Auto Purchases and Lease Fraud



Shopping for best deal at an automobile dealership has historically been a mysterious, painful and often regrettably expensive experience for many consumers. With this in mind, the Florida Attorney General�s Office recommends the following tips for potential buyers:

Research the price
First decide what car model and options you want. Then visit your local library or bookstore and check materials that provide information on the dealer's costs (invoice price) for specific models with the options you desire.

Shop around
Armed with this knowledge, you will be in a stronger position to shop around or to consult car-buying or broker services to obtain the best available deal. Going to only one dealer and relying solely upon the salesman's oral promises, without researching the price or comparison price-shopping with other competitors, is the best way to get "ripped-off." If the dealer does not have the vehicle with the options you desire on its lot, consider ordering your new car, to avoid paying extra for unwanted options.

Negotiate
The STICKER PRICE or "MSRP" is the manufacturer's suggested retail price. Most dealers are willing to bargain on their profit margin, which is generally between 10 to 20 percent of the MSRP. Don't get talked into a lease unless you have researched car leasing and have made an informed decision to lease (see Auto Leasing)

Trade-ins
Your local library will have reference materials which can help you determine the value of your trade-in vehicle. You will usually fare better by selling your car privately. Consider advertising in a local newspaper or flyer. If not, obtain your best possible purchase price from the dealer before discussing the possibility of a trade.

Financing
Check the "APR" (annual percentage rate) at your bank, credit union or even your insurance company or motor club, and compare them to the interest rate quoted by the dealer. Advertised low interest rates by the dealer may require you to pay the vehicle's sticker price.

Extended Service Contracts
The dealer is likely to try to sell you a service contract to provide for repair of certain specified parts or problems. These service contracts usually overlap the initial warranty coverage included by the vehicle manufacturer in the price of the car. Read the contract carefully to determine what repairs are covered, the extent of the coverage (parts, labor, deductibles, exclusions), and the other terms and conditions.

Florida's Lemon Law
The dealer is required to provide you with a booklet published by the Attorney General's office, which explains your rights under Florida's Lemon Law.





Auto Financing



Many consumers prefer to finance their car purchase, rather than paying cash. But according to the Florida Attorney General�s Office, you should not be misled by an auto dealer's fancy computer-generated cost comparisons or other claims that you will save money by financing. Remember that when you pay cash, you have no monthly payments to make. Even if you were to invest each month's car payment in a Certificate of Deposit or other interest paying investment, you would not come out ahead, unless the interest rate of the investment exceeded the loan interest rate.
An advantage of financing is that you will retain your cash and improve your cash flow, thereby enabling you to use your money for emergencies, college tuition or other purposes. Under some circumstances, if you finance a car that develops serious problems, you may have recourse against the finance company as well as against the dealer or manufacturer. Here are some other things to remember:

Interest rates
The Federal Truth-in-Lending Law requires lenders to disclose the ANNUAL PERCENTAGE RATE ("APR"). The APR is the cost of your credit as a yearly rate. These rates may vary significantly. By comparing the APR's offered by various lenders, you can begin to compare deal's. Check with your bank, credit union or even your insurance company or motor club and compare to the APR offered by the dealer. Be aware that car sales agents may earn additional commissions if they can convince you to finance your car through their dealership. Besides the APR, in comparing financing offers, you should determine the amount of any down payment or trade-in allowance, the number and amount of monthly payments, and the total of those payments.

Specially advertised low interest rates
Sometimes dealers seek to entice customers by offering very low financing rates, or even zero percent interest for a specified time period.

Beware of the following:

  • You may be required to make a large downpayment to qualify
  • You may be required to repay the loan in a shorter period of time, such as 24 months
  • You may be required to purchase additional options such as undercoating, or you may be asked to sign over a manufacturer's rebate to the dealer; and the zero percent offer may come with a very high APR which kicks-in after the grace period, and you may forfeit the zero percent interest incentive and be required to pay a back-interest penalty, if you fail to make your scheduled payments when due.


     
  
 



Auto Leasing



Although lower monthly payments make auto leasing appear to be an attractive alternative to financing the purchase of a car, the technical and complex language, and the greed of some car salesmen, cause car leasing to be an option that is fraught with many pitfalls for the average consumer. The Attorney General of Florida has received numerous complaints from consumers, many of whom have been pressured into auto leasing, not been credited for their trade-in vehicle, or have complained of being defrauded in other ways. Be aware that once you sign a lease, you have no automatic legal right to cancel. Before entering into an auto lease, consider the following:

What is a Vehicle Lease?
A lease is a long-term rental agreement. You are paying for the right to drive a vehicle for the term of the lease, but you do not own it. In most instances, you will be responsible for all maintenance on the vehicle, and your insurance rates will usually be higher.

Isn't a lease a good deal if my monthly payments are less than if I purchased the car with financing?
Not necessarily. The monthly payments should be significantly less because you don't own the car. Your monthly payments are based upon the following items:
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  • CAPITALIZED COST or "Cap Cost." This is just fancy terminology for the price of the car. The lower the cap cost, the lower your monthly payment. Cap cost may be the same as the STICKER PRICE of the car, but you can negotiate for a lower cap cost, just like you can to buy it, so don't be afraid to shop around. The cap cost is reduced by the amount of cash or trade equity that you put into the deal that exceeds inception and acquisition fees. The correct amount of credit for your trade-in should be indicated. If manufacturer rebates or dealer coupons are offered, such credit should also reduce the cap cost. Your total credits should be specified.

     

  • MONEY FACTOR. This is a fancy term for "interest rate." The lower the money factor, the lower your monthly payment. The money factor will usually range from .0021 to .0046. Ask the dealer to put your money factor in writing. Then you can multiply it by 2400 to calculate the interest rate. Remember that even the money factor is negotiable!

 

What else should I know about leasing?


The Motor Vehicle Lease Disclosure Act took effect on October 1, 1995, and it provides that all leases must meet certain requirements. You are entitled to copies of all documents which you sign during the course of the lease transaction especially the lease contract which will contain several very important terms. First, the lease contract will be clearly marked as a lease. Second, the price of the car or truck, with any added options and costs, will be listed. Third, your net trade-in value, cash, or rebate will be listed. And fourth, the bottom line price of what you are leasing will be indicated. It is important for you to review these disclosures carefully. Make sure that they reflect what you negotiated with the dealer. Many of the complaints which the Attorney General's Office has received relate to disclosures, so please read the disclosures with care.

You should beware of:

  • Leasing a car on the first visit

  • Relying on verbal promises made by agents or Lease Managers (whose profit motive may well out-weigh their motive for telling the truth)

  • Giving the agent a deposit before you thoroughly read, reread, understand and are satisfied with any completed lease agreement

  • Paying a lot of extra money for an extended service contract when your new car warranty will provide coverage for the major portion of the lease term.

 

Source: The Florida Attorney General's Office




Legislation



Extensive Federal and State legislation has been passed to protection the consumer with regard to automobile purchasing and leasing. Links to particularly relevant laws are provided. WoodruffinjuryLaw.com will continue to augment this listing for the benefit of visitors.


Federal Legislation

Florida Legislation