How Do You Prove Car Dealership Fraud?

Dealerships are required to abide by certain laws when they sell a vehicle. Consumers that have been given false or misleading information that resulted in them purchasing a defective vehicle may be entitled to benefits.

As a California lemon law attorney, we’ve seen many cases of car dealership fraud. We want to provide you with all the information you need – and how to seek justice.

What is Car Dealership Fraud?

Car dealership fraud refers to an auto retailer misrepresenting, concealing, or failing to disclose important information regarding the sale of a vehicle. Car dealership fraud usually involves used vehicles, but it can happen with new vehicles as well.

When it comes to auto fraud claims, there can be two common categories: fraudulent misrepresentation and negligent misrepresentation.

Fraudulent Misrepresentation

Fraudulent misrepresentation – or intentional misrepresentation – is a type of car dealership fraud involving a purposeful lie used to trick the buyer into a purchase. Misrepresentation can occur in several different ways, including (but not limited to):

  • Spoken words
  • Written words
  • Gestures (nods)
  • Silence or inaction

For example, let’s say a dealer makes a knowingly false claim about the vehicle’s accident history. This entices the consumer to sign the contract and purchase the vehicle. The consumer later looks deeper into the accident report and determines the dealership lied. This could be a fraudulent misrepresentation.

Negligent Misrepresentation

Negligent misrepresentation refers to an auto dealer making statements about a vehicle without verifying if it is true. This type of misrepresentation usually involves the terms of a contract – but it can also be verbal.

With car dealership fraud, this would be characterized by:

  • The dealer includes a false representation in the purchasing contract or verbally;
  • The misrepresentation was made without reasonable proof;
  • The consumer relied on that misrepresentation to purchase the vehicle;
  • The misrepresentation was the legal cause that resulted in damages.

An example of negligent misrepresentation would be a statement in the contract claiming the steering is in perfect working order. This can either be proven false or true.

There must be reasonable reliance to validate the car dealership fraud in this scenario. Reasonable reliance relates to how the consumer – with ordinary intelligence and common sense – would believe the statement of the dealer’s representation when hearing or reading it.

Negligent misrepresentation and fraudulent misrepresentation sound similar on the surface. However, there is a key difference. Fraudulent misrepresentation involves the dealership knowingly making a false statement intended to mislead the consumer.

Negligence – on the other hand – involves the dealer failing to provide reasonable care or competence to relay factual information to the consumer. In this scenario, the dealer may have told the consumer the steering worked fine, yet failed to get it inspected/verified by a licensed mechanic.

Dealership Fraud Lemon Law: What Are Your Rights?

Buying a vehicle from a dealership – especially a used one – can be an intimidating process. The dealer’s number one priority is to sell you the vehicle. You may or may not have a strong knowledge of how to differentiate a good car from a bad one.

The good news is you have rights as a buyer under the lemon law in California to protect against car dealership fraud. The dealer is legally required to provide the following:

  • New vs Used

Consumers have the right to a clear disclosure in the sales contract if the vehicle is new or used. If the vehicle has been driven by the dealership as a demo model or previously bought and returned, it must be clearly labeled as “used”.

  • Accurate Odometer

Rolling back odometers is a classic example of shady tactics and illegal behavior a car dealership can use to sell vehicles at higher price points. Consumers have the right to an accurate odometer reading – or a written disclosure that it’s inaccurate.

  • Accident Report

Dealerships are required to provide consumers with an up-to-date accident report detailing if the vehicle has been in a significant accident. If you ask the dealer about prior accidents, they are required to provide a truthful response.

  • Lemon Disclosure

Under California lemon law, the dealership is required to disclose if the vehicle has been previously repurchased as a lemon. Additionally, they must provide details of any prior problems with the vehicle.

  • Prior Rental Vehicle History

If a dealership is selling a vehicle that was previously registered as a rental, they are required to physically display this on the vehicle at the time of the sale.

  • Buyer’s Guide

Dealerships are required to display a buyer’s guide on the vehicle as it is being sold. The buyer’s guide provides the terms of the dealer warranty – or if the vehicle is being sold “as is” (no warranty).

  • Single Document

Consumers have the right to have all agreements regarding price, payments, rights, and remedies with the vehicle on a single document.

Car dealership fraud comes in all shapes and sizes. The most important thing you can do before buying a vehicle from a dealer is to learn the rights you have. This is your best line of defense throughout the process.

Seeking a Settlement for Car Dealership Fraud

Suing for car dealership fraud may be possible if you determine there is something wrong with the vehicle after the purchase. The criteria are a bit different for fraudulent misrepresentation compared to negligent misrepresentation.

  • Suing for Fraudulent Misrepresentation

Seeking justice for fraudulent misrepresentation can require the consumer to show:

  • The dealer made a false representation involving a direct statement intended to communicate a fact or create an impression or belief;
  • The dealer was aware the representation they made was false or made the representation carelessly without verifying accuracy;
  • The consumer relied on the misrepresentation to purchase the vehicle;
  • The consumer suffered economic damages as a result of relying on misrepresentation.
  • Suing for Negligent Misrepresentation

To seek justice for negligent misrepresentation, the consumer must be able to show:

  • The dealership made a false representation in the contract;
  • The dealer should have known the representation was false;
  • The consumer relied on the misrepresentation to purchase the vehicle;
  • The consumer suffered damages as a result of that misrepresentation.

When to Consult an Attorney

Proving car dealership fraud can be tricky. Unfortunately, most consumers are not equipped to handle this without a strong knowledge of the state’s law. That said, it’s essential that you work with an attorney specializing in lemon law to help earn justice from a dealership.

If you have any questions about car dealership fraud, California lemon law, or what your rights entail, do not hesitate to reach out. At Cline APC, we’ve been helping California consumers pursue justice for many years – and we’re happy to help you, too.Call us at 888-982-6915, send an email to, or fill out a FREE case evaluation.

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