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Scams in the Business Office
When you move to the business office to finalize the deal, the really big sell occurs. You thought it was over after
the salesman dropped you off? It's the dawn of a new beginning of sales pressure and scams. Don't be fooled by the title "Finance Manager" (F&I), it's just another
name for salesperson. Their job is to sell you $3500 of high profit extras you don't need and switch you to their financing, from your credit union. If
the F&I is a woman, don't let your guard down. Many men think they can outsmart a woman, but not this woman. This is the most profitable department in a
dealership. If they sell you $3500 worth of extras, it only cost them $500, and that's a 700% profit, 10X the profit of new car sales departments. That's why they
break up the activity. Since the salesperson dropped you off and moved on to the next victim, you think you're safe. But you're far from safe.
Are They Finance Managers or Lienance managers?
Finance people can lie to you about interest rate and money factors and pad your monthly payments. In fact, the epidemic is so bad, I call the folks who commit
these crimes lienance people. Most finance managers are good people, but we all know there are many who will lie. Most finance
people can't read English however, because many of them email to complain that I lump all of them together as lienance managers, which Cleary I am not doing. Only the
ones who lie to you are called lienance managers. If you don't know how to convert money factor to interest rate, DON'T SIGN! Too many people take their word for the
APR or money factor then find out later it's higher, but they already signed and it's too late. Your word against theirs does not hold up in court. |
What is an extended warranty?
An auto extended warranty is the most confusing, profitable product car dealers sell. The language is tricky, and if you don't understand the subtle wording you're in
trouble. Auto extended warranties have nothing to do with the original manufacturer's car warranty on your car. An auto extended warranty is a service contract between
the warranty company and you. They pay for repairs covered by the contract. Your service contract money is deposited in a "claims reserve account", insured
in case the administrator goes belly up.
Backup for the backup
Ideally, the administrator's claims reserve account is insured by a high quality insurance company or risk retention group with an AM Best rating of "A".
Your auto extended warranty is not insurance, so the financial strength of the administrator is crucial. They should insure the claims reserve account to protect you
if they go belly up. This happens all the time with no name warranties you buy at some car dealers. Administrators go defunct you're left holding the empty bag. In
addition to insuring the account, they should also reinsure it with an American insurance company (no offshore international deals) rated "A", or Superior
with A.M. Best. This protects if your administrator goes belly up, and the insurance company can't handle all the claims.
Protecting Your Service Contract Deposits
Warranty Direct for example deposits funds from the purchase into an
insured "Claims Reserve Account" to assure funds are available to cover claims. Warranty Direct's administrator, is publicly traded on stock markets with
minimum cash requirements. Listed below are the ratings of insurance companies who backup your warranties. Many warranty companies won't give you this information.
The order of importance of protecting your payment are 1) The administrator. 2) The insurance company backing up the administrator. 3) The re-insurer backing up the
insurance company.
Be sure you're dealing with a solid extended warranty company
You want your warranty administrator to be able to pay your claims. You deal with 2 companies when you buy a warranty. One sells you the contract, the other
administers your claims, so background check both companies. The best case is a well funded company that markets and administers your warranty like
Warranty Direct has plenty of funds, and has over 20 years of proven
track record.
Wrap Warranties
If the manufacturer warranty is 3 years, with 10 years on the power train,
PowerWrap+ is a less expensive exclusive from
PowerWrap+, with up to 10 years of bumper-to-bumper coverage.
Saving you hundreds, it wraps around longer power train warranties. Vehicles eligible for
PowerWrap+, have power train warranties longer than the factory warranty.
The car maker's power train warranty covers ¼ of the parts.
PowerWrap+ covers the remaining ¾ for the same term. They "wrap"
the bumper to bumper coverage around your power train warranty for the same term. Your vehicle must be 2000 or newer, still covered under factory warranty.
PowerWrap+ runs from the in-service date of your car for the full term
of the power train warranty. Eligible cars: Daewoo, Hyundai, Infiniti, Isuzu, Kia, Lexus, Mitsubishi, Nissan, Subaru, Toyota, VW, Suzuki, Chrysler, Dodge and Jeep.
Are my Macpherson struts covered by the extended warranty?
The better warranties do cover Macpherson struts, but not the inserts. These inserts can be thought of as shock absorbers, and thus no one covers the inserts because
they are a normal maintenance item, added to the exclusion list of items covered. Some warranties won't cover your struts at all.
A Wrap Warranty for certified used cars
What if you buy a used car, or an off lease car and the manufacturer only gives you a powertrain extended warranty? The manufacturer powertrain warranty only covers
about ¼ of the vehicle’s parts, including the engine, transmission and drive train components. Who covers the other 3/4 of the parts on your car? A
CertifiedWrap+ plan, in conjunction with your extended powertrain
warranty gives you the most comprehensive bumper-to-bumper coverage, at the most affordable price. These include such air conditioning, electronics, electrical,
brakes, ABS and much, much more. With CertifiedWrap+, if it’s
not on the short list of exclusions, it’s covered. CertifiedWrap+
will pick up the remaining ¾ for the same term, so it only costs about 3/4 of the cost of a full warranty.
Extended Warranty Myth: "I'll get it at the dealer, it's cheaper and more convenient".
Wrong. It costs more at the dealer. Car dealers are just middleman, you should buy your warranty direct from the source if you can. Car dealers are free to resell the
extended warranty to you at sky high prices. I always receive complaints from car buyers whose dealers tried to sell them new car warranties for $3000. If you buy from
the dealer, they usually do not show you the contract in advance, so you have no idea what you are signing up to other than their verbal promise, or marketing slick
sheets that leave out details that bite you in the butt later. Most car dealer warranties have too many restrictions and weasel clauses compared to the better world
class warranties out there that you can buy yourself for 50% less.
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Top Extended Warranty Companies Reviewed
Warranties I can recommend and still sleep at night
Warranty Direct, one of the best, 60% less than dealer prices, true
sign and drive roadside assistance. More coverage than most warranty contracts, starts the day you buy, not the date the car was titled.
- The most comprehensive plans from a 23 year old Forbes "Top 200 Small Public Companies" firm with documented financial stability.
- Warranty Direct's Warranty Direct covers mass oxygen sensor, air flow
sensor, MAP sensor, and knock sensor. Other companies don't or charge extra.
- You can use the repair shop of your choice, WD pays them directly.
- Over 1.5 million plans sold, administered in house, never outsourced.
- Car Rental, Towing, Road Service, Travel Expenses, Lost Key Lockout.
- A.M. Best ratings: Insurer A- (Excellent), Reinsuer A+ (Superior)
- Multiple vehicle discounts, add another car and save even more.
- Their "wear and tear" is better than dealer "mechanical breakdown" plans.
- True exclusionary Bumper-to-bumper coverage.
- You're buying direct from the source of the warranty, with no markups.
- Consumer friendly easy to read contract language.
You should get a quote BEFORE going to a dealer to compare. I recommend a $0 deductible.
Check Their Site Often for specials. For vehicles no longer under
original warranty, get MaxCare+ coverage if it's less than 3 model years
old under 50,000 miles, after an inspection. They will deduct the cost of the inspection from your warranty price subject to the terms of our inspection program.
Pros: Transferable, flexible deductibles, free instant online quote is cheaper than dealers. They cover boats, and jet ski's too. Less restrictive than
others, free towing, even if it's not a covered repair.
Cons: No coverage for used cars over 60,000 miles. No airbag, GPS coverage. No problem, your insurance covers airbags anyway. |
Do I really need to get an extended warranty?
You must decide that. If you lease for 36 months or less, you don't need one, and it's a scam for a dealer to sell you one. If you got suckered into a long term lease
like 60 months, you better buy one to cover the slack, as you are responsible for all repairs. But if you buy a new car instead of a lease, should you get one? It's
like buying an insurance policy. You spend a bit of money now to protect yourself later when you need it. Like insurance, if you don't buy it, you'll be looking over
your shoulder the rest of your life. Industry data lists the most common repairs are A/C, transmissions, and electrical. Most people I talk to bought their warranty
because they know that 10 minutes after the car maker's warranty expires, the antenna motor will fail. That's $200-$1000. Another common one, window motors, $600-$1000.
One failure can recoup the cost of the warranty. This table lists common repair costs:
| Component |
Cost in 2001 |
Cost in 5 Yrs |
| Engine |
$2300 |
$3226 |
| Transmission |
$1650 |
$2614 |
| Brakes |
$1050 |
$1473 |
| A/C System |
$895 |
$1255 |
Is it a Breakdown contract or a Wear & Tear contract? You want BOTH!
Often the extended warranty sold by car dealers is a confusing mechanical breakdown insurance policy that can cost over $4000! This is not
what you want. You want a wear and tear AND mechanical breakdown contract. Piston rings wear down, they don't break, so they are not covered by a car
dealer's mechanical breakdown policy. People complain that the car dealers lie to them and tell them "everything" is covered, giving the buyer a false sense of
security. Many car dealer warranties require that you have them or a franchised car dealer do the repairs. What happens when you can't get your car to a dealer?
Sites such as Warranty Direct, provide contracts that are both wear
& tear and mechanical breakdown, all in one extended warranty contract. You can have any ASE certified repair shop do the work. If you don't get this type of package,
you'll get screwed I guarantee it. I've seen it happen to people I know.
Warranties are cheaper on dependable cars like Lexus, Honda, and Toyota. If you buy a car with a reputation for being unreliable like Kia, Land Rover etc., you
should consider buying an extended warranty to cover these repairs or you'll be shelling out thousands later for these repairs.
Don't buy a warranty thinking it will cover pre existing failures on your car!
Don't file a claim within the first 60 days!
Normally when you by a used car with no pre existing conditions, the car runs fine with no issues for several months. These are accepted odds by warranty company
actuaries. When things other than the norm happen, red flags go up. When a used car is sold, you don't have 4 parts break in the first 30 days. So when this happens,
it's industry practice that red flags go up, security people step in, the insurance actuaries know the odds of things going wrong, you get the picture. Contracts have
verbiage that even though your car was an inspected prior to selling you a warranty, it can still be shown if there was a pre-existing condition. So don't buy a used
car with problems thinking you'll just get a warranty to cover the repairs. These companies are a lot smarter than you. I tell people don't
file a claim within 60 days to stay off the radar map and not trigger any red flags. Warranty companies know that 90% of the claims filed in the first 30
days are fraudulent claims on pre-existing failures, that can often be proven by independent inspectors. Don't do it.
Beware of repair shops that refuse to work with your warranty company
There are a few scam artists out there. Before your warranty pays the service shop, they ask for a detailed written estimate of the repair, the parts, and the labor
from the repair shop. They know if the repair shop is overcharging standard repair labor hours, or forcing extra parts on you that you don't need. The guilty shops
lie and tell you they don't like your warranty company because their "checks bounce". Leave that service shop immediately.
Always Check The Contract Before You Buy, NOT After You Buy!
Don't leave a dealer with a false sense of security that you have a warranty protecting you from everything. Car dealer contracts have so many weasel clauses you're
lucky if half the claims are paid. I've done a lot of research in this area and created a check list of caveats to avoid. Dig out your current extended warranty
contract and see if it's as good as you thought. Car dealer warranty exclusions are printed in the policy book which conveniently arrives
AFTER you buy the warranty, because they don't want you to dig. The more you dig, the more you'll find. If they can't show you a
copy of the contract, DON'T BUY THE WARRANTY! Sales brochures are not contracts. Lies from salespeople are not contracts. Before you buy you want to see IN WRITING
"What is not Covered". Warranty companies are successful on the internet, as savvy consumers who passed on the 200% markups of dealers hit the web to buy from the
sources at significant savings. Online warranty sites should have a sample contract online for you to view, usually in Adobe .PDF format. Tell the dealer sites such
as Warranty Direct have actual contracts online for you to view, so why
not the dealer too?
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Don't Be Denied A Claim!
These issues will cause your warranty company to reject your claim. Don't let it happen to you!
- Make sure you get approval BEFORE repairs are done! People have been denied reimbursement because they failed to get prior authorization. Even if you are
kept on hold all day long, it's a toll free number. Get authorization BEFORE repairs are done. Do not have any repairs done at a service shop that does not
like to use warranty companies.
- Most warranties require oil changes every 6 months. Follow the manufacturer's maintenance guide or you'll be denied a claim. If your engine blows up
because it's been over a year since you changed the oil, you're going to get the buzzer from the administrator. Take care of your car.
- Beware of warranties that don't cover overheating.
- If you car overheats, pull over immediately. Damage caused by continued operation after a failure IS NOT covered. They can tell when you kept
driving with an overheated engine. You may have to tow it to a repair shop, but its still cheaper than a voided claim on a $2000 engine repair.
- Improper fluid levels, worn gaskets not changed in a timely manner, you know the drill.
- If they tear your car apart to get at the failed part and it is not a covered part, you have to pay for everything.
- If you buy a warranty on a used car that you just bought and they find out the failure was already there, you won't be covered for that failure.
- Before repairs, you MUST notify the warranty administrator in your contract BEFORE the repair is done and they'll determine if it's covered.
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Chrysler Service Contracts
Chrysler's web site has information on their service contracts, with $0, $50. and $100 deductible plans. But they have no downloadable PDF files of the
contract for you to view, which violates my rules of consumer protection. They have no advance contract disclosure.
GM Major Guard Protection Plan
Last time I looked on the GM web site for warranties, they had a link to view the "contract".But you click on it and there's nothing there. The site says
"Coverage details are available at your GM Dealer." When you buy the protection plan from the dealer, and ask for it, the dealer tells you that you'll
get it in the mail with your policy. Well, thanks for letting us see all the terms of our warranty BEFORE we buy. Why not post it online like other warranties?
Ford Warranties: Cost Effective? Not Sure
In 1997 A Ford dealer sold my friend an extended warranty on his 1997 Ford Mustang for $1100! It was only for 2 years and 39000 miles beyond the standard warranty,
creating a 5 year 75,000 mile plan. They hyped the "extra 39000 miles" extension to his warranty, a farce, as he will surely reach 2 years long before 39000
miles. Warranty Direct web site for their 5 year/75,000 mile auto
extended warranty quoted much less for a better package with more coverage.
Warranty Direct pricing for a 7 year 100,000 mile package was
1/2 the dealer's price for a 5/75 package.
Why many car dealers sell cheap 3rd party extended warranties
Why did your Ford dealer not sell you a Ford extended warranty? Same for GM and Chrysler? Car makers dictate how much they'll pay the dealer to perform repairs.
Sometimes these conditions are not in favor of the dealer, so they look to cheap 3rd party warranties that provide better profit margin for them. But sometimes these
warranty companies are not backed by insurance or claims reserve accounts, and go out of business, and you lose. As contracts expire, the remaining reserve dollars
and any earned income belongs to the dealer.
Different Grades Of Extended Warranties
Extended warranties usually sell in 3 grades of "typical" contracts. To be generic, let's call them Level 1, Level 2, and Level 3.
Level 1
Usually for less expensive cars, covers basic parts. These "entry level" packages don't cover radiators, ABS brakes, Turbos, headlight motors, etc. If you have
ABS brakes, power windows, headlight motors, etc., Level 1 is not for you.
Level 2
If you have ABS, Turbo, etc., you need at least Level 2. It covers more items across the board in all categories of parts, including radiators. This is a gray area,
as many car dealers refer to this level as "bumper to bumper". Level 2 coverage is usually thorough, but leaves out parts, so I call it "pseudo bumper to bumper". The
excluded parts may be optional parts that are not present on your car, thus Level 2 is a bumper to bumper warranty for certain cars.
Level 3
This is what I consider to be a bumper to bumper warranty, usually the top package a warranty company sells. Nearly every part on the car except the "exclusion
list" are covered. If you can swing it, buy the top package and you'll have little to worry about. They call these exclusionary warranties because they cover so
much that the contract just lists items that are excluded. Most companies call this Diamond Coverage. By definition, bumper-to-bumper plans are supposed to be
exclusionary, only listing parts NOT covered. Some dealers call their plans bumper-to-bumper, and list the items covered. They are not true bumper-to-bumper.
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What To Look For In An Extended Warranty
Buy It Right From The Source
Don't be foolish and buy an extended warranty from a dealer who charges double what they paid for it. Buy a better package direct and avoid middle man dealer markups.
You want a well funded and insured warranty administrator
The best case for you is a publicly traded well funded administrator who deposits a portion of every contract purchase price into an insured "Claims Reserve
Account" to assure sufficient funds are always available to pay a covered claim.
You want a contract that takes effect the day you buy it
Most extended warranties start the clock on the "in service" date of your car, when you buy the car. But what if you wait 12 months to buy a warranty? Better
warranties like Warranty Directstarts the clock when you buy the
warranty. Many warranties have a cooling off period on new and used cars. Make sure you get one with immediate coverage on new cars. Don't make claims for 60 days.
Reinsured with a minimum "A" Rating with A.M. Best or Standard & Poor's
Anything less, and you can forget about their ability to pay any claims. You could be left stranded. Sites such as
Warranty Direct have the top rating.
$0 Deductible/One Deductible Per Visit
Some policies have sneaky deductibles, charging a deductible for every part repaired. Get a $100 deductible and you bring your car in for a new starter, alternator,
and A/C compressor, that's a $300. Pay extra for a $0 deductible warranty, and avoid the issue. I've seen service managers chewed out by customers who paid $1300 for
a warranty, only to have to pay the first $200. $0 deductibles cost $75-$200 extra, but would pay for itself in as few as 2 visits. It paid off for my Trans AM, I was
constantly in for repairs, having the gas tank replaced twice, the rear hatch painted twice then replaced, the fuel pump and alternator replaced, etc. I would go broke
satisfying $100 deductibles.
100% Money Back Guarantee
If you are unhappy, have not made any claims, and want your money back, they should refund 100% before 60 days.
Transferable when you sell the car
Some warranties end when you sell your car. Choose one that allows you to transfer it to the buyer of your car. This is a great selling point for prospective
buyers of your used car. Transfer the warranty quickly. One of our visitors had trouble because his GE extended warranty was in his father's name, and had not been
transferred within 2 weeks of the transfer of ownership, so the warranty was no longer valid. Nice scam.
Don't Have To Buy The Warranty Immediately After Buying The Car
Most warranties allow you to buy later. But don't wait too long, buy it cheaper as soon as you can after buying the car, as warranty prices increase with time, and
many warranties begin on the in service date of your car. Buy at today's low cost to protect against increases.
Coverage For ABS Brakes and Overheating
Cars without ABS brakes get by with "entry level" contracts, which don't cover ABS. If you have ABS, get the right contract, or you'll be sorry when your
expensive ABS module fails. Some warranties don't cover overheating. My friend's warranty says: "This contract does not cover overheating regardless of the
cause." If the car overheats, there goes $1000! Warranty Direct
covers overheating.
Benefits: Car Rental, Towing, Travel Reimbursement
If your car is in the shop overnight, you want car rental reimbursement, and towing. Make sure this is covered during the Standard Warranty
Period as well. GM weaseled out on me, that's how I lost $650 in car rental expenses the first year I owned my Pontiac, so don't listen to car salesman lies.
If it's not in writing that you will be covered during the standard warranty period, it means you pay for car rentals first
3 years.
Coverage For Breakdown AND Wear & Tear
Many warranties just give you mechanical breakdown insurance, which only covers parts that break, and not wear and tear. For example, piston rings and
suspension parts wear down, they don't break. My friend found this on his Mazda RX7 with the LED in the AC switch. They refused to pay for a new switch module,
claiming "the LED burned out due to wear and tear, the switch did not break."
Repairs That Can Be Done At Any ASE Certified Repair Shop
Some warranties force you to get repairs done at the dealership where you bought them, or at limited shops. This clause will bite you in the butt when you take the
family to Disney World and your car dies. Make sure your warranty allows repairs to be done at any ASE certified shop. Some companies have arrangements with chains
like Pep Boys.
No Cash Layout
Some warranties make you pay the bill, then send in the receipt and wait months for payment. This allows them to weasel out of paying, since you already paid the bill.
They can invent excuses why your repair is not covered. Choose a warranty that pays the repair shop directly. |
Think twice about buying your extended warranty from a car dealer!
Dealers hard sell automobile extended Warranties because they are so profitable, and you have no way to check their cost, verify who the administrator is, or
their ability to pay claims. Many times dealers lie and say that the bank requires you to buy the warranty or you won't qualify for the loan.
A standard manufacturer's warranty on a new car is 3 years. Sure it's convenient to just buy it
at the dealer, but it's also convenient to pick up the phone and order a better extended warranty for half the price. Here's a few Jedi mind tricks dealers use to make
you to buy the extended warranty:
"But, all it takes is for the AC to break down and you're out $700."
I say, "If the car is built so cheaply that the AC will fail, I don't want it. You shouldn't have to pay $1500 to guarantee $1200 worth of repairs won't occur."
The dealer will say you'll get car rental reimbursement with the extended warranty. You may find out later, it's not during the 3 year standard warranty. I
got stung by this bumble bee the first year I owned my Trans Am. I sent in for reimbursement for $650 worth of car rental and Genital Motors refused to pay, saying it
was not covered. So why did I buy this warranty? Why did the GM dealer lie to me and say that anytime my car breaks down I get rental coverage? Check the contract book
for your warranty, look for the section titled "What is NOT covered", and the obscure phrase "any repair covered by the standard warranty". So basically car dealers
hype the hell out of car rental reimbursement that you cannot use. It's more like roadside Ass-istance.
Typical Exclusions In Extended Warranties
No extended warranty covers glass, lenses, sealed beams, light bulbs, trim, moldings, bright metal, upholstery, paint, exhaust systems, tires, air bags, batteries.
These standard exclusions are in nearly all auto extended warranties, so don't let it bother you, it's no big deal. You can see why tires and bulbs are not covered,
exhaust systems rot, paint is covered by the regular warranty. Mostly it's the maintenance items that are not covered by most warranty companies.
Before you buy a warranty, ask to see a sample contract, itemizing what is covered, and what is not covered
Any reputable company will fax you an advance copy to read. If they refuse, DO NOT BUY FROM THEM! This list is part of the contract. If a part in question is not
listed or implied by the "What Is Covered" list, than it is not covered, and check the "What Is Not Covered" list, but verify it with the warranty company.
The marketing sheet dealers show you is not a contract. If a slick sheet is all they show you, don't buy. You'll be surprised what's not covered. Most extended
warranties have a "What is not covered" page. It's a tricky play on words, but here's what it means to your bottom line:
WARNING! Some Extended Warranties DO NOT pay for car rental reimbursement during the standard warranty period! My GM Protection
Plan was a prime example. If you have a 3 year manufacturer's warranty, any car rental expense you incur for the first three years may not be covered. This means even
if the engine dies, and it's their fault, and you have no car for a week, you're out of luck! The better ones like
Warranty Direct cover your rental.
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Many extended warranties have at least a $100 deductible. |
They may not replace your parts with originals. It happened to me with my GM Protection Plan. In 1994 Pontiac repaired a hole on my fuel tank seam under the
extended warranty, but should have replaced it. Why take a chance with someone's life? They repaired it, 2 months later I'm back, same problem. They fix it again, 2
months later, it's leaking again. I take it to another shop and discover Pontiac had welded a penny to the tank as a plug! Copper is corrosive! They refused to
reimburse me. GM's complaint line was a joke, offering to replace the tank if I paid them $500. How generous. Once I got the State of Florida Attorney General's
Consumer Affairs Division after the dealer, they reimbursed me only $300 worth of parts for my car, even though I spent hundreds on car rental, and a new tank. So
save all your records in a notebook. That's why I drive a Lexus now, I got sick of that "great GM feeling".
If they say they have loaner cars, don't believe it! One dealer told us they have loaner cars. We found out they charge for "loaner" cars. BMW, Infiniti, and Lexus
loan you a BMW, Infiniti, or Lexus, respectively. It's a whole different way of doing business.
After You Buy Your Extended Warranty
Your work is not done. Extended warranty contracts warn you to maintain your vehicle according to the manufacturer's instructions in the owner's manual, perform all
the required maintenance, oil changes, fluids, etc., and only use approved parts and liquids, you know the drill. So buy a 3 ring binder to store all your receipts as
CYA proof that you had all proper maintenance performed. Every time I go in for an oil change or other repairs, I just add the receipt to the notebook. Some warranty
companies are real strict about this, and use it as a weasel clause to get out of paying for repairs that were otherwise covered. Some warranty companies have
maintenance logs in their contract books that you can use to log each service performed on your car.
Arguments Dealers Use To Coax More Cash From Your Wallet:
- "Wow, you really beat up our salesman. I've haven't seen the LX sell this low in 2 years! What's your secret?" Now that he's buttered you up, he moves in for
the kill: "Thanks to your negotiating skills, you saved over $3000, so why not apply some of that savings toward our Platinum Protection Plan+ Extended Warranty,
or the rust proofing, which you know is a necessity in this state. This is a windfall for you, like you're getting it free." Isn't it amazing how they can put the
Hoover in your pocket and use the Jedi mind trick to make you think you're getting it free?
- "What if I told you I can cut your payments in half ?" They want you to lease. If you don't want to lease, tell them you don't care, you don't want to cut your
payments in half, you don't want to lease. "But, I'm just trying to understand why you don't want cheaper payments. I'm trying to save you money here, you will be
saving 60% per month in payments." He's not trying to save you money, he's trying to make you spend it. If you negotiated $2000 off MSRP to buy the car, their goal is
to convert you to a lease so you can't see they are selling the car at MSRP. Tell them they are wasting your time, they have fifteen minutes to get everything printed
up your way, or you are leaving. Take off your watch, set the timer, and place the watch down on the desk. That's a powerful psychological tool.
- If they offer you a low APR, be wary. If it's not a real factory subsidized APR, they charge you MSRP on a short term loan (2-3 years), and are hiding
something; nothing is free.
- They'll tell you that you need to establish credit. "you really need to re-establish your credit, I'm trying to help you do that. I know you've had a
rocky past, but we believe in you." Tell them you get offers every week from credit card companies. You have no problem getting credit. Tell them every dealer says
that, and even your credit union said it. I'd rather establish credit buying TV or PC.
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The Spot Delivery Scam
My friend traded in a truck for a new one. Two weeks later they called him saying "Sorry, you didn't qualify for the interest rate we signed you up for".
This is where "subject to financing" clauses on contracts bite you in the butt. They knew what he qualified for, or they'd never let him drive off with the truck.
When I called my credit union, they printed my credit history within 5 minutes and approved me in 10 minutes.
There was a phrase on his contract stating subject to loan approval. This Jedi mind trick means: "The
deal is not final, even though you signed this contract." Most dealers use this phrase. They were already charging him 18%
interest! How much higher can you go? They said he had to produce an additional $1000 AND his payments would go up $50/month. 18% is normal for someone with bad
credit. Bumping up his payments is needless, they knew how much he qualified for when he signed. If this was the state of Washington, they would be breaking the law!
My friend wanted to sue, but even his lawyer said it was legal. So the deal was not really done, and this is where you can be in for a nasty surprise!
He had a few hundred miles on the truck, but he took the truck back, and got his old truck back, after a salesman had taken it home, left the window open, and a
cat urinated on the seat. They even tried to bill my friend for the cleaning! He was luckier than most folks: he got his original truck back. Read your
contract thoroughly and know all the clauses, so there are no surprises. Don't let them speed sign you through.
If you don't pay up, they'll report the car STOLEN. You have a legitimate loan or lease contract, but they are filing grand theft auto against you. If the
cops come after you, show them your original valid loan or lease documents. There's nothing they can do. What they are doing is illegal in some states. |
I wish all states were as strict as Washington with bait and switch interest rates. In Washington, after a deal is agreed upon and the contract signed, if you are
contacted by the dealer saying they need a larger down payment or higher monthly payments, you are not required to accept these terms. They have 3 working days from
the time of purchase/lease to finance the sale according to the contract, because we know that they know how much you qualify for because they ran a credit check. When
the dealer fails to locate the financing specified in the contract, there is no binding contract and they must return your contract documents, down payment and trade-in
vehicle to you. If you have taken possession of the car, return it when notified that they want more money. I wish we had this law in Florida.
Most states don't have a 3 day "buyer's remorse" law.
When they try this scam on you, you'll say I'm bringing the car back in, I want my trade-in back. "Oh, I'm really sorry, we already sold your trade in.
Get us the money by next week, or we will repossess your car."
How do you get out of this? Never take the car the same day you sign if you finance at the dealer. It's tempting, they give you
the keys, but don't take them. You'll be back for the car when the deal is final. Tell them to call you when they get the coupon book, and you'll come for the
car at that time. The Spot Delivery scam is usually done to people with bad credit. They can squeeze more out them because they have them at a disadvantage. They don't
care if you default on the loan because they get cash from the bank. So what if the car gets repossessed. That's the bank's problem, they own the car. When you
finance a computer at Best Buy or Comp USA, do they call you up later to tell you that you could not get these interest rates? No.
Here's what one automall did to a friend: they charged him MSRP for his Prelude, and 18% APR. Some dealers charge 18%, and its up to smart buyers nix it. He had
good credit, he was just naive. After all this, they didn't give him the "Year supply of Pepsi" they were hyping, with thousands of cases in the showroom for the blitz.
No Pepsi for you! For one year! So another friend went in there with him and made a loud enough stink in the showroom, then he finally got the Pepsi Nazi to anti up
several cases of Pepsi, but certainly not a year's worth. Do you really need these insulting car buying games? Be cautious of "buy here, pay here, no credit, don't
sweat it" dealers and places that give away toasters, stereos, "vacations", etc. These are too insulting for intelligent people. You just want to buy a car, without a
TV financed into the deal. I'm not trying to knock the manufacturers, just the sales methods of some dealers, which apparently the manufacturers have no control over,
or look the other way.
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