Car Dealership Fraud Misrepresentation Demand Letters
California’s strong consumer protection laws provide remedies for dealership fraud, misrepresentation, and deceptive practices—from odometer fraud and salvage title concealment to yo-yo financing scams and forged documents.
California Vehicle Code §11713 and the Consumers Legal Remedies Act (Civil Code §1750 et seq.) provide strong protections against dealership fraud and deceptive practices. When dealers misrepresent vehicle history, conceal damage, or engage in financing scams, consumers have powerful legal remedies.
Odometer fraud is a federal crime under 49 U.S.C. §32703 and also violates California Vehicle Code §28050-28052. Key protections include:
Federal damages: The greater of $10,000 or three times your actual damages, plus attorney’s fees
California damages: Civil penalties up to $5,000 per violation, plus actual damages and attorney’s fees
Proof requirements: You must show the dealer knew or should have known the odometer was false. Evidence includes:
- Service records showing higher mileage before the sale
- Carfax or AutoCheck reports revealing mileage discrepancies
- Title history showing mileage rollback
- Wear patterns inconsistent with stated mileage (worn pedals, seats, steering wheel on “low mileage” car)
California Vehicle Code §11713.18 requires dealers to disclose if a vehicle:
- Has a salvage title or has been “sold for scrap”
- Has structural damage affecting safe operation
- Has flood damage
- Was a manufacturer lemon law buyback (must be branded on title)
California requires salvage branding if a vehicle’s damage exceeds a certain percentage of its value (typically if an insurer declared it a total loss). Dealers who “wash” salvage titles by registering vehicles out of state or fail to disclose prior total-loss history face serious penalties under the Consumers Legal Remedies Act and Vehicle Code §11713.
The “spot delivery” or “yo-yo” scam works like this:
- You negotiate a deal and sign paperwork
- The dealer lets you drive off with the car (delivery “on the spot”)
- Days or weeks later, the dealer calls claiming “the financing fell through”
- They demand you return the car or sign new paperwork with worse terms (higher interest, larger down payment, expensive add-ons)
California law provides protection, but dealers exploit confusion about conditional delivery. Key points:
- Check for “conditional delivery” language: Review your purchase contract. If it says the sale is “subject to lender approval,” the dealer may have the right to unwind the deal if financing truly falls through.
- Demand proof financing fell through: Make the dealer provide written rejection letters from lenders. Often, the dealer never submitted your credit to the approved lender, or deliberately submitted to lenders likely to reject you.
- Negotiate from strength: You’ve been driving the car, it has more miles and wear, and you may have registered it. The dealer must explain why you should accept worse terms.
- Consider unwinding the deal entirely: Demand a full refund of your down payment and trade-in, return the vehicle, and walk away. Don’t let them pressure you into a bad loan.
If a dealer lets you drive off without final loan approval:
- Take photos of the odometer at delivery and when they call you back
- Keep all paperwork, including any “conditional delivery” agreements
- Get names of everyone you speak with and take notes
- Do not sign new paperwork without reviewing carefully or consulting an attorney
- Report the dealer to the California Department of Motor Vehicles if you believe they engaged in fraud
Dealers must disclose if a vehicle was previously:
When you discover dealership fraud, you generally have two remedy options:
You return the vehicle and get back everything you paid (down payment, trade-in, monthly payments). The dealer must also pay off your loan. Rescission is available when:
- The fraud was material (significantly affected your decision to buy)
- You discovered the fraud within a reasonable time
- You can return the vehicle in substantially the same condition
Advantages: Clean break, no ongoing loan obligation, you get your money back
Disadvantages: You lose the vehicle, must find replacement transportation, and if you’ve driven the car extensively, the dealer may claim you can’t rescind
You keep the vehicle and demand monetary compensation for the difference in value between what you thought you were buying and what you actually got. Damages can include:
- Diminished value: The difference between a clean-title vehicle and one with salvage history, or between actual mileage and represented mileage
- Repair costs: Cost to fix undisclosed damage or defects
- Out-of-pocket expenses: Costs incurred due to the fraud (towing, rentals, inspection fees)
- Statutory damages: CLRA allows up to $5,000 per violation for certain deceptive practices
- Punitive damages: If the dealer’s conduct was willful or fraudulent, courts may award punitive damages to punish the dealer
- Attorney’s fees: CLRA and odometer fraud laws allow recovery of attorney’s fees, creating settlement leverage
If your dealership receives a demand letter alleging fraud, misrepresentation, or CLRA violations, responding strategically is critical to protecting your license and minimizing damages.
- Pull the complete deal jacket: Retrieve all documents—purchase order, credit application, delivery receipts, odometer statement, title documents, vehicle history reports you obtained.
- Interview involved personnel: Speak with the salesperson, F&I manager, and any managers involved. Get their version of events in writing.
- Verify vehicle history: Pull fresh Carfax and AutoCheck reports, check NMVTIS database, verify title history.
- Check insurance and bond: Notify your dealership E&O insurance carrier and review your dealer bond obligations.
- Assess customer’s claim: Is there merit? Did you make a disclosure error? Can you prove proper disclosure?
Consider prompt settlement when:
- The customer’s claim has clear merit (you genuinely failed to disclose salvage history, prior damage, etc.)
- Your exposure under CLRA or odometer fraud statutes includes attorney’s fees and statutory damages
- The customer has documented evidence (Carfax showing discrepancies you didn’t disclose, service records proving odometer fraud)
- The deal amount is small relative to potential litigation costs and reputational damage
Unwind the deal entirely: Take the car back, refund all money, pay off the loan. Get a full release. This is cleanest when the customer wants out.
Price reduction / partial refund: Offer a cash payment reflecting the diminished value due to the undisclosed issue. Customer keeps the car.
Repairs or replacement: If the issue is fixable (undisclosed damage can be properly repaired), offer to repair at your expense and provide compensation for diminished value.
California DMV regulates dealer licenses and can suspend or revoke licenses for fraud, misrepresentation, or CLRA violations. Even if you settle the customer’s civil claim, DMV may pursue administrative action. Work with experienced dealer defense counsel to manage both the civil claim and any regulatory exposure.
Strong documentation is essential for proving dealership fraud. Whether you’re a consumer pursuing claims or a dealer defending against allegations, gather these key documents.
Dealership fraud cases often settle before trial due to the high stakes: attorney’s fees provisions, statutory damages, and dealer license risks create strong settlement pressure.
Clear odometer fraud: Full rescission or 2-3x actual damages (federal treble damages), often 80-100% of purchase price refunded
Undisclosed salvage title: 40-70% of purchase price as diminished value settlement, or full rescission if customer wants out
Spot delivery / yo-yo scam: Unwinding of deal with full refund, or significant interest rate reduction and fee waivers
Forged documents: Immediate rescission, criminal referral, often 100% refund plus consequential damages
The Consumers Legal Remedies Act allows prevailing consumers to recover attorney’s fees. This creates enormous settlement pressure on dealers—a $10,000 fraud claim can result in $30,000+ in attorney’s fees exposure, pushing dealers to settle quickly and generously to avoid litigation.
I represent consumers in California dealership fraud and misrepresentation cases. My practice focuses on achieving maximum recovery through rescission, statutory damages, and attorney’s fees.
I handle odometer fraud, salvage title concealment, yo-yo financing scams, and CLRA violations. Most cases settle within 90-120 days due to dealers’ exposure to attorney’s fees, statutory damages, and license risk.
If you believe you were defrauded by a car dealer, contact me to evaluate your case and discuss rescission or damage claims.
Schedule ConsultationCalifornia has a 3-year statute of limitations for fraud claims and 4 years for breach of contract. However, rescission requires acting promptly after discovering the fraud—typically within weeks or a few months. If you’ve driven the vehicle extensively or waited too long, you may be limited to damages rather than rescission.
“As-is” disclaimers don’t protect dealers from fraud or CLRA violations. If the dealer made affirmative misrepresentations about odometer readings, salvage history, or other material facts, you still have remedies even if you signed an “as-is” agreement.
Yes. CLRA claims and federal odometer fraud claims allow prevailing consumers to recover attorney’s fees. This means the dealer pays my fees separately from your damages recovery, making attorney representation very affordable for consumers with strong fraud claims.