Avoid GAP insurance rip-offs

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If you’re buying a car from a dealership, resist high-pressure tactics aimed at getting you to buy “GAP” insurance. What the finance manager doesn’t tell you is that auto dealers make a lot of profits from the sales of GAP, or “Guaranteed Asset Protection” policies.

Dealers hike up the price, and add it onto your loan, where it can cost you $1000 or more extra, over the life of the loan. Some charge double or triple what you would pay if you bought GAP separately from a reputable insurance company. Finance managers are usually paid an extra bonus based on how many GAP products they sell. So they have a personal financial incentive to pressure you.

The purpose of GAP is to cover you if your car is stolen or totaled before you pay off the loan. The “GAP” is between the amount of the loan and the worth of the car. If there’s a large difference, it’s a sign you’re paying too much for the car.

It’s better to get a less expensive car, or wait until you can pay more of a down-payment and get a shorter loan, or pay cash, instead of paying extra for GAP.

If you do decide you want GAP coverage, shop around and avoid buying it at the dealership. Why?

One major pitfall to buying GAP at dealerships: many dealers collect the GAP payment, but pocket it themselves, and fail to activate the policy. Some dealers have been arrested and prosecuted for this scam, but even then, their victims were not able to recover their losses.

As a result, consumers who paid for GAP, and believed they were protected, got a rude awakening when their car was stolen, or totaled. When they contacted the insurer that was supposed to pay their claim, they found out they weren’t covered. Suddenly they had no car, and still had to pay thousands extra for the difference between the amount of the loan and what they collected from their auto insurer.

Another problem with buying “GAP” from dealers — often, the policies they sell have loopholes that exclude coverage, in the fine print. So consumers end up paying extra for worthless GAP policies that leave them unprotected.

Bottom line: either don’t buy GAP, or get your own coverage directly from a reputable insurer. Many offer GAP polices, and it pays to shop around.

Car Dealer Apologizes for Having Customer Arrested

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The owner of a car dealership in Virginia has apologized to a former customer who was arrested and hauled off to jail for “auto theft” — even though he had a signed contract to buy the car he supposedly had stolen.

Unfortunately, many dealers threaten their customers with arrest, if they balk at signing subsequent contracts on worse terms — a scam known as a “yo-yo” sale. Some dealers have even gotten authorities to prosecute and convict their customers — even though they had a signed contract, the keys, and all other relevant records. Some had even started making payments.

This is yet another reason why it’s smartest to NEVER get financing at a car dealership, and to immediately seek legal help from an auto fraud expert if a car dealer threatens you with arrest.

Read more:
Virginian Pilot report

 

Certified cars are a boondoggle

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Is it worth it to pay extra to get a “certified” used car? In a word, NO. Auto manufacturers and dealers came up with the notion of “certified” cars to prop up the price of used cars, and increase their profits.

Basically, you are paying extra — an average of thousands of dollars more — just for the name “certified.”  Keep in mind — the dealer who gives the car that “156-point” inspection  has an obvious conflict of interest. Plus the manufacturer doesn’t actually do the inspection. If there’s a problem, the manufacturer will just point fingers at the dealer.

Some dealers have “certified” cars that were grossly unsafe.

For example, one dealer in Michigan sold a GM “certified” car that was actually two cars — a classic “chop job.” The front half of one wrecked car, welded onto the back half of another wrecked car. If the car was in even a minor collision, it would have split in two. GM and the dealer refused to give the buyers –who finally discovered they had been snookered — a refund.

Another dealer in Los Angeles sold a Mercedes that had been in a severe crash as a “certified” used car. The owner noticed that the tires were wearing unevenly. He took the car to have it aligned, and was stunned to hear that it wasn’t possible to get it into alignment because it had been so badly damaged the unibody was twisted out of shape. It was so unsafe, the repair shop told him not to drive it home, but to have it towed. When he confronted the dealer, the dealer refused to give him a refund. He finally sued, and eventually settled his case for a confidential amount.

Many “certified” cars are former rental cars or fleet vehicles that were driven hard and may be poorly maintained. Instead of being worth more than Blue Book, they are usually worth less. But dealers can get away with charging more for them by calling them “certified.”

Instead of paying thousands extra for a “certified” car, pay $100 to get your own, independent inspection. Do it BEFORE you buy. And save thousands of dollars.

Read more: “Certified” car may not be accident-free — CBS Channel 5, San Francisco report

 

 

Take the pledge — I won’t text while I drive

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You’ve probably seen the ads. A young man who has difficulty talking is reaching out to the rest of us, to warn us — don’t text while you drive. He was brain-injured in a crash, where a moment’s inattention resulted in a lifetime of dealing with serious brain damage.

No text or other message is worth risking your life, or harming your passengers or other people who share the roads. Imagine how horrible you would feel if you killed someone inadvertently just because you couldn’t wait to send a text.

AT&T has launched a national drive, to urge everyone to pledge not to text and drive. It’s a good idea, even if they are motivated partly because they want to stave off laws that prohibit texting and driving.

Don’t let your last text end with a crash.

Car Dealer Arrested by Federal Agents

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The former owner of a Suzuki dealership in South Carolina and eight of his former employees have been indicted and are facing federal charges. Prosecutors say they used deceptive advertising that promised low monthly payments to entice customers to buy new cars.

According to the charges that were filed, the deceptive advertising and sales scheme occurred from 2006 through August, 2008.

In TV and radio ads, plus direct mail to consumers, Gibson and his co-defendants allegedly lured customers into buying cars, promising them very low monthly payments — usually between $44 and $99 — and here’s the kicker — at the end of several months, they could trade in the car for new one, at no additional cost.. However, when the “promotional period” ended, the customers’ payments skyrocketed. They were also not allowed to swap cars. Thus, they were trapped with high payments that busted their budgets.

According to a news report in the South Carolina Herald-Journal, “one couple bought a Suzuki in March 2007, [and] agreed to make monthly payments of $47 and were soon slapped with demands for $509 a month to keep their sedan.”

Under a court order issued in 2009, dealership customers divided $2.7 million in funds established by American Suzuki Motor Corp., lenders and the company’s insurance carrier.

Assistant U.S. Attorney David Stephens is prosecuting the case with the assistance of the U.S. Postal Service and the FBI.

Read more:

Spartanburg, SC Herald-Journal, Sept. 14, 2012

 

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”

Scams target military — where to complain

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Dear Servicemembers:

Have you been scammed by a company that claimed you were not in the military, when you were actually on active duty? Or that cheated you in some other way?

Such scams may be a violation of the Servicemembers Civil Relief Act, or other state or federal law. If this has happened to you, please let us know, or complain to the Consumer Financial Protection Bureau.

The CFPB includes the Office of Servicemember Affairs, headed up by Holly Petreaus, wife of U.S. General David Petreaus — with the sole mission of protecting servicemembers and their families from financial scams.

Here’s where to complain:

Consumer Financial Protection Bureau

 

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

 

Missing air bags endanger lives

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Air bag theft and fraud are putting consumers’ lives in danger. Tragically, missing air bags sometimes cause serious or even fatal injuries.

In a heart-rending incident, San Diego-area parents Robert and Mary Ellsworth, members of CARS, lost their 18-year-old son Bobby, who had recently graduated from high school Why?  Because his friend’s pickup truck was missing the front air bags. Bobby was riding as a passenger on a narrow, winding road when the the pickup collided head-on with a BMW.  The Ellsworths didn’t find out until later that the pickup had been in an earlier crash. The front end was heavily damaged and both front air bags had deployed.

The former owner’s insurance company, State Farm, had decided it was not worth fixing. So the insurance giant “totaled” it. But that wasn’t the end of the line. Instead of ensuring it was sold only for scrap, or parts, they sent it to an auction where it was sold to the highest bidder. The same thing happens with an estimated 1.5 million vehicles each year. This way, State Farm and other auto insurers manage to recoup more for their “totaled” cars than if they were sold only for parts.

The buyer made shoddy repairs and cut corners. Sealing Bobby’s fate, he decided not to replace the air bags. Instead, he stuffed the empty compartments where the air bags belonged with craft paper. Then he covered them up, so it appeared that the air bags were intact.

Bobby’s friend, who was driving the pickup, and the driver and passengers riding in the BMW — equipped with air bags — survived. After the crash, experts who examined the wreckage concluded that if the passenger air bag had been replaced, Bobby would also have survived.

Air bags are a tremendous bargain, especially compared to losing a life. But — not to unscrupulous rebuilders, who are only interested in making a quick buck. Auto crash investigators have discovered air bag compartments packed with whatever was handy — rags, Styrofoam, packing peanuts, or even crushed beer cans.

Then the auto fraudsters cover them up. It’s cheap and easy to buy fake air bag covers over the internet.  Companies that sell the fakes offer them complete with manufacturer logos or the initials “SRS” — standing for “supplemental restraint system” — embossed on the cover.  Connecticut’s former Attorney General, Richard Blumenthal, cracked down on one company that advertised fake air bags in Connecticut. But  state law enforcement officials’ hands may be tied, when the companies are located in other states, or sell the fakes over the internet.

Won’t a warning light come of if the air bags aren’t working?  Not necessarily. Some shady rebuilders also tamper with the circuitry that reports on the air bag status, when you turn on a car. Bottom line: you can’t count on a warning to alert you the air bags are missing, or the electronics that control them are corroding due to flood damage.

How can you make sure any used car you’re considering still has all the air bags intact? Insist on having a trusted, reliable independent auto technician check out the car, including checking all the air bags, before you buy. This report shows what can happen if you don’t get a vehicle inspected first:

WOOD-TV 8 Grand Rapids, Michigan– do the air bags on your used car work?