2012 was the most profitable year EVER for auto dealers, according to an annual study by the National Automobile Dealers Association. The study found that profits at the average U.S. dealership rose to over $2,036,000 in today’s dollars. — Automotive News, July 8, 2012
Tag Archives: car dealers
Car dealership service departments “hostile to women”
According to a study commissioned by the National Automobile Dealers Association, women hold only 21% of all dealership positions. Women account for even fewer service advisor positions, at 16%, and just 6% of service managers.
The president of the consulting firm that conducted the study, DeltaTrends, explained that dealership “service departments can have a culture that’s ‘frankly hostile toward women.’ ” — Automotive News, May 6, 2013
Car dealers sue to keep car buyers captive, attack Tesla
Ever wonder why you can’t just order a new car over the internet, directly from the manufacturer? Then pick it up at the factory, or a local showroom, like people do in Europe? It’s because U.S. auto dealers have used their political muscle to get laws passed in all 50 states that give them a special monopoly. Those state franchise laws insulate them from having to compete with manufacturers for your business.
Car dealers got the laws enacted because they know that, given a choice, most car buyers would never subject themselves to the typical car-buying experience.
Car dealers are now attacking electric car manufacturer Tesla in court and in state legislatures, seeking to bar the company from selling its highly-praised electric vehicles directly to the public. Tesla is wise to be wary of auto dealers. As a group, auto dealers are throwbacks to the era of horse-trading. They have been among the most aggressive opponents of advances in fuel economy standards. They also have a long history of opposing mandates to produce electric vehicles.
Car dealers repeatedly sued the U.S. Environmental Protection Agency, seeking to block higher fuel economy standards. They waged all-out war against improved fuel economy in Congress. The end result, of course, was that when the price of gas rose, the value of their gas-guzzling products tanked, leaving their customers upside down in their overpriced loans. Then we bailed them out, at taxpayer expense, including the $3 billion they got from “Cash for Clunkers.”
Plus auto dealers commonly engage in a laundry list of shady or downright illegal practices that add billions onto the price of financing cars — hard-earned money that could be spent to get a newer, safer, cleaner car.
Think you might like to have the freedom to buy directly from a manufacturer someday? Now it’s only a pipe dream for car buyers in most states — unless you’re willing to travel to Europe — but someday it may become reality here in the U.S.
Read more: National Public Radio report
Car Dealers Brag about Attack against Workers’ Rights
According to Automotive News, auto “Dealers have moved to the front lines of opposition against legislation that would make it easier to workers to join unions. The practice is commonly called card-check.”
“Dealers…are claiming some success in slowing momentum of the bill, which is a top priority of organized labor and key Democratic leaders.” — Automotive News, March 23, 2009
That was in 2009. Since then, dealers and their business allies have succeeded in blocking enactment of the legislation.
Dealers like to be able to fire employees at will, sometimes pressuring them to cheat customers, under threat of losing their jobs.
Auto dealers are overwhelmingly conservative. Their political giving, predictably, follows the same pattern. Auto dealers donated tens of millions of dollars to right-wing politicians like former President George Bush, Presidential Candidate John McCain, and Presidential candidate Mitt Romney..
Car Dealers Rake in Billions
Auto dealers like to pose as “Main Street” “mom and pop” businesses, in order to get concessions from legislators and regulators. But according to Automotive News, “The $1 billion club for 2012 includes 34 [dealership] groups, including 13 with more than $2 billion.”
Increasingly, auto dealerships are consolidating and thousands are publicly traded on Wall Street. Microsoft’s Bill Gates is one of the largest investors in the nation’s largest auto dealership chain, AutoNation, which reportedly grossed $15,668,8000,000 last year.*
*Automotive News, “Top 125 dealership groups in the U.S.” – March, 2013.
“check engine” light woes
You’re a smart consumer. So before you buy that used car, you take it for a test drive. You notice that there are no warning lights on the dashboard. You think everything is fine, and you buy the car.
But — shortly after you drive it home, the “check engine” light comes on. This spells trouble. BIG trouble. This scenario is playing out all over the country. It’s become a frequent complaint among used car buyers. “I just bought it and now the ‘check engine’ light is on.” Adding to the woes experienced by consumers who are victims of “check engine-itis” — the repairs to get that pesky light to go off can cost $3,000 — $4,000 or more.
Margie Y of Hawthorne, CA contacted CARS and said she bought a used Toyota for her daughter, as a present for her 21st birthday, from a local dealership. Within a day, the “check engine” light came on. Then the alternator blew up, and the car caught on fire. When she had the partly charred Toyota towed to a mechanic, he said it needed a new alternator, catalytic converter, and solenoid — at an estimated cost of over $2400. Money she didn’t have, since she had paid $6200 cash for the Flaming Toyota, and also traded in a vehicle that was running fine, plus had paid $300 for the tow.
Unfortunately, this story is all too familiar. So — what’s happening? According to automotive experts, unscrupulous dealers buy “scan tools” over the internet that allow them to simply wipe out the error codes that trigger the “check engine” light. Then they sell the car. As soon as it’s driven a short distance, the error codes register and — on goes the dashboard warning light. Some dealers don’t bother to buy the scan tools. They just disconnect the battery, erasing the error codes and getting the “check engine” light to go off just long enough to foist the car off onto an unsuspecting used car buyer.
Not only are the dealers cheating their customers, they’re also falsifying smog test results and polluting the air. They know that chances are good their customers won’t be able to pay for the expensive repairs, and will end up driving the car despite the fact it doesn’t meet emissions standards. The day of reckoning may come when the hapless consumer tries to register it, and it won’t pass the smog test. But by then, the dealer figures it will be too late for the consumer to take them to court.
What can you do to avoid becoming a victim of “check engine-itis”? The most effective single thing you can do is to insist on getting your own trusted mechanic to inspect the car before you buy. They should be able to detect the fact the error codes have been wiped clean, and also do a check of the emissions system that will turn up the problems. Where can you find a good, reliable mechanic? Car Talk’s Mechanics Files is a terrific resource, where you can find the best mechanics in your area, based on reviews written by their own customers.
Check Car Talk’s Mechanics Files to find a reliable mechanic — before you buy
Tell the seller that you want them to take the car to YOUR mechanic before you’ll agree to buy. If they balk at that, or try to talk you out of it, well, that’s why God gave you feet — so you can walk away from there. Pronto. There are plenty of good used cars for sale.You don’t need to get stuck with one that will cause you hassles and headaches.
“The financing fell through” — car deals gone bad
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.
Unsafe, Recalled Used Cars for Sale on Dealer Lots
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.
Read More: CARS tips for used car buyers
Auto dealers granted special exemption from Dodd-Frank based on lies
Auto dealers are directly responsible for writing up the lion’s share of the $850 billion auto lending market. Like home mortgages, most of those loans are then packaged, securitized and sold on Wall Street to investors — spreading the risk around. New and used car dealers are also the leading source of consumer complaints to state and local consumer protection agencies and the Better Business Bureau. They played a major role in the collapse of the economy and the recession.
Despite years of being warned by economic analysts that their predatory practices were a “house of cards” that would inevitably collapse, they failed to rein in their abuses. Instead, their practices went from bad to worse — including falsifying loan applications and forging signatures on documents, and selling cars they didn’t even own — massively defrauding the public, banks, and other dealerships.
So why aren’t they regulated under the Dodd-Frank Wall Street Reform Act?
Simple. It’s because they were granted a special exemption, by Congress. The claim that dealers made, to rationalize this special treatment, was that auto dealers are supposedly “Main Street, not Wall Street.” This talking point became their oft-repeated refrain with members of Congress and the press. Never mind that it was laughably false.
Former U.S. Senator Sam Brownback (R-Kansas) presented the amendment to give the special exemption from Dodd-Frank to auto dealers, on the Senate Floor. Not surprisingly, he merely mouthed the car dealer line about their not being part of Wall Street. He claimed that car dealers
“are the quintessential Main Street business throughout the country. There’s not a single auto dealer on Wall Street. None of them. Not a one. You can go up there today and try to buy a car and you can’t get one. These are Main Street businesses.”
Too bad what Sen. Brownback told his Senate colleagues was totally false. A simple check of readily available public filings would have revealed that actually over 1,000 dealerships are owned by huge automotive dealership chains that are indeed traded on Wall Street.
Exhibit A: the behemoth AutoNation, based in Florida, which owns more than 215 dealerships, and took in over $13 billion during 2011. Bill Gates is one of the major investors who owns shares of AutoNation. Hardly most people’s idea of Main Street.
Here’s a link to Brownback’s floor speech, recorded by C-Span and posted on the U.S. Senate website. Sen. Brownback’s speech appears approximately 2 hours and 53 minutes after the recording starts:
May 24, 2010 Floor Debate over Dodd-Frank Wall Street Reform Act
Reality check: Among the leading auto dealership chains that are publicly traded on Wall Street (revenue based on figures from Automotive News, March 12, 2012 — for the year 2011):
AutoNation — 215 dealerships, over $13 billion in revenue
AutoNation’s filings with the Securities and Exchange Commission
Penske Automotive Group — 145 dealerships, over $11 billion in revenue
Sonic Automotive — 119 dealerships, over $7 billion in revenue
Asbury Automotive Group — 79 dealerships, over $4 billion in revenue
Apparently Sen. Brownback was so gullible, he believed what the auto dealers told him and fell for their line about being Main Street, not Wall Street, without bothering to check the facts. You can draw your own conclusions about his intelligence, or motives. Let’s just say that if you’re buying a car, he’s probably not someone you would want to ask for advice on how to get a good deal.
So — if you’re ripped off by an auto dealer, who would otherwise be policed by the new Consumer Financial Protection Bureau, created under Dodd-Frank, who do you have to blame? Well, the dealer, of course. Plus former Sen. Brownback, who is now the Republican Governor of Kansas. Plus all the members of Congress who failed to stand up to the auto dealer lobby, whether because they were so ignorant about the business, or gullible, or just plain corrupted by auto dealer cash. Interestingly, all the Republicans voted to exempt the car dealers, who are among their biggest sources of campaign cash. Most Democrats voted against the exemption, which was opposed personally by President Obama.
And if you’re ripped off by an AutoNation dealership, you can blame one of their largest shareholders, who profits from their billions in revenue — Bill Gates.
Dealers sell stolen cars
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