Top 5 Ways You Can Be Sued in 2021 as a California Car Dealer

5 min readMar 21, 2021

written by DealerXT January 4, 2021

Doing business in California is tough, especially if you’re a car dealer.

California is home to thousands of new and used car dealerships. It is also home to seemingly endless new laws which have made doing business in California more difficult than in other states. While these laws regulate dealerships and the sale of vehicles, they are also meant to protect consumers. Nevertheless, the combination of consumer and employment laws have put a target on every dealer’s back from eager Plaintiff’s lawyers to DMV investigators, Sales Tax and Employment agencies, bond companies, finance companies, as well as the Attorney General’s Office.

The simple fact is if a car dealership does not follow these laws, it can lead to extremely costly litigation. On top of that, a lawsuit can also cause your bond company to drop you and put you out of business entirely. And as they say “ignorance of the law is not a defense.”

That’s why it’s important that you and your staff all understand the proper procedures needed to keep your car dealership protected.

If you own a dealership in California and you don’t have a strong compliance system in place, it’s only a matter of time before a lawyer, the DMV, or the Attorney General comes knocking at your door.
Ali Rakhshanifar, Esq.

Here are the top five reasons dealers get sued:

1) Buyers Guide NOT on the Window

Customer: “The Buyers Guide was not on the window when I went to purchase the car.”
Dealer: “Here is a copy of the Buyers Guide with the customer’s signature on the front and back.”
Customer: “I never said I didn’t sign the Buyers Guide. I said it wasn’t on the window at the time of sale.”

Because Federal and State law require the dealer to attach the Buyers Guide to the car in a visibly place, the customer can make this claim whether the Guide was attached or not. This type of he-said she-said claim, like most such oral claims, don’t usually go well for the dealer in court.

Make sure you have a compliance system that provides you with documented proof of the Buyers Guide on the vehicle at the time of sale.

2) Didn’t Disclose Accident, Structural Damage, Prior Rental

Customer: “I told you I wouldn’t buy a car with an accident, but you sold me a car with structural damage without disclosing it to me.”
Dealer: “I showed you the CarFax/AutoCheck and you signed a Statement of Facts.”
Customer: “I never saw the CarFax/Autocheck and you forged my signature. The Statement of Facts was blank when I signed it. You must have filled it in later.”

These claims may seem unreasonable, but unfortunately, dealerships are facing these types of nuisance claims on a daily basis. Many times, customers are trained to say things that may not be true, but are likely to lead to a win in front of a jury.

Make sure you are using a sophisticated digital disclosure system designed to protect your dealership from these types of false claims.

3) I Bought a Sedan and You Sold me a Hatchback

Customer: “I bought a sedan but you tricked me and sold me a hatchback.”
Dealer: “Are you kidding me?”
Customer: “It was dark, you kept me in the showroom for hours before I could take the car home, and I was tired. I didn’t realize you sold me the wrong car.”

Once again, he-said she-said claims such as these are difficult for a dealership to defend against.

Make sure you are using a digital disclosure system that documents photos of the car at the time of the sale. These photos should be date stamped and your customer should acknowledge the condition of the car at the time of sale.

4) You Never Gave Me a Copy of the Contract

Customer: “I agreed to buy this car at $15,000. I signed the contract but you never gave me copies of everything I signed. You changed the contract to $18,000 and forged my signature.”
Dealer: “We provided you the contract and we agreed on $18,000.”
Customer: “Let’s see what the jury decides.”

These may sound like extreme cases, but unfortunately, California dealers have heard these types of claims more than once.

Make sure you have an updated compliance system in place to prevent these types of customer claims from putting your dealership at risk.

5) You Promised Me Spare Keys and Floor Mats

Customer: “The salesperson promised that the car had a spare key. He also told me he would throw in free floor mats.”
Dealer: “This is a used car. We only have one key and the salesperson did not promise you a spare key or floor mats.”
Customer: “It’s my word against yours. Either give me the spare key and free floor mats or I’ll call my lawyer.”

At this point, if the salesperson really didn’t promise the spare key and the floor mats, the dealership has a tough decision to make: either spend the money and give the key and floor mats, or risk a lawsuit.

Make sure you have a sophisticated and constantly updated digital disclosure system that protects you from these types of nuisance claims.

Conclusion

California dealers have it really hard when it comes to keeping up with new laws and new legal strategies designed to put them out of business. Make sure you have the right team on your side when it comes to keeping your dealership compliant and doing everything you can to prevent lawsuits and protect yourself against unscrupulous customers and their lawyers.

This testimonial or endorsement does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter whether you decide to be represented by Auto Legal Group, LLP or not.

DealerXT is not a law firm or lawyer referral service and cannot provide any advice or opinion about your legal rights. The information found on DealerXT.com is intended for general informational purposes only and should be used only as a starting point for addressing your legal issues. The information is not the provision of legal services, and accessing such information, or corresponding with or asking questions, or otherwise using the Services, does not create an attorney-client relationship between you and DealerXT, or you and any lawyer. It is not a substitute for an in-person or telephonic consultation with a lawyer licensed to practice in your jurisdiction about your specific legal issue, and you should not rely on such Legal Information. You understand that questions and answers or other postings to the Services are not confidential and are not subject to attorney-client privilege.

Dealer XT

Top 5 Ways You Can Be Sued in 2021 as a California Car Dealer

Written by Dealer XT