Just about one year ago I wrote a column entitled, “The Dealer Fee, Bestiality, and Tallahassee Politics.” You can read that column by clicking on my blog, www.EarlStewartOnCars.com. The timing had to do with the 2008 Florida legislature being in session. The 2009 legislative session is in process and it’s time for another progress report on capping the dealer fee or making it completely illegal in Florida.
Last Saturday’s PB Post carried a column by Frank Cerabino, “Put teeth into ending abuse of animals”. In my opinion, Frank Cerabino is one of the funniest writers on the Planet and if you want some belly laughs, you can read his column online by clicking on www.PBPost.com. The theme of his article is how ridiculous our Florida lawmakers are to not be able to pass a “no-brainer” law like making it illegal for humans to have sex with animals. Florida is one of 16 states in the Union without such a law!
Although, Frank Cerabino raises the possibility that there are some Florida lawmakers who may be blocking such a law from passing, this is only Frank’s acerbic sense of humor talking. The real reason this law does not get passed is from lack of lobbyist support. Unlike Insurance Companies, Trial Lawyers, and the Florida Automobile Dealers Association, The SPCA, Society for the Prevention to Cruelty to Animals, is very poorly funded. They cannot afford to support Florida politicians’ elections, making large campaign contributions to gain access and influence. There can be no other possible serious explanation for such a bill not passing our legislature last year and apparently not going to pass again this year.
Legislators will tell you that each Senator and House Representative is allowed only a very few bills [about 5] to sponsor. This number is a small fraction of the total number of issues and causes that are requested by citizens to be considered as new laws or changes in existing ones. The bottom line is that time constraints on the number of actual bills that get drafted, then get sponsors by both the Senate and the House, then pass successfully through committees, and finally get to the governor’s desk are a tiny fraction of the number that are needed and requested.
So, which bills never even get drafted, or never get a sponsor by both the House and Senate, or get knocked down or delayed by committees, and or lastly don’t get signed by the Governor? The answer is those bills that don’t have the financial support of strong lobbying groups. The sad fact is that very good causes can fall by the wayside year after year because of the cold hard reality of Florida politics.
But there is a big difference between those of us who intensely believe that that the dealer fee should be made illegal and those who intensely believe that bestiality should be made illegal. Of course, the obvious reason is that animals cannot make their voices heard in Tallahassee [Although, Frank Cerabino did suggest that we round up the sheep for a march on the capital]. The car buyers can make themselves heard. In the short run, the powerful lobbying organization, the Florida Automobile Dealers Association, can cause delays as they did this year and last. Write your local newspapers, radio stations, and TV stations. Call your legislators. Call my “No Dealer Fee Hotline”, 800 909-9879. I will email your recorded voice mail to Tallahassee. The voice of the people cannot be ignored over the long run and we must never give up. In the long run we will prevail.
Monday, March 23, 2009
Monday, March 16, 2009
TOP TEN CAR AUTO AD SCAMS
I could write a “Top 50 Auto Ad Scams” because the ingenuity for deception in “getting car buyers in the door” is virtually limitless. However, I chose to concentrate on the ten most popular with South Florida dealers. Just beware that there are many more schemes than these I list.
(1) Discount from Dealer List. Anytime you read or see a car advertised with a large discount, determine whether that discount is from the MSRP [manufacturer’s suggested retail price] or the dealer’s retail price. An all too common practice is for a dealer to mark up his cars thousands of dollars over the MSRP and call it “dealer list” so that he can show huge discounts that aren’t real.
(2) Prices exclude “impossible” rebates. Manufacturers often offer cash rebates to customers who qualify for special reasons. Some of these are being on active duty in the U.S. military. This rebate can be as much as $1,500. If you graduated from an accredited university within the past 6 months you can qualify for $500 to $1000 from some manufacturers. There is a customer “loyalty” rebate which affords you $1,000 or more if you are own the same make car that you are buying. There’s a similar for lease customers. There’s even a “Farm Bureau” rebate which qualifies you for $500 if you are a farmer. Dealers are actually combining all of these rebates and deducting them from advertised prices of their cars. Of course, what are the odds that any customer would simultaneously qualify for all of these rebates? The average reader of these ads qualifies for none of the rebates.
(3) Lease payments based on large down payments. Virtually every lease payment advertisement requires a large down payment which is concealed in the fine print. Most people lease because they want to lay out as little cash as possible. If they had $4,000 cash to spend, they would probably opt for a purchase. Those that fall for this trick often end up leasing the car at the full retail. Leasing companies will allow dealers to lease cars for “only” up to 110% of capitalized cost. When you make a down payment, this reduces the net capitalized cost which allows the dealer to sell your contract to the leasing company.
(4) Lowest Price Guarantee. This guarantee is absolutely worthless. If you read the fine print, you will note that it says that “the dealer reserves the right to buy the car from the other car dealer [his competitor] at the same price his competitor quoted you”. No car dealer is going to accommodate his competition so that they can steal away his customer. Of course the other fact that makes this guarantee worthless is that it requires that you prove the lower price by presenting a buyers’ order from the other dealer signed by a manager. I know of no car dealer [besides me] who will give a signed copy of the vehicle buyers’ order to a customer unless they drive the car home or make a substantial, non refundable deposit.
(5) Only one car available at ad price. When you are reading a newspaper ad, you will often see a strange number next to the advertised car. If you are watching the ad on TV or listening on radio, the number will be unreadable or undecipherable as is the fine print. An example is STK #T91832. This is the stock number of the car and means it is the only car of that model and accessories you can buy at the advertised price. They don’t say “only one car available at this price” because you would realize that the chances of that car being there [or sold to you if it is there] are very slim. Don’t be misled if the ad also says “many more identical models available at this price”. Florida law requires that dealers include the dealer fee in their advertised price. But if that specific stock number car is unavailable, they can add their dealer fee to the price of an identical car. This scam is why I continue to lobby Tallahassee to require that all profits to the dealers be included in all prices whether advertised, verbal, or on the Internet.
(6) Advertised price is “plus dealer installed accessories”. All this means is that the price you see is not the price you get. Dealers love to add their accessories to their cars because they can set any price they want and drastically increase their profit margins. A dealer charging you $299 for pin stripes and floor mats would have a real cost of about $100, allowing him a 300% margin.
(7) Lease payment based on unrealistically low mileage allowance. All leasing companies limit the number of miles you can put on their car without paying a penalty. This is because the higher the mileage, the lower the resale value and the leasing company has to sell their car at the end of the lease. The average American drives her car 15,000 miles per year. It’s very common to see mileage limits of 10,000 and even 7,500 miles per year with penalties of 25 cents per mile. For an average driver in a four year lease that would be a penalty of $7500! The dealers don’t get this money, the leasing company does, but the dealers do this so that they can advertise an unrealistically low lease payment.
(8) Lifetime Warranty. A lot of dealers are advertising these “lifetime warranties” on every car they sell. This is a very limited warranty which applies only to the cars powertrain. The term powertrain has different definitions as to which parts of the car it consists of. It typically means only those parts of the engine, transmission, drive shaft, and rear axle that are lubricated. These parts virtually never fail as long as you change your oil as prescribed by the manufacturer or by the issuer of the warranty policy. If you fail to change your oil as prescribed, the warranty is null and void. It’s a win-win for the car dealer. You have to come in to have your car serviced regularly so that he can make more profit and, if you do comply with this, there will never be a claim. Dealers do pay outside warranty companies for these warranties, but the cost to the dealer is minuscule, around $25. The low price the dealer pays the warranty issuer is further proof that the warranty is worthless.
(9) Purchase payments include “balloon payment”. How would you like to buy a new BMW 2009 328i for just $339 per month only to discover that your last payment was $12,983! Oh, and you also had to make an upfront down payment of $2,500. ALWAYS READ THE FINE PRINT!
(10) Internet Quotes Exclude “Dealer Fee”. The average “dealer fee” in South Florida is about $850. About 25% of car buyers are using the Internet to buy cars today. Almost 90% used the Internet for information about buying their car before going to the dealership. Virtually every car dealer in Florida charges a dealer fee and they all exclude that from the price you are quoted on the Internet. I spoke to a woman just the other day who drove all the way from Lakeland to West Palm Beach to pick up the new Infinity that she had purchased on the Internet. When she got to the dealer, he added an additional $695 for his dealer fee.
(1) Discount from Dealer List. Anytime you read or see a car advertised with a large discount, determine whether that discount is from the MSRP [manufacturer’s suggested retail price] or the dealer’s retail price. An all too common practice is for a dealer to mark up his cars thousands of dollars over the MSRP and call it “dealer list” so that he can show huge discounts that aren’t real.
(2) Prices exclude “impossible” rebates. Manufacturers often offer cash rebates to customers who qualify for special reasons. Some of these are being on active duty in the U.S. military. This rebate can be as much as $1,500. If you graduated from an accredited university within the past 6 months you can qualify for $500 to $1000 from some manufacturers. There is a customer “loyalty” rebate which affords you $1,000 or more if you are own the same make car that you are buying. There’s a similar for lease customers. There’s even a “Farm Bureau” rebate which qualifies you for $500 if you are a farmer. Dealers are actually combining all of these rebates and deducting them from advertised prices of their cars. Of course, what are the odds that any customer would simultaneously qualify for all of these rebates? The average reader of these ads qualifies for none of the rebates.
(3) Lease payments based on large down payments. Virtually every lease payment advertisement requires a large down payment which is concealed in the fine print. Most people lease because they want to lay out as little cash as possible. If they had $4,000 cash to spend, they would probably opt for a purchase. Those that fall for this trick often end up leasing the car at the full retail. Leasing companies will allow dealers to lease cars for “only” up to 110% of capitalized cost. When you make a down payment, this reduces the net capitalized cost which allows the dealer to sell your contract to the leasing company.
(4) Lowest Price Guarantee. This guarantee is absolutely worthless. If you read the fine print, you will note that it says that “the dealer reserves the right to buy the car from the other car dealer [his competitor] at the same price his competitor quoted you”. No car dealer is going to accommodate his competition so that they can steal away his customer. Of course the other fact that makes this guarantee worthless is that it requires that you prove the lower price by presenting a buyers’ order from the other dealer signed by a manager. I know of no car dealer [besides me] who will give a signed copy of the vehicle buyers’ order to a customer unless they drive the car home or make a substantial, non refundable deposit.
(5) Only one car available at ad price. When you are reading a newspaper ad, you will often see a strange number next to the advertised car. If you are watching the ad on TV or listening on radio, the number will be unreadable or undecipherable as is the fine print. An example is STK #T91832. This is the stock number of the car and means it is the only car of that model and accessories you can buy at the advertised price. They don’t say “only one car available at this price” because you would realize that the chances of that car being there [or sold to you if it is there] are very slim. Don’t be misled if the ad also says “many more identical models available at this price”. Florida law requires that dealers include the dealer fee in their advertised price. But if that specific stock number car is unavailable, they can add their dealer fee to the price of an identical car. This scam is why I continue to lobby Tallahassee to require that all profits to the dealers be included in all prices whether advertised, verbal, or on the Internet.
(6) Advertised price is “plus dealer installed accessories”. All this means is that the price you see is not the price you get. Dealers love to add their accessories to their cars because they can set any price they want and drastically increase their profit margins. A dealer charging you $299 for pin stripes and floor mats would have a real cost of about $100, allowing him a 300% margin.
(7) Lease payment based on unrealistically low mileage allowance. All leasing companies limit the number of miles you can put on their car without paying a penalty. This is because the higher the mileage, the lower the resale value and the leasing company has to sell their car at the end of the lease. The average American drives her car 15,000 miles per year. It’s very common to see mileage limits of 10,000 and even 7,500 miles per year with penalties of 25 cents per mile. For an average driver in a four year lease that would be a penalty of $7500! The dealers don’t get this money, the leasing company does, but the dealers do this so that they can advertise an unrealistically low lease payment.
(8) Lifetime Warranty. A lot of dealers are advertising these “lifetime warranties” on every car they sell. This is a very limited warranty which applies only to the cars powertrain. The term powertrain has different definitions as to which parts of the car it consists of. It typically means only those parts of the engine, transmission, drive shaft, and rear axle that are lubricated. These parts virtually never fail as long as you change your oil as prescribed by the manufacturer or by the issuer of the warranty policy. If you fail to change your oil as prescribed, the warranty is null and void. It’s a win-win for the car dealer. You have to come in to have your car serviced regularly so that he can make more profit and, if you do comply with this, there will never be a claim. Dealers do pay outside warranty companies for these warranties, but the cost to the dealer is minuscule, around $25. The low price the dealer pays the warranty issuer is further proof that the warranty is worthless.
(9) Purchase payments include “balloon payment”. How would you like to buy a new BMW 2009 328i for just $339 per month only to discover that your last payment was $12,983! Oh, and you also had to make an upfront down payment of $2,500. ALWAYS READ THE FINE PRINT!
(10) Internet Quotes Exclude “Dealer Fee”. The average “dealer fee” in South Florida is about $850. About 25% of car buyers are using the Internet to buy cars today. Almost 90% used the Internet for information about buying their car before going to the dealership. Virtually every car dealer in Florida charges a dealer fee and they all exclude that from the price you are quoted on the Internet. I spoke to a woman just the other day who drove all the way from Lakeland to West Palm Beach to pick up the new Infinity that she had purchased on the Internet. When she got to the dealer, he added an additional $695 for his dealer fee.
Monday, March 09, 2009
The Results are In...
TESTS SAY NITROGEN DOESN’T IMPROVE FUEL ECONOMY IN PB COUNTY BUSES
Regular readers of my column in Hometown News and my blog, www.EarlStewartOnCars.com may be tired of reading about nitrogen. This will be my 4th column in 3 years reaffirming that paying somebody to inflate your tires with nitrogen is waste of your hard earned money. Earlier columns are entitled “Don’t Pay for Nitrogen in Your Tires”, “Nitrogen and Shark Cartilage”, and “Nitrogen Scam Foisted on Palm Tran”.
What amazes me is how hard it is to put this nitrogen myth to rest. On my radio show last Saturday [Seaview AM 960 from 9-10 am], a caller told me she had paid a service department $8 per tire to fill her tires with nitrogen. She proceeded to tell me that she came back frequently to this service department so that they would add nitrogen to her tires “at no charge”. She was very happy with this arrangement. Her service department is the one that should really be happy! First they sold her a worthless product for $32 that might have cost them a total of $1.00. Secondly, they have her coming back to their auto service company regularly so that they can “inspect her vehicle” just in case there is further service she should pay them to do.
In my article, “Nitrogen Scam Foisted on Palm Tran” I asked Chuck Cohen, the Executive Director of Palm Beach County’s bus system, why he was spending $65,000 in taxpayers money for a worthless product. In email correspondence, Chuck of course disagreed with me. He told me that he would be testing the nitrogen in his bus’s tires to be sure that they did give them better fuel economy. The buses average about 4 miles per gallon of diesel fuel. I asked Chuck why he had to spend more tax payer’s money for tests when Consumer Reports had already conducted an extensive one year test of all makes of tires and come to the conclusion that nitrogen in your tires is no better than air. This is no surprise to those who know that air is comprised of 78% nitrogen.
Chuck Cohen’s assistant, Lorraine Szyms, sent me a copy of the final tests on Palm Tran’s tires on March 4. The tests were completed on January 30 by the Department of Mathematical Sciences Florida Atlantic University and Harold Herzlich of Herzlich Consulting, Inc. I’m not sure why it took so long for her to email me the test results. The test results are 8 pages long and you can read them in their entirety by clicking on this article on my blog, www.EarlStewartOnCars.com.
After reading through 8 pages of “techni-speak” by the FAU mathematics professors and Harold Herzlich, the fact that nitrogen was proven to be worthless for improving fuel economy was restated several times. The clearest phrase I could fine was, “From the previous data analysis we conclude that there is yet no observable effect in the fuel efficiency due to nitrogen tire inflation for the group of buses in this experiment”.
What concerns me is that there is clearly an effort under way to do more tests. Note the word, “yet” that Harold Herzlich used above. In the summary at the end of the test, it is stated, “Palm Tran is currently conducting further analysis using an electronic pressure sensor monitoring device that captures the tire pressure electronically”. The results of this testing should be completed by June 2009. Further more, Herzlich Consulting, Inc. is suggesting that they do more test too. This is no surprise, that’s how they make their money...doing testing.
It’s pretty obvious that the tests results are an embarrassment to Chuck Cohen and those “remaining members” of the Palm Beach County Commission who authorized the “Nitrogen Scam”. I guess they think if they can keep on testing, they never have to admit they were wrong. Other than the obvious problem with this scenario, is the additional cost of testing. I think that Karen Marcus and the “remaining” county commissioners owe it to the Palm Beach County taxpayers to draw the line and end this now. The taxpayers are already out $65,000 for the nitrogen apparatus. I want to know how much Palm Beach County paid FAU and Herzlich Consulting, Inc. for the first tests that proved nitrogen in their bus tires does not improve fuel mileage. I would also like to know how they chose Herzlich Consulting, Inc. Did they get competitive bids? Did they get bids from PBCC, FAU, and University of Florida? How much are these new tests with their “electronic pressure sensors” that Palm Tran itself is conducting costing us?
In case Chuck Cohen hasn’t been reading the newspapers or watching the news lately, our country is going through the greatest economic crisis since the great depression. It’s bad enough that his buses cost a $half-million each, get 4 miles to the gallon, and average less than 20% occupancy [it would be less expensive for the tax payers to pay “cab fare” for the handful of people riding Palm Tran]. Municipalities and counties are desperately looking for ways to cut spending so that they can continue to provide vital service to their citizen. We can’t afford to spend any more money to exonerate Chuck Cohen and the PB County Commission from another bad decision.
You can view the actual report here.
Regular readers of my column in Hometown News and my blog, www.EarlStewartOnCars.com may be tired of reading about nitrogen. This will be my 4th column in 3 years reaffirming that paying somebody to inflate your tires with nitrogen is waste of your hard earned money. Earlier columns are entitled “Don’t Pay for Nitrogen in Your Tires”, “Nitrogen and Shark Cartilage”, and “Nitrogen Scam Foisted on Palm Tran”.
What amazes me is how hard it is to put this nitrogen myth to rest. On my radio show last Saturday [Seaview AM 960 from 9-10 am], a caller told me she had paid a service department $8 per tire to fill her tires with nitrogen. She proceeded to tell me that she came back frequently to this service department so that they would add nitrogen to her tires “at no charge”. She was very happy with this arrangement. Her service department is the one that should really be happy! First they sold her a worthless product for $32 that might have cost them a total of $1.00. Secondly, they have her coming back to their auto service company regularly so that they can “inspect her vehicle” just in case there is further service she should pay them to do.
In my article, “Nitrogen Scam Foisted on Palm Tran” I asked Chuck Cohen, the Executive Director of Palm Beach County’s bus system, why he was spending $65,000 in taxpayers money for a worthless product. In email correspondence, Chuck of course disagreed with me. He told me that he would be testing the nitrogen in his bus’s tires to be sure that they did give them better fuel economy. The buses average about 4 miles per gallon of diesel fuel. I asked Chuck why he had to spend more tax payer’s money for tests when Consumer Reports had already conducted an extensive one year test of all makes of tires and come to the conclusion that nitrogen in your tires is no better than air. This is no surprise to those who know that air is comprised of 78% nitrogen.
Chuck Cohen’s assistant, Lorraine Szyms, sent me a copy of the final tests on Palm Tran’s tires on March 4. The tests were completed on January 30 by the Department of Mathematical Sciences Florida Atlantic University and Harold Herzlich of Herzlich Consulting, Inc. I’m not sure why it took so long for her to email me the test results. The test results are 8 pages long and you can read them in their entirety by clicking on this article on my blog, www.EarlStewartOnCars.com.
After reading through 8 pages of “techni-speak” by the FAU mathematics professors and Harold Herzlich, the fact that nitrogen was proven to be worthless for improving fuel economy was restated several times. The clearest phrase I could fine was, “From the previous data analysis we conclude that there is yet no observable effect in the fuel efficiency due to nitrogen tire inflation for the group of buses in this experiment”.
What concerns me is that there is clearly an effort under way to do more tests. Note the word, “yet” that Harold Herzlich used above. In the summary at the end of the test, it is stated, “Palm Tran is currently conducting further analysis using an electronic pressure sensor monitoring device that captures the tire pressure electronically”. The results of this testing should be completed by June 2009. Further more, Herzlich Consulting, Inc. is suggesting that they do more test too. This is no surprise, that’s how they make their money...doing testing.
It’s pretty obvious that the tests results are an embarrassment to Chuck Cohen and those “remaining members” of the Palm Beach County Commission who authorized the “Nitrogen Scam”. I guess they think if they can keep on testing, they never have to admit they were wrong. Other than the obvious problem with this scenario, is the additional cost of testing. I think that Karen Marcus and the “remaining” county commissioners owe it to the Palm Beach County taxpayers to draw the line and end this now. The taxpayers are already out $65,000 for the nitrogen apparatus. I want to know how much Palm Beach County paid FAU and Herzlich Consulting, Inc. for the first tests that proved nitrogen in their bus tires does not improve fuel mileage. I would also like to know how they chose Herzlich Consulting, Inc. Did they get competitive bids? Did they get bids from PBCC, FAU, and University of Florida? How much are these new tests with their “electronic pressure sensors” that Palm Tran itself is conducting costing us?
In case Chuck Cohen hasn’t been reading the newspapers or watching the news lately, our country is going through the greatest economic crisis since the great depression. It’s bad enough that his buses cost a $half-million each, get 4 miles to the gallon, and average less than 20% occupancy [it would be less expensive for the tax payers to pay “cab fare” for the handful of people riding Palm Tran]. Municipalities and counties are desperately looking for ways to cut spending so that they can continue to provide vital service to their citizen. We can’t afford to spend any more money to exonerate Chuck Cohen and the PB County Commission from another bad decision.
You can view the actual report here.
Monday, March 02, 2009
CAR BUYERS BEWARE OF “THE BOX”
OK, you’ve just bought that new or used car and the pressure is off…right? WRONG! The next step for the car dealer is to get you into the “box”. You won’t hear this word mentioned. It’s inside car dealer slang for the F&I office or the business office. This is the place that you sign all of those papers making the sale legal and final. But in addition to that, it’s also a very important profit center for car dealers. In many car dealerships it’s the most profitable department. It’s not uncommon for car dealers to make an additional $1,000 profit or more in “the box” on each car they sell.
Here’s how that profit is generated. First and usually foremost is making money on the interest they charge you. Essentially, they make money on “the spread” just like banks make money when they loan it. For example, a car dealer will borrow money from Bank of America for 4.9% and loan it to you for 7.9%, or whatever interest rate they can convince you to accept. The second way they earn that big profit in “the box” is by selling you “products” which are added to the price of the car you just bought. There are many products and some of the most common are extended service warranties, maintenance plans, road hazard insurance, GAP insurance, window etch, and LoJack.
The way you should protect yourself on the interest rate is to have already shopped your own bank or credit union and two other banks for the best interest rate you can qualify for. Never go into “the box” without knowing what the best rate other banks or credit unions will allow you. The best way to protect yourself against the products they will try to sell you is to completely understand each product. Do you want or need an extended warranty on your new car? If this product costs $1,900 for example, how long are you going to keep the car and how long are you likely to be driving it when it’s out of the manufacturer’s warranty? Ask the same questions of each product they try to sell you. If you are unclear on the merits of a product, do not commit. You can always go home and think about and seek advice from friends and advisors.
Another important tactic that I recommend is to never go into “the box” alone. If it’s just you and the F&I manager [often called business manager], and there is a dispute over what was said, it’s just your word against his. Also, having a friend or advisor present will usually be a deterrent to any attempted deception.
These are some of the kinds of deception you should be on the lookout for. Tying the sale of a product like an extended service contract to the interest rate or eligibility to have the bank finance your car is illegal. But this practice happens all too often behind the closed doors of the “the box.” The F&I manger may tell you that the bank “requires” you to buy the extended warranty, GAP insurance another product in order to protect the bank’s collateral. This is simply a lie and it’s illegal for banks or car dealers to do this. Another common form of deception is to simply not disclose the products or interest rate and have you sign the contract without reading it. There are a large number of documents to be signed after you buy a car. Buyers are often in a state of euphoria now that they have bought their dream car and are in too much of a hurry to sign everything and drive their new car home. The car dealer is required by law to give you a signed copy of the installment sales contract. Be sure you carefully read it and be sure have a copy. If you don’t get a copy, you may find that you signed a different contract than the one you read.
Extended service warranties, GAP insurance, and other insurance products are regulated in Florida unlike many other states. This affords you some degree of protection like being able to cancel an insurance product as long as you did not use it. You can do this in 60 days for a 100% cancellation. You don’t get the cash back and your monthly payment won’t go down however. But the amount is taken off the principal amount you are financing through the bank. You cancel insurance products after 60 days, but the cancellation is not pro rata and you pay a large penalty.
If you remember nothing else from this article please remember this one thing. Do not hurry the process of financing your car and signing the papers. Do not let the car dealer encourage you to sign anything you don’t understand. Time is on your side because it will allow you to think and to consult with others who can help you make your final decision. I get a lot of calls from victims of “the box” and the one thing they all have in common is that they let themselves be rushed into signing the documents so that they could drive their dream car home that same day.
Here’s how that profit is generated. First and usually foremost is making money on the interest they charge you. Essentially, they make money on “the spread” just like banks make money when they loan it. For example, a car dealer will borrow money from Bank of America for 4.9% and loan it to you for 7.9%, or whatever interest rate they can convince you to accept. The second way they earn that big profit in “the box” is by selling you “products” which are added to the price of the car you just bought. There are many products and some of the most common are extended service warranties, maintenance plans, road hazard insurance, GAP insurance, window etch, and LoJack.
The way you should protect yourself on the interest rate is to have already shopped your own bank or credit union and two other banks for the best interest rate you can qualify for. Never go into “the box” without knowing what the best rate other banks or credit unions will allow you. The best way to protect yourself against the products they will try to sell you is to completely understand each product. Do you want or need an extended warranty on your new car? If this product costs $1,900 for example, how long are you going to keep the car and how long are you likely to be driving it when it’s out of the manufacturer’s warranty? Ask the same questions of each product they try to sell you. If you are unclear on the merits of a product, do not commit. You can always go home and think about and seek advice from friends and advisors.
Another important tactic that I recommend is to never go into “the box” alone. If it’s just you and the F&I manager [often called business manager], and there is a dispute over what was said, it’s just your word against his. Also, having a friend or advisor present will usually be a deterrent to any attempted deception.
These are some of the kinds of deception you should be on the lookout for. Tying the sale of a product like an extended service contract to the interest rate or eligibility to have the bank finance your car is illegal. But this practice happens all too often behind the closed doors of the “the box.” The F&I manger may tell you that the bank “requires” you to buy the extended warranty, GAP insurance another product in order to protect the bank’s collateral. This is simply a lie and it’s illegal for banks or car dealers to do this. Another common form of deception is to simply not disclose the products or interest rate and have you sign the contract without reading it. There are a large number of documents to be signed after you buy a car. Buyers are often in a state of euphoria now that they have bought their dream car and are in too much of a hurry to sign everything and drive their new car home. The car dealer is required by law to give you a signed copy of the installment sales contract. Be sure you carefully read it and be sure have a copy. If you don’t get a copy, you may find that you signed a different contract than the one you read.
Extended service warranties, GAP insurance, and other insurance products are regulated in Florida unlike many other states. This affords you some degree of protection like being able to cancel an insurance product as long as you did not use it. You can do this in 60 days for a 100% cancellation. You don’t get the cash back and your monthly payment won’t go down however. But the amount is taken off the principal amount you are financing through the bank. You cancel insurance products after 60 days, but the cancellation is not pro rata and you pay a large penalty.
If you remember nothing else from this article please remember this one thing. Do not hurry the process of financing your car and signing the papers. Do not let the car dealer encourage you to sign anything you don’t understand. Time is on your side because it will allow you to think and to consult with others who can help you make your final decision. I get a lot of calls from victims of “the box” and the one thing they all have in common is that they let themselves be rushed into signing the documents so that they could drive their dream car home that same day.
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