I8ABMR

http://blogs.consumerreports.org/car...practices.html


The Federal Trade Commission announced yesterday that it will begin looking into sales, financing, and leasing practices at car dealerships around the country. Car buying transactions are the most common source of complaints received by the FTC. The agency will hold a series of round-table discussions around the country to speak with consumer advocates, car dealers, and other industry participants, beginning on April 12th in Detroit.

In particular, the FTC wants to look into dealer-arranged financing and leasing, which it says, “…can be a complicated, opaque process and could potentially involve unfair or deceptive practices.” Last year when Congress created the Consumer Financial Protection Bureau, it gave the FTC authority over consumer financing fraud.

The round-table discussions will focus on complaints related to discrimination against minorities and members of the U.S. armed services. The FTC will also target potentially deceptive practices in financing, including interest rate markups and up front payments, and payments “packed” to include unnecessary add ons.

These types of complaints have been widespread in the industry for decades. While modest markups in interest rates are legal, many other practices are not, such as packing payments (essentially selling consumers something they did not agree to buy), exorbitant interest-rate markups, and discrimination.

Representatives from the National Automobile Dealers Association (NADA) plan to attend the discussions to make the case that dealer financing helps some consumers buy a car who otherwise couldn’t, that dealerships provide financial education for consumers, and that existing laws are adequate to combat the problem.

Rosemary Shahan, president of Consumers for Auto Reliability and Safety, agrees that current laws already forbid many the types of deception that lead to complaints today. But she says the problem is that state and federal agencies have not enforced those laws. “The single most important thing the FTC could do is enforcement,” Shahan says. “There’s a lot of activity in auto sales and lending that’s already illegal.”

Shahan points out that most fraud cases against car dealerships have been brought by federal agencies in response to corporate complaints such as those from “floorplan” lenders--the banks that loan money to car dealers to finance their inventory.

Holding discussions on the issue could be the first step toward increasing enforcement to protect consumers from unscrupulous practices.

mmarshall

While the car-sales buisness may never be totally clean, it is vastly better today than it was decades ago, although there still seem to be some questionable practices, such as the Dealer-Processing-Fees, which, to me, seems to be nothing but pure added profit. Dealerships also often take advantage of high-demand and low-supply of some new and/or hot-selling models to mark them up over list, with a second-sticker on the window.

That's why I liked Saturn's sales practices so much. I thought it was one of the best concepts to ever hit the often-dishonest world of car-sales. Every Saturn product, regardless of price, media-hype, supply-and-demand (whatever have you) sold at factory-list, plus state tax and tags (Saturn, of course, can't control what the state charges for a new-car sales tax). That's it. Period. No dickering. No arguements. No Middle-East-Bazzar-type circus atmosphere in the dealings. No deceptive practices.....(almost). Write the papers up, sign them, and drive off in your new car. A Saturn dealer who either discounted a new car or sold it at more than list risked losing his franchise....Saturn was serious about that policy. The company also had a great 30-day money-back policy on its products for any reason.....even if you simply took the car home and then decided you didn't like the color. No significant damage, and clear title up to 30 days...and your purchase price, minus tax/tags (which Saturn had no control over) was refunded.

But even Saturn's system wasn't perfect....that's why I said (almost). One still needed (sometimes) to bargain on the financing rate and trade-in price, the questionable dealer-processing fees were still used at some dealerships, and Saturn dealers could add factory/dealer-approved accessories to hot-selling cars to boost profits (the standard mark-up from wholesale to retail, for the famous plastic-bodies S-series, was around 14%.....accessories, of course, would add to that). They did that, of course, with the hot-selling, low-supply Sky roadster.

Scion, today, has adopted the Saturn no-dicker, list-price-only system (the only mainstream auto company to so so) , but, to my knowledge, does not have the 30-day money-back guarantee.

I8ABMR

Can you imagine Saturn style sales at Mercedes. All in all I am for any extra regulation of car dealerships. I am sure we have all been screwed to some extent at some point in our car buying lives

Och

iTrader: (3)

That 30 day money back guarantee is a gimmick. Nobody is going to buy a car, pay thousands in taxes and then return it and lose all that tax money.

IS-SV

That's the reality of such a gimmick.

And the billions upon billions of dollars lost by Saturn are proof to the shareholders (and taxpayers) of a failed business model.

Lexmex

The consumer can be better educated now more than ever given all the knowledge tools like the Internet. I have gone with a good many friends and family members, too, to buy a vehicle and we walked out the door many, many times on a deal because of dealer games. I remember one particular Japanese name-brand auto dealer telling my friend, his family and I, "Look we've been here hours, are we gonna be here all day?" and my friend said, "with $30,000 in my hand, hell yeah before I just buy it at face value."

My joy is always watching some of these dealers that we knock off unnecessary items and even get dealers to throw in additional maintenance items (using vehicle's reliability issues against them), and then watching the dealer's face in horror as we tell them we already had our own financing group.

My favorite thing at the dealer is watching what I call the "loud buyer" who being only a few feet away from other buyers will loudly say, "YOU'RE CHARGING ME $500 FOR (INSERT USELESS DEALER ADD ON ITEM)?" and you watch all the other tables around start to utter the very same words to their salesperson.

I8ABMR

I always tend to fight with dealers. Not because I cant afford the car, but because thats what you are supposed to do . I had a idiot Lexus dealer tell me " Im not going to nickel and dime with you. You are a doctor" . I told him to go to hell and I went to the dealership 9 miles away and bought my brand new GS for the price that I wanted. They ruin the fun of purchasing a new car by trying to rip you off rather than being pleased that they will be moving a higher end vehicle. I did return the next week to buy some accessories for the car and he saw me. I know he was pissed from the look on his face. I hate the way that these dealers will find out what you do and how much money you make and use it against you when making the purchase.

ABC

I bought my IS through email. I emailed every Lexus dealer i was comfortable driving to, told them what i wanted, asked for their best OTD price (OTD = everything included)... After a day or two, narrowed down the list to 2 dealers. Pit them against each other and got a nice price on the car with no hassle outside of writing a few emails in my pj's

When i got there, the price was as stated in our emails. Signed, and drove off. BEST car buying experience i have ever had. I will never go into a dealer to buy a car again.

caddyowner

"I'm shocked, shocked to find deceptive practices at car dealers."

- Captain Renault

mmarshall

That policy was not a gimmick. I found that out myself. I owned a plastic-body 90's vintage Saturn SL-sedan that I was very pleased with. But when I ordered a bright-yellow 2001 Limited-Edition coupe (only a few thousand were made that year, and they weren't stocked on dealer-lots, so I couldn't test-drive it in advance like I usually do), it arrived and was delivered with what apeared to be engineering and/or production defects which caused both a shimmy and rattles that could not be adequately addressed. After two weeks (and after both me and the shop-foreman working on the car, unsuccessfully), I just gave up and returned the car. Right there, in the dealer's buisness office, they cut me a check for not only the car's purchase price, but the sales-tax as well. When I questioned that (being the honest person that I am) and pointed out that they didn't have to refund both the purchase price and the tax as well, they said that, don't worry, Saturn routinely did that even though legally they owed only the purchase price. So, I got back every penny I had put into the car.


(BTW, that's how I eventually got into Club Lexus. I had looked at the then all-new Lexus IS300 at the D.C. show that year, and liked it. I took the money that I got back from the Saturn coupe I retured, went down to the Lexus shop instead, added a little more of my own cash out of the bank, and came home with a yellow IS300. I kept the IS almost 5 years).


Of course Saturn went downhill after 2001.....we all know that. But that was not the company's fault. Parent-corporation GM was, IMO, guilty of almost criminal mismanagement of the company, and, in just a few years, ruined what was one of the great automotive success-stories of the 1990s, turning it into just another ho-hum GM division, and then, of course, an unprofitable one at that.

mmarshall

A lot of Mercedes customers, though, are well-heeled, especially those buying S-Class and AMG products, and they probably don't care if they get a discount or not. They have more (sometimes a lot more) in their bank accounts than the car costs, and, to them, it's just a matter of signing the papers and driving off.

Of course, you don't have to be a millonaire to drive a Mercedes either. For those who can't afford to purchase a new Mercedes flat-out, many M-B deals are actually lease-deals, because one can often drive an upmarket car like a Mercedes for less each month than buying one outright, if they meet, and are willing to accept, the lease-terms. That, of course, is the case with a number of M-B's competitors as well.

mmarshall

I hope they look into the Dealer-Preparation fees. That, IMO, is the most questionable charge of all. Those fees are regulated by the states (MD, for example, limits them to $99.....VA doesn't have any limit at all, so they can run from $300-500). Fortunately, the relatively low VA new-car sales-tax of 3% (4% on a used-car), helps balance those fees out to some extent.

Something else, IMO, that needs looking into, though it is probably not as questionable as the Dealer-Prep fees, is the separate Destination/Freight charge on the new-car window sticker. While, of course, it is true that it costs money to deliver the car from factory to dealer (railroad, trucking, and container-ship companies obviously don't operate for free), those costs should, IMO, be taken into consideraton when the auto-manufacturer sets its list-prices. And, although actual shipping costs will probably (?) vary for each vehicle, depending on how far the factory is from the dealership, many manufacturers set one figure that is good for anywhere in the nation....or maybe the world. That, to me, just doesn't make sense. (you can find what that one shipping cost is on the Build-Your-Own-Vehicle feature that most manufacturers have on their websites).

Then, of course, the inevitable question comes up......should there even be a separate shipping charge on the price-sticker for a new car at all? For example, when you buy a new refrigerator at Sears, or a new sofa at the furniture store, you don't pay a separate charge for what it costs to ship it from the factory to the store (although sometimes there is a charge for delivering it from the store to your house). Why can't auto companies just figure the average cost of factory-to-dealer shipping nationwide or worldwide, and incorporating that figure into the list price? It would certainly make the paperwork easier.

grabber2

Are you kidding me???? Which city was that???

mmarshall

Although cars, in general, are assembled much better today than they were years ago, and generally more free of defects (some of the German makes are an exeption), it is still somewhat risky, IMO, to make a deal sight unseen, without at least a visual inspection of the car and test-drive. You should see, for example, what I do when I myself check out and inspect a car, either for myself or for someone else if I am shopping with him or her. I go over it with a fine-tooth comb.

IS-SV

It's a gimmick, simply because GM never intended for a significant number of customers to take advantage of the marketing gimmick. I'm sorry that you had to live through such a nightmare and I'm glad you got out of it ok. But everybody can have a different opinion on this of course. All part of the Saturn story that ended up netting GM billions upon billions in losses.

This sales gimmick is not required to accomplish the sales return for full purchase price (including sales tax). I know a lawyer that returned his 7 series (early Bangle Butt with multiple electrical problems) for a full refund including sales tax a month after delivery. BMW did not advertise the same gimmick.