No Thanks….I’m just browsing (The plan: when you go to the dealer to buy a car)

(continuing our series on the Car-buying process…..) Hopefully, by the time you read this, you will have done the research necessary to take the first steps in the car-buying process that have you leaving your house. (Click HERE For a refresher on the three things to research: Your car; Your credit and Which bank you should go to for a loan)  Now you are ready to step foot in the dealership. But remember, what Consumer Courage calls the rule of the ‘stuck-withs.’ 

Let the one who is gonna be “stuck-with” the car be the most careful and ask the most questions

What a lot of people who are buying a car don’t realize is that the people who are going to be the happiest when you buy the car (the salesman, his boss, the dealership’s owner, the company that built the car) are going to be long gone, by the time you go to make your first payment.  That’s because they will all get paid as soon as you sign the contract.  And they keep their money – whether or not you like the car.  If the system was set up for those folks to get their money slowly (like if they got a small slice of every payment you sent to the bank), you could bet that they wouldn’t try to take advantage of you.  Only thing is – that’s not the case.  Once you’re gone, they can stop worrying about what you think; what you were expecting to get; or even what they said to you to get you to say ‘Yes.’

Can they actually lie to me?

They’re not supposed to – but, it’s been known to happen.  You would think that the law would protect you from being lied to, when you buy a car.  If you live in the great state of Ohio, you would be incorrect.  Ohio used to have a really nifty rule that was put in place by the Attorney General (not the current one, of course) that made it against the law for the car salesman to tell you one thing – and put something else in the contract. (for instance, they couldn’t tell you that your trade-in was worth $10,000 and put in the contract that it was only worth $5,000; or that your new car had a 100% warranty for 6 months, and then put in the contract that it was only for 30 days)  Then, all they had to do was distract you, until you were outta there and before you noticed that the contract said something entirely different.

In 2009 that all changed.  The Ohio Supreme Court decided what consumer advocates refer to as ‘The Spitzer case.’  (actually, it’s commonly referred to as the ‘Blankety-blank Spitzer case,’ but, this is a family show)  In Spitzer, the salesman told the buyer that his trade-in was worth a thousand dollars more than they put in the contract.  The buyer didn’t notice it, because he was “only thinking about whether I could afford the monthly payment or not.”

Editor’s car-salesman tactics reminder note: ‘Only talking about the monthly payment’ is sales-tactic 101.  Salesmen are taught that since most people really only care about whether they can afford the payment; keep the buyer focused on that and you can talk them into almost anything.    In fact, some dealers arm their salesforce with terminals that display the monthly payment with gigantic numbers, so that when they turn the screen toward you, while they are talking, you will be hypnotized by the ‘low payment number’ and forget that they are trying to make you sign a contract with all sorts of nasty terms. 

Just remember: if there is a term, a condition or a promise between you and the salesman or dealer that is verbal (and not actually IN the contract) it’s as if that term does not exist.  If the salesman says “I swear on the foul ball that I caught at the World Series game between the Indians and the Braves in 1995 that you will get free oil changes on this car forever, free tires and a 100% money-back guarantee if you don’t absolutely LOVE the car” and it’s not in the contract – the law says that it never happened.  If you care enough about whatever the salesman is telling you, simply ask: Could you please show me where that is in the contract you want me to sign?

It’s a three-day event

For many people, the whole car-buying process is so uncomfortable, they merely go to the dealership; take an hour to look through the lot and then go in and pick the blue one with the affordable payment.  Even if you’ve done the right amount of research, you should not be buying a car on the first day.  Realize that it should take at least a few days, from the time you walk in to the first dealership. 

    • First day: Scope out the car, lay down the law, find THAT vehicle.
    • Second day: make some calls; find THAT vehicle for THAT price.
    • Third day: Buy THAT vehicle.

First Day

The first day at the Dealership should be all about reconnaissance.  Tell them you’re just there to browse.  But, remember, you are on a detail-gathering mission.   You should be able to leave the dealership with three things (none of which is an actual car!) 

    • Find the one of your three favorite models that you are willing to buy;
    • Determine any extras that it comes with;
    • Find out how much the dealership wants you to pay
      • This one’s a little tricky.  All you want is a price, but you don’t intend to buy the car.   However, the salesman has been trained to distract you with a ton of other info, before talking about price.  Be firm, put on the brakes when they want to talk about your payment amount; how much you make at your job; whether you are going to buy black or blue floor mats and redirect him back to the price. 

This is also the point where you want to go for a test drive, while you are trying to get the salesman to commit to an actual price for the car and the list of options that it comes with.   Every dealership should be willing to give you a detailed invoice for the car which shows you everything the car comes with and how much they want you to pay for those things.  Is it the ‘sport’ package? Are there power windows/doors? Are there anti-lock brakes? Passenger air-bags?…..There are a ton of details about the bells & whistles that this particular car has that you’ll forget, the minute you leave the dealership.  (and just to be clear – you are leaving the dealership without a car!)  Take your time and write down as much as you can.

Second Day  (More Homework) 

On this day, you will take the detailed list of amenities that the car has and call other dealerships.  Describe the make/model/features, etc. and see how much they will take (quote the price you got from the dealer you went to) and see what they say.  If they agree to give you the same make/model at a lower price, ask them one important question: “What’s the VIN # on that car?”  Asking for the VIN will prevent the salesman from thinking “I’ll say yes to anything, just to get them in here.”  If they can’t give you a VIN, they are only pretending that they have the car you want – it’s as simple as that.  If they switch models and offer you a better price on a model that you would have considered at the first dealership, that’s OK.  (Remember: you’re not married to a particular model)  Just make sure that you get the VIN for the car they are talking about.

Third Day

When you are ready to buy – only buy the car.  This sounds silly, I know. What you are saying NO to is the extras that make the salesman a sweet commission.  Practice saying ‘no thanks’ a thousand times, before you show up to sign a contract to purchase a vehicle.  Why?  Because they are going to try to sell you everything in the showroom that isn’t nailed down – that’s why.    Here are the Ground Rules for the day you visit the dealer and are ready to sign a contract:

    • Do NOT Buy anything else besides the car;
    • Never talk in terms of a payment plan; Never negotiate payment amounts; Never talk about anything besides what you will be paying them to buy a car;
    • Be prepared to walk out;
    • All promises that you are told MUST be written in the contract.

Quick Quiz: The dealer makes most of their money on the price of the vehicle – True or False?

(Hint: the answer is ‘False’)

That’s right, the dealer will make most of their money selling you an extended warranty, floor mats, undercoating, seal-coating, credit-insurance, the loan to finance the purchase of the car, tinted windows, fuzzy dice and anything else they can convince you that you need.   Where does this occur? – In that little room in the back of the dealership, where they take you after you agree to buy a specific car at a specific price with the salesman. What they would like you to believe is that you are in the clear once you agree on a price and that the visit with the Finance and Insurance rep is just window-dressing.  (“We just have some standard paperwork for you to fill out” should register in your mind as something like “put up your hands and let us go through your purse”)  The Reality is that the dealer makes most of their money on the financing they can talk you into, the fees they can pack into your loan and the extra garbage they can convince you to pay for. 

What’s the strategy here? Your new mantra is “No thanks.  I’m only buying the car” 

A few other things to keep in mind

    • Never talk in terms of a payment plan; Never negotiate payment amounts; Never talk about anything besides what you will be paying them to buy a car.
      • Imagine if you went to buy a TV and asked about reception, whether the TV was HD and how many channels you could get and the salesman replied with the phrase “Let’s look at your monthly payment.” Or “Never mind that stuff, what if I could reduce your payment to $50 a month, from $60?” You would think he’s nuts.  So, don’t fall for this when looking at a car.  Any talk about the terms of the payment amounts is just an attempt to trick you into spending more money. 
    •  Be prepared to walk out
      • If you feel like the salesman is trying to push you too hard; if he seems like he is ignoring you; if you feel even a little creeped out – say ‘Thank You’ and walk out.  Don’t slam your hand on the desk, or make a production out of it.  Just leave.  NOT buying the car is the single only weapon that you have to protect yourself – use it. If he calls you back and changes his behavior, great.  If not…was he really going to work with you, anyway?  There’s plenty of dealerships in your city. 
    • Dealings w/the Dealer
      • There are a few terms that have become meaningless in the car-dealership world. When you see them, don’t let them convince you of anything.   If the salesman crows that this car is “Certified Pre-owned,” just look at him and smile.  Does the car have a sticker that says “MSRP?”  That’s wonderful.  Just remember, that sticker was created, designed and filled in by the company that built the car.  If they wanted, they could say that the MSRP is a nickel. 

Take your time when you go to buy a car.  You’re going to spend a lot of time sitting inside it, trusting it with your life and writing checks to cover the cost.  You might as well get yourself a good deal.

Posted by: Mark Wiseman (who once convinced his wife to walk out of a dealership – only to have the salesman ignore him.  So, he had to settle for another car)

“….. and you can trust me, or my name ain’t Nathan Arizona!” How to avoid interest rate markups in Auto Loans

In the movie Raising Arizona (which I wholeheartedly recommend, by the way) one of the main characters is a furniture salesman who ends every ad with the tag line “you can trust me on that, or my name ain’t Nathan Arizona!” Which is cute, until you find out that his name really is NOT Nathan Arizona.  Which brings us to this week’s news out of the CFPB (Consumer Financial Protection Bureau) in Washington.

The CFPB issued a bulletin this week, warning banks and auto-finance companies that they must stop the practice of issuing loan interest markups in a racist manner.  The markup that the CFPB is referring to is when the finance company jacks up the buyer’s interest rate (or authorizes the dealership to do so) over-and-above the rate that the buyer qualifies for.  The transaction happens like this: You walk into the dealership and pick out a car.  After you settle on a price, the salesman tells you how sweet the deal is and how they are going to ‘take care of you.’  Then, they lead you to an office, where you sit down with the F & I (Financial & Insurance) officer to work out the loan that will allow you to buy the car. (for a great explanation of F&I officers and what their mission really is, go to the Consumer Rights Law Blog

However, instead of giving you the lowest interest rate that you should get, they trick you into thinking that your credit isn’t so good and charge you a higher interest rate than what the finance company requires them to. (this way, they make more money.  That is becuase, the lender that is financing the loan has offered the dealership a slice of the extra money that they are able to fool you into paying over the life of the loan) 

You think that they will pull your credit and use your score to figure out how to charge you the lowest interest rate that they can, in order to save you money.  Not so, says the CFPB.  It seems that the banks have been pulling a fast one and adding points to the loans of CERTAIN borrowers.  Those borrowers have been overwhelmingly African American and Latino.  “There oughtta be a law!” you say? Well…….there IS a law! It’s called the Equal Credit Opportunity Act (ECOA), which basically says that it is unlawful to use certain non credit-related factors (such as the color of someone’s skin) to determine whether or not to extend credit (or when making up the terms of that credit).

With the announcement yesterday, the CFPB is sending a shot across the bow of the lenders that are under its jurisdiction.  The message is that the CFPB is going to be watching how they lend. (whether that watch-dogging is going to include a review of past loans; and whether the CFPB is going to start suing lenders who continue to misbehave – only time will tell)

What can you do to protect yourself if you are going to buy a car?  (Even if you are not likely to be discriminated against, you certainly want to make sure that nobody makes money by giving you an interest rate that is higher than the rate that you deserve)  Ask some very pointed questions of the F&I officer, while he is explaining the terms of your loan (and right after you say “No thanks, I DON’T want an extended warranty!”):

1. What is my credit score? Consumer Courage is always telling people to pull their own credit report and try to improve the score, a few months before you try to borrow money.  But, many car purchases happen, because the old jalopy has broken and you don’t have months to shop around.  Just because you really need a car, doesn’t mean that you can’t ask the F&I guy to explain your own credit score to you.
2. What is the lowest interest rate that I qualify for? If they don’t give you a straight answer to this question, they’re lying! Banks and finance companies decide what kind of interest rate to give you, based on the risk that you might stop paying them at some point. That risk depends on many factors (how many times you’ve been late; what your income is; what your credit score is, etc.) It’s not so important that you understand just HOW the financial model that they use to determine your interest rate works.  It IS important to know that they actually have a model. Somewhere, there is an equation that they will use to figure out what interest rate to charge you.  You want the lowest rate, right? So, ask for it!
3. Is there an ‘interest rate markup’ on my loan?  If the first two questions didn’t get results, this one surely will. 

Make sure and write the name of the person you talk to and his/her answers down, while you are in their office (in case – heaven forbid – you find out later that they weren’t exactly honest with you) 

There are many other concerns to buying car, certainly. But, don’t make the mistake of letting your guard down, as soon as you have a price.  You are going to between 3 and 5 years to pay the loan back.  You might as well get the best deal that you can.  You can trust me……..or my name ain’t Nathan Wiseman!  (Actually, that’s my middle name. But, you get the point)

Posted by: Mark Nathan Wiseman

Shouldn’t they make it HARDER for car dealers to hide problems?

Ever buy a used car or know someone that did? Do you think the dealer should have tell you about problems they know about (think – rebuilt wrecks, flood vehicles)? The FTC is weakening the rule that applies to the information that car dealers must share with you, when they sell you a used car. A little background – the FTC created the administrative rule that requires car dealers to post a window sticker on every used car that is for sale.  This sticker is commonly referred to as the Consumer’s ‘Buyer’s Guide.’  It’s the window sticker you see (or should see) on every used car with the two big boxes that say “As Is” or “Warranty.” One of the boxes must be checked.  This information is important, because it becomes part of your contract with the dealership if you buy that vehicle. If a warranty is part of the deal, the dealer must tell you what it will cover, how long it will last, and what (if anything) you have to pay to get repairs completed under the warranty.

The FTC is now considering the first major changes to be made to the Buyers Guide form in decades.  The proposed changes (which can be found HERE) have caused much hand-wringing in the advocate community, including a group of advocates who issued a press release at the end of 2012, which highlighted some of the worst aspects of the new rule. 

(Editor’s Note: For instance, the new rule proposes that the Buyer’s Guide will say “ THE DEALER WON’T PAY FOR ANY REPAIRS,” which is what is referred to in the attorney biz as ‘untrue.’  That’s because no matter what the Buyer’s Guide says, if the dealer lies to you about some kind of defect that they know about, you can actually sue them and make them pay for the repairs. Unfortunately, the instruction in the new Buyer’s Guide is misleading and could cause some buyers to shy away from trying to get a dealer to fix a car in a situation where they knew about the repairs.)

In 2008, no less that 40 State Attorneys General sent a comment to the FTC, indicating that not only should the Buyer’s Guide not be reduced; but it should go FARTHER and include actual defects that the dealer knows about.

(Editor’s Note:  The President of the National Auto Dealer’s Association told NBC news that any requirement to tell a potential buyer about a used car’s defects “does not help consumers to require dealers to disclose information about a vehicle that may not be available to a dealer or that may not be accurate.”  In other words, “since any bad information about a used car might not be 100% accurate, we’ll just ignore everything we know about it.”) 

The FTC is still accepting comments on this new proposed rule until the end of the day tomorrow.  The public comment period has been extended once, already.  So, it’s quite possible that the FTC is taking the complaints about the proposed rule to heart. If you’re interested, you can actually complain online, here.  It will only take you a few minutes, if want to tell the FTC what you think. 

It’s clear that the new rule will give dealers the ability to hide defects and malfunctions that they know about.  While there are good and honest car dealers out there, this is an incentive to those dealers who don’t care about you, or your family, or other motorists on the roadway to conceal information from you and turn a blind eye as soon as you pull a car they know is riddled with defects off the dealership lot.

To read more about the problems with the proposed changes, visit the Americans for Financial Reform website

Posted by: Amy Wells

“Ooooh that smell….” Hurricane Sandy gives another reason to be careful when buying a car

Although those of us who do not live in the New York/ New Jersey coastal areas were not affected by Hurricane Sandy, we still might have a reason to be wary of her reach.  True, none of us experienced the tragedy of those who were in the storm’s path.  But, that won’t stop Sandy from sending us gifts of our very own. That is because of a lesson that people learned all too well, in the aftermath of Hurricane Katrina in 2005, when an estimated half-million cars that were flood-damaged were sold to unsuspecting buyers all across the Country.    According to some reports, at least a quarter million (and possibly as many as 600,000) cars were damaged by the flood waters created by Hurricane Sandy.   The worry for a state like Ohio is that many of those damaged cars could be headed here.  So, if you’re in the market for a car (either new or used) you might want to take a few minutes and read on about what you can do to make sure that you don’t buy a vehicle that spent Thanksgiving under water. 

How can a Sandy-flooded car make it to Ohio? 

Any one of following outlets for car sales could be responsible for bringing a ‘Sandy’ car to Ohio:

• A New York/New Jersey resident from one of the affected areas using an internet car-selling forum;

• A junk yard (or somebody else) that purchased a vehicle that was totaled by an insurance company, as the result of an insurance claim;

• An Ohio-based dealer that purchased the car at an auction, without realizing that the car sustained flood damage;

How can you protect yourself?

There are the obvious red flags to look for:

• Does the car smell musty (or does it have any other strong smell)?
This seems like an easy one.  Of COURSE, if a car smells musty, you will think that it has some water damage.  But, what if someone tried to clean it and used a little too much Clorox (or other pungent cleaning agent).  Any other strong smell should have you looking further.  Also, make sure the car sits with its windows closed for some time, before you get in.

• Is the car really clean?
Try looking in areas where it might be hard to clean. Open the trunk and peel the carpets back to see if there are any smells that have not been cleaned.  If the metal that is under the carpet in the trunk has any mold, rust or any type of smell, be prepared to close the trunk and walk away.

• Is that rust I see? 
If the answer is YES and you are looking inside the engine compartment, the car may very well have been in water.  The inside of an engine compartment of a healthy automobile should not have a speck of rust.  If there’s rust, or if the wires have corrosion that makes the car look older than it is, fall in love with another car

• Where did the car come from?
Ask a few questions about the car and the previous owner to see if it came from New York or New Jersey.  Although someone who is trying to unload a flood-damaged car might not be upfront about where it came from, any answers that don’t add-up might be a clue that something is wrong.

• There is no shortage of advisories that were published in the aftermath of Hurricane Sandy.  Here’s one by the FTC; one by the Better Business Bureau; and a longer one by the National Association of Attorneys-General

Other than giving the car a good whiff, are there any laws that will help me?

For NEW cars, the law requires the dealer to have certain paperwork, before it can obtain an Ohio title for the car. 

If the car has never been titled anywhere:

The dealer that sells you the car is required by law to  have what’s called a ‘Manufacturer’s or Importer’s Certificate.’ (commonly referred to as the ‘Manufacturer’s Statement of Origin or MSO’)   For every new car, the MSO arrives with the car when it gets shipped to the dealer. The dealer has to provide an MSO , before the Bureau of Motor Vehicles will issue a title.    Dealers don’t typically hand this out to buyers.  But, you can always ask for a copy of the MSO. 

While MSOs are straightforward, what happens to the MSO if a car is sent from the original dealer to a second dealer is not.  So, I enlisted help from my friend Ron Burdge who is an attorney who represents consumers and who most people in Ohio consider to be THE EXPERT on auto fraud and other consumer issues.  Here is his answer: 

The original MSO (a title document for the vehicle and not the MSRP window sticker) does, in fact, state the ordering-retail dealer’s name, address, etc. Dealer’s do trade and transfer new vehicles too and when that happens the MSO would be signed over to the subsequent dealer and then go with the vehicle (or be sent to the dealer separately). A second dealer can not get, on its own request, a newly issued MSO showing it to be the 1st retail dealer who ordered the vehicle but a replacement MSO can be issued by the manufacturer if the first MSO is lost, etc. For any motor vehicle there can only be one MSO – it’s like the birth certificate for the vehicle. In spite of that, I have seen a case where an Rv manufacturer bought back a lemon Rv and then issued a brand new MSO for the vehicle and sold it to another dealer using the old VIN with the new MSO, and made it appear to be “new” all over again – highly illegal I am certain. That case settled quickly

If the MSO shows that the vehicle was originally shipped to a dealer from one areas affected by Hurricane Sandy, that means trouble.  (If the dealer tells you that the new car doesn’t have an MSO – that it’s lost, or some other nonsense – you should be very skeptical)

ASK THE DEALER:

“Can I see a copy of the MSO for this vehicle?”  You should ask this question, even if the dealer says “Oh, don’t worry about that!  I am going to do the title work for you.  So there’s no need to see the MSO.”  Tell the salesman: “Thank you for getting my new title.  But, if it’s all the same to you, I’d like to see a copy of the MSO.”

USED cars, also require the dealer to have paperwork

If the car has never been titled in Ohio, but WAS titled in another State:

The dealer must have what is called a ‘Physical inspection certificate,’ in order to obtain a title in Ohio.  (Be careful: the physical inspection that takes place does not look for damage or any evidence about what condition the car is in.  Instead, they are just verifying that the vehicle in the paperwork is the actual vehicle that you are buying – make, model, VIN #, etc.) But remember, the fact that a physical inspection certificate exists is more important than what kind of inspection was done.  That’s because it will show you that the vehicle was already titled in another State, and which State that was. 

ASK THE DEALER/SELLER:

“Was the car titled in another State, before it came to your dealership?”  If the answer is “YES,” then ask “Where was the car titled, before it came to Ohio?”  AND, ask them to verify which state the car came from.

If the car has been titled in Ohio, before it came to the dealer (or, if you’re buying the car from a private individual):

This one will be a little more tricky, because one of the time-tested ways to scrub a car’s title of the information that the consumer might not want to see (evidence of a salvage; evidence of flood damage; evidence that the car came from a State where there was a Hurricane, etc.) is for the dealer to arrange for a few fake sales in different states, that will create a ‘clean’ title for them in the state where they have a dealership.  If this happens, the title that the Ohio consumer sees will be an Ohio title that doesn’t say anything about flood damage, an insurance claim or that the car was originally at a dealership in the New York/New Jersey areas. 

In addition to the questions above about the car, it’s history and condition that you can ask the salesman, the Department of Justice has a website that describes the National Motor Vehicle Title Information System (NMVTIS).  The NMVTIS has complete cooperation and information from the Motor Vehicle Bureaus from (as of this date) 43 different states.   The report is very useful, because it will show you every place the vehicle was ever titled, what the mileage readings were, each time a title was issued and (most likely) whether the vehicle sustained flood damage, whether it was totaled or rebuilt and other great information.  (Here’s a warning though: the reports are NOT free – ranging from $3.00 to about $12.00.  And, you have to go from the DOJ’s website to the site of a private vendor to purchase a report.  But, the cost is minimal compared to the cost of the vehicle or, say, the cost of fixing some flood damage that you missed)

ASK THE DEALER:

Pointed questions about where the car was titled, before they got it.  Then follow-up with: “Please buy a vehicle history report from the NMVTIS.  I know it’s not free.  But, since I’m spending thousands of dollars at your dealership, I think I’m worth it.”

Just remember to be very careful, go slowly and ask a lot of questions.   That way, your car will last as long as you want.

Posted By: Mark Wiseman