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How to Sue a Car Dealership

Camila Lopez - Car Dealership - September 10, 2022

People Clerk helps you with your small claims court lawsuit.

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Do you have a dispute with a car dealership over a car you purchased, a refund on a warranty, or bad title? Did you buy a used car from a private seller and the car won’t drive? There are several legal options available to you, including suing the car dealership or private seller in small claims court.

Common Types of Small Claims Lawsuits against Car Dealerships & Private Sellers

We often receive the question, can I sue a car dealership or private car seller in small claims? The answer is yes as long as the dispute is for the amount set by your local small claims court.  

Here are some examples of small claims lawsuits against car dealerships:

  • The car had mechanical issues shortly after you bought it. For example, you bought a car and the next day the engine started to act up.

  • The car dealership made a fraudulent misrepresentation or advertising regarding the car you purchased. For example, the car dealership lied that the car was never in an accident.

  • The car dealership refuses to fix your car after you purchased a warranty. For example, you purchased a warranty when you bought the car and you pay for repairs after having mechanical issues. Now the dealership or the warranty won't refund you for the money you spent fixing the car.

  • The car dealership refuses to refund your purchase. For example, you canceled an extended warranty you purchase and the dealership agreed to refund you but never did.

  • The car dealership or private seller refuses to give you the title documents. For example, you purchased a car but the car dealership or private owner didn't provide you with the title documents to the car.

  • The car dealership or private seller engaged in some type of auto fraud.  Common examples include “bait and switch” when the dealership advertises the car at a certain price and then says that the car is no longer available or inflation of a vehicle’s invoice price. 

California DMV Car Buyer's Bill of Rights. The DMV publishes a guide on common issues with car dealerships here are some of the topics covered (1) required disclosures car dealerships are supposed to provide you with, (2) using the word "certified" when selling a used car, (3) buying a used car and the option to cancel the contract within 2 days.  

If you are in New York, the Department of Consumer and Worker Protection published a Used Car Consumer Bill of Rights guide that addresses consumers' rights when purchasing a used car from a used car dealership. 

Check your state’s DMV website or other government agency to know your rights when buying a car. 

Do “Lemon Laws” apply?

What are lemon laws? Lemon laws are designed to protect consumers who purchase new cars, trucks, SUVs, and minivans. All fifty U.S. states have passed their own lemon laws with different standards and procedures but similar coverage. Lemon laws may also cover older, used, and leased vehicles but this will depend on the laws in your state. 

If you buy a “lemon,” meaning a car that has defects that cannot be reasonably repaired Lemon laws help consumers find relief in the form of cash settlements, buybacks, or even replacement vehicles. 

Lemon law cases are usually taken by lawyers on a contingency basis. Depending on your state’s lemon laws and if your vehicle applies. You might want to search your state’s lemon laws specifically and see if your situation falls under the guidelines provided. 

P.S. One of our favorite California lemon law attorneys is Michelle Fonseca-Kamana at West Coast Lemons. Check out her amazing TikTok videos @westcoastlemons. 

Suing a Car Dealership for Negligence 

Can you sue a car dealership for negligence? The answer to these questions is yes. If you want to sue a car dealership for negligence you will have to prove that the standard of care the dealership owed you was breached because it fell below what a reasonable person would. This means that the dealership did not act reasonably when they lied to you or misrepresented some material fact about the car. 

If you think your local car dealership negligently sold you a car you may want to initiate a lawsuit against the car dealership for negligence. 

What to do if a Car Seller Never Gave you Title 

Sometimes buyers may be the victims of title jumping, which happens when a car is sold without registering title in the new owner’s name. Used car dealers might sell you a used car without title to avoid paying taxes on the car. Today, though, this practice is not limited to just private used car dealers and buyers should be aware when purchasing a secondhand or new car. 

Another reason a seller or car dealer might not pass title to you is that ownership cannot be transferred due to liens on the title. This could mean the car has a mechanic’s lien, storage lien, or bank lien. 

Can you sue a dealership or private seller that does not provide you with title? Yes, because when you purchase a car you intend to drive, regardless if it is new or used the dealership or private seller needs to hand down title to you so you are able to register at the DMV. Most states have a time limit for how long car dealers have to give you the title to the car you bought, it is not a long time limit and usually, they only have 30 days or so. 

If a car dealership or private seller never gave you title consider some of the options below, like filing a small claims lawsuit or filing a complaint with your local DMV. 

What to do if you Bought a “Bad Car” from a Private Seller 

Often times buyers will purchase cars from private sellers instead of a dealership because the private seller may be selling the car for a lower price. However, buying from a private seller does come with risks. Most of the time sellers will be selling cars in their current condition or “as is.” This means if something happens to the car you have no warranty and the private owner does not owe you anything. Also unlike dealers, private sellers are not required to sell the car with a buyer’s guide (more on this below). 

What are the most common problems with selling a car from a private seller: 

  • Buying a “lemon”; i.e. a faulty or defective car.

  • Misrepresentation as to the car’s history, for example, the private seller tells you the car has never been in an accident when it has.

  • If the seller owes money to a financing company the car that is now in your possession may be repossessed.

  • The car breaks down the first time you drive it and has no warranties. 

  • The seller did not have the actual title to the car. 

Unfortunately, lemon laws oftentimes do not protect buyers when they purchase a car through a private seller. Used cars in general might not be covered under a state’s lemon laws. 

Best practice is to fill out a bill of sale when conducting a car purchase with a private seller and taking this bill of sale to the DMV. The bill of sale is like a contract and is notice that a sale took place between you and the seller. Also, have an independent mechanic inspect the car before purchasing it. 

If you bought a car that has bad suspension, bad transmission, or other defects from a private seller and they refuse to refund your purchase or pay for mechanical work your best legal option may just be a small claims lawsuit. In this article, we discuss what a small claims court is and how to file a small claims lawsuit against a car dealership or private seller. 

What to do if you Bought a “Bad” Used Car 

The Federal Trade Commission (FTC) requires dealers that sell used cars to post a Buyer’s Guide on every used car they offer for sale. This guide is also required to be given to buyers after the sale. The guide covers:

  • Whether the car is being sold “as is” or with a warranty.

  • That buyers ask to have the car inspected by an independent mechanic before they buy.

  • What percentage of the repair costs a dealer will pay under the warranty.

  • A manufacturer’s warranty can include the cost of repairing specified mechanical or electrical problems in parts of your car. 

Note that private sellers do not have to provide you with a Buyer’s Guide. If you buy a used or secondhand car from a private seller try to obtain warranty promises in writing and obtain an independent inspection prior to purchasing. 

Suing a Car Dealership based on a Warranty 

As-is Warranties 

The FTC’s Buyer’s Guide will have different types of warranties that the car comes with. One version of the federal Buyer’s Guide will have an “as is – no dealer warranty.” If this is the case, buyer beware! The car dealership will not be responsible for any problems after you buy the car. Some states do not allow many used cars to be sold “as is” without a warranty. Your state’s Buyer’s Guide will have different warranty options. 

Implied Warranties 

Some Buyer’s Guides will have implied car warranties that protect buyers under certain situations. The implied warranty of merchantability and the implied warranty of fitness for a particular purpose are federal warranties. Essentially, these warranties state the car is in good enough condition to be sold and can be used for the buyer's specific purpose (if the buyer stated the purpose to the seller at the time of the purchase). 

For example, if you are buying a pickup truck because you want to transport heavy machinery or tow heavy vehicles and the dealer assures you the truck you are purchasing can but it turns out this is not true, the warranty of fitness for a particular purpose could apply.

Other warranties include full and limited warranties and manufacturer warranties. Check which warranties apply to your vehicle in the Buyer’s Guide you received at the time of purchase. 

What to do Before Suing a Car Dealership or Private Seller in Small Claims Court

Consider filing a complaint against the car dealership with the DMV 

Some state DMVs have a Business Regulation Section or Licensing Board. Some of these DMV boards will investigate instances of auto fraud, note however that not all complaints get investigated. If your complaint falls outside of the jurisdiction (power) of the DMV then they may simply not be able to do anything further with your complaint.

Consider filing a complaint against the car dealership with your state’s consumer protection agency 

Some states, or counties within a state, have a Department of Consumer Affairs or Consumer Protection office that will handle consumer complaints, regulate various businesses and industries and issue business licenses. Some of these government agencies deal with motor vehicle dealers and will handle complaints from buyers. 

Check your local state or county's consumer protection agency to see if they handle consumer complaints against car dealerships. 

Consider filing a complaint against the car dealership with the Better Business Bureau  

The Better Business Bureau (BBB) is a non-profit that serves as an intermediary between companies and consumers. For example, if you want to complain about the car dealership that sold you a used or new car you can file a complaint against the dealership with the BBB. Before you purchase you can also go on the BBB website and search for your car dealership to see if they had any issues in the past.

Here is how you can file a BBB complaint against a car dealership.

Send a Demand Letter to the car dealership or private seller 

A demand letter is a letter that outlines a set of requests or a demand for payment. For example, you could request a refund and explain why you are requesting a refund in a demand letter.  

What to include in the demand letter?

Unsure of what to include in your demand letter to the car dealership, here is a list of information you could include:

  • How much money you are owed.

  • Why you are owed money.

  • Your contact information.

  • Where to send payment.

  • Give them a few days to respond (usually about 7 to 14 days).

  • State that if they don't respond, you intend to sue.

Make sure to review any contracts you have from the car dealership in detail in case they have requirements on where to send a demand letter or if they have forced arbitration.

How much does it Cost to Sue a Car Dealership or Private Seller in Small Claims?

So how much are you going to spend by suing a car dealership or private seller in small claims court?

Court Filing Fees

The amount you will pay to file a small claims lawsuit depends on how much you are suing the car dealership or private seller for. In general, filing fees tend to be affordable, and on average filing fees are $15 - $75. If you cannot afford to pay court fees, you should ask the court to waive the fees if this is an option in your local small claims court. 

Serving Costs

Once the lawsuit is filed, you have to notify the car dealership that you have sued them. This is called "serving." Serving Costs can range from $0-$75.

More on who to serve on behalf of the car dealership below. 

How Much Can you Sue a Car Dealership or Private Seller for in Small Claims?

It depends on your state or sometimes even on your county. Make sure to check your local court limit to see how much the maximum you can sue for is. This court limit will likely be something between $2,500 and  $10,000 if you are an individual. Note, if you are a sole proprietor, you count as an individual in most states. 

By suing in small claims you agree to waive any amount over the maximum amount you can sue for, even if you are owed more. For example, if the car dealership owes you $12,000, and you decide to sue in small claims, you are waiving suing for an additional $2,000. Meaning that you will win a maximum of $10,000.

While you may be missing out on the full amount you are owed, there are practical benefits to suing in small claims instead of suing in "regular court."

Here are some of the benefits:

  1. Court filing fees are cheaper in small claims than in other courts.

  2. The process is faster in small claims than in other courts as your hearing will usually be scheduled 30-70 days after you file the lawsuit.

  3. Lawyers are generally not allowed in small claims which helps keep the costs of suing low.  

You can also speak to a lawyer if you think the car dealership may owe you a lot more than the small claims limit. Most attorneys that deal with consumer fraud, like auto fraud, will provide you with a free consultation to determine if they can take your case. Reach out to us via our chat if you need assistance finding a consumer fraud lawyer.

How to File a Small Claims Lawsuit against a Car Dealership or Private Seller 

Step 1: Identify the legal name of the car dealership, their address, and their "agent of service of process."  

For private sellers, identify their full legal name and address. 

In order to sue in small claims, you need to be able to correctly name the person or business you are suing. Identifying whether the car dealership is doing business as an LLC or Corporation is very important. Alternatively, the business may be owned by a person, known as a "sole proprietorship."

  • Look for names the car dealership uses on contracts, receipts, or on their storefront. Look through any documents you have from the car dealership and write down any potential names you have from the car dealership. Follow the steps below using the names you have written down.

  • Run a search on your state’s DMV website. Car dealerships have to be licensed by the DMV. You can run a search for their license information on the DMV website. Their license information will list their legal entity name.

  • Fictitious Business Names. Many car dealerships use a name other than their legal name to do business. They do this for marketing purposes usually because their legal name is too long. A name other than a legal name is called a fictitious business name. Each county has a database of fictitious business names where you can search for the real legal entity name.

  • Business License Search. Using the address of the car dealership, you can search for their business license. Each city has a database of business licenses. Call the business license department for the city where the car dealership is located in.

  • Search on your state’s Secretary of State website. The car dealership may be registered as a corporation or LLC. You will need to identify the name of the corporation or LLC. It is important to identify the agent for service of process (someone selected by the corporation or LLC to receive legal documents on its behalf) as this is the person who will be served.

Step 2: Complete the small claims court initiation process

Courts vary in how the process is initiated, most commonly there is a form on the court's website that you submit to initiate the lawsuit.

Here is some information that you will need for the lawsuit:

  • Find the correct legal entity for the car dealership in your state. 

  • Make sure to always verify this information by reviewing your state's Secretary of State's website as this information may change.

  • Each Small Claims Court has a different procedure for filing. You have to check with your local small claims court whether they allow filing in-person, by mail, online, or by fax.Or we can file your case for you!

Step 3: Serve the car dealership or private seller 

Remember, serving the car dealership means serving their  "agent for service of process" as listed on your state’s Secretary of State's website.  

What is a Small Claims Court Hearing like?

Small claims hearings are informal and most hearings last around 15 minutes. While many disputes settle before the hearing, here is what to expect if your lawsuit against a car dealership does not settle.

The specific procedure of the hearing will vary from court to court, but there are a few things that you can expect from the procedure regardless of the court. 

  • The judge will ask you why you are suing.

  • The judge will ask the car dealership's representative to tell them their side of the story.

  • The judge will ask you to show them the evidence you brought. Sometimes the judge will keep the evidence. Other times, you will get the evidence right back.

  • Very rarely a judge will tell you whether you won or lost at the hearing. Instead, the judge will tell you that their decision will be mailed to you (which usually takes a few weeks to two months or so).

Here is some evidence that you may consider including:

  • Your contract or policy with the car dealership or private seller.

  • Emails or other types of correspondence between you and the car dealership’s representatives.

  • Pictures of the car and all other relevant evidence. 

You don’t want to regret after your hearing not including a piece of evidence. 

If you need help with small claims, we are here to help!

Chief Legal Architect & Co-Founder @ People Clerk. Camila is an attorney, consumer advocate, and certified mediator. Her passion is breaking down complicated legal processes so that people without an attorney can get justice.

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