NJ says used-car dealer complexes are ripping you off

Used car buyers beware.

The State Commission of Investigation is out with a new report that warns New Jersey’s used-car industry remains a refuge for dealers who engage in deceitful and sometimes unlawful activity, including schemes that harm consumers.

This report, which follows a 2015 report, focuses on discrepancies in the regulation and oversight of hundreds of used car dealers in what are known as multi-dealer locations, or MDLs.

The 19 MDLs in New Jersey, according to the SCI, are not actually normal dealerships but almost completely vacant buildings and warehouses that may have cubicles and a landline but no one is actually working there.

“Nothing goes on at these dealerships. There’s no sales occurring. They’re just completely operating in absentia,” said SCI spokeswoman Kathy Riley.

She said the SCI report points out these MDLs are essentially sham enterprises that allow individuals from New Jersey and other states to have a “home base” and get licensed to sell used vehicles.

Riley noted these used car dealers, who may list an MDL as their place of business, usually work out of their homes and many times will cater to individuals who can’t get credit and can only afford very modestly priced, high mileage vehicles.

She said consumers who work with a used car dealer associated with an MDL may wind up getting shafted.

“They may purchase a vehicle from someone who doesn’t really work out of this site and if they have any problems with the vehicle, they have no one to go to," she said.

She pointed out the SCI investigation found this subset of used car dealers was involved in all sorts of schemes, ranging from consumer and bank fraud to tax evasion and money laundering.

“The reason some of this occurs is because there’s not a great deal of oversight of these types of dealerships,” said Riley. “Consumers continue to be harmed by unscrupulous car dealers who operate in these multi-dealer complexes without any type of impunity.”

She said when someone buys a vehicle from an MDL, “most times these are as-is sales, and under New Jersey law that means if there’s any repairs or any kind of structural problems with the vehicle, it’s on the buyer.”

She said the report finds New Jersey’s consumer protection laws fall short in this regard, so “we’re recommending that the consumer protection laws be expanded to at least give consumers who may be victim to these type of sales a little bit of ability to obtain some recourse.”

She explained if you pay less than $3,000, or if a vehicle is more than seven years old or has more than 100,000 miles, it is not covered by any kind of consumer protection.

She said a lot of MDLs operate online, or in some instances, through word of mouth.

Riley stressed consumers are sometimes not only getting raked over the coals financially, they’re also being put in danger.

“A woman bought a vehicle to take her elderly mother to doctor’s appointments and her mother went to climb onto the running board of the vehicle and it fell away because it was so rusted out," she said.

Riley pointed out oversight of used car dealers falls under the New Jersey Motor Vehicle Commission, and while the MVC has put some new reforms in place, the agency is limited in what it’s supposed to do.

The report underscores the MVC is “responsible for overseeing a vast portfolio of entities, including but not limited to used-car dealers, and that it must do so with finite resources.”

According to a statement by MVC chief administrator Sue Fulton, “as the SCI has pointed out, we continue to make great strides.

We have standardized penalties, hired additional staff and are drafting additional regulations to make dealers aware we will be imposing progressive measures for repeat offenders. When our investigators uncover infractions, we take appropriate action. As the SCI noted, in many instances we are guided by existing statutes. For example, New Jersey’s inspection process – including salvage inspections – is dictated by statute.

We are not alone in this. Many issues noted are consumer-related issues rather than dealer licensing issues. As with any business operating in New Jersey, there are multiple departments that share our interest in protecting the safety and interests of consumers.

You can contact reporter David Matthau at David.Matthau@townsquaremedia.com