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Bad Deal? Squeaky Wheel Gets the Grease

* An unhappy car buyer who knows how and where to complain can often repair the damage.

February 07, 2001|CLIFF ROTHMAN | SPECIAL TO THE TIMES

Tom Hirko's head was spinning when he left the auto dealership. And after discussing the deal with a customer at his barbershop the next day, his stomach was spinning too.

He had walked into Sheridan Toyota near his shop in Santa Monica last summer with $12,000 in cash and a trade-in, ready to purchase the $20,800 RAV4 sport-utility he had seen on the lot.

But after the sales team had finished with him, he'd paid more than $25,000 for the same RAV4, with no added features. And he had agreed to finance it for 72 months at almost 12% interest--much higher than justified by his credit history. Altogether, he'd be paying about $36,000 by the time the pink slip was his.

He was what industry insiders call a "lay-out," a customer anxious to buy and ripe for exploitation.

With his excellent credit rating and upfront cash outlay, most dealers would have negotiated a four-year loan for Hirko at an interest rate of about 9%. And most Toyota dealers at the time were cutting prices on similarly equipped RAV4s to about $19,000 to clear inventory. A deal like that would have saved Hirko almost $9,000 over the life of the contract.

For the Record
Los Angeles Times Wednesday March 28, 2001 Home Edition Highway 1 Part G Page 2 Financial Desk 2 inches; 41 words Type of Material: Correction
Clarification--The Times failed to disclose that the author of a story Feb. 7 about renegotiating automobile sales deals is a personal friend of the subject of the story. Further, the author advocated in his reporting that Sheridan Toyota rewrite a lease agreement on behalf of the subject.

"What can I say? I was naive and gullible," he said in retrospect. "I was overwhelmed by the pressure. They kept putting one deal after another in front of me, including pressure to lease. I was overwhelmed and didn't look at the figures carefully enough."

Hirko's story has a happy ending--he persevered and got through to dealership owner Daniel Sheridan, who tore up the old deal and wrote a new one. But many similar stories don't end well.

Certainly, only a small portion of auto dealers are shady operators. A recent national Gallup survey of new-car buyers for the trade journal Automotive Retailing Today found that 85% of new-car buyers had positive feelings about the experience and that 94% were happy with the dealership where they bought their vehicle.

But that still leaves 2.7 million car buyers with negative feelings about the purchase process and 1 million who didn't much like the dealership they used.

A bad car deal can happen to anyone.

California has no cooling-off period for car purchases. You're expected to be prepared and to live with the consequences when you sign a lease or purchase contract.

But if you truly believe you were taken advantage of and are willing to push and know where and how to apply pressure, undoing a bad deal--or at least obtaining a compromise you and your budget can live with--is not impossible.

The state attorney general's office is in the midst of an intense statewide investigation of auto dealerships based on scores of consumer complaints.

Most recently, two Southern California Toyota dealerships agreed to pay fines to settle civil fraud charges by the attorney general's office. It was alleged last summer that South Bay Toyota in Gardena and South Coast Toyota in Costa Mesa defrauded almost 150 customers. The suspect deals included pressuring customers to switch from buying to leasing cars and then inflating prices by as much as $10,000.

Both those dealerships were recently sold and are under new ownership.

"Our office and the [Los Angeles] district attorney are looking into a number of dealers who engage in questionable practices," said Herschel Elkins, head of the attorney general's consumer law section.

Although most dealers run clean operations, consumer fraud occurs "with enough regularity that it creates a major problem in California, not only for automobile purchasers but for all dealers, because they all get painted with the same brush," Elkins said.

The Department of Motor Vehicles also regulates car dealers. Just last week it filed fraud charges against Gunderson Chevrolet in El Monte, charging the company with systematically forging customer signatures to deals that inflated the purchase prices by adding unauthorized options. Gunderson, now owned by the AutoNation chain, is negotiating a settlement in hopes of avoiding the ultimate penalty: loss of its dealership license. The DMV says more than 1,400 customers were defrauded.

With a tough regulatory climate in place and at a time most auto makers are using customer satisfaction scores to reward dealerships that keep car buyers happy, complaints are being listened to as never before.

Most dealerships, after all, depend on their reputations. They are loathe to have someone with a well-documented case complaining about them--particularly if the complaints are heard in the right places.

Auto dealers have no obligation to talk a customer out of spending too much money.

If, however, you've been victim of a deal involving excessive pressure, underhanded tactics or over-the-top terms, you need to act.

Some salespeople wobble on the line between aggressive tactics and misrepresentation. Knowing which got you to sign the contract is what can get a deal reversed.

In Hirko's case, a sales team swamped him with proposals and counterproposals until he couldn't keep track of the numbers, he said.

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