FAQ Answer Page-Can I Rescind My Contract For Car Dealer Fraud?

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Overview: California's Lemon Law
A Consumer's Right to Cancel a New or Used Automobile Sales Contract For Auto Dealer Fraud.

Q: What circumstances would justify canceling this auto contract?

A: California Law provides a myriad of reasons to justify rescinding a contract to purchase or lease a new or used automobile. Basically, California allows an automobile purchase or lease agreement to be rescinded if it is based upon fraud, mistake, or significant non-disclosure or concealment. The basic concept is that there must be a "meeting of the minds" in order for a contract to be valid.

    California provides consumers with vast protections against misrepresentations that are made during the negotiations for the purchase or lease of vehicles. Further, there is no requirement that the dealership intended to make a misrepresentation; the fact that a representation was made which in fact is not true is all that is required.

    Some examples of misrepresentations, which would justify rescinding the sale, may include the following, especially if more than one of them is present:

  •      The inaccurate representation that the vehicle is "new," when in fact it is used or reconditioned (if your "new" vehicle had several hundred miles on the odometer, it was not likely a "new" vehicle);

  •     Any inaccurate representation concerning the quality or benefits of goods or services (this would usually cover anything told to you by the salesperson, or sales and finance manager, including that the car is in excellent condition, has never been in an accident, that "GAP" insurance is required, how much you'll be protected by the service contract, that the finance rate is the best available, etc.);

  •     Significant non-disclosures of information required to be disclosed (such as the fact that the vehicle was a "demonstrator," was previously totaled due to body damage or flood, has a salvaged title, was a previous "lemon law buy-back", was involved in an accident involving damage to the frame, and a whole host of other problems which should have been disclosed but were not).

     Often, used car dealers will attempt to persuade you that you bought it "As-Is", and therefore whatever problem you are experiencing is your problem. However, this is not true with respect to most problems discovered after the sale by consumers, non-professional buyers, since the consumer's decision to buy "As-Is" was based upon some representation made about the vehicle that proves not to be true, such as the car is in excellent condition.

    The most basic of these misrepresentations concerning the mechanical condition of a used vehicle center on the requirement that the DMV requires all dealers to have a basic safety check performed on the vehicle to verify that the vehicle is safe to operate on the road, that it has such basic safety features as brakes, brake lights, turn signals, lights, seat belts, etc. Invariably, this "safety" check is described by the salesperson as the service department having thoroughly gone over the entire vehicle, and found it to be in good, great, or excellent condition.

     The worst examples of car fraud can be found at any used car dealership catering to individuals with poor credit, who are often persuaded to buy pieces of junk for over-inflated sales prices and interest rates. These poor individuals think no one else will sell them a car, so pay large down-payments on useless vehicles so they can get to work and pay their bills, only to find out their car payment money is being spent making repairs to a vehicle that it not worth fixing, with the end result that the car gets repossessed, and, you guessed it, sold to the next poor individual with poor credit.  Even worse, some of these dealers get away with selling junk cars by giving a warranty, because the buyer will take the car back to the same dealer who thoroughly checked the car out and missed or lied about the problem, then the dealer takes weeks to fix an issue, does a "bubble gum" temporary repair, or refuses to repair all the issues, and provides no towing or loaner car.

     Other misrepresentations are common.

INSIDE SCOOP:  The car deal works like this: You show up at a dealership, either out of curiosity or due to advertising, which may or may not be misleading, and meet with a salesperson.  This salesperson, and the entire dealership, has one goal, and one goal only; to make a sale, get you to sign a contract and drive off the lot in their car, and thereby make money.  When there, the salesperson who is "up" will go out and do the "meet and greet" (smile, look you in the eye, introduce him/herself, shake your hand, and interest you in a car, which you may or may not test drive).  The salesperson knows that if you walk off the lot without buying, you will likely not come back, and they may be fired.
     A worksheet is often created, with the price of the new/used vehicle price (normally in black felt pen so that you think it is non-negotiable), your proposed down payment, and most importantly, your monthly payment (how much can you afford a month-heh heh, up to what?), and what they are willing to pay for your trade-in, if any (so that they can make a profit on that as well). Once these numbers are hashed out with the sales manager (whom you may or may not interact with directly), they get you to agree to buy on those terms, and a worksheet is often presented for you to sign or initial, so that the salesperson has earned his/her commission, so s/he can then get back on the "up" list, and meet and greet the next customer.  You get passed on to the F & I department.  The salesperson has now earned his/her commission, assuming you drive off the lot in their car.
    The Finance & Insurance (F & I) manager earns his/her living off commissions as well, a percentage of the predominantly useless add-ons s/he adds into your contract, often to bring the car and add-ons up to the monthly payment you agreed you could afford (often referred to as "loan packing"). This may happen by diddling with the interest rate, or by extending the term of the loan to 84 months, or whatever. It is his/her goal in life to sell you these, for the most part, useless, overpriced, add-ons.  The only exception is perhaps a service contract from the vehicle manufacturer that you need to extend protection beyond the manufacture's original warranty, and not from some useless out-of-state company that excludes most problems you may actually encounter, that you buy for double what that company charges the dealer; and perhaps GAP protection, but only if the fair market value of your new purchase is substantially less than the amount you are financing.

     The above are just a few examples of facts which would justify rescinding a sale, and there are many, many more, and you are encouraged to contact us for a consultation.

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The Law Office of MICHAEL R. QUIRK

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Walnut Creek, California 94596

NOTICE: Information printed here is not legal advice.  The information is general in nature, and is not intended as a substitute for legal advice or a legal opinion on a specific individual fact scenario. Individual rights, remedies and obligations vary; laws frequently change. Your specific facts should be reviewed by this office before taking any action on your own. Results are not a guarantee or indicative of future success. Site content approved by Michael R. Quirk.

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