Trust Your Car Dealer... but Verify

BUT VERIFY

I don’t know of any other car dealer (or any retailer) who makes his personal cell phone number public like me. Mine is 561 358-1474, printed at the end of all my blogs, given to all my customers, and printed on my business card. As you might expect, I receive a lot of calls and texts and especially from car buyers victimized by other car dealers. Of course, I get complaints directly from my customers so I can resolve them, which is the main reason I give them my personal number.

My point in telling you this is not to “brag” (Oh, maybe a little), but to tell you the most common kind complaint I get from car buyers is from those who’ve been “ripped off”. Almost every call I receive is afterthey’ve bought the car. Why don’t they call me before they sign on the dotted line? It’s because they TRUSTED the dealer, his advertisements, and their salesman.

All of us make far too many decisions in life on appearances. “Looks” play way too big a part in how we choose our friends, our spouses, who we vote for, and from whom we buy things. Businesses understand this and choose salespeople and managers who look and sound honest. The illustration at the top of this article is of Charles PONZI and his wife. Everyone has heard of the Ponzi scheme…Charles invented it, and was one of the greatest con men of all time. If he’d looked devious, mean, or dishonest, he wouldn’t have succeeded in bilking thousands of people out of millions of dollars. A dishonest, shifty looking con man would be a total failure because nobody would trust him!

When I hear from victims that just bought a car and found out they’ve been taken advantage of, I often hear “he looked so nice, or honest”, or “he reminded me of my grandson”. When emotion takes over reason, folks let their guard down and don’t ask the hard questions you have to when spending your money. They’re afraid they might sound rude or might offend the nice young salesperson that’s trying so hard to help them buy the right car for a good price.

You can sound and look “trusting” by smiling and being courteous, but at the same time be firm and ask the hard questions…”I won’t sign anything until I have compared your price with other dealers”. “Please put in writing that you’ll give me a free loaner car whenever my car is in for service” (and all other verbal promises). “Before I decide if I will finance with you, I have to check with my bank and credit union”. I won’t buy this used car until I take it to my mechanic for complete inspection.” Is the price you gave me out-the-door, meaning I can give you my check for that amount and drive my car home?”

Always remember that this nice young man who reminds you of your grandson, is paid 25% of the price he can persuade you to pay above the cost of the car. His manager is also paid a commission which goes up for every dollar he can raise the price of the car. Two cars of the same MSRP are rarely sold at the same price. Each customer pays as much as the salesman can persuade that customer to pay. It’s not uncommon to see thousands of dollars difference in price on the same car to different customers. You want to be the customer that pays the lower price, and you do that by trusting but verifying.

I’m not suggesting that most car dealers are dishonest. I am saying that the auto retail business’ culture and structure encourages dishonesty. It’s hard for two Chevrolet dealers, just 10 miles apart, to give every customer their best price on every Chevrolet they sell. What’s to prevent that customer from taking one dealer’s best price to the other dealer and buying from the one with the lowest price? The only way for dealer A to outsell dealer B is to advertise and tell his prospective customers that his prices are lower. When every Chevrolet dealer in the market does this, is when you have dishonesty.

The owners and general managers of these dealerships don’t always know the details of the deception or sometimes they “don’t want to know” because that negates the argument of “plausible deniability”. Owners and general managers are also reluctant to fire a salesman that is a top producer. An average salesman sells about 10 cars a month. A very good salesman can sell 30+ cars per month. You can easily replace an average salesman, but it’s next to impossible to find another “30 car a month man”.

Given the culture of the retail auto business, the lack of regulation, and the lack of enforcement of laws against deceptive advertising and sales practices, your chances of dealing with a dishonest salesperson are high. In a car dealership with loose supervision and hiring practices, the salesman that sells the most cars is more likely to be the most dishonest.

Don’t Let the Car Dealer Dictate the “Game Plan”

Take Control and Make Him Play by Your Rules! 

Car dealers rely on tactics designed by them to trick and confuse the buyers. Among their favorites are hidden fees, dealer installed accessories, counterfeit window stickers, undervaluing your trade-in, and inflated interest rates and overpriced products sold in the finance department, and advertising that grossly understates the true selling price. Here’s how you can buy the car using your game plan, taking control and getting the lowest out-the-door price. 

1. Hidden fees. Lots of car buyers ask me how they can force a car dealer to remove or reduce his hidden fees. The answer is to let him keep his hidden fees, but to include them in the “out-the-door” price you should demand. Out-the-door price definition:  The amount of money you can write out your check for, present it to the dealer, and drive your car home. This tactic neuters the only reason dealers have fees. This is to lure you into the dealership on a very low price, only to add several hidden fees, raising the real price by thousands of dollars. By insisting on the out-the-door price, and their knowing that you’re comparing their real price with their competitors, you don’t care what amount of “fees” they include. You’re making your buying decision on the lowest bottom-line from at least 3 other dealers. 
2. Dealer pre-Installed Accessories. These include nitrogen in the tires, paint sealant, fabric protection, road hazard insurance, pin stripes, tinted windows, floormats, emergency road service and many more. What these all have in common is that they’re way overpriced and many are worthless, like nitrogen. Another thing they have in common is that they’re often pre-installed, but not included in the advertised price. The salesman often says, “I’m sorry but we can’t remove these accessories because they are already on the car”. Rather than argue with the salesman, remind him that you’ll be comparing his out-the-door price with 2 or 3 of his competitors. Tell him that you don’t want or need any of those “preinstalled accessories”, but if he insists on including them in his out-the-door price, you’ll be comparing his price with dealers that do not. 
3. Counterfeit Window Sticker. Most car dealers add a window sticker referred to as an “addendum” next to the federally mandated Monroney Label on new cars. It’s designed to jack up the true MSRP (manufacturer’s suggested retail price) by thousands of dollars. The increase varies from a few hundred dollars to several thousand. This dealer added label is usually designed to look like part of the Monroney label. In other words, counterfeit. I’ve dubbed this the “Phony Moroney”. The purpose is to make you think you’re getting a bigger discount or a large trade-in allowance. One again, don’t argue with the salesman. Insist on the out-the-door price and always get at least 3 bids on your trade-in from other dealers. 
4. Undervaluing your trade-in. Car dealers appraise trade-ins for as little as they think they can get away with. The dealer vernacular for this is “steal the trade”. If your trade-in is really worth $20,000 and they can convince you it’s only worth $17,000, they can make an extra $3,000 on the car you’re buying; or they can trick you into thinking their giving you an “extra” $3,000 discount. ALWAYS shop your trade-in with at least three other sources. Do not rely on “books” like Kelly Blue Book, NADA, or Black Book. Get actual buying bids from sources like CarMax, Carvana,  WeBuyAnyCar.com or the used car manager at a dealer that sells the make of your trade. 
5. Inflated interest rates and overpriced products sold in the finance department. If you remember nothing else from this article, remember this. ALWAYS GET A BID FROM YOUR BANK AND/OR CREDIT UNION if you’re going to finance your car. Car dealers make considerably more financing your car than they did when they sold it to you. You can save thousands of dollars by your bank’s lower interest rate and not buying worthless finance products sold in the dealer’s finance department. 
6. Advertising that grossly understates the true selling price. IGNORE ALL CAR DEALER AND AUTO MANUFACTURER ADVERTISING. Without exception, all car dealers and manufacturers understate in their advertising the true price you must pay. Ask yourself this question, “Have you ever bought a new or used car for the advertised price?”. 

By refusing to argue about dealers’ hidden fees, pre-installed accessories, phone Monroney, etc. and insisting on an out-the-door price that you compare with the competition, you’re TAKING CONTROL and making the dealer play by your game plan. 

Don’t Tell the Car Dealer That You’re Paying Cash

Most folks can’t, or don’t want to, pay cash for their next car. I advise against paying cash in today’s economic climate because borrowing costs are at historic lows and expected to stay there for a long time. The stock market is climbing to record highs. You can borrow the money from your bank or credit union to finance the car at a lower interest rate than your rate of return on conservative investments.

With that said, there are folks who simply don’t like to borrow money, “Neither a borrower nor lender be”. They’re typically my generation, baby boomers. My parents taught me to save my money until I could afford to pay cash…that’s just the way it was back then. Then, I could often get a “cash discount’ because the seller got all his money up front and didn’t have to wait or worry about getting “stiffed” by the buyer, because he couldn’t or wouldn’t pay. That’s no longer the case. Sellers aren’t lenders anymore, but there are lots and lots of lenders anxious to loan the money. The sellers get all their money upfront, via the third-party lenders, including car dealers.

This morning I noticed a posting on my Facebook page, www.Facebook.com/EarlStew. This was the post by Elizabetha, “I WAS TOLD BY SEVERAL SALESMEN TODAY THERE ARE NO INCENTIVES IF YOU PAY FOR A CAR WITH CASH. DOES THIS MAKE SENSE TO YOU? 

One of my Facebook friends asked me to give Elizabetha my opinion and here’s what I posted:

Earl Stewart: Elizabetha, car dealerships, not only won’t give you a discount for cash, they’ll likely charge you MORE. Dealers make a lot higher profit FINANCING the cars they sell than from the actual sale. If they know you’re paying cash, they’ll try harder to make more profit on the sale.

AutoNation, the largest auto retailer in the USA, makes over $2,000 per car in their finance department…more than TWICE their net profit on a car.

Elizabetha: You would know, Earl Stewart Toyota :)

Earl Stewart: Elizabetha, yes, I’m personally experiencing this in my dealership. Competition is fierce on car pricing and if you use this to your advantage, you can buy a new or used car at a lower price than ever before. Even if you do pay cash, DON’T tell that to the dealer until you’ve bought. Let him think he can “make up” for the low price you negotiated by financing and selling you GAP insurance, extended warranties, and maintenance plans. If you want to finance, use your bank or credit union.

Elizabetha: Earl Stewart, why would I get a lower interest rate through my own credit union or bank?

Earl Stewart: Elizabetha, the banks dealers finance our car through allow the car dealer to “mark up the interest rate”. For example, the dealer will borrow the money from the bank at 2.5 % and finance your car at 4.5%. The bank then “kicks back” the extra 2% to the dealer. This profit to the dealer can be several thousand dollars. If you borrow directly from your bank or credit union, not the marked-up dealer rate. In Florida, the legal interest rate a car dealer can charge you on a new car is 14.5%.

Car Dealers are Angry at You...

...because you want to buy new cars for lower prices

I receive some of my most informative and interesting information via www.YourAnonymousFeedback.com. This is a special link offered by a company named, Incogneato. If you’re interested, you can buy an anonymous inbox at https://incognea.to. The feedback I get for my radio show, “Earl on Cars”, my blog www.EarlOnCars.com and even from the employees from my dealership is refreshingly honest, whether I always agree, or not. Of course, I do get some less than honest and even insulting feedback, but this is the price I gladly pay to hear unvarnished truth (as the sender sees it). If you truly want to hear what people think about you, allow them tell you “anonymously”.

Below is the dialog between someone I believe to be a car dealer and me. “Mr. P” sent me his opinions about new car prices through my anonymous feedback link, www.YourAnonymousFeedback.com. You can use the same link to voice your thoughts to me and I will never know your name.


Mr. “P” (Anonymous Car Dealer):

“Don’t ostracize dealerships. Dealerships and people who run them have families and houses to support. They have to make a living, so give them a break.”

Earl:

My goal is not to “ostracize” dealerships, but to make consumers aware of their deceptive tactics so they aren’t deceived, and hopefully to persuade dealerships to reform their tactics.


Mr. “P” (Anonymous Car Dealer):

The truth is dealers don’t make much or sometimes nothing on new cars as the markups are very small. If a dealer makes $800-$1,000 that’s wonderful-$150 goes to a salesman. So now you look at the dealership’s costs of bringing the car in, sitting on the lot, paying interest on it, and many others, and these profits don’t look all that amazing.

Earl:

It’s true that many new car dealers don’t make big net profit (and some lose money) on the sale of new cars, but this is because their average gross profit per sales is lower than they would like. You’re incorrect that the mark-up on new cars is very small. The markup is whatever the customer will allow the dealer to charge. Smart negotiators get low markups, those not so savvy, pay a large markup. Buyers who can’t negotiate prices pay very high prices, often exorbitant. The reason average new car profits are getting lower is that car buyers are becoming more savvy regarding negotiating aware of deceptive advertising and sales tactics. Most new car dealerships do make good total profits. Most of them are doing this in their other departments, finance, service, used cars, parts, and collision repair. Even if the dealer didn’t make a good profit on the new car he just sold, he’ll make good profits providing financing, service, parts, collision repair and selling the used car that was traded in on the new one. In 2018, AutoNation’s 325 dealerships, largest new car retailer in America, made an average net profit after taxes of $1,218,462.54 per dealership. Many of AutoNation’s Lexus dealerships make over $1,000,000 monthly.


Mr. “P”, Anonymous Car Dealer:

Dealers need to come up with alternatives to compensate, and make a bit of profit; otherwise, it would not be a CAR BUSINESS. It would be FREE cars. So, give them a break and stop complaining. You absolutely DO NOT need to deal with them. In fact, they are happy not to negotiate with problematic little whiners. As of me, I will always buy a new car and a new car only. I know where it came from. I know the price outright. I can maintain it as I please. It will run forever. Mr. P.

Earl:

Car dealers pay almost every employee a commission on how much they sell. Salespeople and managers, service advisors, technicians, and all dealership management gets a percentage of the sales or profits they’re responsible for. I agree that this should be changed because commission, especially with no set prices, pits the salesperson against their customers. The higher the salesman raises the price of the car, the more money he makes. Car dealers should post their lowest price on every car, service, and part they sell. Those that sell the products should be compensated on how well they satisfy their customers and how many products or services they sell…not on how high their profit per transaction is.

The car dealer that sent his opinion probably isn’t a bad person. He’s part of a retail business and culture that’s unique. Car dealers have been around for over 100 years, and they’re operating today just like they did in the early 20th century. They sell every car for as much money as they can get away with. Rarely do any two buyers pay the same price. Car dealerships are protected by state laws that make them virtually immune to regulations by state and federal legislators and regulators. They’re also protected from the auto manufacturers. In Florida and many other states, car dealers openly break the law by their advertising and sales practices daily. They get away with it because the Attorney General and other regulators are reluctant to go after them due to auto dealers powerful political lobbying power.

COVID-19 FEE!

CAR DEALERS NEWEST HIDDEN FEE?
I knew it was bound to happen. It was only a question of when. In Monday’s USA Today, there’s an article on businesses using the pandemic as an excuse to secretly raise prices. One example is an airline that charged a passenger $1,150 when their customer was forced (Europe banned American travelers) to cancel because of the pandemic. A restaurant/Sports Bar in Miami, New Wave Billiards, is adding 3% to customers’’ checks, called a COVID-19 Fee. A beauty salon in Michigan is adding a 4% “safety fee”. The article didn’t mention any car dealers, but I can guarantee you that this is probably happening now and many more dealers (especially in Florida) will jump onto the bandwagon.

Some argue that if businesses incur additional costs, they’re justified in passing these costs along to their customers. Afterall, a business must make a profit, and can only do so by charging the customer more than its total expenses. The “fly in this ointment” is that these fees are HIDDEN and not included in the advertised or quoted prices.

Say your shopping for a new 2020 Honda Accord Sedan LX, and you see an advertised price of $22,994 from dealer A, $23,750 from Dealer B, and $24,249 from dealer C. To the unsuspecting car buyer this is a “no-brainer”; He’s going to buy his new Honda from Dealer A. What you don’t know from the advertisement is that Dealer A has 3,000 in hidden fees, Dealer B has 1,500 and Dealer C has only $500. Dealer C, with the highest advertised price, has the lowest out-the-door price, $24,749.

This should make you understand the biggest problem car buyers in Florida (and many other states) have…THE DEALER WITH THE HIGEST HIDDEN FEES CAN ADVERTISE THE LOWEST PRICE. In Florida there’s no cap/limit on the number or the amount dealer fees. There’s also no regulation on what car dealers canname their hidden fees. They typically choose names to trick those few who discover the fees that look like government fees…tag agency fee, Doc fee, e-filing fee. One of latest hidden fee name popular among dealers is “Taxable Fees”. A real government fee is not taxable; sales tax must be paid on phony hidden fees. Now, beware of the COVID-19 fee.

There are laws on the books in Florida that require that the added fees be included in the advertised price (Florida Statute 501.976 (18), but that law is ignored by almost every car dealer because there’s no enforcement of the law by our Attorney General, Ashley Moody or any other regulator. There are also disclosure laws which require dealers to add this language to the vehicle buyer’s order to the effect that the fees represent “costs and profit to the dealer”, but this language is hidden in the fine print and the reams of paperwork signed by car buyers in the finance office. Furthermore, dealers typically disclose only some of their hidden fees.

If there were a concerted effort to crack know on the dealers it could have a powerful effect. There are many dealers who would rather not have to resort to deceptive advertising but feel they must out of “self-defense”. If a Toyota dealer’s nearest competitor charges $1,200 in hidden fees and he doesn’t, that dealer can advertise prices substantially lower. If Florida Attorney General Ashley Moody were to enforce Florida Statute 501.976 and require dealers to include all taxable fees in the advertised and quoted prices, you the consumer would have an easy time of buying your next car at the best price.

If you agree with me, please take a few minutes to call Florida Attorney General Ashley Moody at 850 414-3300 and ask her to please enforce Florida Statute 501.976 (18) that requires car dealers to include their fees in the advertised prices. Virtually no car dealer in Florida complies with this law. You can tell Ashley Moody that all she must do to verify my allegations is click on any online car dealer advertisement and check. She’ll find that some car dealers will mention the amount of some of their dealer fees in the fine print, some will simply say plus dealer fees (or some other name) and no mention of the amount, and some will not mention the fees at all. NONE of them will actually include the amount of all their dealer fees in the advertised price.

DON’T BUY A NEW CAR Used Cars Are Better Than New Cars!

No, I’m not joking; I’m serious. This didn’t used to be the case. When I started in the auto business in 1968, buying a used car was only for folks who couldn’t afford to buy a new one.

 Back in the 20^th Century, the reliability of new cars was so low (compared to today) that when their owners sold or traded them in, the used car was virtually “worn out”. Banks were reluctant to finance used cars. If a used car had been driven more than 50,000 miles, most conventional lenders wouldn’t consider it.  If they agreed to finance any used car, they limited the term to 12 or 24 months, required large down payments, and charged very high interest rates. The mileage on odometers was routinely rolled back to far less than the actual. There was no CarFax report to tell you the condition of used cars. Some of you will remember the old saying, “When you buy a used car, you’re buying somebody else’s troubles.”

Today, everything has flipflopped. New cars are extremely reliable. Manufacturers’ warranties are much longer. The quality, reliability, maintenance costs, and safety are exponentially better than before. You may have heard Honda’s slogan about their certified pre-owned vehicles, “The Best New Cars Make the Best Used”. A high-quality new car maintained according to the manufacturer’s recommendations can be driven more than 300,000 miles with low maintenance and safety, but most trade them in long before they’ve reached that mileage.  Today, many people buy new cars because of new styling, as status symbols, or because they still believe that used cars are too risky to buy. They trade in or sell their perfectly good used car and buy another new car. This affords you the opportunity to buy their trade-in at a bargain price. The new car they buy depreciates thousands of dollars the minute they drive it off the showroom floor. Used cars depreciate far slower.

If you’re looking for a better value and decide to buy a used car, just follow these basic guidelines.

1. Research the best used cars with Consumer Reports, www.ConsumerReports.org. Their annual auto issue lists, not only the best used cars to buy, but lists the worst ones…the ones you should never buy.
2. Consider buying your used car from CarMax, OffLease Only, or AutoNation. These are honest, transparent used car sellers that put their lowest price on every used car and their hidden fees are smaller than other dealers. The best site to look for that used car is www.AutoTrader.com.
3. No matter where you buy your used car, insist on an out-the-door price. Do this research online and tell the salesman that your definition of an out-the-door price is “the amount you can write a check for, present it to the seller, and drive the car home.” Virtually all car dealers add hidden fees and unwanted accessories to their advertised and quoted prices. Getting an honest, out-the-door price will save you potentially THOUSANDS of dollars.
4. Before you sign on the dotted line, take the vehicle to your independent mechanic for a complete check-over. This can cost $100 to $200 but it’s worth every penny. If the seller won’t allow you to do this…DON’T BUY THE CAR. They’ll often argue that their mechanic has rigorously inspected the car, but clearly this is not as reliable as your mechanic.
5. Study a CarFax or AutoCheck report that should be provided to you by the seller. This prevents you from buying a car with a dangerous recall, one that’s been in a bad accident, or a flood. It also provides the maintenance record if it was service by dealer reporting to CarFax or AutoCheck. 

Maintaining and Repairing Your Car During the COVID-19 Pandemic

Virtually everything is changing during this crisis, including how you take care of required maintenance and repairs on your vehicle. If you own a car that’s still under the manufacturer’s warranty, you’re required to have the recommended maintenance spelled out in your vehicle owner’s manual within certain time/mileage limits.  If not, you risk having your warranty being voided when lack of recommended maintenance is the cause. You also must be concerned about having safety items like tires and brakes inspected.  

Most manufacturers recommend maintenance every six months or 5,000 miles, whichever occurs first. Oil changes are recommended every year or 10,000 miles (synthetic oil now used in all late model cars) whichever occurs first.  

Vehicle sales are surprisingly strong when many other retail sales have fallen off.  This is because we feel safer in our cars. Your car is just about the only place to be safely outside your home, without having to wear your face mask. Most people won’t take a train, bus, Uber/taxi or fly, for fear of being infected. More and more of us are driving our cars to vacation spots. It’s natural that you want to have your car checked out before embarking on a long trip. Who wants to be stuck on the turnpike on Sunday night with a disabled vehicle? 

These are my tips on safely maintaining your vehicle. 

1. Be sure you read your owner’s manual so that you know what your responsibilities are to maintain your car under warranty. If you can’t find your owner’s manual; you can access it online.  

2. If you feel uncomfortable about bringing in your car for service, check to be sure the service department you use has taken all the proper precautions…All employees and customers must wear face masks, social distancing maintained with marks on the floor, hand sanitizer and handwashing basins quickly and easily accessible, plastic “sneeze shields” separating you from those you’re dealing with, and daily deep disinfecting cleansing of all the areas you’ll be in.  

3. Check to be sure your car will be disinfected thoroughly before it’s returned to you. Some service departments offer an antimicrobial treatment which will protect your car from being re-infected for 30 days.  

4. If you still feel uncomfortable about visiting an auto service department, ask if they offer pick up and delivery. A few are offering this at no charge if you’re not too far away, and most are offering this for a charge.  

5. Call the service department and explain that you feel uncomfortable about bringing your car in and ask for an extension of the time stated in your owner’s manual. Be sure you confirm in writing, email, text, or letter. Most car dealerships and manufacturers will be flexible…an extra 3 months for an oil change shouldn’t be a “big deal”.  

6. If you have a problem with your car while under warranty, report the problem to the dealer service manager immediately. Explain why you can’t bring your car in and ask that this complaint be noted in your service record. When you can bring the car in, most dealerships and manufacturers will still fix the problem under warranty at no charge. As always, be sure to confirm this in writing.  

7. Finally, remember that you are not required to have your car maintained at the dealership you bought it from, or even by a franchised car dealer. If you take it to an independent service department, be sure to keep the records proving you had the maintenance recommended in your owner’s manual done at the specified intervals.

Pandemics, Bad Credit, and Car Buying

Since the Covid-19 pandemic enveloped us, millions of Americans are either unemployed, furloughed, or working fewer hours for less pay. Banks and all lenders are raising their credit standards to buy vehicles. Lending institutions, themselves, are financially threatened by customers unable to make their car and home payments.

Almost counterintuitively, new and used car sales are surging back almost to pre-Covid times. Many car dealers have always taken advantage of buyers with bad credit. With millions more car buyers with bad credit, this danger to you is worse than ever before. People with bad credit can be desperate (and therefore careless) when buying a car. They’re more worried about having their financing approved than buying the right car at the best price. This allows car dealers to overcharge them for the car they want to sell. It also allows dealers to sell them the car that the dealer wants to sell, not the one the customer wants to buy.

Following are six rules to follow if you have low income, bad credit, or too little credit, and you need to buy a car:

• Never assume that you have bad credit; you should check your own credit score which you can do free. Even if your credit score isn’t good, you should always check with your credit union and/or bank before you opt for dealer financing.

• Choose the car that you want to buy and negotiate the best price before you let it be known that you have marginal credit. Almost every car dealer will try to get you to fill out a credit application before you even begin discussing the car you want to buy and the price. REFUSE to do this and tell the salesman that you have acceptable credit. By doing this you ensure that the dealer isn’t raising the price and steering you to the wrong car because you have bad credit. 

• Car salesmen and finance managers can falsify your credit application that is sent to the bank. NEVER sign a credit application until it is completely filled out, and you’ve verified its accuracy. Be sure that you have a copy of the credit application before you accept delivery of your car. Falsifying credit is a federal crime, not to mention the fact that you’re probably paying far more for the car than you can afford. 

• Choose the car that’s best for you, not the one the dealer “wants” to sell you. The dealer will choose a car that he “wants to get rid of”, one that he can’t sell to anybody else; and/or he’ll choose one with a higher loan value than the one you really want.

• Verify that the car described to the lender has the same options and accessories as the one you’re buying. Dealers will sometime falsify additional optional equipment on the car that they’re asking the lender to finance. Adding fictitious options like sunroofs, navigation, sound systems, etc. tricks the lender into advancing more money than they should. This allows the dealer to sell you a higher priced car, increasing his profit. 

Lenders that specialize in people with bad credit are called “subprime lenders”. Car dealers even have separate finance people that specialize in subprime buyers. They’re called the “special finance” department. Subprime lenders often charge a fee to the dealer which can be as much as $2,500. This fee is not supposed to be paid by the buyer, because it would effectively increase the interest rate, probably above the usury law limits. Unfortunately, it’s commonly added to the price of the car. This is illegal, but it’s almost impossible to prove. By negotiating the best price on the car you want to buy BEFORE the dealer find out you have credit problems, it becomes obvious if the price is increased.

Car Dealers Have Blocked Your Right to Sue

Did you know that when you bought your last car that you agreed to waive your constitutional right to sue the car dealer who sold you the car and have your complaint heard in a court of law by a jury of your peers?

You probably did not, because an “arbitration clause” was hidden in the fine print of your contract that you signed. Even worse, you also are prohibited from even taking that car dealer to arbitration unless you write a “demand letter” first!

What is “arbitration” anyway?

The average person does not understand what arbitration is, much less know that they agreed to substitute this process for their right to sue when they bought their last car. Arbitration allows individuals that are employed by an arbitration company to decide who is right in a dispute, you or the car dealer. Professional arbiters can be retired judges or anyone that the arbitration company decides is qualified. Because car dealers use the arbitration company often and because car dealers determine the compensation to these companies, there is a good chance that the arbitrators are inclined to side with “the hand that feeds it”.

You can’t even file for arbitration unless you write a “demand letter” to the dealer which must contain specific information as prescribed by Florida statute 501.98. This is a summary of that law:

“Florida Statutes require that, at least 30 days before bringing any claim against a motor vehicle dealer for an unfair or deceptive trade practice, a consumer must provide the dealer with a written demand letter detailing the name, address, and telephone number of the consumer, the name and address of the dealer; a description of the facts that serve as the basis for the claim; the amount of damages; and copies of any documents in the possession of the consumer which relate to the claim. Such notice must be delivered by the United States Postal Service or by a nationally recognized carrier, return receipt requested, to the address where the subject vehicle was purchased or leased or where the subject transaction occurred, or an address at which the dealer regularly conducts business.” If you would like to read the detail of this law, you can access it online at https://www.flsenate.gov/Laws/Statutes/2013/501.98.

If you hire a lawyer because you believe a car dealer has taken advantage of you, you’re not eligible for reimbursement of any legal fees unless you have sent the demand letter exactly as described above. Therefore most lawyers are reluctant to assist you because they know that the fees they would normally be entitled to are at risk…both because of the arbitration requirement and the demand letter.


What I’ve described is just one more reason why you should be extremely careful when you buy or lease a car. In the back of our minds most of us believe that when we are doing business with a car dealer, or anybody else, if we are taken advantage of we have the right to sue to force the company to make things right. This is not true with 99.9% of car dealers. You should realize this and be even more careful when you purchase a car. Access my blog for articles on every facet of doing business with a car dealer. There are hundreds of articles accessible in the archives of www.EarlStewartOnCars.com. You will learn never to go car shopping alone, get all promises by the salesman in writing, spend at least two weeks researching the purchase of car, and always get at least 3 competitive bids on the car you’re buying, your trade-in, and your financing.