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NPR on Auto Stealerships

8/30/2022

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Revealing National Public Radio piece on how many auto dealers operate.

https://www.npr.org/sections/money/2022/08/30/1119715886/inside-the-rise-of-stealerships-and-the-shady-economics-of-car-buying
Recently, my truck was stolen, forcing me to get some new wheels. And, for the first time in my life, I've been looking to buy a new car. The process has involved hours of searching. Painful haggling. And encounters with many dealerships that, quite frankly, have been downright duplicitous. The whole thing has been kind of a nightmare.

Cars are, of course, expensive, especially with the supply chain fiasco creating shortages. But it's more than that. Shopping for cars is not like shopping for most other products. Unlike, say, computers or refrigerators, cars are typically not sold for one standard price. Ten people could go into a dealership and each pay a wildly different amount to buy the same exact vehicle.

Economists call this sort of pricing strategy "price discrimination." That's when, instead of charging everyone the same price, sellers charge people different prices based on their willingness to pay. In simpler terms, it means that the seller milks as much money as they can out of you. Not all dealerships engage in this pricing strategy, but many do it aggressively, often with snake oil-style salesmanship, deceptive marketing tactics, hidden fees, and overpriced add-ons, like floor mats, alarm systems, or anti-rust undercoating. Some consumers call the outfits that employ these tactics "stealerships." . . .

See the rest here.


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Tell the FTC About Your Car-Buying Experiences By Labor Day 2022!

7/18/2022

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After a decade of research, the Federal Trade Commission has issued draft rules to combat the plague of auto-dealer misconduct throughout the sales process.  You can help make sure the FTC adopts the strongest possible version of the rules by telling the FTC about your car-buying experiences. The car dealers lobby will be pushing back against pro-consumer rules, so we need everyone who has been subjected to abuse from a car dealer to build the strongest possible case about why the strongest possible rules are so vital.

So, please, if you have ever had a bad experience buying a car, turn that bad experience into good by telling the FTC what happened to you.  

Your story can help the FTC write the strongest regulations. 

Stick up for consumers by sharing your experiences at
 
this link. 


And if you are a consumer advocate, urge the FTC to issue stronger car buyer protections on regulations.gov.  

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Very Good Article on the truth about "Certified Used Cars"

6/14/2022

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Consumers' Checkbook, a consumer-oriented site, has a very good article on "certified" used cars -- if you are considering one, you will want to read the whole article carefully before you go shopping. Short excerpt below ...

https://www.checkbook.org/puget-sound-area/used-car-certifications-often-not-meaningful/


Used-Car Certifications Often Not Meaningful
by Anthony Giorgianni
Last updated May 2022

Dealers promise rigorously inspected rides and peace-of-mind warranties, but we found some consumers get rebuilt wrecks and even a former crash-test vehicle.

Most used-car shoppers find the process a stressful ordeal filled with possible perils. They worry they’ll end up with an unreliable vehicle, and they don’t feel comfortable dealing with car salespeople: A 2022 Gallup poll found them to be the second-most-hated profession in the U.S.; only lobbyists fared worse. Worst of all, supply-chain problems for new-car factories have created a surge in demand for used ones—during the first quarter of 2022, average prices for secondhand rides were up 35 percent compared to the previous 12 months. Competition is so stiff that many used cars are purchased sight unseen by desperate buyers.

To reassure used-car buyers worried about getting stuck with a lemon, manufacturers in the 1990s began offering “certified” used cars. They’re marketed as the crème de la crème of the secondhand auto world and even come with manufacturer-backed warranties.


But our research uncovered that certified labels don’t guarantee vehicles won’t have serious hidden mechanical or structural problems. We were astonished by some of the flaws we discovered, many that should have been noticed during promised inspections. We also found certified cars that were totaled wrecks that were rebuilt and resold, and even an SUV previously owned by the government and used in crash tests.


Because manufacturers count on their dealers to conduct the promised inspections needed to certify vehicles, certification labels are only as reliable as the diligence of the dealerships and their mechanics in doing the screening tasks and fixing any problems they find. And our research indicates they’re not always diligent. . . .


(Read the whole thing at https://www.checkbook.org/puget-sound-area/used-car-certifications-often-not-meaningful/)

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Outstanding Idea: Stop Auto Dealers From Using Yo-Yo Sales Scams

4/29/2022

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Friend of John Gear Law Office and outstanding consumer attorney Young Walgenkim, along with a stellar cast of other consumer protection experts, has filed a petition with the FTC to stop one of the worst abuses in the entire US market system, the yo-yo sales scam that auto dealers use.

The yo-yo sale is so bad it reminds you of the old saying that "If you think the illegal stuff is bad, take a look at what's legal."

Basically, a yo-yo sale is where you are stuck with the bargain you made but the dealer gets to revoke it … in other words, they get you psychically invested into and committed to the car you bought and often into sinking money into the car, and then they pull it back (the yo-yo) and demand that you, the consumer accept a worse deal or give the car back. And, believe it or not, today, that's legal.

It’s absolutely a shocking and abusive predatory practice that ought to be outlawed in auto sales just like all other forms of consumer contracts. If the deal isn't binding on them, it shouldn't be binding on you.

Read the rulemaking petition below and then contact your congressional rep and your Senators and tell them you agree:

If an auto dealer isn't bound by the contract, the consumer shouldn't be either. 
If a deal's a deal, then it should be binding on both sides or neither side. End Yo-Yo Auto Sales!

2022-04-29_request_for_rulemaking_yo-yo_grppetition_yo-yo_financing_ftc_04-29-22.pdf
File Size: 404 kb
File Type: pdf
Download File

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How Much Cheaper Could Car Loans Be if Dealers Had to be Honest?

7/22/2019

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Good Washington Post Article on How Car Dealers Rip You Off with Financing

Ian Ayres is the William K. Townsend professor at Yale Law School.


As websites such as Cars.com and TrueCar have made car pricing more transparent, auto dealers have turned to boosting their profits with hidden fees on loans.

When a consumer chooses in-house financing with an auto dealer, the dealer sends the customer’s financial information to a lender and is told the rate that the customer qualifies for. But it’s legal for the dealer to turn around and charge the customer a higher interest rate. You might qualify for a 5.9 percent interest rate, but if the dealer can get you to agree to a loan at 11 percent, the lender will kick back more than $1,000 to the dealership as pure profit. This discretionary markup of the interest rate allows auto dealers to arbitrarily increase their fees.

An analysis by the independent online auto-loan marketplace Outside Financial has found that dealers are charging an average markup of $1,791 per loan. By contrast, in 2003, Vanderbilt University economist Mark Cohen estimated that 10 percent of loans to Nissan’s borrowers were marked up more than $1,600. Now the average loan is boosted more than that.

. . .

Economists have had evidence for decades that car dealers tend to charge minorities higher prices. A series of studies I authored and co-authored in the 1990s found that auto dealers consistently charge black consumers prices that are hundreds or thousands of dollars more than their offers to white shoppers. These inflated prices can more than double the dealer’s profits compared with selling the same vehicle to a similar white customer.


. . .


The CFPB and other government agencies should be on the lookout for ways to better curtail dealership lending abuses. Yet instead of stepping up enforcement and protecting customers, the CFPB has rolled back rules on discriminatory lending practices and decreased enforcement of existing protections. Just last year, the Senate used the Congressional Review Act to overturn a CFPB rule that explicitly banned auto lenders from charging discriminatory fees on the basis of race.  . . .


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Before buying a used car, enter the VIN into the safety/recalls database

4/15/2019

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Where's my VIN?Look on the lower left of your car's windshield for your 17-character Vehicle Identification Number. Your VIN is also located on your car's registration card, and it may be shown on your insurance card.

What this VIN search tool covers
  • Vehicle safety recalls that are incomplete
  • Vehicle safety recalls conducted over the past 15 calendar years
  • Vehicle safety recalls conducted by major light auto automakers, including motorcycle manufacturers.
What this VIN search tool does not cover
  • Completed safety recall information
  • Manufacturer customer service or other nonsafety recall campaign
  • International vehicles
  • Very recently announced safety recalls for which not all VINs have been identified
  • Safety recalls that are more than 15 years old (except where a manufacturer offers more coverage)
  • Safety recalls conducted by small vehicle manufacturers, including some ultra-luxury brands and specialty applications

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The Car is Just the Bait: used car dealers are Payday Lenders in disguise

4/1/2019

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 Turns out I'm not alone in recognizing that most used car dealers (not all, but most) are really just shady payday lenders disguised as merchants.

But I've been too optimistic!

Below is a quoted comment from an auto industry expert in the midwest. And this ins't me talking or another consumer attorney. This is a car industry guy talking - someone who helps dealers!

BHPH = "buy here, pay here" -- the classic small independent car lot.

He warns that even the big chain used car places have the same practices!

For used car dealers, the car is just the bait for the important part -- selling you an outrageous loan and optional "extras" that give the dealer much more profit than the car ever could. (Because, think about it -- the only reason 99% of the customers step onto the lot at one of these places is that they have such poor credit that they have to buy the car that someone else felt good about getting rid of.)

With the horrible increase in economic inequality in the US, this isn't going to change anytime soon.

But at least understand what you're dealing with -- if you feel like you have to buy a used car from a dealer, do everything possible to GET YOUR OWN FINANCING first, before you get anywhere within 100 miles of a dealer. Know what you are approved for IN TOTAL as well as in weekly or monthly payments, and walk away the minute the dealer tries to sell you financing.

Dealers are pushing out financing terms to absurd lengths to make used cars "affordable," but that just puts you into a negative equity trap (you owe much more than the car is worth) at trade-in time ... if the car even lasts long enough for a trade to be possible.


BHPH dealers are usually their own bank for holding the notes and collecting, and skirt the financial disclosure regulations in the process and in the re-titling of repos. (Assuming the title is ever placed in the buyer's name.) Often, their floor plan is private or through major auctions, and the finance arm is a wholly-owned subsidiary of the dealership.  

This particular predatory practice is not limited to the sketchy downscale boulevard dealers, but is often found in the flashy franchised used car groups, doing high volume sales with extremely detailed buyer qualification handbooks. They've been with us for years, but the increase in the mass of low income workers who need mobility 
now make the problem more visible. 

Often, the condition of the vehicles are blamed for the repo, but it's more likely to be the burden of repayment that triggers. It's a better business model to sell the best cars the particular market will bear, setting the markup aside. These dealers are selling money, and the car is just a mechanism that recognizes a need and opens the door to a payment process. It's a lot more profitable to repo a decent vehicle if you're going to resell it. 

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US should follow Australia's lead on re-sales of recalled cars

11/5/2018

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"Don't buy a used car until you've read this"
Daily Mail, Australia
Sept. 6, 2018
"Dealers who still sell cars with killer Takata airbags can still face fines up to $220,000 or penalties of $1.1 million."
https://www.dailymail.co.uk/news/article-6137609/Vehicles-killer-airbags-offloaded-unsuspecting-motorists.html


"Why cars with deadly airbags are still being sold"
Yahoo News

Sept. 8, 2018
 
"Not only can dealers face hefty fines over such practice, if someone is injured as a result of a faulty vehicle sold, the dealer would be liable for the accident and could face prosecution."
https://au.news.yahoo.com/cars-deadly-airbags-still-sold-062047068.html

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In Oregon as in Arizona and New Mexico -- Never take your eyes off the dealer (the car dealer)

8/27/2018

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  Remember -- you have EVERY RIGHT to take the paperwork home from a car dealer so you can get help reading and understanding it at your leisure before you sign!
   A car salesman who says "I can't hold this car for you if you leave" is a liar trying to pressure you into signing on the dotted line without having help reviewing the contract.


FTC press release:


Not all dealers play by the rules. In a
case announced today, the FTC alleges that Tate’s Auto Center of Winslow, Inc. — as well as related dealerships in Arizona and New Mexico and their owner and manager, Richard Berry --

* used deceptive advertising to get people in the door,
* failed to disclose required financing terms, and
* frequently falsified consumers’ income and down payment information in an effort to close the deal.

Instead of using the income information people gave, Tate’s often inflated numbers to make it look like people had higher monthly incomes.


https://www.ftc.gov/news-events/press-releases/2018/08/ftc-charges-auto-dealerships-arizona-new-mexico-falsifying

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Lawyerly Fine Print:

John Gear Law Office LLC and Salem Consumer Law.  John Gear Law Office is in Suite 208B of the Security Building in downtown Salem at 161 High St. SE. That is right across High Street from the Elsinore Theater, a half-block south of Marion County Courthouse.

John Gear is only licensed to practice law in Oregon. This site may be considered advertising under Oregon State Bar rules. There is no legal advice on this site so do not take anything you read here as advice for your particular problem or situation. And I do not represent you and I am not your attorney unless you have hired me with a representation agreement. While I do want you to consider me when you seek an attorney, you should not hire any attorney based on brochures, websites, advertising, or other promotional materials.  All original content on this site is Copyright John Gear, 2010-2022.
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