GM “certified” cars face Federal scrutiny

The U.S. Federal Trade Commission has confirmed that it is investigating advertising of General Motors’ “certified” used cars, regarding their safety recall status. The FTC is the first federal agency to take action to protect the public from car dealers’ sales of unrepaired recalled used cars. CARS applauds the FTC for acting to police vehicle safety in the used car market, under existing laws.

According to the Detroit News, “GM said it was notified June 3 of the investigation by the FTC that concerned “certified pre-owned vehicle advertising where dealers had certified vehicles allegedly needing recall repairs.”

CARS and our consumer group allies have been urging the Federal Trade Commission to crack down on CarMax, over its sales of unsafe, recalled used cars. CarMax is the largest retailer of used cars in the U.S. CarMax advertises that all its vehicles must pass a rigorous “125 – point inspection” to qualify to be sold as “CarMax Quality Certified” vehicles.

However, CarMax openly admits that it knowingly and deliberately sells cars that are being recalled by the manufacturer because they have lethal safety defects. CarMax neglects to ensure that the cars are repaired and safe to drive, before offering them for sale. The CARS Foundation and CALPIRG Education Fund recently issued the report “CarMax Is Endangering Lives in California” about the unsafe, recalled cars CarMax offered for sale in Oxnard and South Sacramento, CA.

New York City’s Department of Consumer Affairs was the first local agency to crack down on car dealers’ sales of unsafe, recalled used cars, under a law in New York that requires dealers to certify that vehicles they offer for sale are roadworthy.

Read more: Detroit News: GM Faces FTC Investigation

 

CarMax – Too Risky for Wise Investors?

Thinking of investing in CarMax? You may want to take a close look at their breathtakingly risky practice of selling unsafe, recalled cars to consumers.

CarMax is already under fire from consumer groups,  faces potential action by the Federal Trade Commission, and has been repeatedly exposed in undercover investigations by TV news organizations, including ABC’s 20/20, over its sales of unsafe, recalled cars to consumers.

Here’s the rub:  CarMax advertises that all their cars must pass a “rigorous 125+ point inspection” before they can be sold as “CarMax Quality Certified” cars.  But how can a car with a killer defect possibly pass a rigorous inspection and meet their standards?

Despite the mounting scrutiny, CarMax recklessly persists in selling “CarMax Quality Certified” unsafe, recalled cars at retail to consumers. Case in point:  Even when competitors like AutoNation have wisely announced their decision to cease selling used cars with unrepaired Takata air bags, CarMax continues to sell them anyway.

Defying common sense and responsible business practices, CarMax somehow seems unable to bring itself to stop selling consumers cars with the notoriously defective air bags, which can explode on impact, hurling shrapnel at the driver and front-seat passenger’s face and neck..  In cases that are making global headlines, the defective air bags have caused  serious injuries, including blindness, while other hapless victims have bled to death.

This particular defect  remains the focus of Congressional investigations in the U.S. Senate and House of Representatives. Takata also faces possible legal action by the National Highway Traffic Safety Administration, and by the US Department of Justice.

So — what does AutoNation know and take into account that CarMax doesn’t seem to grasp?

Is CarMax waiting for a total PR catastrophe, before they stop making that added bit of profit by selling lots of unsafe, defective, recalled cars to consumers, instead of having them repaired or selling them for a somewhat lower price, at wholesale?

Whatever CarMax’s motivation, wise investors may wish to rethink the company’s self-inflicted level of exposure.

 

CarMax — caught on Camera AGAIN selling unsafe, recalled cars

An undercover investigation by WSB-TV in Atlanta, GA found CarMax is still selling unsafe, recalled cars — while claiming they take care of safety recalls.

Instead of cleaning up their act, and ensuring the cars they sell are safe, CarMax says they plan to keep leaving it up to car buyers to get the safety recall repairs done — AFTER they buy the car. For millions of recalled cars, it could take months before repair parts are available, and meanwhile CarMax customers will be stuck driving ticking time bombs.

Watch video: WSB-TV report: CarMax under Fire over Recall Policy

FTC takes action against 9 car dealers over “deceptive” ads

In a rare move, the Federal Trade Commission (FTC) recently zeroed in on how auto dealers sell, finance, and lease both new and used motor vehicles. The agency called their nationwide sweep “Operation Steer Clear.”

As a result of the FTC’s taking action, nine auto dealers agreed to settle deceptive advertising charges.  The agency alleged that the dealers made a variety of false claims in print, Internet, and video advertisements that violated the FTC Act, deceiving the public about the actual costs of purchasing, leasing, or financing vehicles. One dealer even advertised that consumers had won prizes they could collect at the dealership — only to find, when they arrived on the lot, they had not won.

“Buying or leasing a car is a big deal, and car ads are an important source of information for serious shoppers,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Dealers’ ads need to spell out costs and other important terms customers can count on. If they don’t, dealers can count on the FTC to take action.”

According to the FTC, the agency’s ‘Operation Steer Clear’ led to settlements with these dealerships in California:

Casino Auto Sales of La Puente, CA and Rainbow Auto Sales of South Gate, CA. Both allegedly violated the FTC Act by “deceptively advertising that consumers could purchase vehicles at specific low prices when, in fact, the price was $5,000 higher. Both dealers’ ads involved a mix of English and Spanish.

Honda of Hollywood in Los Angeles, CA, and Norm Reeves Honda of Cerritos, CA, violated the FTC Act by deceptively advertising that consumers could pay $0 up-front to lease a vehicle when, in fact, the advertised amounts excluded substantial fees and other amounts. The ads also allegedly violated the Consumer Leasing Act (CLA) and Regulation M, by failing to disclose certain lease related terms. Norm Reeves Honda’s ads also allegedly violated the Truth in Lending Act (TILA) and Regulation Z, by failing to disclose certain credit related terms.

The FTC also settled similar cases with dealerships in Georgia, Illinois, North Carolina, Michigan, and Texas. The Los Angeles Department of Consumer Affairs and the Michigan Department of Attorney General assisted the agency by investigating dealers in those states.

The FTC deserves credit for focusing on harmful auto dealer practices, including at politically potent new car dealerships.  However, no dealer agreed to pay a fine or any restitution to victims. Instead, the dealers agreed to behave better in the future.

The public is invited to comment to the FTC about the settlements, until Feb. 10.

Read more:  FTC Announces settlements with auto dealers

 

 

Federal Trade Commission — private car sellers often give “more reliable information” than auto dealers

We now have an official answer to the age-old question: Are you more likely to be misled if you buy a car from a private individual or from a used car dealer? Obviously, dealers want you to buy from them — and these days, they are boasting about their record profits.

But — auto sales remain the leading cause of consumer complaints to state and local consumer protection agencies. Year after year, new and used car dealers also rank #1 among the most-complained about businesses, in terms of consumer complaints to the Better Business Bureau.

To top it all off, the leading federal consumer protection agency for America’s car buyers recently stated flat-out that you’re more likely to get accurate information about a used car’s history when you buy a car from another consumer, rather than a used car dealer.

Here’s what the Federal Trade Commission stated:

“The Commission concluded that the [Used Car] Rule should not extend to private or casual sellers of used cars because the record failed to support a finding that deceptive sales practices were prevalent in private sales. The Commission noted that in private sales, prospective customers often receive more reliable information about mechanical condition than they do from dealers…” **

    ** Federal Register, Vol. 77, No. 242, Dec. 17, 2012, pages 74761-74762.

Of course, you still have to be on the lookout for “curbstoners” — dealers masquerading as consumers. Be sure to insist on seeing the title and registration, and past work orders from repairs, and make sure that the names on the documents match the seller’s name.

And ALWAYS, ALWAYS insist on getting the car inspected by an independent, reliable, trustworthy mechanic / body shop of YOUR choosing, before you buy. A good place to find an expert to perform the inspection? Car Talk’s Mechanics Files.

It’s a good idea to also check the National Motor Vehicle Title Information System and other vehicle history services before you buy. The more you know, the better. NEVER trust a car dealer to tell you the truth about a car.

Twelve tips for consumers on how to buy a safe, reliable used car — without being cheated by a shady car dealer:

CARS’ Twelve Tips for Used Car Buyers

Happy, safe car buying and Happy New Year!