Category Archives: Safety recalls

Dealer ordered to pay off loans on traded-in vehicles

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In response to dozens of complaints from consumers who were stuck struggling to make payments on vehicles they had traded in, plus the cars they bought, Washington State’s Attorney General ordered dealerships owned by Mark Gilbert to pay off the liens on the traded-in vehicles.

Washington state law requires auto dealers to pay off the remaining balance consumers owe on traded-in vehicles within two days after they make a new purchase. Typically, the amount owed on the trade-in — known as “negative equity” — is added onto the price of the newly purchased car.

According to the Attorney General’s office, “The Walla Walla County Superior Court..entered a preliminary injunction, ordering several Northwest auto dealerships owned by Mark Gilbert to comply with Washington dealer and consumer protection laws, requiring prompt payoff of customers’ trade-in vehicles.”

The Attorney General’s legal case involved car dealerships Gilbert owned that sold new Honda, Jeep, Dodge, Chrysler, Nissan, and  Ford vehicles.

How can you protect yourself from this scam? The safest thing to do is to wait to buy your next car until you have paid off the loan on the car you are currently driving. Otherwise, you risk having both cars repossessed if the dealer fails to pay off the loan on the car you trade in.  Plus you sink deeper into debt. And — always insist on seeing the title to the car BEFORE you buy. If the dealer doesn’t have the title, the lender for the prior owner can repossess your newly purchased car — even if you are making all the payments in full and on time to your lender.

Read more:

Washington State Attorney General Press Release

“The financing fell through” — car deals gone bad

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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!

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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

Extended Service Contracts — Worth it, or not?

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It’s hard to buy a car today, from a dealer, without having to pay $1000 or $2000 or more for a “service contract.” Some dealers pressure car buyers into these notoriously high-priced add-ons by telling them that if they don’t get the contract, the lender won’t approve their loan.

In some states, that is an unfair and deceptive trade practice. But it’s usually very difficult to prove.

What dealers won’t tell you is that they get hefty kickbacks from lenders, insurers, and other companies that sell service contracts, in exchange for selling them. A dealer may make more on the service contract than on the price of the car.

But are they a good deal for car buyers? According to Consumer Reports, based on the respected consumer magazine’s survey of 8,000 new-car buyers, the answer is NO.

Among the reasons service contracts tend to be a bad deal:

They often exempt coverage for pre-existing conditions, or items that are prone to break down.

They usually won’t cover prior damage, which gives the service contract company a convenient excuse to deny claims. If the car was in a wreck or flood, chances are the warranty will be partially or totally void.

Some dealers fail to forward the money you pay for the service contract. Instead, they pocket it and leave their customers in the lurch. It’s a very unwelcome surprise to find out that the coverage you thought you had — doesn’t even exist. Especially when you face an expensive repair. Even major franchised car dealerships have been caught engaging in this scam.

The products are overpriced. Based on loss/claims ratios, the charges are often outrageously high.

The contracts are written with many exclusions and limitations hidden in the fine print. Blown gasket? “Sorry — you can’t prove the used car you just bought had the oil changed every 3,000 miles. Claim denied.”

Some service contract companies have gone under, leaving both the consumers and dealerships holding the bag.  Even some that were highly rated by “objective” ratings companies were actually a stack of cards. This has happened over and over again.

Bottom line: You’re usually better off spending $100 to get a reliable, independent auto technician to inspect the car BEFORE you buy, rather than spending an extra $1000- $2000 for a worthless contract that is loaded with loopholes.

Read more:

Consumer Reports “Extended warranties: a high-priced gamble”

Old Tire Blows Out, Puts Teen Driver at Risk

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You could tell the father was upset, when he called CARS recently. He had purchased a 2005 Ford Excursion from a major franchised car dealership in Southern California. He checked the tires, and they had plenty of tread left, so he thought they were fine. They also looked nice and new.

But when his 16-year-old daughter drove the Excursion, one of the tires blew out. She almost lost control of the car, on a busy highway. She had barely started to learn to drive. and the experience was quite traumatic for her. Had she been driving faster, she might have lost control and crashed.

Her father had the car towed to a reputable tire shop. They informed him that the tires, which appeared to be nearly new, were in fact 10 years old. They had deteriorated to the point where the rubber was likely to crumble, when they heated up. All 4 tires had to be replaced.

When he confronted the dealer, at first the dealer refused to replace the tires. Then it tried to pressure him into paying half the replacement cost. It was only after he stood his ground and persisted that they reluctantly agreed to pay for four new tires.

Now he’s more wary, and will insist on checking the numbers on the tires before he agrees to have them installed on the Excursion.

The National Highway Traffic Safety Administration (NHTSA) estimates that 400 fatalities a year may have been attributed to tire failures.

Some experts recommend that you avoid tires that are 6 years or older. Even tires that have never been sold before and appear to be “brand new” might actually be old, after sitting on a warehouse shelf for years. To be safe, look for the DOT number on the inside of the tire tread. The last 4 digits are the month and year of manufacture. If the tires are more than 6 years old, it’s safest to avoid them.

NHTSA FAQs about the perils of aging tires

CA Senator Boxer and U.S. Rep. Capps: Stop Renting Unsafe Cars to Consumers, Federal Workers

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Are the rental cars driven by consumers and federal employees safe? Or are they prone to catching fire, having brake failures, or other serious safety defects?

CA Senator Boxer and U.S. Rep. Lois Capps call on Congress and federal agency to protect consumers and federal workers from unsafe rental cars

Lawmakers Urge Agency to Take Action Now While Congress Works on Legislation to Stop the Renting or Selling of Vehicles Under Safety Recall

Santa Barbara, CA – On August 10, U.S. Senator Barbara Boxer (D-CA) and Congresswoman Lois Capps (D-CA23) sent a letter calling on Office of Management and Budget Acting Director Jeffrey Zients to take steps to protect federal workers from renting vehicles under safety recall while they are traveling on official business.

Boxer and Capps are the lead authors of House and Senate legislation – the Raechel and Jacqueline Houck Safe Rental Car Act of 2012 – which would ensure the safety of America’s rental car fleet by preventing rental car companies from renting or selling recalled cars or trucks. The legislation is named in honor of Raechel and Jacqueline Houck, who were killed in a tragic accident in 2004 caused by an unrepaired defect in a PT Cruiser rented from Enterprise that was under a safety recall.

The two California lawmakers wrote in the letter, “This terrible accident drew attention to the fact that car rental companies are not required to repair vehicles under safety recall before they are rented or sold to the public. We have written legislation to close this loophole and are working with our colleagues in the House and Senate to enact this measure into law.

“In the meantime, we believe it is imperative that we protect people from unsafe recalled vehicles,” the lawmakers wrote. “So today we are urging the Federal government to put in place policies that will ensure that no Federal employee rents a vehicle under safety recall until it has been fixed.”

Senator Boxer and Congresswoman Capps announced the letter at a press conference at Santa Barbara Airport today. They were joined by Cally Houck of Ojai, California, the mother of Raechel and Jacqueline, who along with Hertz and consumer groups has endorsed the new House and Senate rental car safety legislation.

The text of the letter follows:

August 10, 2012

Dear Acting Director Zients:

We are writing today to call on your agency to ensure the safety of all Federal employees driving rental vehicles while on official duty.

In 2004, Raechel and Jacqueline Houck of Ojai, California, were killed in a tragic accident caused by an unrepaired defect in a rental car that was under a safety recall. This terrible accident drew attention to the fact that car rental companies are not required to repair vehicles under safety recall before they are rented or sold to the public. We have written legislation to close this loophole and are working with our colleagues in the House and Senate to enact this measure into law.

In the meantime, we believe it is imperative that we protect people from unsafe recalled vehicles. So today we are urging the Federal government to put in place policies that will ensure that no Federal employee rents a vehicle under safety recall until it has been fixed.

On July 30, 2012, the California Department of General Services announced plans to amend the State’s contracts with Enterprise to include specific policies for recalled vehicles. The Director of the Department of General Services, Fred Klass, wrote “Under the terms of the amended contract, Enterprise will be required to repair all recalled vehicles prior to making them available to State employees. In addition, Enterprise will be required to call back any vehicles already being rented to State employees once a recall notice is issued so those vehicles can be exchanged for a non-recalled vehicle.”

We urge the Federal government to act now to protect Federal workers from the type of tragedy that this California family endured. We would be happy to work with you on this critical matter.

Sincerely,
Barbara Boxer
United States Senator

Lois Capps
Member of Congress

US Senators Boxer, Feinstein Introduce Rental Car Safety Legislation

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Boxer, Feinstein Introduce Legislation to Ensure Safety of America’s Rental Car Fleet

Legislation Would End the Practice of Renting or Selling Vehicles Under Safety Recall

Washington, D.C. – U.S. Senators Barbara Boxer and Dianne Feinstein (both D-CA) today introduced the Raechel and Jacqueline Houck Safe Rental Car Act of 2012, legislation that will ensure the safety of America’s rental car fleet by preventing rental car companies from renting or selling cars or trucks that are under safety recall.

The two California Senators introduced the legislation named in honor of Raechel and Jacqueline Houck, two sisters from Santa Cruz, ages 24 and 20, who were killed while driving a recalled Chrysler PT Cruiser they had rented from Enterprise in 2004. About a month before the deadly crash, Enterprise received a recall notice that the PT Cruiser had a defective power steering hose that was prone to catching fire and that it would be repaired by Chrysler free-of-charge. Despite the warning, Enterprise did not get the vehicle repaired and rented it out to three other customers before renting it to the Houck sisters. The defect caused the car to catch fire and crash head-on into a tractor-trailer, killing both sisters.

Their mother, Cally Houck, has joined with consumer groups in support of the new legislation, which would close a loophole in safety standards by requiring rental car companies to ground recalled vehicles as soon as they receive a safety recall notice and prohibit them from being rented or sold until they are fixed. Auto-dealers are already subject to these requirements and the bill would simply extend the same requirements to rental car companies.

“We cannot allow another family to go through the pain and loss that Cally and her family have gone through,” Senator Boxer said. “We will not rest until Congress has passed legislation that protects American consumers from these unsafe vehicles, and we urge all the rental car companies to join Hertz in committing to the safety of their customers.”

Earlier this year, Senator Boxer sent a letter asking the nation’s four leading rental car companies – Enterprise, Hertz, Avis/Budget and Dollar/Thrifty – to protect consumers from unsafe vehicles by making the following pledge: “Effective immediately, our company is making a permanent commitment to not rent out or sell any vehicles under safety recall until the defect has been remedied.”

Of the four companies – which together control 92 percent of the rental car market – only Hertz agreed to the pledge in its entirety. Senator Boxer is continuing to urge the companies to take the pledge and fully protect their customers.

The Senate bill is the companion legislation to a bill introduced last month by Congresswoman Lois Capps (D-CA), Congressman Eliot Engel (D-NY) and Congresswoman Jan Schakowsky (D-IL). The new House and Senate bills are an updated version of legislation introduced last year by Senator Chuck Schumer (D-NY), Senator Boxer, Senator Feinstein and Senator Richard Blumenthal (D-CT).

The new House and Senate legislation is supported by Hertz, Consumers for Auto Reliability and Safety, Advocates for Highway and Auto Safety, the Center for Auto Safety, Consumer Action, the Consumer Federation of America, Consumers Union, the National Association of Consumer Advocates and the Trauma Foundation.

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What if the dealer sells you a junker “AS IS”?

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It happens all too often. It’s one of the most frequent complaints CARS gets.  Consumers buy used cars that break down right away. Some don’t even make it home.

For instance — an 18-year-old high school graduate in Davis, CA bought his first car from a dealer in Roseville. He asked the salesman about its history and condition. The salesman repeatedly assured him it was in good working condition. He needed a car so he could start a new job and attend college in Sacramento. He agreed to pay the dealer about $5000. But when he tried to drive his newly purchased car home that night, the headlights stopped working about 5 miles from the dealership.  Then the car stalled –while he was driving on the freeway, in traffic. He managed to get it to the side of the road. Then it wouldn’t re-start. He was stranded there, with trucks and other vehicles whizzing by, until his mother got out of work and gave him a ride home.

The next day, he called the dealer and tried to get a refund. The dealer refused, pointing out the car was sold “AS IS. He had the car towed to an auto repair shop. There, the service manager told him that it was plagued by many expensive problems, and would need a new engine simply to be driveable. He couldn’t afford to pay for the repairs, and keep making the payments, to avoid having a repossession on his record. He eventually donated the car to a charity, and instead of going to college, joined the Marines.

But according to some legal experts, he may have been able to get a complete refund if he had sued the dealer in small claims court. While the car was sold “AS IS,” he might have been able to prove that the dealer knew or should have known the car was seriously defective, and concealed that information from him.

Faced with similar situations, some consumers have sued shady dealers in small claims court, and been awarded complete refunds, or reimbursements for repairs.

If you have sued an unscrupulous dealer in small claims court, and won, CARS would like to hear from you, and share information about how you did it with other consumers. How did you overcome the dealer’s claim that the car was sold “AS IS”? Did you find an expert who was willing to testify on your behalf? How did you prepare for the trial? How long did it take? We’d love to hear from you!

Yes, I won! Contact CARS