Manipulative Selling Not Confined To Auto-Dealers

There are many jokes about the integrity of used car sales people.  In fact, I think car sales people in general, take a lot of abuse with regard to their sales practices, this despite that fact that some of the worst abuses actually occur in the financing department.  See the article here: Avoiding Car Dealer Fraud, for more information in this regard.

But, car sales are not the only abusive, manipulative sale organizations.  Take, for instance, the check I received in the mail yesterday.

Great Fun Check from Budget
Great Fun Check from Budget

Great Fun Check - Terms
Great Fun Check - Terms

Now, who doesn’t like receiving an unexpected check in the mail, even if it is only for $8.25 ?  Looks great doesn’t it, until you read why you received the check.

It appears that Great Fun – fun for whom I wonder – has been contracted by Budget – and here I am assuming the car rental company, why is it always the automotive industry – to provide a money back program to customers / prospective customers.

Hmm, I thought.  How can I be getting money back when I haven’t spent anyway ?  Well, upon further reading of the terms in the not-so-fine print on the back of the check, it turns out they are giving me $8.25 back in advance of my giving them $13.99, every month, for 12 months, at which point it becomes $14.99 per month, or whatever the (higher) current fee happens to be at the time.

Now, by my trusty calculator calculations, $13.99 * 12 = $167.88.  Oh, I’m forgetting, my “money back” check is a whopping $8.25 so my discounted price is $159.63.  OK, maybe I didn’t ask for this program but perhaps it has some value to let me see what I get for my unrequested annual subscription fee of $159.63.

Well, it turns out I can get up to 2% of purchases up to $5,000 per year.  So, 2% of $5,000 is $100.  OK, if I spend $5,000 on my credit card(s) my Great Fun with Budget program has now only cost me…lets see…$159.63 – $100 = $59.63.  Apart from paying Great Fun $159.63 per year and making $5,000 worth of credit purchases, what else do I have to do to get my $100 back ?

Oh, it seems I have to provide Great Fun with copies of my credit card statements.  Now I don’t know about you, but the fact that they sent me this check unsolicited tells me they already know more about me than I am comfortable with, and they’re not afraid to use that information to try and con me into signing up for an account of dubious value.

Of course, there never is a free lunch.  While it may be legal for companies to send enticements like this, clearly designed to get people to cash the check without knowing that they are committing to purchase services they neither need nor probably want, it strikes me as somewhat immoral.

The moral of my little story is really quite simple.  DO NOT CASH CHECKS that arrive in your mail if you are not absolutely certain why you received it and that, indeed, you expected the check to arrive because you initiated the transaction.

By my calculation, participation in this program would cost me a minimum $60 per year.  Not participating in it will save me $60 per year.  I’m already better off without it, and so would you be too.

Oh, and as a last action item, I will be writing to Avis Budget informing them that I will never again rent a vehicle from either of those companies or their affiliates because they felt they had the right to sell my credit card information to Great Fun.  If you plan on doing the same, here is the address:

Avis Budget Car Rental, LLC
6 Sylvan Way
Parsippany, NJ 07054 U.S.

Car Dealers Exempted from Consumer Protection Law Update

The NPR did a recent story on this bill and how it will affect the consumer. One of the most fascinating aspects of this bill is that it will exclude auto-dealers.

What makes this so strange is that car dealers are notorious for taking advantage of the public as can be seen from other articles on this, and many other, web sites.

Further information on this exemption sought, and won, by the car dealers can be found at this link:

This should come as no surprise really considering the investment the government has made in the auto-industry at GM and Chrysler and the additional $500 million loaned by the government to Mr. Fisker to make cars for ‘the select’ in Delaware.  Articles are here at the LA Times and here

Christmas Meeting & Luncheon

Christian Legal Society
Orange County ChapterChristmas Meeting & Luncheon

The O.C. CLS chapter will celebrate Christmas together on Thursday December 10, 2009 at 12:00 noon.  Aurora Harris is hosting the event at her lovely office:
The Honest Lawyer
605 W. Chapman Ave
Orange, CA. 92868
(714) 288-0202
We will provide a traditional Mexican Christmas feast with fellowship and Christmas carols together.  Please RSVP to (714) 288-0202.  The cost is $10 per person.  Our president Steve Meline will make a brief presentation, and elections will be held for the 2010 year.  We very much look forward to seeing you all there to celebrate the coming of Christ.

Avoiding Auto-Dealer Fraud

Imagine buying a new computer which you later discover had been dropped from a fork lift and repaired before you bought it as new  or spending ten hours with six different salesmen who were trying to convince you to lease and not buy a cell phone; or after closing escrow on a new condo or home, discovering you were charged commissions and points that were not in the escrow documents; Or being forcibly detained at a vacuum cleaner showroom.

These type of things happen too frequently at car dealerships !

No other consumer products are sold in the way cars are sold. At many car dealerships, consumers are handled in pre-programmed ways under sales systems designed to confuse and manipulate them. In innumerable interviews of fraud victims, I have heard many variations of the same deceptive auto sales schemes.  In this article I want to help you to recognize what is happening to should you encounter an unscrupulous car sales organization.

Only the Final Written Contract Counts

Most people do not realize that car dealers continue negotiating up to the moment of contract signing. Do not let your guard down. Even if you have already shaken hands on a deal, the terms are frequently different in the contract finally presented to you for signing. It is easy to overlook that you are not getting what you agreed upon in the long hours of negotiating. Do not think the person in the Finance and Insurance (F&I) Department just handles the paperwork. It is often the best and slickest salesperson who has the last chance at you in F&I. The sales “closer” has gotten you to verbally agree to a monthly payment higher than what your credit status requires and more than enough to pay for the vehicle. Now F&I will try to sell you on all the extras, or maybe with some friendly chatter, they can just include the extras on the contract and you will not notice until later.

But do not buy paint sealant, upholstery protectant, undercoating, extended warranties and especially credit and disability insurance. These are largely worthless “products” that are heavily marked up by the dealer.

Study the Written Contract Before You Sign It

The average person will not read most of a pre-printed document. Dealers routinely take advantage of this. Also, customers tend to believe a dealer’s promise to “help” arrange the financing with a third party lender. This is because financing is complex and intimidating and dealers routine hold themselves out as experts in auto finance. An exhausted car buyer would much rather hear it explained than read all the fine print. But read you must.

Do not be caught up in someone else’s rush. Demand time to think it over. Ask for a copy to take home and read later when you are not so worn out. Do the calculations yourself. You will be making those payment for many years.

Simplify the Transaction

Multiple elements of a car deal lead to confusion or fraud: purchase price, options, down payment, trade-in credit, monthly payment, interest rate, loan term, and balloon payment. Which of them will you focus on and miss others? Distraction is an art that many car salemen study diligently. For example, many people have been snookered by focusing on just monthly payments. You will get the best deal if you separately handle your financing and trade car. This simplifies the negotiation and leaves you able to focus only on the best purchase price for the vehicle.

Financing is More Expensive at the Dealership

Pre-arrange your car loan directly with your own lender. In most cases the best financing is through a credit union or other outside source. Investigate the current rates and discuss loan availability before you go to the dealership. Order a credit report ahead of time and know your credit pictures. Many dealers will try to make you embarrassed by any credit dings and take advantage by making you think they are doing you a favor.

Do not be swayed by the dealer’s promise to get you better rates, especially not by leasing. Leasing is fleecing. Even some attorneys and accountants who are car buyers have been bamboozled by its complexity. Do you trust a high school dropout in an Armani tie to truthfully or accurately explain leasing? Car dealers push leasing because they make more money leasing cars. And NO, its NOT like renting. Take one moment to stare at the termination penalties clause in a lease contract (yes, its on the back in fine print) and trust your gut. In the long run, despite the low monthly payment, for many reasons leasing is the most expensive and restrictive method of getting a car. You earn no equity, only liability.

Dealers make more money on the financing than in the selling of cars. They earn undisclosed points charged to you on the car loan arranged at the dealer. They may falsely claim that a certain interest rate is the “banker’s rate”. However, the dealer always tries to get you to pay higher than the lender’s current rate. The dealer will get a percentage of the difference in a secret ‘kickback’.

Do Not Trade-in. Sell Your Old Car Yourself

You can get a much higher price by selling your current vehicle yourself. When trading in your old car at a dealership you get below wholesale Blue Book for your old car. Worse yet, you could get confused about exactly what you are getting. For example, you may bargain with a dealer to get a higher price for your trade vehicle, but not realize that the purchase price of the new vehicle is also being raised.

Don’t Become “Captive at the Dealer”

Annie went into a local dealer on her lunch hour just to see what her old clunker was worth. Seven hours later her worried boyfriend found her sitting in her driveway in a new leased car, crying her eyes out. Annie had turned over her car keys to have the vehicle appraised. Although she asked repeatedly for the keys, she never got them back. “I really didn’t want this car, but I just couldn’t seem to get away.”

Variations of this trick happen too often to be a coincidence. The intention is to wear you down with negotiations and delay but to keep you from leaving. The more time a customer has “invested” in the transaction tends to keep them from simply walking out when they hear of undisclosed costs. It is a common tactic to delay the bad news (i.e., the manager refused to give the promised trade-in credit at the time of finalizing the deal). Stay in control.

Never ever accept a ride to the dealership by an employee, as they decide when you go home. Call the police if someone at the dealership continually postpones giving back you property after you have asked. Keep an extra set of keys if they appraise your car.

Make a decision before hand about the maximum time you will stay at the dealer. Leave if you are tired or if you think you have been kept waiting too long. Any good deal can wait. Do not take small children along. You cannot meet their needs and negotiate with a clear head.

Do take along an experienced friend, your lunch, necessary medicines, a book, research materials, a calculator and any advertising which drew you there.

Be Leery of Any Retailer That Seeks Your Trust

The most ripped-off fraud victims seem to be people who had a good reason to trust the dealership, i.e.: their boyfriend’s cousin worked there, the dealer advertised in their church bulletin, the salesperson was the customer’s same race and gender, or has a common interest.

A car salesman will pretend to be on your side, trying to convince you he is there to help you negotiate with his boss. He will ferry your offers into the decision maker, who hides out like the Wizard of Oz. This strategy is part of a power play system, where an unseen manager directs the sales process, maybe even watching you through a one way glass. If one salesman does not seem to make any headway with you, another and then another will be assigned.

Inspect the Car Carefully

Thoroughly test drive the car you intend to buy and have it checked out by your own mechanic. Frequently defective cars are sold at a tent sale or public auction where, in the excitement, it will be forgotten that the sale car has not been test driven.

Previous accident damage to a car seriously depreciates its value and safety. A kitchen magnet that will not stick to a fender indicates bondo, a plastic filler used in body repair. Also do a visual inspection for paint overspray in the door jambs, strange weld marks under the carpeting in the trunk, door and windows that are not air tight, wrinkles or color fading, unevenly worn tires, steering wheel drift or uneven gaps in the body seams. Even some new cars have been sold damaged.