“The financing fell through” — car deals gone bad

Posted on April 1, 2013 by admin

It’s a consumer transaction like no other. When you buy any other product or service, once you’ve signed on the dotted line, the seller can’t unilaterally change the deal. But then you set foot on a car dealership lot, and it’s like you’ve entered a parallel universe where suddenly the rules of the road no longer apply.

No other shopping experience in your life prepares you for what auto dealers try to pull. It’s called “yo-yo” financing. It’s a shady practice that has made headlines nationwide, and is becoming notorious, but continues to happen at auto dealerships every day, all across the country.

You negotiate to buy a car. You reach an agreement. You make a deposit and trade in the car you own. You are then sitting across the table from the Finance Manager, who is all smiles and claims to be on your side. He says he’ll get you the “best terms” on a car loan. He shows you the federally required Truth in Lending disclosures. Total amount financed. Monthly payment. You look it over, it appears to be reasonable, and you sign the Retail Installment Contract. The salesman hands you the car keys, and off you go, in your newly acquired car. Life is good.

But then a week or two later, you get a phone call from the dealership. They say that the financing “fell through.” They want you to go back and sign another contract. On worse terms. The interest rate you agreed to was 4%. Now they want to charge 16%. Or 20%. The monthly payment was a manageable $240. Now it will shoot up to $480. They claim that your credit isn’t as good as they thought. Which makes no sense, since they pulled your credit report before financing the car. Given electronic communications, they knew within seconds what rate you qualified to get.

What they’ve done is known as “de-horsing” — a term that harkens back to horse-trading days. Their goal is to get you out of the car you own, and take you out of the market and trap you into a deal with them. Once they have your trade-in and down-payment, chances are good you can’t just go somewhere else and buy a car on better terms. They have you over a barrel.

If you balk at signing the new contract, they will threaten to report it as stolen. Or they’ll threaten to repossess the car, and ruin your credit. If you drive back to the dealership in your newly purchased vehicle, they may park cars on both sides and behind it, to block you from being able to leave, until you sign the new contract. Typically, they refuse to return your deposit. They also claim they already sold your traded-in car, even though it’s actually sitting on a back lot.

You feel trapped into signing, even though it will cost you thousands more than you had initially agreed to spend.

This is the twisted world of “yo-yo” financing. The dealers claim that the financing “isn’t final” — even though you reached an agreement and signed a contract.

The ONLY way to make sure you don’t fall into the yo-yo trap: NEVER, EVER get a loan from a car dealer. Always get your own pre-approved loan. And don’t fall for it if the dealer claims it will get you better terms. Because those can change after you drive off the lot.

CARS recently heard from a consumer, Michael L., who was being scammed by a major car dealer in Sacramento. He and his fiancee are expecting their first child in a few months and wanted a bigger car. Michael had pre-qualified for a loan at around 10%. He had the check, from Capitol One, in hand. The dealership finance manager promised a lower interest rate. Thinking he could save some money, Michael agreed to go with dealer financing. Then came the phone call — sorry, the loan “wasn’t approved” at the lower rate. The dealer demanded that he pay 18%. So instead of paying $23,000 for the loan, Michael was going to have to pay over $30,000 to finance the same car.

He contacted CARS and we brought his case to the attention of a major national news organization. When the dealership found out about the potential news coverage, it backed down and Michael got to keep the car on the original terms. He said he’d learned his lesson — never trust a car dealer, especially not on the financing.

Chrysler refuses to recall its flaming Jeeps — Act Now!

Posted on February 26, 2013 by admin

Over 287 people have died in 202 fiery crashes involving 1993-2004 Jeep Grand Cherokees, more than the ill-famed Ford Pinto in the 1970s. Yet Chrysler continues to refuse to recall their flaming Jeeps.

Please help stop innocent people from being burned to death in Jeeps designed with the gas tanks behind the rear axle, where rear-end collisions cause the tanks to rupture and explode.

A courageous woman from Virginia who witnessed a horrific crash, which cost a mother and teenager their lives, has filed an online petition. Once you read it, you’ll know why those Jeeps have to be recalled — and why it’s important to add your name to the growing list of concerned consumers calling on Chrysler to stop the carnage —

Here’s where you can sign Janelle’s petition

Who needs car dealers?

Posted on February 19, 2013 by admin

If you want a new car, unless you are buying a Tesla, you are probably going to be forced to buy from a car dealer. That’s because car dealers in all 50 states have paid legislators handsomely to enact special franchise laws that give them monopolies over new car sales. This leaves new car buyers with little choice, but to buy from a dealer.

But used cars are another story. Each year, millions of American consumers buy and sell used cars directly to each other — without having to pay a middleman. Why is this kind of transaction so popular?

You can save thousands of dollars

You can avoid major headaches and hassles

You can get a newer, cleaner-running, safer, better vehicle — for the same amount of money you would have paid for an older, dirtier, less safe vehicle from a dealer.

According to the Better Business Bureau, year after year, auto dealers are the #1 source of consumer complaints to the BBB. So why go there?

The average dealership sales transaction takes approximately 4 hours, and is designed to wear you down and get you to the point where you will sign anything, just to get it over with and leave. Some consumers have been literally held hostage at dealerships that took the keys to their cars– supposedly to evaluate them as a trade-in — then refused to give them back — until they bought a car.

Common scams you can avoid when you buy from a private person —

Sales of unsafe, recalled vehicles — it seems incredible, but — the National Automobile Dealers Association has taken the official position that its dealer members should be able to sell you an unsafe, recalled used car that hasn’t been fixed. Even though the fix is FREE. In some cases, innocent, unsuspecting used car buyers have been maimed or killed in recalled vehicles sold to them by licensed dealers — who claim it’s not their responsibility if the car was under a recall.

“Yo-yo” financing — basically, bait and switch on the terms of the loan. You sign a contract with the dealer, that says you’re going to pay 4% or 5% interest. You leave a down payment and trade in your old car. You drive off the lot and everything seems fine. Then you get a call from the dealer telling you that you have to come back because the financing “fell through” — which is a lie. But if you refuse to return and sign a new contract to buy the car at, say, 16% interest, or give the dealer a bigger down payment, or both, the dealer threatens to repossess your car, or report it as stolen. The dealer refuses to give you back your down payment and traded-in vehicle, to trap you and keep you from being able to go elsewhere to buy.

Dealer “markups” — hidden kickbacks that increase the price of auto loans from car dealers, and cost consumers over $25.8 billion in a single year. Dealers get kickbacks from lenders, in exchange for raising the interest rate on your car loan beyond the rate you actually qualify to get. This extra charge is not based on risk, but on the dealer’s assessment of how much they can get away with charging you, after sizing you up, including checking out your profile in databases that have your personal information sliced and diced by literally hundreds of criteria.

Unsafe, Recalled Used Cars for Sale on Dealer Lots

Posted on February 4, 2013 by admin

Used car dealers across the nation persist in foisting off unsafe, recalled vehicles on an unsuspecting public. Motor vehicles rank among the most hazardous consumer products in the nation, in terms of fatalities, serious and debilitating injuries, and economic costs to our country.

Fortunately, car dealers are prohibited by federal law from selling or leasing NEW cars that are being recalled by the manufacturer. But unfortunately, there is no such law to protect USED car buyers.

Each year, about 40 million people purchase used cars. But the powerful auto dealer lobby — which received billions of taxpayer dollars during the Great Recession — has blocked attempts in Congress to protect used car buyers from unsafe, defective recalled cars being sold at dealerships.

News organizations have repeatedly identified this problem. In 2010, the non-partisan U.S. Government Accountability Office (GAO) recommended that Congress address the threat posed by unsafe, recalled used cars. But so far, Congress has failed to act. Auto dealers are not even required to report fatal or injury crashes involving recalled vehicles they sell to the public, to the National Highway Traffic Safety Administration.

CBS’ Early Show investigated sales of recalled, used cars and found unfixed, recalled cars on lots scattered across the country. When they asked if the cars were being recalled, sales personnel assured them that they wouldn’t have them for sale if they were being recalled. If only that were true.

According to CBS’ Early Show: “A dealer in Oklahoma sold Tabitha Gordon a used Durango in 2009. She was driving with her son, Kaden, when the lights, wipers and locks went haywire. Gordon said of the incident, “I felt like I was in a twilight zone. … The plastic that covers the speedometer had popped, and smoke started billowing into the vehicle.”

She managed to pull over and get Kaden out as the car caught on fire. [“Early Show” Consumer Correspondent Susan] Koeppen said it turns out Gordon was sold a car that had been recalled for an electrical defect. “We were told that it was safe and it would be a safe vehicle for our family,” Gordon said. “And it wasn’t, it was far from it.”

Watch video: CBS Early Show — Recalled Used Cars Up For Sale

Can you imagine how awful it would be, for your car to catch on fire, when you have your child strapped in a child safety seat in the back? What if you are driving with several children who are strapped in? Would you be able to get all of them out in time, before the car explodes?

Auto dealers complain that it’s too much bother for them to find out if a car is being recalled and get it fixed, before offering it for sale. They would rather risk your life, and your family’s safety, than take the time to call the manufacturer’s toll free number and check the car’s status, or visit the manufacturer’s website, online, and get the car fixed — for free.

CARS believes that even if you can’t afford a new car, or if you simply decide that a used car is a better deal, you and your family still deserve to be safe.

What can you to to protect yourself from unsafe, recalled used cars? When you find a car you like, NEVER take the car dealer’s word for it that the car does not have a safety recall pending. As reporters have repeatedly documented, car dealers are prone to lying about safety recalls, even if you ask them face-to-face about a specific car.

Instead, BEFORE you buy, do your own research. Note the Vehicle Identification Number (VIN), which is stamped on a small plate on the dashboard, visible through the windshield. Call the auto manufacturer’s toll-free number and ask if all the recall work has already been done. Or check the auto manufacturer’s website, under “safety recalls,” and enter the VIN. You can also contact a local dealership that sells that make of vehicle, and ask them to double-check for you. Since new car dealers get paid to do recall repairs on makes they sell, at least they have some incentive to tell you the truth.

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

Posted on January 2, 2013 by admin

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!

Buyer Beware: Auto dealers selling unsafe, recalled cars — without fixing them first

Posted on December 8, 2012 by admin

One of the reasons many car buyers purchase used cars from an auto dealer is to get a car that they think is safer. But are they really safe? Not necessarily. Each year, millions of used cars are sold, without the safety recall work being done. Many are being sold by so-called “reputable” auto dealers.

The harsh reality — dealers are prohibited from selling NEW cars that are under a safety recall, but are exploiting a loophole in federal law that allows them to sell USED cars that are under a safety recall, without fixing them first.

Their excuse? They don’t want to bother to take them out of service as loaner cars, or to another dealer, for FREE repairs. After all, that might cut into their profits or be inconvenient.

Never mind the fact they are putting their customers’ lives in jeopardy. And also creating a hazard for other motorists who share the road with the unsafe, recalled cars. This excuse is especially lame, since the repairs are FREE. By federal law, the auto manufacturers must pay for the repairs, in full.

According to a report issued by the non-partisan Government Accountability Office, car dealers’ sales of unrepaired, recalled cars is a serious problem that urgently needs to be addressed.

In the wake of the Toyota recall scandal, and in reaction to the GAO report, Congress attempted to require auto dealers to fix recalled used cars before selling them to the public. But under pressure from the powerful auto dealer lobby, that provision was stripped from the national auto safety bill that finally passed.

Tragically, unsafe, recalled cars continue to put unsuspecting car buyers and their families at risk. One investigation by highly respected consumer reporter Joe Ducey, Channel 15 in Arizona found dozens of recalled cars for sale on the lots of major auto dealers:

Cars with unrepaired safety recall issues sold from Valley car lots

Don’t fall prey to this dangerous scam. Be aware you can’t rely on auto dealers not to sell or rent an unsafe, recalled car. In fact, the powerful auto dealer lobby is actively pushing in Congress to keep on putting their customers’ lives in jeopardy. So far, they have prevailed.

Were you sold an unsafe, recalled car by a dealer? If so, CARS wants to hear from you. The only way this reckless policy will stop is when people like you speak up and the truth gets out.

Contact CARS

Meanwhile, here are 11 top tips from CARS, for how to buy a safe, reliable used car — without even having to step foot on a car dealer’s lot:

How to buy a safe, reliable used car — without getting ripped off

Dealers sell stolen cars

Posted on November 14, 2012 by admin

When you buy a car from a dealership, you don’t expect to end up with a “hot” car that was reported stolen. But — some dealers have been selling stolen cars to unsuspecting consumers. Worse, when the cars were seized by police, the dealers refused to give the consumers a refund.

A Florida woman bought a car from a large franchised auto dealer. Imagine her shock when police showed up at her home and seized the vehicle. They told her it was stolen property. She showed them the contract and other documents. She had even registered it in her name and paid for major, expensive repairs.

However, that didn’t matter — she still lost her car. When she contacted the dealer who sold her the car, he refused to accept any responsibility.

Eventually, she got an attorney and sued, but years later she was still trying to get a refund, while the dealer kept stonewalling.

Recently, a news team in Sacramento contacted CARS about a similar case. The insurance company had paid off the claim on the stolen car, and took possession when it was recovered — from a hapless car buyer, who had a receipt to prove she had bought it from a local dealer. Suddenly she was without her car, and she lost all the payments she had made.

You may think that when you buy a car from a licensed dealership that you’re protected. Unfortunately, when stolen property is involved, often the dealers and insurers come out ahead, leaving innocent consumers in the lurch.

A Texas man was arrested by Mexican authorities after the vehicle he bought from a dealership in Texas was identified as stolen, after he drove it into Mexico and attempted to return home. He was eventually cleared of auto theft charges. But the dealership balked at paying him back for the stolen car.

Some consumers are victims of a sophisticated scam known as “VIN-switching” or “vehicle identity theft.” Thieves switch the VIN plates or alter them. According to the FBI, VIN switching is a serious — and all-too common — crime.

Bottom line for car buyers: Always insist on seeing the title to the car before you buy. Make sure the name on the title matches the seller’s name. Make sure the VIN on the car is the same as on the title. Double-check with the motor vehicle department in your state to confirm that the owner has proper title to a car with that VIN.

Read more: FBI — suspect sentenced for VIN switching

Texas man says dealer sold him stolen car

CARS Blog

Consumers for Auto Reliability and Safety

Category Archives: Car Buyers: Beware