Andriy writes:
It seems as I’m falling a victim to a Yo-Yo Car Financing | Spot Delivery Scam from a car dealer…I purchased a new Toyota (scion) vehicle at a dealership exactly 2 weeks ago. I drove away. The total price was $20600 – I left a $500 down-payment. 13% APR in my contract. $470 payments for 60 months. Finance manager pressured me into purchasing GAP and extended warranty (around $2100 total) saying that banks would likely grant me a loan if I show them I’m serious about investment. Well, my credit is sub-prime (620 FICO) with few accts that are almost falling off and 2 recent ones for a few hundred bucks. But I still smelled something fishy though…
To make a long story short – last Friday, finance manager called me and told me he wasn’t able to obtain financing through 5 banks. I told him I had a blank check from Capital One, that I’d be willing to use after verification process – so I’m working on that now. He said that’s fine. But he also asked if I could put more money down, to which I said “NO”, explaining that my rent and other monthly expenses need to be covered. I’m in the process of repaying debts to my friends, so I’m not able to put more money right now.
My question is – what happens if Capital One doesn’t finance? Am I correct believing that I’d have to return the car back to the dealer? Will they refund my $500 down payment? What about car not being new anymore and having 1300 miles. I heard about dealers asking to bring car back before – but not sure how the process goes. I have that long contract on my hands with APR and payments, etc. – and it says Toyota Motor Finance. I actually don’t mind bringing car back to punish them *they knew what my credit was like*, I’m just worried about down-payment. I think they’ll try to pressure me into higher APR / payment situation. Do you know what the proper course of action is?
That sucks and they’re totally tying to scam you. Check out this site for more info. Honestly, your best bet is to take the car back and get your deposit back. Sorry boys, guess the deal didn’t work out. If they say no, tell em it’s either one of two ways: either one, you, Andriy, own the car and will pay the financing based on the terms offered, or 2, Andriy doesn’t own the car and so here it is, thanks for the free ride, give me my money back or I’ll sue you in small claims court. You should go for returning the car, as those financing terms are a disgusting ripoff.
Great advice,Thanks Ben. I just spoke to a friend’s brother (who was a Toyota selling guy for 10 years) and he told me that I was scammed and that I should a) do what you suggested + cancel my gap and extended warranty.
The only thing I’m not clear about is the deposit – actually it’s not big by any means (but 500 is 500) and I did put 1200 miles in 2 weeks – so I’m wondering whether they’ll try to charge me. I actually realize that it doesn’t make sense to them to take the car back, since it’s not officially new.
I’ll keep you posted. Have a great holiday season!
My only concern left is whether: A) I should arrange my own financing (possibly with higher APR) – I really don’t want that and I think I could live without a car for few weeks till I get something else.-Andriy
Well like I said, either you own it, or they own it. So they have to take it back. If they try to snake your deposit, fight tooth and nail for it back. Hell, tell them your old pal is the editor of the most popular consumer rights site on the internet with over 9 million pageviews per month and we will drop the wreckage on their asses.
As for your next car, ever think about driving a used beater? There’s a concept we enjoy on the site called, “don’t buy what you can’t afford,” which is to say, avoid going into debt. If this is too hard, and you do go through a dealership, come with your own financing, i.e., arrange your financing with your bank or credit union first and walk in with that.
Actually, that’s the reason I don’t want to keep the car. With 3 monthly payments I could get a 10-15 year old Honda….Traffic is so bad around DC that I realized that I’m not driving as much as I thought I would.
I guess I could loose the deposit, but that’s better than overpaying $8000 in interest on a $17k car. I’ll see how the developments will go. That old pal editor – is a powerful thing anyway. I just sort of feel bad, cause the finance manager seemed so be willing to help me, etc. I guess they have to pretend friendly. Actually spot delivery is something big in MD – Here the say that MD MVA (DMV) doesn’t permit temp tags – ““Temporary registration permits, or certificates and plates, may not be used by dealers in cases where vehicles are released to potential purchasers prior to consummation of a vehicle sales transaction. These types of transactions are commonly referred to in the industry as “Spot Delivery,” “Fronting” “Macarthur Statement,” etc.
I guess it’s just a lot of stress, etc. I’ll try calling the manager and let me know what’s going on. The only thing I’m worried about is that he doesn’t mind me getting my own financing.
(Photo: Vince Brown (attila))
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13%? Jesus. If you don’t understand compound interest, please learn. Buy used if you actually need a car. If you’re traveling within the beltway, you may be able to get by with a monthly metro and bus card. I did that when I lived in DC and saved a lot of money and hassle as a result (no gas, repairs, insurance, parking).
@KingPsyz: Curious, how is “pure price” not “price fixing”? Even when Saturn had the “no haggle” price there were still cars sold under MSRP or with extremely discounted add-ons and accessories. What you are saying is that the manufacturer sets the price and then strong arms the dealer to sell it at that price. Sounds like price fixing to me.
They tried to rip you off. seriously, those financing terms are robbery. If you can’t keep the car, you owe them *nothing*.
No price fixing is the name given when several corporations, usually considered competition, secretly adjust wholesale pricing to collude a fixed price for a good well above it’s normal cost.
This is no different then brands like Apple that set a retail price and tell anyone licensed to sell it that they cannot deviate from that price.
It’s not done in secret, they’re completely straightforward about it.
The idea is to take the scam out of buying a car. When there’s no haggling on price like you’re in a turkish bazzar, then you can’t feel ripped off. Too bad the Edmunds.communists who feel like everyone should get a car at manufacturing costs keep that from happening on a larger scale.
@KingPsyz: Oh the poor Scion dealer, makes little to no money. Bullshit. Or did you mean they make little to no money on the car but make their money selling the difference in interest rate, dealer fees, add ons and bogus service?
Dealers WON’T sell a vehicle if they can’t make money. It would be bad business to do otherwise.
[www.bigtwoscion.com]
Scion’s “Pure Price” purchase experience means no haggle, no hassle. The price you pay for all products and services offered equals the dealership’s posted and advertised price. Price menus are clearly posted in the dealership showroom for all products and services. Dealers are free to set their own prices.
Whoops.. you might want to contact that dealer and tell him he is fucking up your story. Oh and you may want to contact these people too. [donmcgillscion.com] So “Pure Pricing” means you pay what is advertised. Novel concept I will grant you.
Face it this dealership knew they could not get the deal done for $500 down and was waiting the two weeks to try and force more money from the OP. There is NO legitimate reason it would take two weeks for a loan approval.
So what dealership do you work for?
@trollkiller:
I agree with your analysis of the “Pure Price” bit and I think the other poster is off-base with his “no adjustment” claims.
However, I still firmly believe that it could, in some circumstances, take 2 weeks to arrange financing for one with poor credit. Maybe they wanted to verify his income and the HR person at his work took a long time to get back to them, etc.
I know dealers set their own Pure Price, and as I already mentioned they have to set those prices at the begining of the year and make the SAME OFFER TO ALL CUSTOMERS AND CLEARLY STATE IT IN THE SHOWROOM AND ON THEIR WEBSITE IF IT DIFFERS FROM MSRP.
I know, I have already spoken with Scion about a dealer in California that was breaking Pure Pricing.
I know the industry sucks, I see it from our side and wish everyone would go the way of Scion. Sell it for MSRP, which in general is a $1,000.00 markup over invoice at most, which if you consider everyone that works in a dealership that is not a whole lot to go around. Then nobody gets ripped off.
But because for some reason everyone thinks that they’re entitled a car for being alive, everyone thinks they should get the sharp pencil, sell it at cost deal. Which as you already observed, would nullify dealerships quickly.
The reason Scion dealers exist is for several reasons. One Toyota’s whole goal is to sell vehicles at a low price point and give them a plesant experience and then when they’re happy and ready to upgrade into one of the Toyota models they’ll make some money there. So they “encourage” AKA basically force all Toyota dealers in large enough markets to carry Scion and follow Scion policy. Two, dealerships know that by giving them a hassle free experience on the car itself, they’ll be more inclined when they want to upgrade their Scion to come back to the original dealer.
That’s the only time a dealer can make money off Scion.
Everything is regulated on the original sale though. Even trade values are regulated by Scion. We have to offer top dollar and cannot negotiate trade value, once an offer is given it cannot be changed. Meaning there’s no incentive for a salesperson to lowball a trade value only to bump it in the negotiation. Same goes with fees, if any. They have to be announced in the begining and they can’t tack on extra or erronious fees. Scion watches this as well. In fact Scion regularlly sends people into the dealerships to run “audits” on Scion policy.
Yes there are legit reasons why it takes two weeks to secure final financing as I already explained. Only if someone fits within a fairly narrow credit profile are they funded before they walk out the door.
Most times the dealer secures financing a week or two after a customer dirves away but we meet or exceed the original offer and so they never know about any kind of delay.
I work for a dealer, and because when I signed for the car I was in a simmial credit situation to the OP it took two weeks to get funded. But in the end I got a better rate and even got them to pay for registration. but it still took two weeks. The fact that it’s taking this long means someone is going to bat for him. But again, there’s nothing in it for them to have him default or return the car.
If he honestly feels he was given the runaround, or pressured, or anything like that he needs to contact Scion immediately.
I work for a dealer, but I won’t advertise for them here, that’s not the purpose for my posting here.
Quick story: I once bought a brand new, $35,000 SUV from a Toyota/Mitsubishi dealership. The going deal was 0% interest. I had a 750 FICO and more than qualified. We traded in our car, signed loan paperwork and drove off the lot.
A week later they called me: “You don’t qualify for the 0% deal. You need to come down and sign new loan papers at a higher rate.”
My response was as follows: “No, I’m not signing anything. You either make it work under the terms of the original agreement or the deal is off, I’ll bring it back and you can return my old car to me.” When they pressured me by claiming they no longer had my old car, I told them, “Well, you’d better find it, then, because I’m going to sue the ever loving shit out of you people for breach of contract.”
What do you know, suddenly I qualified for the 0% deal again. Funny how that works.
@KingPsyz: Actually, Apple is a bad choice of comparison to Pure Price since I can and do get things for upto 15% less than MSRP from authorized Apple retailers. Heck, I usually get 10%+ discounts at the Apple store. And no, I don’t work for Apple.
As for everyone wanting the “cost deal”… I blame this solely on dealerships. Decades of bad practices have created an environment where no one trusts or believes them and wants to stick it to the dealer/salesperson/industry for something that happened to them in the past.
I have zero sympathy for any dealership or dealer salesperson and I prefer to aggressively haggle for a price that seems fair to me. Why? Because I’ve worked for a car dealer in a non-sales position and I see how hard dealers try to confuse customers and fudge numbers. Even when selling a car at “cost” the corporate incentives provided a decent profit on the backend. That and $500 undercoat that cost us about $25 in materials and 45 minutes of a $7/hr employee.
I don’t believe for a second that a Scion has a $1000 margin on a $15,000 car. I like the Scion line, but the build quality is subpar for Toyota*. Couple that with cheap materials and a bargain basement powetrain and you have a lot more margin than $1000. Let me rephrase that – someone has a lot more margin than $1000. Maybe dealers are getting screwed by corporate, which sounds probable. If that is the case it should be self-correcting in the marketplace.
* I test drove a last gen xB, things may have improved in the current iteration.
Well all the Scions are built by the Toyota. They did try and get a little too agressive with cutting costs in the first gen xB and the new one is a huge improvement.
You have to see the gaping hole in your logic about pricing though. You say it’s to make up for years of getting ripped off, yet now that so many customers are demanding cars at invoice and people not buying cars as often the dealers get desperate and try and get everything they can out of anyone they can and the cycle continues…
I can’t wait til something like Pure Pricing is industry standard and sites like edmunds and lemon law are no longer required. All they do is create false experts and an air of animosity that doesn’t do anyone any favors.
I work in sales but not as a salesperson, so I agree there’s some things in this business that suck to high hell. And there are a lot of us on the “inside” who are consumer advocates and are fighting for change. Internet sales departments are the way to go for a car buy until Pure Pricing is industry standard.
I don’t know what brand you were working for, but with Toyota there is honestly a very narrow margin.
Now I might get in trouble for this, but here goes.
For an automatic 08 xB the MSRP starts at $17,220.00 Invoice on that exact MSRP is $16,400.00.
That’s $820.00 above invoice… Now pay for building lease, sales commission, management, payroll, accounting, finance commission, phone center, website fees, utilities, ect with that $820.
Obviously Scion doesn’t collect dust the way some domestics do, but you get the idea.
@KingPsyz:
What I see you laying out here amount to “sales” tactics. The dealer is going to make more than $800 on the sale. Whether that comes from kickbacks from the manufacturer or the banks, they certainly bank more than $800. The reasons you give come across as towing the company line. Most of us with logic know the dealers are there to make money, and certainly don’t expect them to lose money on the sale. However, it comes across pretty shady when you start saying “we have to pay rent, employees, etc.”. I don’t care what your problems are, or what bills you have to pay. We’ll negotiate. You (the dealer) will come down as far as you possibly can and still profit. I, the buyer, will come up as far as I am willing to. It’s a game. If I can find your bottom line before you find my limit, I win. If you find my limit before I find your bottom line, you win. It’s all a game, and I think it’s better for all involved than this “pure” pricing business. In some cases, the dealer can make more than they would have via pure pricing, in some they make less.
@KingPsyz: I think you honestly believe what you are telling us, sorry but I have to disagree on a few points.
First that $820 does not reflect all the profit margin in that vehicle. As an underling I would not expect you to know all the ins and outs of the profit margin. If you charge a dealer prep fee, dock fee, or any other fee of that nature you are adding to the profit margin.
You show a finance commission to your list of expenses. A sales commission is easy to understand, car gets sold, money is made, the salesman gets their cut.
Now ask yourself why would you pay a commission on something that is not making a profit? You wouldn’t. Why does the finance guy get a commission? Would it be because he gets the loan done at a lower percentage than what is sold to the customer? So there is a few more thousand added into the profit of the vehicle.
Add in the money made by selling gap insurance and now you have more profit margin added to the vehicle.
Add in the money for undercoating, accessories, application fees and you add even more profit margin to the vehicle. Oh and don’t forget dealer incentives.
As you can see there is a lot more margin then the dealership pretends is there. When was the last time you saw a dealership owner wearing Wal~Mart clothes?
You say sometimes it takes two weeks to get financing but the customer never knows about it because you find a better deal? It may take two weeks before the paperwork is filed in all the right places but you know if the loan is approved before that.
Look at the OP again, now ask yourself would you do a $500 down on a $20k vehicle with that FICO? Of course you wouldn’t. The dealer thought they could send it out the door and force more money from the OP after two weeks. The OP would at two weeks in be attached to the vehicle and most likely have no other means of transport. If they had a trade in you can bet they were dehorsed too.
@Pylon83: Personaly I like a “Pure Pricing” type of set up. The dealer sets what they feel will be a proper price and I as the customer can decide if I think it is worth it.
Andriy writes:
@KingPsyz: Where’s the flaw in my logic? A car dealership is a business that exists to sell a product. If they can’t sell their product for a profit they should not be in business. Like I said, self correcting problem.
If people stop buying cars because they can’t get the price they want, dealerships will eventually close and the market will constrict. At some point prices will go back up and the cycle will be complete.
@trollkiller:
Actually as I said before, with a low 600 middle score I got into a Certified Camry with about 20k miles on it for about 19k with tax and all and I got a 7% rate and $500 back to pay my registration with.
So yeah, they could have got him done. Did someone try and get a bump in theri commision in the finance department? Probablly, but again that’s why I mentioned that if he honestly feels like they put the screws to him or messed around to report them to Scion. They do respond. I have contacted them before, not letting them know I work for a dealer and I always hear from then in 24 hours or less.
It’s fine if you and Pylon don’t agree with what I am telling you about Pure Pricing. I know it’s on the up and up, and you just won’t ever be able to purchase a Scion if you insist on bargining or haggling. We can’t even touch those deals with a 20ft cattle prod.
Trust me, there’s once a year when we can make a fuck ton of money on special edtions if we we’re allowed to adjust pricing.
You know how Ford dealers add 15k to a GT, or a Roush Mustang? We can’t do that. Period.
I do this run around with people every day, they insist they should be able to make an offer, and I try and tell them we’re not allowed to change pricing or haggle on Scions.
I think if the industry went with set pricing accross the board, you wouldn’t need commisioned sales people. The customers would be in a much better posistion because they all get the same deal.
One last thing and I’ll walk away since there’s no changing your minds.
Yes here in Vegas all dealers have a high DOC Fee, usually in the $500 range. That’s the only fee were allowed by Scion to add because we advertise it on our site and here in the showroom.
The accessories are sold to the customer at Scion’s set price, we cannot charge for dealer installation or undercoating, or any other garbage. In fact for Scion customers here we just give them the paint sealant for a year, free. Nothing added to the deal, not allowed to. We give it for free hoping they’ll come back here when they do need some kind of service down the road or want to add accessories.
There are no dealer incentives on Scion, ever. You can choose to not belive me, but it’s true. As I mentioned previously, Toyota considers the Scion brand a loss leader.
And yes, I do expect the dealer to pay everyone involved, even if there’s not alot to be made, because why would anyone want to work for free?
@KingPsyz: I agree with you on the need for a true price like most other goods and services.
I just produced an ad piece for a Scion dealer, it spoke of factory incentives, employee pricing, discounts.. etc. Because it is an ad piece I won’t take it as gospel but if what you are saying is true the old school dealers still want to play the game.
@Ben Popken: Whoa whoa whoa, they matched you with car insurance? I don’t know about your state but here that is illegal. Dude you are being clubbed like a baby seal, return that car. Even if you take the $500 hit you will come out ahead.
You are dealing with a slimy dealer. Bail out NOW. Go back to driving the beater until you can buy the right car from the right dealer.
@KingPsyz: That DOC fee is extra profit on the vehicle, even if everybody is doing it.
“Hell, tell them your old pal is the editor of the most popular consumer rights site on the internet with over 9 million pageviews per month and we will drop the wreckage on their asses.”
I love it….
@trollkiller:
That Scion dealer could be in big trouble if Scion corparate got wind of that ad.
Unless they were in regards to the Toyota portion of the dealer…
Yes the DOC is profit, so they made a whopping $1,300.00 off a $17,220. car.
Many companies would buckle under that kind of narrow margin. The car buisiness is pretty much a tightrope act. I agree there needs to be change industry wide, but in this one instance he bought a car from a manufacturer that tries to prevent their customers from getting the shaft.
@KingPsyz: The ad piece left it all pretty gray as they all do.
They made a whopping $1,300 on a product they did not have to buy. If the dealer was out of pocket $15,920 to make that $1,300 he would be nuts. If the auto business was set up like a normal retail business the margin would be very thin. The dealer does not have to pay for his new car stock until it sells. If your boss tell you different he is a liar.
If a lot is on the tightropes it is because they either do not have the products the customers want or their practices are so shady that only suckers buy from them.
You mentioned before that you hate sites that make customers instant “experts” and I can feel you on that. Try selling electronics when you are up against Consumer Reports. Try explaining to the customer that the model they are dead set on buying was discontinued 6 months ago. Not fun.
An educated consumer is the thorn in the side for a dealer, but the dealers are the ones to blame. Car dealerships have a well earned reputation as the OP demonstrates. I agree with you he needs to get corporate involved.
Hi, this is Andriy. There’s no problem with Scion – the price is $17620 for the Scion tC (including $620 dealer destination charge). There’s $100 doc processing fee (that says not required on the paperwork – not sure that that is). There’re taxes and fees. Plus there’s Platinum contract and GAP insurance, which I know cost too much. Finance manager still insists I keep those (even though I know now those aren’t required). He told me not to return car – he said he’ll work something out. I sort of trusted him in the beginning since he told me not to get coating/alarm – told me it’d be waste of my money. I said strict no to adding more money / higher APR – told him we had a deal. So I’m just trying not to drive far away now. I’ll just hold on and wait. The car is nice to have, but public transportation is available here, so I shouldn’t be in too much trouble if I return it, so I’m not worried about it. I really appreciate everyone’s advice – I realize what my right are now. Really appreciate everyone’s help.
@wildmight:
Yeah, Keeping a car you obviously can’t afford, as well as the sucker additions the dealer talked you into and you know you should keep. I’ve got a bridge for sale in Arizona, let me know if you’re interested.
I would call your own auto insurance to find out how much they charge for GAP. As to the PLATNIUM COVERAGE, yeah ditch that this is a brand new Scion and just about everything is covered. Unless this was a certified used model, then Platnium Certified should only run you about $750 max.
@KingPsyz:
“1,300.00 off a $17,220. car.”
7.5%
That’s pretty damned good considering average margin on sold consumer products in the US is under 6%, with the majority under 4%.
OK, things went from bad to worse….
It’s been almost 7 weeks now since they’ve given me the vehicle. I think the finance manager screwed up and doesn’t know what to do.
The car still looks good, but it has 3000 miles already. They told me (my manager and another guy) that they’ve exhausted their finance options, so they’ve tried me to do the financing myself. I didn’t see anything wrong with it (although contract stipulates that it’s dealer’s responsibility to come up with financing).
Also, my 1st payment was due on the 5th, but I never received the bill. Contract says that they may ask me to return the car in good condition without excess mileage (not specifying what excess is).
With my financing, i was pre-approved for up to 26k by HSBC AUto. I went to dealer and we closed the sale (i know he had to fax to them whole bunch of papers), I got congratulated on the phone by bank manager – dealer put filled-out Turbo and authorized check into safe. However, I get a call maybe 20 minutes later from the bank saying they’re voiding the check and they need more docs from me (I’ve been at my employer for 2 years, however, I wasn’t getting money while overseas for a good chunk of 2007 – so I think they’ll still deny when I send them other docs – my W-2 is still good).
Anyway, the situation is that I realized that maybe God doesn’t want me to have this car anymore. That manager (whom I don’t trust a bit) told me I’d loose $3000 if I take car back (I’m sure he meant trade-in though).
My question is this:
A) Should I e-mail the General Sales manager and ask them to send a bill? I asked people around and they told me they’ve never heard about situation like this – usually if they can’t finance – they ask to bring car back within a week.
cool.gif Who’s screwing whom? Is this bank’s fault, my fault for driving away (i had 100% impression i was approved 1st time I drove away).
C) What’s the nice recourse I have? (leave them $500 downpayment and they take car, what if they want more money for mileage)
Please advice as I’m very lost at this point – I’m just afraid that if I just wait – the whole situation will not be in my favor.
I decided I don’t want the car at all – all I want is a peace of mind.