Dealership Scams and the Consumer Fraud Act – What You Need to Know

By Janie Byalik, Esq.

Have you ever seen an advertisement for a new or used car?  Does the deal sound too good to be true?  What about when you get to the dealership – the car you were promised is nowhere to be found, the price you were quoted suddenly jumps by thousands of dollars, or you are offered a car that you didn’t want, something the dealers called bait and switch.  And what if everything up until the sale goes smoothly, you buy a car that the dealership assured you was in excellent condition only to later discover that car has sustained previous damage, that it was a showroom demonstrator, that it was used as a rental car, or that it was totaled and rebuilt, and none of this information was disclosed to you.

The law in New Jersey protects innocent consumers from unscrupulous actions such as these.  The New Jersey Consumer Fraud Act prohibits the use of any unconscionable commercial practice, deception, fraud, false pretense, false promise, or misrepresentation in connection with the sale or advertisement of any merchandise, including new and used cars.  The Act further prohibits sellers from knowingly concealing or omitting any material fact with the intent that the consumer rely upon the concealment in his or her decision to make a purchase.

The law also prohibits dealership conduct such as:

  • offering a vehicle for sale without disclosing its prior use (such as a rental car)
  • offering for sale a used motor vehicle without disclosing the prior damage to the vehicle;
  • failing to disclose the actual odometer reading
  • overcharging for registration/title fees

This list is by no means exclusive.  There are numerous restrictions placed on dealerships and host of guidelines by which they must abide in advertising and selling cars.  For detailed information, please see the full text of the New Jersey Consumer Fraud Act, the Motor Vehicle Advertising Regulations, and information on New Jersey’s Lemon Law, which can be found on the Division of Consumer Affairs’ website.

Two extremely common schemes by dealerships are overcharging for title and registration fees and selling damaged vehicles.  By law, dealerships are not allowed to charge more for title and registration fees than they pay to the Department of Motor Vehicles.  If there are ancillary fees charged in connection with processing  a title or registration, those fees must be itemized and disclosed to the customer.  A common scheme among dealerships is to charge a set amount as a title/registration fee and note in the sales agreement that the customer may be entitled to a partial refund after it pays the DMV fees, and then to never issue a refund in the hopes that the customer will have forgotten about it.  Just recently,  in 2012, a class action alleged that two Morris County car dealerships were charging customers unlawful fees, including registration fee overcharges.   The case resulted in more than a $3 million settlement.

The most common scam by dealerships is to sell a vehicle that sustained previous damage without disclosing that information to the consumer.  By law, a seller of a vehicle must not misrepresent the mechanical condition of the vehicle and should disclose all material defects in the mechanical condition of the vehicle which is known to the dealer.  The best way to protect yourself against purchasing a previously damaged car is to run a CarFax and if possible, ask the dealers to have an independent mechanic inspect the car before purchasing it.  If you already purchased the car that is later discovered to have sustained accident damage, you may have a claim against the dealership if this information was not disclosed to you.

New Jersey has some of the strictest consumer protection laws in the country.  The Consumer Fraud Act not only is a useful means of providing consumers with a vehicle to bring forth these claims, but also permits the consumer to recover triple damages and attorney’s fees if the case is successful.  For dealership scams, the Consumer Fraud Act is just one of the many tools at your disposal.  You may also have a claim for breach of various warranties, breach of contract, fraud, and possible relief afforded through the New Jersey Lemon Law.

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