Dealer's Tricks - bait & switch, etc.

bowke28 · April 2004

as long as a deposit is specified on the buyers order as "non-refundable", then thats it. sometimes, its just easier to give it back, but legally, a dealership is not obligated to do so. by leaving a deposit (and with honda, its not an actual "order". you are holding an incoming unit) you are keeping that vehicle from being sold, and that costs the dealership money.

a deposit to "hold" a car has only 1 purpose. to keep it from being sold. if you hold a vehicle and back out, then the only thing that has happened is lost opportunity for the dealer.

grapevinetx · April 2004

No, bowke28, regardless of the wording on the buyer's order, there isn't an enforceable contract in place until both parties to the contract have received compensation. People may need / want to back out of a buyer's order for any number of reasons. Dealerships are not endowed with any legal right to decide what's a good enough reason.

Someone may come back and cite a complicated exception to this general statement, but in general, in a simple situation of buyer's order regret, where physical possession of the vehicle has not been taken by the potential buyer, the court will find no basis for the dealer to keep a deposit. The dealers here who say that they would give back the deposit suggest that they do so out of the goodness of their hearts, and that may well to true, but it may also be because they know or suspect that they will lose a legal challenge if they try to keep it.

rroyce10 · April 2004

...... ** but it may also be because they know or suspect that they will lose a legal challenge if they try to keep it.**

No, that's not a true statement .. if it "is" part of the contract and the dealer can show actual expense, then the dealer can keep part of the deposit, some of the deposit or even all of the deposit .. it will all depends on the situation, time element and the incurred cost ....

Terry.

grapevinetx · April 2004

Yes, Terry, I agree that if the dealer can show what a judge deems to be an actual expense, then the dealer may be awarded damages to cover that expense. In most cases of simple order regret, though, the dealer is unlikely to have such expenses. Opportunity loss, as in "I couldn't sell the car during that 24 hours", is not an actual expense.

dsattler · April 2004

Grapevinetx,

No, opportunity cost is not an actual expenbse, but the interest the dealer is paying on the car is. And if the car then sits on the lot long enough to lose its holdback, that can be a lot of money to the dealer. If someone special orders a car with an odd combination of options and then backs out, it could easily be a car that no one else will want to buy.

grapevinetx · April 2004

An assertion that the special ordered car would be harder to sell based on having an odd combination of options is entirely speculative and is not an actual expense either. A buyer who wants that exact combination of options could as easily walk in the door tomorrow.

Whether the dealer could recover for lost holdback is an interesting question. I don't know, off the top, whether that's been tested. I expect that it would have to be a situation, though, where time had passed and an actual loss of holdback could be calculated. I don't see it flying at the time the original deal falls through based on a speculation / prediction that the car *might* sit and have the holdback come to be used up.

The holdback thing is a little murky, in terms of how it would be calculated for a particular car. I've seen dealers assert that holdback is more of a lump sum that applies to the entire fleet, or a subset of the fleet that came into inventory at a given point in time. I can as easily see the holdback being considered an expense incurred in the normal course of doing business and not specific to the one transaction that fell through.

bowke28 · April 2004

floorplan interest is calculated from the day the vehicle is reported to have been dropped off on the lot. if an order is placed, and backed out of, the dealer can simply wait until it sells, and report the total bill for the floorplan on that particular vehicle. now it becomes an actual expense.

grapevinetx · April 2004

Have you tested it, Bowke28? That is, have you waited until an ordered car sold to someone else and then sued the customer who ordered it orginally to recover lost holdback?

blh7068 · April 2004

"An assertion that the special ordered car would be harder to sell based on having an odd combination of options is entirely speculative"

First, what "odd combination of options" would qualify your assessment of a harder sell by the dealer as being speculative?

This may be a fringe example, but here goes.

Say some one who lives in Florida orders a car without power options and say even air conditioning(if possible). Not to even mention color.

Car arrives, buyer backs out. Dealer now has to sell the car to someone else. Based on my example is it really "speculating" that this particular unit would be harder to sell?

grapevinetx · April 2004

Blh7068, we were talking about what would or would not constitute legal damages against a potential buyer who ordered a car and then backed out of the deal. "Speculative", in this context, means in comparison to actual expenses that could be allowed in court. I don't think anyone's disagreeing that a car that's not air conditioned may be harder to sell in Florida. The question was whether dealers have been able to prevail in attempting to collect damages from the original orderer of the car in such a situation. Do you have a direct experience that you can share?

driftracer · April 2004

on that car with no air in Florida you just backed out on since you're making me eat the WHOLE CAR! That thing would have 2 birthdays on just about any lot in the South.

grapevinetx · April 2004

I have no doubt that you would attempt to keep the deposit, Drift. The discussion is about whether, when the buyer who backed out sues you to recover his deposit, you will be allowed damages based on your argument that the car will have 2 birthdays on the lot.

rroyce10 · April 2004

....... Depending on the situation, the the potential buyer can get back some, a little, most or none of it back .. in a situation where your in Florida and you order a "no-air" vehicle the buyer would -0- back ..

The point is, not to get yourself in a situation like that -buyer or seller- ... dealers don't want the aggravation and buyers should know better.

Terry.

chadwick32 · April 2004

I am considering the purchase of used vehicle from dealership. I believe the particular vehicle has been on the lot for some time (5 months). Assuming car is in satisfactory mechanical condition and has clean history I am going to make an offer at approximately $750 over Trade-in value as posted by Kelley (sorry Edmunds). This equates to about $3,500 less than what the dealer is currently asking (list price of around $17k). Assuming the car was purchased by the dealer at auction does the auction price paid by the dealer generally come close to the trade in value? For those of you in the business would this be an acceptable profit considering the car is not moving very well and the market seems to be saturated with this particular vehicle?

Kirstie_H · April 2004

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mirth · April 2004

Post a great description of the vehicle on the Real World Trade-In Values topic and Terry will give you a good price to offer for the car.

bowke28 · April 2004

normally, i find that inventory costs are significantly more than trade-in value. most of the time, its anywhere from $500-$1000 over. think of it this way:

full detail and prep: $200
mechanical inspection: $100
4 tires: $500

these are the most common things to charge to a vehicle in reconditioning.
other common things:

dings/scratches: $50 each
wipers: $20
brake pads: $300/set
tune-up/oil change: $150

most of this is maintenance. if you want to buy a car at trade-in value, you will get a car thats in trade-in condition.

dont be surprised if they stop coming down around $1700-$2000 below sticker.

chadwick32 · April 2004

Thanks. That's helpful..I'm looking for a good starting point from my side. One thing I'm noticing is some of the used vehicles I'm looking at don't have brand new tires. So it sounds like I can take trade value add some maintenance items you mentioned and be at a reasonable starting point. Maybe I get lucky and they really need to sell the car as I am in no hurry at this point.

stickguy · April 2004

What a dealer has in a car really has no correlation to what you should pay for it. The market determines what it is worth.

Basically, dealers can get buried in a used car the same way you can be buried in yours. And and salesperson would tell you the same message: it's worth what it's worth, and if you owe more than that, too you are stuck.

The economic's term is "sunk cost", which seems particularly appropriate in this case.

Of course, economic factors don't stop plenty of people (dealers and privates alike) from refusing to sell for what the market will bring, since they "have more than that in it"

Heck, I bought a Miata last November (in NJ), and got to here (second hand) the wailings of the UC manager about how he had 10,500 in it, so how can he sell it to me for 10,700, yada yada yada. My answer? It's 45 degrees out, and winter is coming.

steine13 · April 2004

"What a dealer has in a car really has no correlation to what you should pay for it. The market determines what it is worth."

Right. That's how it should be.

In the real world, that's how it works 3 months later... I do believe that car dealers aren't much better than regular people... getting a dealer to take a loss at "fair market value" has got to be like pulling teeth, compared to a dealer realizing a $1,500 profit at the same price when they "stole" the vehicle at trade time.
Really, it's all about the money, that's how business works. It's not about, oops I made a mistake and I love to admit it.

-Mathias

chadwick32 · April 2004

Agreed. I just want some comfort that my initial offer is at least reasonable on some level. On a 19k used I30 I may offer 15k based on trade in value and some other costs the dealer has in it. I know I would pay a bit more (say 16K) but not even consider the 19k at full retail. This is the point that the "market value" theory kicks in. If dealer knows it can be sold for more than 16K then that's great for him and I won't be offended because if I want the car bad enough then I have to pay his price. But if I know 16k is the max I will pay then likewise he should not be offended by my offer. By the way, I think the market is closer to my price since there seems to be an awful lot of these cars on his lot and have been for several months. So I plan to make an offer and see what happens.

bobst · April 2004

Your offer will be refused. That is what will happen.

Your next move should be to walk toward the door. That is when the fun begins.

As you are walking, the salesman will start to make all kinds of low counter offers. When you actually open the door, they will then accept your offer.

You don't believe me? Then try it, and see what happens.

chadwick32 · April 2004

Yep, I believe you. Thankfully this is not my first time in negotiations with a dealership. Most times have been ok as I try to be as prepared as possible (thanks to Edmunds and the like)and respectfully tell them where I need to be on price. Also I am in no hurry to buy because I have about a month until I need the car but would certainly "buy today" if the price and car are right.

isellhondas · April 2004

Trust me...if you were to offer FOUR THOUSAND dollars less than a tagged price on a used car, I would not follow you to the door!

I would figure you weren't serious.

stickguy · April 2004

That is assuming you have the cars priced to sell. I have also seen dealers that inflate prices tremendously on the used cars, so 4K off isn't theat much of a stretch.

IMHO, shopping new is much easier than used. You take condition out of the mix, and it is much easier to compare prices from car-car and dealer-dealer. Pricing also tends to be much more upfront, since there is so much info available, and dealers have to compete through advertising.

It's just not that hard to get to TMV on a new car (or pretty close to it), but figuring out a realistic price for a lot of used cars is not for the layman.

chadwick32 · April 2004

I am serious about the car but not going to overpay. Do you recommend making my best offer and not leaving room to come up? In my earlier example I was offering 15k but would most likely go up to 16k. I recently purchased used vehicle that was on the lot for 23k and got almost 5k off that price. I thought my price was fair but dealer was originally asking way too much. Several times I have left dealer lot with their best price only to be called later with a better offer so why not wait it out a while? Doesn't mean I'm not a serious buyer.

kyfdx · May 2004

If you are confident in the value of the car, and aren't worried about overpaying, then leaving $1000 of room from your first offer is too much. Once the dealer has you moving that much off your initial offer, they will try to keep moving you up.

I try to never come up more than $300-$400 to my highest price. Of course, if I've over-estimated the worth of the vehicle, then I risk paying to much. But, I find this works best in negotiations.

regards,
kyfdx

bowke28 · May 2004

is subjective, because you might think the car is "worth" more to you than another person, and yet another person would think it is "worth" more than you do. offer what you are comfortable paying to begin, and hold firm. if they get within a hundred bucks or so, id go ahead and pull the trigger.

using your #s, i would offer $15800+TLFs, and pull the trigger at $16k-$16.2k.

bobst · May 2004

If you plan to offer $15800 but are willing to pay $16200, the salesman, who is very skilled at negotiation, will soon get you up to $16200. That is what he does for a living.

Save yourself the anguish and offer $16200 and stand firm.

dorrie9 · May 2004

Hi, I received a letter in the mail from my Suzuki dealership saying they wanted to offer me a good price on my Vitara for a trade-in opportunity to get a new vehicle.

I'm very happy with my Vitara so nearly threw out the letter, but then I saw a little scratch-off ticket. The letter said I could redeem the prize on the scratch-off ticket just for showing up at the dealership on Saturday, May 15. So I scratched off the ticket and it said I won a $1,000 shopping spree.

I had my friend call the dealership (because I am shy) to find out what the shopping spree was about . The salesman said I would be shown a catalog full of jewelry, electronics, and other stuff and could order anything I wanted up to $1,000. He said it'd be shipped to me.

Has anyone heard of this? Is it a scam?

bowke28 · May 2004

sometimes, there are legitimate things, but often, a purchase is required to redeem these things. by all means, go in and redeem it, but read EVERY WORD before you go. i expect that there will be language in it somewhere requiring you to buy a car before the stuff is shipped. if not, and they hedge, call a lawyer...or better yet, call the news stations in town.

but i hope you get your stuff.

fredvh · May 2004

I have heard of this. Most of the time the shipping on your "free items" is far more than what you would normally pay. The only way I see that it would work out for someone is if there was an item that one really needed and to pay the inflated shipping might be cheaper than to buy the item at a retail outlet. This is really not getting $1000 free.

CarMan@Edmunds · May 2004

Hi dorrie9. Here are my thoughts on this subject. I am always fairly skeptical about this type of offer because nothing in life is free. Why would a business that you have never even contacted, filled out a contest entry form with, or purchased anything from give you a valuable prize? I suppose that it is possible that this offer is completely legitimate, and the dealership is using it to generate positive word of mouth and to try to get consumers to come into its showroom, but unfortunately there is more than likely some sort of catch as the previous posters have mentioned.

Car_man
Host
Smart Shoppers Message Board

mirth · May 2004

I was once offered a similar type deal by a credit card company once for joining some promotion. The deal was a $500 free shopping spree. Since I was signing up for the promotion anyway, I got the thing in the mail. What is was was two $250 coupons (only one per item) and a catalog of merchandise to order from. Nothing in the catalog was less than $300, and since they were way overpriced, with the shipping it wasn't even worth it. I suspect this is a similar situation.

lucaja · May 2004

I'd appreciate it if some of you would weigh in with some thoughts on this situation . . .

I recently purchased a new Dodge Durango for cash. At the time I negotiated the deal, I had the dealer agree, in writing on the purchase contract, as follows:

"Customer will be credited will all rebates, incentives, trade-in assistance/allowances (if customer provides a trade-in vehicle) offered by manufacturer or otherwise available at time of delivery."

At the time I picked up the vehicle, I found there was a $2,500 Cash to Customer rebate and a $500 Loyalty rebate (which I confirmed with Dodge that they could be combined).

After debating a bit with the finance manager, he credited me with both rebates.

I also had the dealer register the car for me (it was an out-of-state registration), for which the dealer collected sales tax.

When the dealer told me to come in and pick up my plates, I was given a receipt from DMV that showed they paid less tax than they collected from me and it indicated an extra $500 rebate.

When I questioned the administrative person who handed me my plates, she pulled my original paper and gave me a copy of the dealership's original invoice (which she probably wasn't supposed to do).

The invoice in their file was not the same one they gave me (it had a different sequential number on it). It also showed an extra $500 rebate--however, they seemed to add another $500 to the price of the vehicle. So the bottom line number came out the same--but it appears they collected an extra $500 rebate.

I've already spoken to the dealer and asked him to explain the discrepancy on the title receipt from the motor vehicle department, which he said he'd look into. I haven't told him that I have a copy of their other invoice.

They way I look at it, I'm owed $500 for the rebate and the extra tax that they collected but did not pay.

If they're smart, they'll quickly refund the money before I start writing letters to various agencies and Dodge--small claims court is also a cheap easy option.

My question is whether anyone can shed some light on what the dealer did--and if this is a common trick they pull thinking you'll never see the paperwork in their file or check the amount of tax paid to the state.

Sorry for the long post . . .

brianw220 · May 2004

I think you should call your local TV station and hve them do an expose on this. It is an outrage that they may possibly have collected an additional $500 (could be dealer cash) despite your mutually agreed upon out-the-door figure. If the TV station doesn't work, then go to the papers or perhaps the radio stations. You may even want to consider venting to a reverse-auction web site.

kyfdx · May 2004

This is good advice... if you don't have a life. And enjoy confrontation.

oregonboy · May 2004

If you have proof that the dealer collected sales tax and did not remit it to the State, the dealer is in a world of hurt. The State really frowns on others cutting in on their turf.

The State Department of Revenue would be very interested in seeing the details of the transaction. They will definitely follow up by contacting the dealer. It could potentially lead to an State tax audit which could result in significant penalties and interest.

If the dealer is routinely collecting and pocketing taxes, criminal charges could be brought as well. You can get away with murder, but you do NOT want to mess around with taxes.

james

mirth · May 2004

...what the $500 was for. If it was a customer rebate, then you have a decent grievance. If it was manufacturer-to-dealer cash, then it's their money, not yours. Manufacturer to dealer rebates are not the same as customer rebates, and the dealership is under no obligation to share that money with you.

Kirstie_H · May 2004

Don't forget tonight's member-to-member chat - it's open mic night, so come and discuss whatever's on your mind.

http://www.edmunds.com/townhall/chat/townhallchat.html

6-7pm PT/9-10pm ET. Drop by for live chat with other members. Hope you can join us!

kirstie_h
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dbgindy · May 2004

Take a look at the last sentence by brianw220. I think he was writing a little tongue in cheek. :-)

Duncan

kyfdx · May 2004

I believe you are correct.. my apologies.. Hard to believe that I would overlook a sarcastic post. "tongue in cheek" should be my middle name.

regards,
kyfdx

bowke28 · May 2004

the dealers ARE NOT required to give manufacturer rebates. if, through negotiation, you arrive at a price, thats why they had the stipulation at the beginning.

as far as taxes go, if your taxes are paid in full, then the dealer owes the difference. (you will probably get a check in the mail in a few weeks.) every car i have bought happens this way.

lucaja · May 2004

Not sure I'm following you . . . I know dealers are not required to give rebates--that's why I had them put the language I quoted in my earlier post on the purchase order.

That language became a binding term of the contract once the dealer signed off on it--thus I am owed all rebates that were available. If they retained any such rebate, they have breached the contract and I am well within my rights to recover it from them.

The only question is whether they'll want to fight me on it. I would think not, because it's clearly stated in the contract and considering they seem to have screwed with the taxes and I'm sure I'm not the only person whom they've over-collected from.

My question though, is whether anyone can shed light on why they increased the price $500 (on a separate line item) and then claimed an extra $500 rebate. My hunch is that it's to keep the final price the same for their book-keeping. I'm just wondering if this is a common tactic some shady dealers use and whether it's more complicated than it appears.

As for the taxes, it should be a no-brainer for them to refund any over-payment without a fight.

bowke28 · May 2004

" I'm just wondering if this is a common tactic some shady dealers use and whether it's more complicated than it appears."

dealers do it all the time, and mostly are not 'shady'. if a buyer does not ask for a rebate, they dont get it. thats been part of car deals for decades.

your deal said "all available rebates" right?

if this was a factory-to-dealer incentive, then you languaged yourself out of $500.

lucaja · May 2004

Bowke28---my language was as follows:

"Customer will be credited will all rebates, incentives, trade-in assistance/allowances (if customer provides a trade-in vehicle) offered by manufacturer or otherwise available at time of delivery."

They can try to dipute it--however, on the tax form they indicated the extra $500 as a rebate.

grneyes · May 2004

Got quoted a killer price, $4700 below invoice on dealer stock '04 last week. THis was $1K under carsdirect! Internet deal. Started talking about other avail. colors, he said he could get same model, same options by doing a trade with another dealer. We found the car and got ready to do the deal, and now the car at the other dealer was produced later in the year than the first, and there was a price increase. Now, the model I want is $1000 more simply because he made an error. Faxed me the invoices, showing that one had an earlier ship date and a lower MSRP.
My choice is to take a color I don't want or pay extra. Does this sound right?

joe2617 · May 2004

Sure I don't have to give a customer the rebate but that doesn't mean I get it. Most manufacturers require the customers signature on a rebate form for the dealer to receive it. Now DEALER CASH that's a different story. On the other hand a dealer can simply negotiate a price without disclosing the rebate until it comes time to sign the purchase order, contract etc..

joe2617 · May 2004

Is the new invoice $1,000 higher than the original? If so there may have been mid-year changes to that model that increased the price. $1,000 is a pretty big price increase if there are no other changes. Also, when one dealer trades with another it usually costs the initiating dealer $ so dealers won't go out to find a car for a short deal. Offer to pay $500 more for your color and see what happens.

rroyce10 · May 2004

.... ** As for the taxes, it should be a no-brainer for them to refund any over-payment without a fight **

          I think where you "might" be getting mixed up with the tax issue is: you pay taxes based on the buyers residence, most states are now reciprocal, (example) meaning they will pay the Florida sales tax and the balance for - let's say Ohio, goes north, it's a very common thing nowadays ....

            Was the $500 used to lower the "difference" figure ..?

                     Terry.

Dealer's Tricks - bait & switch, etc.

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