September 17, 2014

Car Buying Tips You Don't Want to Miss

If you dread - absolutely dread - buying a car, you are not alone. A reported 83% of Americans loathe the process of dealing with a car salesman. You would rather go to the dentist, handle a job interview, or sit through dinner with the in-laws. But, the truth is that you can make the job of buying a car less painful by getting prepared.

Chris Radomile (along with an anonymous insider co-author) recently penned a piece for the the popular and irreverent blog, "Cracked," recommending 5 key points to help the hapless car buyer. You can read the full, colorful discussion here.

The authors point out:imgres.jpg

1 - If one dealer seems to have a better price, read the small print
2 - Negotiate on the total price of the car, not the monthly payment
3 - The Internet is your trump card
4 - Car buying isn't nearly as bad as it used to be
5 - A shocking amount of customers prefer haggling

Of these five points, we would particularly agree with items #2 and #3. Doing your homework on the internet is crucial to car buying these days, and a thorough Google search can save you money in overall price and/or monthly payments for years to come. One of the best sources is the car valuation feature on the Edmunds website. You can access this tool here. Also, download one of the many available percent calculator apps so that you can quickly compute the true cost of credit.

With respect to item #1, if one dealer seems to have a better price for the same make/model vehicle, we recommend not only reading the small print, but reading the very large print that might say "AS IS." It is shocking how many people ignore this red flag. If the price is too good to be true, there could be something seriously wrong with the car.

With regard to items #4 and #5, it is true that many consumers are more comfortable with the whole negotiating process, now that they have more information available about the cars themselves. Nonetheless, car buying in some ways is even worse than it used to be, because the dealer finance departments (called "F&I") have slick software programs and aggressive sales techniques to up-sell the customer on after-market items. The best thing is to research the estimated price of the car you want before financing, calculate what the car will cost with all the finance charges, and resist buying any aftermarket items when you sign the contract. These add-ons are usually unnecessary and consist of high-profit negotiable price opportunities for savvy dealership salesmen.

After you know what the price of the car should be before financing, pull your own credit report, so you know what your score is, and do not authorize the dealer to pull another. Estimate what you think you can make in car payments per month. Do not wait for them to tell you what you can afford. Set that amount of money aside in a bank account each month for 2-3 months, to see for yourself if it will "break the bank." Only then do you know what you can really afford.

One final word to the wise. For the remaining 17% of people who do not dread buying a car, but consider it a form of suburban entertainment, don't take the family on a Sunday afternoon. Take only your spouse or co-buyer, or a truly objective trusted friend. The American car lot is not a playground, but rather a dangerous place for your financial well-being. If you want to spend a weekend afternoon with the children, go to the beach or a movie or a park. Otherwise smart people can make bad deals because they brought the whole family with them for a test drive. A few hours later, they are still there, the kids are hungry, and Mom or Dad will sign anything just to get home.

September 7, 2014

What Does it Take to Become A Car Salesman?

Last year he was a celebrity, this year a ...car salesman? After the NFL upheld star receiver Josh Gordon’s yearlong suspension last week for repeated positive drug tests, he found himself out of a job with the Cleveland Browns. At least for the time being. There is talk of the NFL revising its drug policy this season and some pundits wonder if that may lead to Gordon's reinstatement. But it looks like he won't be leaving Ohio in the interim. ESPN’s Josina Anderson reported Thursday that Gordon will be working for the Sarchione Auto Group, an Akron area multi-make car dealership. images-1.jpg His title is some sort of goodwill "ambassador," but his activities will reportedly include time on the sales floor.

We always wondered what qualifications are needed to get a job as a car salesman.

The editors at the highly informational automotive website, www.edmunds.com, apparently wondered the same thing. And they really went for it. To present an up-to-date expose, they hired invetigative journalist, Chandler Phillips, to work undercover at two new car dealerships in the Los Angeles area. The result is "Confessions of a Car Salesman," an absolute must-read narrative for anyone about to buy a car from a dealer of any kind. You can check out the full article right here

It's a little scary. Add the speed, size, strategy and driving ambition of pro football to the local car dealer sales force and the ordinary consumer hardly stands a chance.

November 28, 2012

Toyota Recalls Millions of Cars, Including Corolla and Prius Models

Toyota's problems continue to cascade through a series of announcements and news reports. In October 2012, media drew its attention to Toyota's world-wide recall of about 7.43 million vehicles, for defects in the power window switches causing a risk of fire. That was the manufacturer's largest single recall ever.

Now the popular Japanese brand has announced the recall of another 2.8 million cars, involving multiple model years. The latest announcement concerns problems in the steering system and electric water pumps.

The good news is that Toyota is owning up to defects and giving its broad fleet of consumers fair notice and an opportunity to have the problems fixed. The bad news is that Toyota might soon surpass its competition for the dubious distinction of being most-recalled auto maker ever. At the same time, it is important to note that the absolute number of vehicles recalled reflects Toyota's high global market share, and the recalls are not for the entire vehicle, but particular components. Toyota Prius owners, in particular, are notably loyal to the brand and Toyota's dominance among hybrids is likely to continue.

June 25, 2010

Department of Insurance Slams Consumer Direct Warranty Services for Unlicensed Sale of Insurance

Dilbert taps into consumer frustration with the comic strip posted below. Call it wry humor. But the California Department of Insurance doesn't think consumer fraud is funny. Whether they are referred to as "service contracts," "extended warranties" or "mechanical breakdown insurance," vehicle repair agreements are a big profit center for new and used car dealers. Telemarketers or internet schemes may tout them as well. Often such contracts are unnecessary. Even illusory. Some of these products are legal, but many are not. In the midst of a slick sales pitch, almost no one reads the prolix printed warranty form. That is a mistake Dilbert's "confusopoly consultant" wants you to make. Now the Department of Insurance is clamping down.

For many years, car dealers have claimed that these after-market products do not qualify as insurance and they do not have to be licensed to sell them. That may change. On June 17, 2010, the California Department of Insurance issued a Cease and Desist order against Consumer Direct Warranty Services and related entities. You can read the Department's full press release here.

Some dealer service contracts fall within an exception to the insurance rules. However, in order to exploit that loophole, car dealers must follow certain procedures, have back-up insurance, provide cancellation rights and comply with other regulations.

"If you want to sell insurance in California, you must obtain a license, have adequate financial reserves and you must not deceive consumers," said Commissioner Poizner. "In order to protect California consumers, there are specific requirements for insurance companies seeking to do business in California. If companies do not abide by these requirements, they will not be permitted to sell insurance in our state."

The Insurance commissioner's website goes a step further to promote consumer protection. Check out its "Guide to Auto Service Contracts and Agreements" here. If you have purchased a service contract or extended warranty that does not comply with these rules, contact us even before your car breaks down.

June 24, 2010

NCLC Consumer Resources

nclc_logo.jpg The National Consumer Law Center just launched a new website. Check it out here. The nonprofit center, headquartered in Boston, has been a premier source of assistance for consumers, legal services and consumer lawyers for decades.

Its new website provides information on NCLC's recent reports, numerous publications and current initiatives. Among other things, NCLC publishes reports on scams and predatory trends in consumer transactions, manuals and treatises on a wide variety of legal topics affecting consumers, as well as other books for lawyers and the public alike.Return%20to%20Sender.JPG NCLC is the publisher of "Return to Sender - Getting a Replacement for Your Lemon Car" by Nancy Barron.

In addition to its publications, NCLC funds research, legal conferences and consumer education programs on a wide range of important consumer topics -- from automotive fraud and warranty law, to financial abuse of the elderly, energy policy, student loans, and predatory lending.

Kemnitzer, Barron & Krieg is actively involved in the work of NCLC. Bryan Kemnitzer is a member of the partner's council and Nancy Barron currently serves on its board of directors.

June 11, 2010

Car Dealers Fear Financial Reform

Finance reform has been bumped from front page news by international incidents and the catastrophic BP oil spill. But even as public attention has shifted elsewhere, the National Automobile Dealers Association (NADA) has not lost its focus on Washington. They are lobbying hard against legislation aimed at improving consumer protection. Why?

sleazy-salesman-thumb.jpgThe landmark financial reform package that is working its way through Congress would greatly improve financial oversight of lenders. This means a wide variety of entities who share in the business of lending money, not just banks. After the House and Senate passed different versions of the bills, lawmakers from both bodies are in the process of reconciling the two versions. The battle is drawn, because the House passed a bill that exempted car dealers from financial reform, but a similar amendment failed in the Senate.

The outcome of this process will greatly affect the way cars are sold in coming years. NADA is lobbying for its car dealers to be exempt from financial regulation, and is trying hard to persuade committee members that dealers don't get involved in car loans. Nothing could be further from the truth. As Paul Wiseman of USA Today reports, "auto dealerships originate 79% of auto loans and leases." He goes on to quote the non-partisan Cambridge Winter Center for Financial Institutions Policy as concluding "that auto finance is demonstrably susceptible to unfair and deceptive practices." You can read USA Today's article here.

The argument made by car dealers that they are all small mom & pop shops is also far-fetched. While many are indeed locally owned, thousands of dealerships are controlled by mega-dealers like AutoNation whose 100+ stores have reportedly sold more than 7,000,000 cars. These multi-state conglomerates keep a short leash on customer finance through their tightly controlled on site dealer finance departments and preferred lender programs which direct dealer-arranged financing to a handful of financial institutions.

Just this week, the trade publication, Automotive News reported NADA to be particularly concerned that the proposed consumer financial protection agency would have scrutiny over sale of service contracts and aftermarket items. As we have often discussed on this blog (click on "Shopping for Car Loans") regulation of dealer finance departments is long overdue.

April 21, 2010

General Motors and Chrysler Repay TARP Funds

gm-and-chrysler-logo.jpg


The Obama Administration issued a report today entitled A Look Back at GM, Chrysler and the American Auto Industry. Actually, it is a short look back through the last tumultuous twelve months, to announce the unexpectedly rapid progress that General Motors and Chrysler are making toward repayment of their federal bailout money. "GM’s early repayment of its $6.7 billion loan leaves the remaining U.S. government stake in the company at $2.1 billion in preferred stock and 60.8% of the common equity," the notice reports. And, while the announcement does not say Chrysler has fully repaid its government loan, the news that “Chrysler Financial has already fully repaid (with interest) the $1.5 billion TARP loan that it received to support auto financing” is encouraging.You can read the entire report here. While Chrysler's relatively rosy outlook and General Motors' early repayment of billions will come as good news to taxpayers, their corporate success is small comfort to consumers whose warranty rights were trampled in the messy restructuring of both companies. The car buying public remains cautious. Like the manufacturers themselves, consumers are eager to pay off debts before going on a spending spree. Whether these icons of American industry will recover market share once pent-up demand spills over and credit eases will depend on whether improvement in vehicle safety and design follows the companies' financial improvement.

April 10, 2010

Consumer Literacy - A Case for Doing the Numbers

We are bombarded daily with advertisements for new cars, used cars, leased cars, rental cars, sales, auctions and swaps. When you can’t tell the “no-down” from the “low-down,” I say it’s time to slow down. Do the math. Don’t cringe! The fact is things cost money. And money is all about numbers.

Any time you are not paying cash, you need a calculator or a clear head for something called “credit math.” You are buying two separate things: (1) the wheels and steel you will drive off the lot and (2) the money you need to pay for it. Each of these two things makes a profit for someone, and their profit comes out of your pocket. Subtraction and addition, in other words. Throw in some multiplication and division, fractions and percents. Those are the basic functions of credit math.910922_calculator.jpg

The mathematical relationship between buyer, seller, lender and borrower is the very crux of our economy. And, at its most basic, a fundamental failure of that relationship is what set off the global economic crisis. Bankers and brokers took advantage of the fact that, in layer after layer of transactions, the person signing the documents had no clue what they meant but assumed that someone, somewhere did. Financial illiteracy got us into this mess.

Consumer literacy should be a matter of national security. All Americans should know how to ask - and get answers to - questions that affect financial health: Can I really afford this loan? What is the difference between credit and debit, or debit and debt? What is my interest rate? What’s an APR? When should I pay cash? Why do I owe this late fee? What factors go into a credit score? How do I protect against identity theft?

Finally, consumer literacy is getting some attention. An article in today's New York Times laments the dearth of financial skills training in standard curriculum. It will be a long time before budget-strapped high schools offer such courses, but there is some evidence that money matters are creeping into the classroom. The National Endowment for Financial Education has produced a number of programs for use in schools. One useful tool mentioned in the NYT piece can be accessed online here While it is billed as “40 Money Management Tips Every College Student Should Know,” there is plenty of good advice for all of us.

March 30, 2010

Motorcycle Financing – A Bumpy Ride on the Open Road

Motorcyles are all about freedom and fun and wind in your face. But that "open road" fantasy fades fast when the bills pile up in a frightening heap.

For 50 years, Californians have enjoyed protections provided by the Rees Levering Act. This law applies to most street-legal motorbikes when sold with closed-end financing. The buyer may drive the motorcycle off the lot, but the lender holds title until the loan is repaid. The Rees Levering Act requires specific information telling consumers not just the cost of the vehicle, but also the cost of credit, so borrowers can shop for the best finance terms. The law further regulates repossession practices.
656046_red_bike.jpg The traditional credit transaction for a vehicle purchase involves closed end financing. That means you know the term, or length, of the loan, and the monthly payment doesn't change. Credit cards, on the other hand, are open-ended, with no fixed term and fluctuating payments. It is a riskier purchase from the consumer's perspective.

A couple of years ago, we began to see a troubling trend. Motorcycle companies looking for loopholes in the Rees Levering Act started selling street bikes with open-ended credit through what looks like a factory-branded credit card. Despite the outward appearance, these operate differently than the usual co-branded card, such as an airline VISA card that can be used at any retailer that takes VISA. These, on the other hand, can be used only to buy the motorcycle and perhaps some accessories or maintenance services. In many cases this is an abuse of truth in lending rules.

So what's going on here? The ready use of credit helps manufacturers move product in a tight market. A low initial monthly payment gets the buyer past sticker shock.Yet, consumers have no idea they may be giving up important fraud protections when they buy a bike with a factory-branded credit card. The devil is in the details, there in the form of small print legalese. That $99/month offer is likely to be a teaser rate. We have even seen deals like $49 for 24 months. But what happens after that? The bike is not paid off. All of a sudden the monthly charges increase and the consumer has no idea why, or how to challenge the bump. In some cases, this is just a bait and switch with a new plastic lure.

These factory-branded cards are so profitable, that manufacturers have poured money into catchy ad campaigns. The images play to the dream of "Easy Rider," but easy credit can turn the dream into a nightmare of uneasy debt. If you are the victim of this kind of bait and switch, give us a call.

March 16, 2010

Kemnitzer, Barron & Krieg Launches New Website

Kemnitzer, Barron & Krieg LLP, the host of this California Lemon Law Blog, has just launched a new website with a Q&A section on a variety of consumer protection areas, ongoing consumer alerts, attorney biographies, internet resources, a bibliography and contact links. Check it out here

The firm represents consumers throughout California and has, to date, filed cases in 34 separate California counties. Bryan Kemnitzer, Nancy Barron and Bill Krieg have a combined 99 years experience as trial attorneys fighting to protect consumer rights.

Supported by a dedicated staff, attorneys in the firm have taken individual and class action cases to trial, obtaining verdicts and judgments that include punitive damages and civil penalties. On the other hand, the vast majority of cases settle prior to trial. In settlement, Kemnitzer, Barron & Krieg have obtained debt relief exceeding $300 million, as well as thousands of new car replacements and refunds.

As California consumer lawyers, the members of the firm believe that every consumer is entitled to safe and reliable transportation, fair credit, truth in lending, access to the courts and freedom from fraud. All clients have the opportunity to learn more about consumer protection in ways that increase consumer literacy and save money, as well as resolve the particular case at hand.

April 24, 2007

Hybrid Cars – Green Lemons Waiting to Ripen?

Full disclosure here: A hybrid just might be my next car. The local parking lot’s “green preferred” spot is nearly always filled with a Prius; my octogenarian aunt just bought a Honda hybrid; and my trendsetting friend Cathy tools around in a Lexus RX. My consumer research has begun. So let me just say, I hope the answer to the title question is, "No."

The history of the Prius reads like a classic modern case study in production and marketing: from government funded R&D under Clinton, to concept car, to prototype, to production version, to withdrawal of government hybrid funding under Bush, then to Internet promotion, and finally to a full scale American marketing campaign.

In our law practice, we have seen very few complaints of hybrid lemons to date. At the same time, our 25+ years handling consumer car cases inform us that most new make and model vehicles need a few years to work out the glitches in design and developing technology. Far from being a detriment to advances in technology, critical consumer feedback can serve the R&D process in a positive way. Toyota, for example, has issued “voluntary” recalls of thousands of Prius vehicles for possible steering shaft assembly problems, in response to numerous complaints. There are other reports of limited service campaigns in 2004-2006 Prius cars, for a variety of problems, although not involving all vehicles. The loudest grumbling appears to be from the fact that owners can't seem to achieve the 50-60 miles per gallon hybrid makers advertise. Let’s hope that Toyota and other manufacturers remain pro-active, eager to replace defective parts with out charge, and otherwise live up to their promises. If you feel they have not done so, we'd like to hear from you.


Since most hybrids are still under factory warranty today, their ultimate longevity remains to be seen. For example, the Prius has a 3 yr/36,000 basic warranty, and a 5 yr/60,000 mile powertrain warranty. The Honda Insight, which billed itself as the “original hybrid” is no longer sold as new, having been superceded by the Accord Hybrid and the Civic Hybrid. Honda advertises the same warranties as Toyota, while noting that the battery has an 8 year, 80,000 mile warranty. That is, frankly, a remarkable promise.

We are keeping our fingers crossed that this new technology will prove effective in reducing defective vehicles while reducing greenhouse gas emissions. And we hope that the new hybrids are not green lemons waiting to ripen. Meanwhile, there are many things all consumers can do to be more environmentally conscious, whether or not we drive hybrid cars and trucks.

The State of Michigan , which has a lot at stake here, offers the following “20 tips for Energy Efficient Driving” :

1. Combine trips for shopping and errands.
2. Avoid unnecessary trips. Use the telephone or e-mail to communicate.
3. For short trips, walk or ride a bike.
4. Join a carpool or use public transit to and from work or school.
5. Don’t idle the car for more than one minute
6. Drive the speed limit, or below, for better mileage.
7. Overdrive gears improve the fuel economy of your car during highway driving.
8. Avoid sudden bursts of speed, tailgating and pumping the accelerator pedal...
9. Out on the open highway, keep windows rolled up to reduce drag.
10. Using a vehicle’s air conditioner on a hot summer day can decrease mileage...
11. Travel during off-peak hours when possible.
12. Take the shortest route with the best roads.
13. Use the cruise control -- it can save fuel by maintaining a steady speed.
14. Keep tires at the recommended air pressure.
15. Keep your car engine properly tuned.
16. Remove bicycle and ski racks when not in use.
17. Excess weight uses more fuel. Remove unnecessary items...
18. Use the lowest octane gasoline recommended by the manufacturer.
19. When buying a new car, make fuel efficiency a priority.
20. Don’t buy a bigger engine than you need.