Category Archives: Auto Finance

The Financing Activities Of Car Dealers Need Regulation !

Car dealers are working hard right now putting out a false spin, claiming they do not even engage in lending, falsely asserting they just “facilitate” loans for car purchases.

Yeah, and in the process, dealers “facilitate” low and moderate income people out of billions in extra finance charges! The truth is that dealers make a huge percentage of their profits secretly from kickbacks on markups in vehicle financing.  No wonder dealer advertising lures the public with promises of “easy financing”.

Many crooked dealers actually falsify a buyer’s credit– frequently without the buyer’s knowledge or consent. This was exactly the same problem that occurred with the mortgage meltdown.

Submerged Car Surfaces In Court

Here is a very interesting video on You Tube about a man that purchased a car that had, at some point, been completely submerged under water.  Something of a sales arbitration horror story.

There are lessons to be learned from this event.

  1. Do NOT  take delivery of a car you are buying where work is orally “promised”.  Even if the promise of repairs is in writing, it is best to leave the car at the dealership (do NOT even drive it home overnight) but let the dealer  fix it first. Then only AFTER the dealer has attempted the promised repairs do your further inspect it before deciding whether you still want to complete the deal.
  2. Car faxes are highly overrated.  They do not replace a careful inspection by a qualified mechanic.  Car faxes seldom provide sufficient information about a vehicle’s history of accidents, past repairs, mechanical condition, out of state salvage title be of much use in learning much about the real history of a car.
  3. Never sign a contract that has an arbitration provision in it, giving up your right to a trial by jury. Demand that the dealer use a different form contract (yes they have them) or go shopping for a car at another dealership that does not use contracts with arbitration clauses. Yes people, this requires that you READ the contract. Try calling a dealership first before you go there and ask them if they use contracts without arbitration clauses.  Then verify it when you first arrive and again before signing the actual contract.


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

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.


On A Mission

This article appeared originally in The Orange County Register on November 24th, 2004. The original article can still be picked up in the office for those who would like a copy.

the orange county register

"MARKET EVANGELIST": Lawyer Aurora Dawn Harris aims to protect car buyers from unscrupulous selling practices.
MARKET EVANGELIST: Lawyer Aurora Dawn Harris aims to protect car buyers from unscrupulous selling practices.




It was the RV salesman who dared an old man to sue, saying he’d die before the case went to trial, who helped Aurora Harris find her mission.

The Salesman was right about this: Fortune Brooks, to whom he had sold a motor home with a dry-rotted roof, was not long for this world.  But he was wrong about justice.

Harris, then just a few years out of Western State College of Law, invoked a statute that allows for a speedy trial.  With Brooks set to testify that the salesman had taken his checkbook and written out a down payment while he lay on a couch, popping heart pills, the RV dealer settled for $80,000.  The not so fortunate Brooks died two months later.

He willed himself to live long enough to fight for the respect he deserved, Harris recalls.  It was such a satisfaction to help this old man achieve justice.

Twenty years after Fortune died, Harris is still battling car dealers, on behalf of the elderly, single women, immigrants and the disabled.

I know there are a few good dealers, but I don’t hear about those, Harris says.  I get people who have been wounded by dealer practices.

Like Kenneth and Catherine Gorman, 85 and 83, who said they were told they needed to trade in their 15,000 mile Honda because rats had nested under their hood and eaten the wiring.

DEALING WITH THE LAW: "Although I am heavily biased toward the consumer, I try to see the car dealer's point of view too," says Harris, whose practice is on Chapman Avenue.
DEALING WITH THE LAW: "Although I am heavily biased toward the consumer, I try to see the car dealer's point of view too," says Harris, whose practice is on Chapman Avenue.

Harris alleged the dealer sold their “unsafe” car that same day.

Or Oscar and Gloria Marrufo, 67 and 65, who complained they were tricked into signing a 66 month lease on a PT Cruiser that they had tried for eight hours to buy.

The salesman belittled us.  They broke us down.  I feel like they singled us out because of our race.  I couldn’t drive past the dealer without feeling small, Marrufo said.  Miss Harris has restored my dignity and my pride.

Added his wife, Gloria, We thank God for her.

God will come up a lot in this story.

That may surprise you if you’ve bought into the stereotype of trial lawyers as vultures out for million-dollar verdicts.  Aurora Dawn Harris has no mansion.  No Mercedes.  Never had a million-dollar verdict (or sought one).

Sure, she clobbers car dealers.  But she can show mercy too.  She calls herself a marketplace evangelist, struggling to show by example and to give God credit when that is due.

Lest you get the wrong idea, Harris hastens to add: I am not saying God is on my side.  We all make mistakes, bad decisions, persecute people unfairly.  That’s why I like to give people a chance.  We need to struggle to make sure we are on God’s side.

A runner with three Los Angeles marathons under her Nikes, Harris appears younger than her 51 years.  She drives a used Toyota and lives in a modest home in Orange (the flat part).  She practices out of a 1920 bungalow on Chapman Avenue, where the sign reads “Hones Lawyers.”  But inside there is only Harris and her paralegal, Ada Gutierrez, a former missionary.

Harris’ one extravagance is a gleaming espresso machine.

I bought that for my Christian singles coffee group, she says, pumping the handles until the black elixir drizzles.

Harris was born in China, the daughter of a Baptist missionaries who built churches in the mountains of Formosa.  Her grandparents were also missionaries; her great grandparents before them.

Harris recalls her late father, Dr. Hendon Harris, renting a fishing boat to sail into the South China Sea, looking for Vietnamese refugees victimized by pirates.

After her family returned to the United States i 1967, she began to rebel against her father’s church.  It was the male dominance that turned me away .. the fundamentalist belief that women are to play a subservient role.

Harris earned a degree in comparative literature at California State Long Beach.  Drove a forklift in a machine shop.  Worked for an ad agency.  Then battered a three-cylinder Honda across Orange County as a messenger, paying her way through law school.

Although the case of the rotten RV helped Harris find her niche, it would be 15 years before she came to see that work as God’s mission.

The epiphany for Harris came when she split with the father of her boys, a retired Orange County judge.  Her legal training had prepared her to fight.  But she realized that the battlefield would be her family.

God’s presence was really there.  I decided I wasn’t going to fight tooth and nail and it all worked out.  Sometimes you have to give it all up to win.

Today there’s an antique Bible on her table.  A Psalm on her sign.

If you would be shocked if your lawyer tried to pray with you, Harris may not be your barrister.  I will suggest prayer when I see that clients need calming, or sometimes, need to be grateful, Harris said.

Marrufo, the Cruiser customer, didn’t wait for Harris to suggest prayer; he brought one with him.We put on the armor of God, Marrufo recalls, referring to a passage in Ephesians that he has memorized:

Put on the whole armor of God, that you may be able to stand against the wiles of the devil.

So car dealers are … the devil ?

Harris says no; wickedness is something inside that we all must struggle against.

But the dealers do feel typecast.  They accuse Harris of demanding exorbitant payoffs for customers who simply have buyer’s remorse.

Aurora has the ability to generalize too much, says Charles “Mike” Michaelis, a Tustin attorney who represents new-car dealers.

Without a doubt, there are certain individuals in the industry that do engage in aggressive tactics.  But my experience is that dealers are honest business people trying to make a fair profit like anybody else.

When Aurora comes after a dealer, she throws in the kitchen sink.  Her letters intimidate a car dealer that doesn’t understand what is coming at them.

For that, Harris makes no apologies.  I want car dealers to treat everybody who complains with the same respect, and not know if the customer has a lawyer; not know if there is a $300,000 lawsuit waiting, Harris said.  I want to show them that our society will not tolerate businesses that victimize vulnerable people.

Harris says those sharply worded letters are the dealers chance to settle upfront, before a lawsuit.

When I was younger, I was a much more brassy type of person.  I’ve tried to temper that with mercy.  Although I am heavily biased toward the consumer, I try to see the car dealer’s point of view too.

This, some of her opponents acknowledge, is true.

Other attorneys use consumers for their own means, Michaelis says.  My impression of Aurora is just the opposite.  I think she often forgoes fees if a dealer is willing to settle a consumer’s problems.

But does she ever ask the dealers, or their lawyers, to pray with her ?

Harris is taken aback.

No ! My gosh ! You’re pushing me on that one. Then she adds softly, Maybe I should be.

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