Monday, July 22, 2019
Top Ten Car Ad Scams
(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 4 year 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 own the same make car that you are buying. There’s a similar rebate for lease customers. There’s even a “Farm Bureau” rebate which qualifies you for $500 if you’re a farmer. Dealers are 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 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 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. Very few car dealers will give a signed copy of the vehicle buyers’ order to a customer unless they drive the car home or make a substantial, nonrefundable deposit.
(5) Only one car available at ad price. When you are reading or listening to an advertisement, 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 hidden dealer fees 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 notthe 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 must 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 car’s 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 if 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 must 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 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 Fees”. The average “dealer fee” in South Florida is over $1,000. At least half 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 multiple, hidden dealer fee and they all exclude those 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 about $1,000 in hidden dealer fees.