Monday, May 22, 2017

Dealing with the Dealer Fee: Earl Stewart’s User’s Guide


Hopefully by now, all but my newest readers know about the infamous “Dealer Fee”. If you don’t know, it’s a hidden price increase on the car you purchase disguised to look like a federal, state, or local tax or fee. It’s 100% profit to the dealer. “Dealer Fee” is the most common name for this disguised profit, but it goes by many names such as doc fee, dealer prep fee, service fee, administrative fee, electronic filing fee, e-filing fee, tag agency fee, pre-delivery fee, etc. The names are only limited by car dealers’ imaginations. Almost all car dealers in Florida charge a Dealer Fee. The dealer fees range from around $700 to as high as $2,000!

This is the Florida law that is supposed to regulate the Dealer Fee: “The advertised price must include all fees or charges that the customer must pay excluding state and local taxes.” The law also requires that the Dealer Fee must be disclosed to the buyer as follows: “This charge represents costs and profits to the dealer for items such as inspecting, cleaning, and adjusting vehicles and preparing documents related to the sale.”

This law is very weak and almost never enforced. When enforced, it isn’t enforced by the letter of the law; it is done so as to “accommodate” the car dealers. The law is “weak” because it requires only that the dealer fee be included in the “advertised” price. The word “advertised” is narrowly interpreted to mean a specific car shown in a newspaper, TV, radio, or online ad, but, what about when you get a price on the phone, online, or from the salesman? You don’t find out about the Dealer Fee until you’re in the business office signing a bunch of papers. The dealers get around advertisements very easily by including a “number” in the fine print. This number is their stocknumber that designates one specific car. When you respond to the ad, this car is no longer available (sales people are usually not paid a commission for selling the “ad car). The advertisement might say “many more identical cars are available.” It’s true that identical cars are available for sale, but they are not available for sale at the sale price because they are not the advertised stock number car. If you buy one of those “exact same cars” you will pay from $700 to $2,000 more.

The reason I’m told that the law is rarely enforced is that the Florida Attorney General’s office is understaffed and too busy enforcing other Florida laws. I’m also told that Florida car buyers don’t file very many complaints against car dealers for violating the Dealer Fee law. I don’t believe that there can be too many other infractions of the law that take more money annually from consumers than dealer fees take from car buyers. Just one car dealer selling 1,000 cars a year and charging a $1,000 dealer fee is taking a $1 million annually from car buyers. Most car dealers in South Florida well a lot more than 1,000 cars annually and many charge more than $1,000 dealer fee. I believe that the reason more complaints aren’t filed on the dealer fee is because most car buyers don’t know that they are being duped. They either don’t notice the fee or assume it’s an official federal or state fee. Dealer often tell their customers that all dealers charge it and that it’s required by law.

The Attorney General also “accommodates” the dealers by not interpreting the law the way it was intended. For example, the law says that the dealer fee must be included in the advertised price. The Florida Senate has ruled that the law requires that the fee be “included” rather than “specifically delineated.” But the Attorney General allows car dealers to advertise car prices without including their dealer fee in the price if they mention their dealer fee in the fine print. They also allow car dealers to simply state in the fine print that they have a Dealer Fee but not even mention the amount. To me they are simply allowing the car dealers to break the law.

Lastly, the required disclosure of the Dealer Fee on the vehicle buyer’s order or invoice is confusing, misleading, and incorrect: “This charge represents costs and profits to the dealer for items such as inspecting, cleaning, and adjusting vehicles and preparing documents related to the sale.” It should not say “costs” because any cost that you pass along to the customer in the price of a product is pure profit. A dealer can pass along his utility bills, sales commissions and advertising if he wants to and call it a “dealer fee”. It should not say “inspecting, cleaning, and adjusting vehicles” because all car dealers are reimbursed by the manufacturer for “inspecting, cleaning, and adjusting vehicles”.

So, what should you do when you are confronted by a car dealer with the “Dealer Fee”? Besides “LEAVE”, here are some suggestions that may help you:

  • Make it clear from the very beginning that all prices you discuss must be “out-the-door” prices. This way you don’t care if the dealer fee added up front because you will shop and compare their bottom line price with at least 3 competing car dealers. Ideally you should require that they include tax and tag in that price. If you don’t they might try to slip in something they call the “electronic filing fee” or “e filing fee” and trick you into believing that it’s part of the license tag and registration.
  • The dealer will often tell you that all car dealers charge Dealer Fees and that they are required by law to add the dealer fee on every car they sell. Simply tell them that you know this is not true and you can cite me and other car dealers like Mullinax Ford, OffLeaseOnly.com and Earl Stewart Toyota that do not charge a dealer fee. Print out a copy of this article, show it to them, and tell them that you know that there is no law that says he must charge you a dealer fee.
  • If you and the dealer understand that the out-the-door price is the price you will shop and compare with his competition, you don’t need to be concerned whether there is a dealer fee showing on the vehicle buyer’s order. To be competitive, the dealer can simply reduce the price by the amount of his Dealer Fee and the bottom line is what you are comparing.
  • Be aware that dealers usually do not pay their sales people a commission on the amount of their dealer fee. In fact, dealers often misinform their sales people just like they do their customers. The salesman who tells you that the all dealers charge Dealer Fees and that the law requires everyone pay a dealer fee may believe it. Sale people who understand that the Dealer Fee is simply profit to the dealer will be resentful of not being paid their 25% commission on it. A $1,000 dealer fee costs the salesman $250 in commission.
  • When you respond to an advertisement at a specific price for a specific model car, object when the dealer adds the dealer fee. Unfortunately, the law allows him the loophole of claiming that the ad car is a different stock number, but you might be able to shame him into taking off the dealer fee. If you raise a “big enough stink”, the dealer would be smart to take off the dealer fee than claim that technicality, especially if you were to advise the local TV station or newspaper.

I hope that these suggestions help you and I hope that you will file a complaint with the Florida Attorney General, Pam Bondi. If enough consumers (who are also voters) let our elected officials know how they feel about the Dealer Fee, it will bring positive results.

Monday, May 15, 2017

10 Costs Comprising the TOTAL PRICE of a Car

Understanding and calculating the TOTAL PRICE of a car is very complicated and time consuming. The average price of a new car is about $40,000, but when you add all the other costs associated with the car and multiply this by all the cars you will buy in your lifetime, you’re talking hundreds of thousands of dollars. This means that you should make the effort and take the time to fully understand the Total Price of the next car you buy.

Car dealers and car manufacturers advertise car prices that are only a small fraction of the true cost of the car. When you’re comparing advertised prices from different dealers and different makes and models of cars, you have virtually no valid information on making the right purchase decision. Dealers almost always advertise a price that is substantially lower than you can buy their car. If they don’t do this, their competitor will, and they will lose the sale.

Manufacturers almost never advertise the other costs associated with their cars, unless the car happens to have a low cost in that category. For example, Subaru has a low cost of depreciation, but you’ll never see a Chrysler ad about depreciation cost. The fine print in every manufacturer’s ad stipulates that the dealers can add dealer installed accessories and dealer fees.

Below I’ve listed all the costs totaling the TRUE TOTAL COST of the cars you buy.

(1) Selling price of car

(2) Trade-in allowance

(3) Interest cost of financing

(4) Finance “products”.

(5) Depreciation

(6) Insurance

(7) Maintenance

(8) Repairs

(9) Dealer Installed Accessories

(10) Dealer Fees

Selling Price of Car. Determine the lowest selling price of the car you want to buy as follows: Check with these two 3rd party car buying services, www.TrueCar.com and https://www.costcoauto.com. Then take the lowest price of the two and shop it with at least three dealers on the exact same make, model, accessories and MSRP as the car you priced with TrueCar and Costco.

Trade-in Allowance. Keep the sale of your trade-in separate from your purchase transaction. The dealer you buy your car from will try to pay you less for your trade-in than it’s worth; or he will delude you into believing he’s giving you a good price by overcharging you on the car you’re buying. Get purchase offers on your trade-in from the used car departments at three dealers who sell the make of car you are driving. Make an appointment with the used car manager and simply explain that you want to sell your car, but make it clear you aren’t buying another. Also, tell him you are getting competing bids from two other dealers. When you make the final decision on the dealer you will purchase your car from, offer him the right to match or beat your best price offer. Remember that Florida and other states offer you sales tax exemption on the amount of your trade-in allowance.

Interest Cost of Financing. Car dealers make more money financing cars and selling warranties and other “finance products” than they do on the actual sale of the car. Check with your bank and credit union. Credit unions offer lower rates than most banks. You can join some credit unions for a relatively modest annual fee. Also, consider the dealer’s interest rate if it is a subsidized low rate offered by the manufacturer of the car.

Finance Products. There’s pressure by the federal agency, the CFPB, Consumer Finance Protection Bureau, on car dealers about charging exorbitant interest rates to minorities. Many dealers have resorted to shifting their finance profits to products and services added into the retail installment sales contract. Oftentimes these products and services aren’t properly disclosed to the buyer. Carefully read your installment sales contract before you sign it to be sure that there are no warranties, prepaid maintenance agreements, road hazard insurance, roadside assistance, LoJack, or anything else added to the finance cost of your car that you haven’t agreed to buy.

Depreciation. All different makes and models of cars depreciate at different rates. The differences are substantial and can amount to thousands of dollars. The selling price of a Subaru and a Chrysler can be the same, but the Chrysler will depreciate thousands more than the Subaru. You can research depreciation online at www.ConsumerReports.com, www.Kbb.com, www.Edmunds.com, and www.ALG.com.

Maintenance. The cost of maintenance for cars has dropped precipitously in the past ten years. Cars are built better and require far less maintenance, like oil changes, than ever before. The cost is so low that most manufacturers are offering free maintenance in first 2 or 3 years of ownership. However, if you keep your car longer, the cost of maintenance naturally increases. Consumer Reports is, by far, your best source of information on maintenance and repairs of all makes of used and new cars.

Repairs. Repairs are usually mentioned together with maintenance, but I separate them because, even though repairs are required less frequently like maintenance, the actual cost of repairs are very high. This is because today’s cars consist of very high tech and complex computer systems which are often manufactured in modules. Repairs often involve the replacement of an entire computer module (not just a few parts), costing thousands of dollars. One again, I refer you to Consumer Reports for detailed information on repair costs. Their annual April Auto Issue is “worth its weight in gold” as source of buying information.

Dealer Installed Accessories. JUST SAY NO! With rare exceptions, all accessories installed by dealers on their cars before they are sold are vastly overpriced and have very little value or utility. Dealer installed accessories exist so that the dealer can add profit to the sale of the car above the advertised price. Examples of these overpriced accessories are Nitrogen in tires, LoJack, pinstripes, roadside assistance, and paint sealant.

Dealer Fees. Last, but certainly not least, are car dealers’ dirtiest little secret. Dealer fee is a generic name for all the bogus fees that dealers add to the advertised price of their cars. The thing they have in common is the word “fee” because it resonates as an “official” local, state, or federal fee. A few of the “creative” names for dealer fees are Electronic Filing Fee, Tag Agency Fee, Notary Fee, Handling Fee, Administrative Fee, Dealer Prep Fee, and Dealer Service Fee. The way to spot a real fee from a bogus fee is by determining if the dealer charged you sales tax on that amount. THERE IS NO STATE SALES TAX CHARGED ON GOVERNMENT FEES.

Monday, May 01, 2017

FREE LIFETIME ENGINE/POWER-TRAIN WARRANTIES ARE PHONEY-BALONEY, WORTHLESS COME-ONS

Car dealers will do almost anything to “get you in-the-door” to sell you a car, and one of their favorite tricks is a “free lifetime warranty” with every car they sell. I haven’t written about this before because I didn’t think anybody would believe a car dealer would give then anything of value free, but I was wrong!

I was recently shown a survey of South Florida car owners. The survey asked which features and benefits associated with the purchase of a car they considered to be the most valuable. To my amazement and disbelief, the number one and two items were free, lifetime engine and power-train warranties!

For clarification, the engine is part of the powertrain. the main components that generate power and deliver it to the road surface. This includes the engine, transmission, drive shaft, differentials, and the final drive (drive wheels). Essentially, these are all thelubricated parts of your vehicle. These parts are very important, and they are also very reliable and not likely to fail if properly maintained.

All engine/powertrain warranties, free or otherwise, have requirements that they be maintained, at least per the manufacturers’ recommendations. Many free warranties also have conditions that they be maintained even more frequently than the manufacturer requires. Most non-manufacturer engine and powertrain warranties (and all free nonmanufacturer) EXCLUDE SEALS AND GASKETS* which are the only parts that might wear out during any reasonable length of time. Some of these phony warranties have requirements that all maintenance and repairs be made at the dealership you bought the car from; some have requirements that you use a specific brand of oil. All of them require that you have detailed, written evidence of every single required maintenance that the fine print in the warranty requires. There are also other exclusions (“CYA” for the warranty seller) regarding how you use your car…do you tow a trailer, drive commercially, etc. A good tip for you regarding warranties, free or not, is to read the fine print which tells you what the warranty DOES NOT COVER. This is usually on the last page in fine print but what it does cover is on the front page in large, bold print.

Because there is virtually no warranty cost to auto manufacturers from repairing engine and powertrains that have been properly maintained, they offer much longer, higher mileage coverage on the engine/powertrain than the rest of the car. Hyundai and Mitsubishi warrantee their engine/powertrains for 10 years or 100,000 miles. Acura warrantees theirs for 7 years or 70,000 and most other manufacturers for 4 or 5 years and 50,000 miles. Remember that the manufacturers do cover gaskets and seals on their warranties, but the car dealers offering the free warranties do not. The only things that can fail on a well-maintained engine or powertrain are the seals and gaskets. If the manufacturer did not cover these, they would offer a lifetime warranty too.

When you see one of these car dealer advertisements offering you a FREE engine or powertrain warranty, ask him how much of adiscount from the advertised price he will give you if you decline the warranty; and/or ask him to show you proof of any warranty repairs his dealership has ever made on an engine or powertrain covered by their free warranty. I think we both know the answer to these questions…you won’t get a dime’s discount on the car and they’ve never spent a nickel on warranty repairs. The bottom line is that a free engine/powertrain warranty is just like free advice…it’s not worth anything.

*CORRECTION: It has come to my attention that not all of these warranties exclude seals and gaskets. In particular, Bev Smith Toyota and West Palm Beach Nissan both offer free lifetime powertrain warranties that do cover seals and gaskets.

Monday, April 24, 2017

Open Letter to Florida Car Dealers

I wrote this letter to Florida car dealers almost a decade ago and, so far, I’ve received no replies…at least from car dealers. But I’ve received thousands of replies from car buyers thanking me for taking a stand against the Unfair and Deceptive Trade Practice of dealer fees. I thought that I’d give it another try.

FRIDAY, AUGUST 24, 2007

SUBJECT: ELIMINATE THE DEALER FEE

Dear fellow Florida car dealer, I started in the retail auto business in 1968, about 39 years ago, and I have seen a lot of changes in the way we dealers sell cars and the expectations of our customers. My remarks in this column are made sincerely and with a positive intent toward you and your customers. I am not trying to tell you how to run your business; I am suggesting a change that will reward both you and your customers.

Virtually every car dealer in Florida adds a charge to the price of the cars he sells, variously referred to as a “dealer fee”, “documentary fee”, “dealer prep fee”, electronic filing fee etc. This extra charge is printed on your buyer’s orders and is programmed into your computers. It is regulated in many states including California. You charge this fee to every customer and it ranges from a few hundred dollars to several thousand. Florida law requires that you disclose in writing on the buyer’s order that this charge represents profit to the dealer. Florida law also requires that you include this fee in all advertised prices. You don’t always do this and you get around the law by limiting the number of advertised vehicles (as few as one).

The argument that I hear from most car dealers when I raise this issue is that the dealer fee is fully disclosed to the buyer on his buyer’s order. But, most car buyers are totally unaware that they are paying this. Who reads all the voluminous paperwork associated with buying a car? The few who notice it assume it is an “official” fee like state sales tax or license and registration fee. Those few astute buyers who do question the fee are told that your dealership must charge this fee on very car which is not true. These astute buyers are also told that all other car dealers charge similar fees. This is almost true, but, as you know, my dealership does not.

The reason you charge this fee is simply to increase the cost of the car and your profit in such a manner that it is not noticed by your customer. This is just plain wrong. Dealers will admit this to me in private conversations and some will admit that they have considered eliminating the fee as I have, but are afraid of the drastic effect to their bottom line. By being able to count on an extra $999 in profit that the customer is not aware of or believes is an “official fee”, you can actually quote a price below cost and end up making a profit. Or, if the price you quote the customer does pay you a nice profit, you can increase that by several hundred dollars.

This “extra, unseen” profit is even better for you because you don’t pay your salesmen a commission on it. That’s being unfair to your employees as well as your customers. When the rare, astute buyer objects to the dealer fee, the right thing to do would be to decrease the quoted price of the car by the amount of the dealer fee. This would have the same net effect of removing it. The salesman won’t permit this because he will lose his commission (typically 25%) on the decrease in his commissionable gross profit.

If you don’t know me, I should tell you that I don’t profess to be some “holier than thou” car dealer who was always perfect. Although, I never did anything illegal, when I look at some of my advertising and sales tactics 20+ years ago and more, I am not always proud. But, I have evolved as my customers have evolved. My customers’ expectations, level of education, and sophistication are much higher today. Your customers are no different. As I began treating my customers, and employees, better I discovered that they began treating me better. Yes, I used to charge a dealer fee ($495), and when I stopped charging it a few years ago, it was scary. But I did it because I could no longer, in good conscious, mislead my customers. Just because everybody else was doing the same thing did not make it right.

Now here is the good news. My profit per car did drop by about the amount of the dealer fee when I stopped charging it. But, when my customers realized that I was now giving them a fair shake and quoting the complete out-the-door price with no “surprises” the word spread. My volume began to rise rapidly. Sure, I was making a few hundred dollars less per car, but I was selling a lot more cars! I was, and am, selling a lot of your former customers. My bottom line is far better than it was when I was charging a dealer fee. You can do the same!

Why am I writing this letter? I’m not going to tell you that I think of myself as the new Marshall that has come to “clean up Dodge”. In fact, I’m aware that this letter is to some extent self-serving. Lots of people will read this letter to you and learn why they should buy a car from me and not you. And, I am also aware that most dealers who read this will either get angry and ignore it or not have the courage to follow my lead. But maybe you will be the exception. If you have any interest in following my lead, call me anytime. I don’t have a secretary and I don’t screen any of my phone calls. I would love to chat with you about this. My cell phone number is 561 358-1474.

Sincerely,

Earl Stewart

Monday, April 10, 2017

Red Flags to Watch for When Buying or Leasing a Car

The “Big Sale Event"
If you go online or turn on the TV, you will find that most car dealers in your area are having a “sale” of some kind. It may be because of a current holiday, “too large an inventory” of cars, to “reduce their taxes”, “the manager is out of town”, or some other nefarious lure. “Advertising 101” says that you should give the prospective buyer a “motive to act”. Unfortunately, it doesn’t matter whether the motive is real or not. The fact is that most car dealers do not sell their cars for less during “sales events” than they do at any other time. I point this out so that you don’t rush your buying decision. If you don’t buy a car during the tight time constraints of a phony sales event, you can negotiate just as good a price, if not better, the next day. The exceptions to this are legitimate rebates offered by the manufacturer. These often expire at the end of the month which is one reason why the “last day of the month” really can be the best time to buy a car”.

“The Price I’m giving you is only good for today."
If a salesman or sales manager tells you that, it is only a tactic to push you into buying the car. The only exception would be the expiration of a factory rebate. Once again, this is simply a tactic to push you into buying before you have a chance to do your comparative price shopping.

“Take the car home today and see how you like it."
Test-driving the car you are considering buying home can be a good thing. It will give you a lot better idea about how the car performs, etc. However, there are two reasons the car salesman offers this. One is that you must leave the vehicle you might be trading in with the car dealer. This means that you cannot shop prices with other dealers. The second reason is the psychological impact of parking that new car in your driveway where your family and neighbors can see it. The slang expression for this is “the puppy dog”. If you were to take home a little puppy from the pet store, you and your children would fall in love with her and could not return her the next day.

“You must give me a deposit before I can give you a price."
This must be one of the most insulting ways that some car salesmen have of intimidating a prospective buyer. It’s amazing how many people actually succumb to this which allows the salesman an element of control…. you can’t leave until they give you your money back. If confronted with this ultimatum, simply walk away.

“Are you ready to buy a car today?" 
Often, if you say no to this question, the salesman will tell you to come back when you are ready to buy. He will tell you to shop around and come back with your best price so that he can beat it. The salesman is afraid that, if he does give you his best price, you will go somewhere else and that salesman will beat it. Of course, that is the whole idea of competition and that is exactly what you should do. If the salesman is afraid to give you a price because his competitor will beat it, it must not be the best price!

“Make me an offer and I will take it to my manager for approval."
This is a very common tactic which you may have already encountered. It’s not unethical. It’s simply part of negotiating. I point this out so that you are fully aware that this is part of the negotiating game. Be aware, that no matter what price you offer, the manager will ask you for more money. Even if you mistakenly offered a high price that would be a very large profit for the dealer, the manager would ask you for more money. The psychology behind this is that if you suddenly accepted the offer, you may frighten the customer by thinking he had offered too much (which he would have). When you negotiate, you must be well versed on what is a good price for that car. Start out below the best price you think you can buy it for. If you cannot negotiate a price close to your best price, get up and leave. Continue this process with another car dealer.

The “really big” discount”
The other day a friend showed me direct mail advertising piece from a new car dealer with a coupon good for $2,000 discount on any car in his inventory. This is very common for online and TV ads too. Federal law requires new cars to have a price sticker on the window named the Monroney label. A discount from this suggested retail price gives you a fair basis for comparison. Unfortunately, most car dealers today, increase the suggested retail price substantially with the use of an addendum to the Monroney sticker often referred to as a “Market Adjustment Addendum”. This “adjustment” can be several thousands of dollars. Be sure you know what the true MSRP is for the car when you have been offered a “big discount”.

The best protection from all of the above is to find a car dealer that you can trust. Ask your friends about their experiences with dealers and call the Better Business Bureau and the County Office of Consumer Affairs. I have a list of dealers that I recommend and a list to beware of that you can access online at www.GoodDealerBadDealerList.com. All things being equal choose the dealership that has been in business a long time and an owner or general manager who will make himself accessible to you and all his customers.

Monday, April 03, 2017

Fake News Is No Worse Than Fake Advertising

The media has been bombarding us for nearly a year with their pompous outrage over “fake news”. The democrats are blaming the republicans, and parties are blaming the media, and everyone is blaming the Russians.

But what about fake advertising? Where is the media’s outrage when a car dealer advertises a car to make you believe it’s brand new, but when you try to buy it, you find out, either doesn’t exist, or it’s a used car? Most of the car dealer advertisements that you see on TV, hear on the radio, view online, read in the newspaper are FAKE.

The Federal Trade Commission, FTC, has regulation that requires the advertiser to display any fact that changes the price or payment of an advertised product in a clear and conspicuous fashion. The FTC says that this means it must be portrayed adjacent to the advertised price or payment and in as big letters. The next time you’re watching a car advertisement on TV, try to read the fine print. You’ll be lucky if you even notice it because it’s flashed on the screen for only a second or two, and the print is so small you couldn’t read it even if it stayed on the screen for 30 seconds.

The only reason I know what is being disclaimed in the fine print is because I’ve gone to the trouble of standing within inches of my TV screen with a high-resolution camera and taking a picture of the fine print which I then enlarge. This is how I discover the “$5,000 down payment” required for the low monthly payment advertised in large print along with the loud audio. I see $999.95 dealer fees, $398 electronic filing fees, $149 doc fees, $79.50 tag agency fees, etc. These “fees” are disguised, hidden profit to the dealer.

Another common deceit hidden in the fine print are price “qualifiers” that are impossible for the buyer to have. Most common are rebates named military, college graduate, conquest, and loyalty. Military means that you must be on active duty in the military. College graduate means that you must have graduated from a 4-year accredited college within the last 6 months. Conquest means that you must own or lease car which is not the same make as the car you’re looking at. Loyalty means that you must drive a car that is NOT the same make. These rebates, totaling over $1,000, are deducted from the advertised price.

What I’ve disclosed to you is just the tip of the iceberg when it comes to car dealers’ deceptive advertising. Why, you ask, does the media allow these advertisements to run? You probably know the answer before I tell you…M O N E Y. Car dealer advertising and car manufacturer advertising are two of the media’s largest sources of revenue.

Maybe IBM’s Watson could calculate how many billions of dollars are stolen from consumers in this country annually by fake advertising. All of our politicians are talking about lowering taxes, repatriating overseas money, and cutting costly regulations (we have plenty of regulations against false advertising but no enforcement).

I would like to see a politician run on the platform that she or he would stop fake advertising. He could do this largely by enforcing the laws and regulation we already have on the books. I would recommend one more law. Make it illegal for the media to run an advertisement that violated federal, state, or local laws.

Monday, March 27, 2017

Don't Get Spotted!

When you bought your last new or used vehicle, did the salesman encourage (or even insist) that you drive your vehicle home that same day? The chances are very good that he did because Florida dealers and those in most other states have a firm policy of doing this. I’ll estimate that 90% to 95% of all cars sold in Florida are “spotted” which is the slang expression dealers have for this policy. A few states, like New York, make it illegal to deliver a newly purchased car until the tag, title, and registration process have been finalized which delays the delivery for a few days. As much as you may be tempted, these are 5 reasons you should not sign the papers and drive the newly purchased vehicle home the same day you decide to buy it. Some car buyers are under the impression that there’s a 72 hour “cooling off period” mandated by law that allows you to return purchases, but this is not true when you buy a car at the dealership. It applies only if you purchase the product in your home. 

(1) If you’re financing the car through the dealer, there’s a chance that your financing has not been approved based on the same terms, interest rate, and down payment you agreed to. If you bought the car on a weekend or after 5pm, most banks and credit unions are closed. Even if you bought it earlier during a weekday, it can take a day or more for a bank to do a thorough credit
investigation and approval. If your credit is later turned down or the down payment, interest rate, or terms modified, you will be faced with the embarrassing necessity of returning the car and resigning a contract that will result in you paying more money than you had agreed to. 

(2) Most cars, surprisingly, are purchased on impulse with emotion overcoming logic. The 2nd largest expenditure the average person makes in their life is for their car. This decision should be made with logic, not emotion. Logic dictates that one should spend several weeks studying the pros and cons of the many different vehicles available. The Internet offers a wealth of information. Should you lease or buy? Should you buy a late model used car or a new one? Which dealer offers the lowest price? Which dealer offers the highest price for your trade-in? Which bank or credit union offers the lowest interest rates and terms and down payment acceptable to you? You should never buy a vehicle without an extensive test drive. 

(3) The dealer may be insisting that you take delivery immediately because he knows that this is the best way to force your emotion to overcome your logic. When you take your new vehicle home and show it off to your friends, family, and neighbors, you’re far more likely not to change your mind. Because you’ve left your trade-in with the dealer, you’re not going to be checking prices with other dealers. Taking you out of the market by keeping your trade in has a slang term among dealers…you’ve been “de-horsed”. Taking that new car home the same day also has a slang term…you’ve been “puppy-dogged”. Have you ever gone puppy shopping with your family and brought home a warm, cute, and cuddly puppy? What are the chances you’ll return her the next day because the price was too high? 

(4) A legally binding contract must have “offer and acceptance.” Taking your car home completely binds the acceptance of the contract, if you signed one, and makes it far less likely that you will be able to get out of the deal you made. 

(5) Unscrupulous car dealers will spot deliver cars knowing that the lender will not approve the low interest rate, low down payment, and longer terms that you have agreed to. They’re relying on the fact that you’ll fall in love with your “new puppy” and that you’ll brag to your family, friends, and neighbors how about the low price, low interest rate, etc. that you negotiated. When you get that call from the finance manager at the dealership a few days after delivery that you must come back to “take care of a little more paperwork”, you won’t hesitate. When you get there, you find out that you have to come up with a lot higher down payment, a much higher interest rate, and tell you that you have to buy an extended warranty because “the bank requires it”. Your monthly payment goes way up and so does the dealer’s profit. The dealers have a slang expression for this too…it’s called the “yo-yo delivery”. 

If you find yourself in the position of being told to return your purchase because the bank requires a higher interest, higher down payment, or shorter terms be sure that you understand that you have no obligation to sign a new contract and keep the vehicle. Your contract is null and void. There’s even an argument to be made by you and your lawyer that the first contract is valid and that you can keep the car at the original terms agreed upon. You may have signed a paper, typically referred to as a “Rescission Agreement”, which purports to require you to return the car if the bank refuses to honor the contract as written. There are financial penalties if you don’t. This was common practice with all Florida car dealers for many years but court decisions, case law, has made this a very questionable practice. I hope that this never happens to you but if it does and you decide you want to keep the car under the terms of the original finance contract, I recommend you hire a lawyer.