about being defrauded and even those who hire attorneys do not go out announcing it to the world. So the overall effect is minimal and can be more than compensated by spending the extra profit on some positive PR. It’s unfortunate but true.
Now let us say that the dealership is owned by an individual with an impeccable moral character. I presume you know that the turnover rate for an entry level sales person is only a few months. So when that salesperson is scrambling to make money and meet quotas to be able to survive and not get fired, will he care about the greater good of the dealership’s reputation or will he lie and cheat to up-sell and make extra money on the spot? Some will be true to their values – they will not survive; the ones that up-sell and cheat and make the extra income will survive, get commended by the management and ownership and keep their jobs. Even if the boss does not know that the salesperson lied the boss will prefer him over the honest guy who cannot sell or sells dirt cheap. That is the nature of the business. I am sorry that I sound so pessimistically but the day this changes will be the day I will gladly stop practicing dealer fraud (due to lack of work) and find another niche practice. Till then I hope the honest salespeople do not take offence to my blogs and realise that I honestly admire and respect them for being the brave souls in a evil enterprise. Thank you.
- Hovanes Margarian, Attorney At Law
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