“BUYERS ARE LIARS”.
I don’t think I was in the car business one hour before I heard that catchy little phrase. Sure enough, over the course of my retail career, I suspect I was lied to over and over again by the best of them.
I’m not going to pontificate about what buyers lie about and why – many of us could easily write a book on that subject. Instead I’m going to bring up what I think is an important point – buyers can say pretty much whatever they want without fear of recourse, dealers cannot. Yep, that’s right. Buyers can outright lie through their teeth, but dealers are not allowed to stretch the truth even a little.
Doesn’t seem fair, does it? Well it’s not. All may be fair in love and war, but it sure isn’t fair on a car lot. For the most part, when buyers lie to a dealer, they get to go on their merry old way. But if a dealership is accused of being dishonest with a customer, either by commission or omission, they may end up in a courtroom or worse.
When you look at actual enforcement actions and court cases against dealerships, there is typically one common element – the perception that the dealer was less than completely honest with a consumer. The laws allow for a very broad interpretation of what is considered to be unfair or deceptive. Here are some common examples of accusations by plaintiff’s attorneys and regulators:
- Making false statements or failing to disclose a material facts to a consumer
- Oral promises made to the consumer that the dealer fails to deliver upon
- Misleading statements about APR, such as “You won’t be able to get a better interest rate than this”, when the buy rate is being marked up
- Communicating information in a manner that may be misleading, either by commission or omission
- Adding the cost of an F&I product to a consumer’s purchase agreement or lease without first obtaining the consumer’s express consent to purchase the product
- Informing or suggesting to a consumer that the price of any F&I product is included in the price of the motor vehicle
- Informing or suggesting to a consumer that the sale or lease of a vehicle subject to credit approval is a final or completed transaction
- Altering documents without the knowledge and permission of all parties
- Obtaining a credit bureau without proper authorization
- Failing to sell a vehicle at or below an advertised price, whether or not the consumer knows about the advertisement
- Advertising vehicles with intent not to sell them as advertised
- Misrepresenting discounts in advertising and not disclosing important limitations
- Advertising claims such as “everyone financed,” “no credit rejected,” or similar claims when the dealer is unwilling to extend credit to any person under any and all circumstances
- Engaging in false or misleading advertising, either orally or by way of media
- Advertising “no money down” or “zero drive off” when there is actually some money needed to achieve the advertised payment amount (such as tax, license, acquisition fee, etc.)
- Representing to a consumer that a vehicle is available for sale when it is not
- Informing or suggesting to a consumer that an F&I product is a required purchase
- Informing or suggesting to a consumer that purchase of an F&I product will increase the likelihood that the consumer will be approved for financing or that financing will be approved on more favorable terms to the consumer
- Increasing the selling price of a vehicle to cover a bank acquisition fee
- Intentionally overstating a vehicle’s value by supplying an incorrect book-sheet or due bill to a financial institution
- Over-allowing on a trade-in, thereby increasing the sale price of the purchased vehicle or failing to properly disclose negative equity
- Misrepresenting the amount of rebates available to a customer
- Engaging in payment packing, i.e. inflating payments, inflating down payments, extending the contract term or in any way disguising the actual charges for goods or services.
- Knowingly delivering a vehicle where the lender or lessor will not approve the consumer for financing according to the terms set forth in the installment sales or lease contract, with the intention of re-writing the contract at a later date
- Failing to properly disclose deferred down payments
- Knowingly misrepresenting a vehicle’s prior history or condition, either by commission or omission
- Forging documents
- Knowingly misrepresenting a vehicle, products or the terms being offered
- Falsifying, or allowing to be falsified, any information on a credit application
- Knowingly allowing a consumer to participate in a “straw purchase”
- Misrepresenting the scope or extent of coverage under a service contract or warranty
It’s more important than ever to be very careful when dealing with customers. Plaintiff’s attorneys are constantly on the prowl for cases and regulators recognize the political capital in going after dealers. There’s just no upside to being accused of lying.
The good news is that you can feel free to lie to car salespeople in your spare time.
Author: Jim Radogna
Jim Radogna is a nationally recognized auto industry consultant specializing in dealership sales and finance department legal compliance. His background includes founding and operating a national compliance consulting firm, Dealer Compliance Consultants, Inc., as well as having spent over 15 years in various dealership management positions .