By on December 6, 2016

deal1

“Character is what you do when no one is watching.” This quote, ascribed to John Wooden, C.S. Lewis, and others, is doubly true when it comes to the oft-reviled profession of automotive sales. Any dealer can be “ethical” when they are facing an informed consumer with money, credit, the ability to hire counsel, and the self-confidence to fight for own interests. I’ve had plenty of trouble-free transactions with dealerships that had well-earned abysmal reputations for ethics. Hell, I’ve even managed to buy some new motorcycles over the years without getting raked over the coals too hard.

You can’t judge a dealer based on how he treats a middle-aged white guy with a spotless credit rating, a laptop full of information, and a thorough knowledge of the laws in his state regarding new-car sales. That would be like the Misfit having a good opinion of the grandmother in the Flannery O’Connor tale. Rather, you judge a dealer by how he behaves when there is nobody of consequence looking. Given a dark-skinned female customer with a decent co-signer and some down payment money but no genuine idea of how the process works, how much advantage will a dealer take?

The answer might shock you, as they say — but it probably won’t.

A friend of mine stopped by the house a couple of weeks ago with a thick envelope full of papers from a Kia dealership in central Ohio. Three years ago, the woman who is now his live-in girlfriend had gone to see that Kia dealer about the purchase of a new Soul. We will call her “Destiny”; that’s not her name, but it’s from the same neighborhood, linguistically speaking. She’s a nice girl, but she will never be mistaken for a New York socialite or even a member of the urban-Midwest Eloi. Born of mixed-race parents and “country” as the day is long, she is short, squat, inordinately cheerful in disposition, and absolutely unable to comprehend any math above what you’d use to run a cash register.

Her credit wasn’t good, but as is often the case in this world, she had a mother who had kept her nose clean and could easily co-sign to a bank’s satisfaction. There was just one minor hitch: Mama had a 2006 Maxima she wanted to get rid of at the same time. The good news was that the Max was a creampuff and she didn’t owe much money on it compared to its likely retail price.

Mama and daughter went to the Kia dealership to get a Soul. Here’s a picture of the deal, but if you aren’t the kind of person who likes to pore over paperwork, don’t worry because I’m going to give you the highlights.

deal2

The full MSRP of a 2013 Kia Soul+ automatic is $17,700 plus $810 destination, for a total of $18,510. This was revised up to $18,639 through methods that were opaque to Destiny; probably a stripe package. The dealer can be excused here, I suppose; if you don’t ask for a discount, you don’t get one, and I’m sure that Destiny and her mother were told that there wasn’t much (meaning any, meaning negative) room to deal on these low-margin automobiles.

To that, the dealer added a $250 doc fee, which is on the absolute high-end of the ethical or even legal range. They charged her $18.50 for a $3 temp tag and $15 for the 39-cent stamp they used to mail the MSO to the Ohio title office. That’s about all the money you can screw out of someone in that department, I’d say.

The 2006 Maxima was valued at $9,957 against a payoff of $10,498. How much was the Maxima really worth? Using a sort of holistic method that involves checking sale prices at the time, evaluating current sale prices for 2009 Maximas, and holding my finger up in the wind to check which way I think it’s blowing, I’m going to say that they took a little money out of Destiny’s mother’s pocket there. This was a car they could have probably sold for $13,500 without too much trouble, which meant that they could have given her the payoff and simply left it out of the deal.

Unfortunately for certain groups of buyers, however, there’s a phenomenon at dealers that I think of as blood in the pool. If the used-car side of the house can determine from certain signs that the new-car customer is not in a strong negotiating position, they will drop the amount they’re willing to pay for a car. Why should the lazy jerks on the shiny side of the building get all the profit from a fresh pigeon?

Signs of a low-information, high-profit customer include:

  • Dirt or clutter in the car. Only people with low future time orientation arrive at a dealer with a dirty, messy car. You always hear that dealers “appraise through dirt,” and they absolutely do, but they also consider that the Consumer Reports types show up at trade-in time with a clean car.
  • Bumper stickers on the car. There’s a mild correlation between the number of stickers on a car and personal gullibility. The alpha example of that would be the “Salt Life” sticker; I’ve never seen one in proximity to someone with an IQ above median.
  • Black or Latino compact discs. No amount of social-justice media programming will ever dislodge the hard-nosed belief in the used-car game that minority customers should pay more for a car. That’s true even among minority dealership personnel. Maybe more so.
  • A car seat, particularly a beat-up one. If you have a kid, you have less negotiating room. If you’re putting your kid in a worn-out or secondhand car seat, you’re a buy-here-pay-here customer or close to it.

Don’t yell at me; I didn’t make the rules, I just report them. So Destiny’s mom took a five-hundred-dollar lowball on the trade. Fortune passes everywhere, as Gurney Halleck would say.

The last thing the dealer did to cash out on this car was to add a $895 gap insurance policy. Destiny doesn’t have much recollection of why this happened, except that it was necessary. My guess is that the F&I department told her the bank wouldn’t buy the deal without it, which is of course a lie.

So let’s compare the deal Destiny got with the deal that, say, your humble author could have gotten. I’d have expected to pay no more than a dime over $17,000 for this car, and that includes whatever stupid fees the dealer felt entitled to. I’d have scrapped for full payoff on the Maxima, and I’d have told them to pound sand on the gap insurance. If you’re reading this with a calculator in hand, you’ll see that the difference between Destiny’s deal and mine would be about $3,300. For the same car.

For Destiny, however, the ride was just beginning. With her rock-solid mother as co-signer, she should have expected to pay a second-tier interest rate. Maybe seven or eight percent. Instead, here’s the deal she got — and as with the bill of sale, I’ll cover the highlights afterwards:

deal3

11.6% over 72 months! For a magic-sounding payment of $396.97, even after a $500 down payment from Destiny’s mom. The bank also charged them $195 for the privilege of putting their stamp on this airtight three-hole fucking of the customer, secure in the knowledge that gap insurance would cover their tails in all but a repossession situation.

Some of you will have already deduced how this deal was constructed. It was a typical four-square “how much can you afford per month?” Destiny told them $400, so they bundled profit into the deal until they reached the magic $400 mark. And since they were greedy — oh, so greedy, dear readers — they even pushed the term out of 72 months.

If Destiny had bought the car for $17k plus tax, gotten a fair trade, and put $500 down, she could have gotten a 6.9% loan over 60 months and paid $348/month over 60 months instead of $397 over 72. But this dealer understood that she was over a barrel and acted accordingly.

I wish I could have been a fly on the F&I office wall while this absurdly profitable deal was made. How they must have laughed, slapped each other on the back, made plans for the $500 commission the salesman would get and the $750-plus spiff that would have gone to F&I. Plus the extra profit on the used side. It’s the kind of deal that becomes short-term legend around the sales floor, the golden ticket legend that sustains the staff through endless “mini deals” made with laptop-toting H1-Bs and Consumer Reports-reading professionals.

Over the course of twenty minutes, I laid all of this out to my friend. Showed him where they made the money and how. “Well, can she get out of this and get another car?” he asked. Destiny had worked a solid job since then, kept her credit together.

“What does she owe on the Soul?” was my response.

“About fifteen thousand dollars.” For a 2013 Soul+ automatic with high-ish miles.

“It can’t be worth a penny more than eight grand to a dealer,” was my opinion. “Closer to seven is my guess.”

“So she owes $15,000 on a $7,000 car,” he clarified.

“Yes, one that cost the dealership about $15,000 three years ago. Really, she’s finally made it to the original value. She’s just been paying profit to people ever since she bought it.”

“Well … that’s horrible.”

“It is.” And that’s where we could end the story. Destiny’s life is pretty good right now; she’s shacked up with my friend, living rent-free and eating fine meals on his dime while she saves money for whatever the future holds. A three-year-old Kia Soul is a pretty reliable, livable proposition. I have no concerns about it lasting the rest of the loan. Destiny will be sadder than she’d like until she reaches equity, which should happen in about two and a half years. Let’s hope she’s wiser in the future, too.

But I would be remiss if I didn’t mention that there were four victims of this dealer’s unabashed profit-seeking:

  • Destiny, who will pay $28,581 for a $17,000 car;
  • Destiny’s mother, who will have this loan on her credit record for a few years longer than she would have had a reasonable term-and-rate loan;
  • My friend, who is effectively financing Destiny’s life in exchange for certain other salutary qualities which she possesses;
  • Kia Motors America and the Kia parent company.

Wait, what? How is Kia a victim? Simple. Destiny likes her Soul. She’d like a new one. But instead of getting a new one after three years, she’s going to keep her old one. So Kia has sold one car when they could have sold two. This doesn’t bother the dealer; Destiny’s deal on the Soul was more profitable than five mini-deals to pencil-pushing IT geeks or spreadsheet-toting middle-class accountants. But Kia didn’t make a penny more on that unit than they’d have made if I’d worked the deal instead of Destiny.

Worse yet, you’d be a fool if you think that Destiny is mad at the dealership. Her mind doesn’t work that way. She’s out there telling everybody that she got screwed over by Kia, not by a particular Kia store. And whatever joy she had in Kia ownership is long gone now, a casualty of the way she was milked for profit by the dealer. So instead of buying at least two Kias, and maybe three decades’ worth of Kias in the future, she’s now a zero-future-Kia buyer who is flapping her gums about it to every friend and family member who will listen.

In the end, therefore, the biggest sucker on this deal wasn’t Destiny, and it wasn’t Destiny’s mom. It wasn’t even my friend. It was the company that built the car and supported the dealer. And you wonder why the manufacturers would tear down the pillars of heaven to get to a direct-sales model? The first automaker to turn that particular trick will have a very bright future; everybody else will just have a Destiny.

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209 Comments on “No Fixed Abode: Dealers Gone Wild!...”


  • avatar
    analoggrotto

    Strong fascination with Kia dealer practices?

    These articles serve as a constant reminder for : a/ why I should better care for what I have so I don’t need a new car and b/ the importance of setting up one’s own financing ahead of time.

    • 0 avatar
      SirRaoulDuke

      b/ is always Rule Number One. Well, assuming you know the fee game and know what a car is worth to begin with. There is not much else in life that feels more satisfying than telling a car dealer, “Take my offer, or F you.”

  • avatar

    Character is what you do in the dark. (c.f. Professor Emilio Lizardo, Buckaroo Bonzi…)

    Nothing is new. Early in my career, a woman (dark skin, hard service job, honest to a fault church-lady type from an island) She comes to us after a Mitsubishi dealer sells her a tiny Mitsu (don’t recall exactly). By the time they were done with her, the $13k car was $24k with interest. She’d gone herself to buy the car to prove to her husband she could do it….and this was the result-he at least said “and first thing tomorrow you are going to the lawyers’.

    For reference, the Porsche 924S I was baby-lawyer lusting after at the time was a $25k car.

    Because she hadn’t made a payment yet and the deal was SO egregious, we were able to put the car back on the lot with a letter rescinding the deal. More importantly, we reached out to the lender, explained the situaiton, and as “no payment had been made yet” they realized that they should back down.

    Public Service announcement…If you ever have a problem with a car deal, a sleazy dealer will always say “just make the payment and we’ll work it out”.

    WRONG

    Once you make a payment, you have “attorned” the deal, and you won’t be able to easily break the contract…and the lenders don’t care, which is why your loan is always from a third party, not the dealer directly or car maker, directly.

    Likewise, if the payment book is “wrong”, don’t pay and then think you can fix the deal. Go right back to the dealer, CALL the lender yourself first. Trust me, the dealer will suggest you pay “as not to impact your credit rating” and “we’ll work something out”.

    If the dealer calls after delivery, and says the deal is wrong and needs to be re done, don’t pay, drive the car back, hand them the keys. In the alternate, ignore them, don’t play. Under no circumstances do you go back to the lion’s den.

    These tricks don’t change…I’m sure that before my lady’s 80’s Mitsu, it was done in the 60’s and 70’s and is being done today.

    Yes, a Mitsu crap-box for the same price as a latest and greatest (ok, base) Porsche 924S. There are sharks, and you can get bit out there.

    PS- I always wash the car and clean the interior before getting any service done…including under the hood. A mechanic who seees a clean under hood will never send my car to “just rolled into the shop” at Reddit and it says “owner cares”.

  • avatar
    kvndoom

    Damn that’s cold and painful. And oh so true. It happens every single day. It’s 8:30 in the morning on the east coast, so somewhere it’s happening right now.

  • avatar
    NoID

    I’m slowly becoming a better car buyer, and these articles are only helping. My first dealer-purchased used car I fell victim to a classic bait and switch. It’s gotten better from there, each time I’m less of a victim but each time I always have something to look back at and say “damn!”

    One thing I’ve been able to negotiate away each time since is the silly “documentation fee.” I will not ever pay that again, and so far I’ve been successful in having the dealer wipe that pile of excrement off the paperwork. An extra fee for them to “record, compile, and store our documents”, eh? What else do you want to split out on your contract? The electric bill? Lawn maintenance? Keurig K-Cups in the service lounge? As far as I’m concerned whatever costs are associated with documentation is just another piece of overhead, and if they don’t account for it in the vehicle price then that’s their problem, not mine.

    • 0 avatar
      mfennell

      I’ve done that (and the dealer eventually caved) but I’ve also taken a different approach (at a used car dealer, in this case). I ask them what the fee is up front and just factor that into my offer directly. It eliminates a step.

      • 0 avatar
        George B

        mfennell, I agree. I now just make dealers compete against each other on the total out-the-door price. Doesn’t matter that much to me it they put their profit in the car price or the fees. Reasonably smart dealer sales departments will accept a small profit win-win deal, especially if you show up during a slow time of the week.

    • 0 avatar
      ajla

      In Florida (highest average dealer fees in the country) it is the law that the dealer fee can’t be individually waived. Now you can get the price of the car lowered to net it out to zero, but oh man do dealers fight for that fee with everything they’ve got.

    • 0 avatar
      dal20402

      I couldn’t care less whether the total price is just reported as the price or broken down into price and fees. If you want to charge me a $250 doc fee or a $15 mailing fee, fine. But the price better be reduced by the same amount.

      For either buying or leasing there’s really only one number that matters. If you’re buying, it’s the price before tax and license but after *all* other fees and add-ons. If you’re leasing, you better be paying zero down, and the number that matters is the monthly payment.

      • 0 avatar
        JMII

        Plus the infamous dealer “advertising fee”. Yep I’ve seen them put a separate line item for $300 to cover them taking pictures of the car and putting it on their website. Well how else were they going to sell it? Telegram? Smoke signals? Town crier? Imagine if every product you bought came with such fees: Peanut Butter is $3.50 a jar plus .25 stocking fee, plus .50 advertising fee, plus .75 FDA insurance fee. I think the reason dealerships do this nonsense is because people fight based on payment or cost of the car itself, not the DEAL. Then by the time the negotiations are done your exhausted thus tacking on an extra $300 causes you to give up, it just isn’t worth it at that point to continue the fight. This is why you need to do everything based on the OTD out-the-door cost. Tell them this is bottom line price, they can put whatever fees they want up above, but if the bottom line exceeds X you don’t sign.

        • 0 avatar
          kmoney

          LOL. Our fee for “extra” photos over the included 10 (I work at an auction not a car dealer) is $5 a piece. The computer system does everything else automatically after the inspector clicks the shutter release, so whoever takes the pictures brings in enough top-line revenue to cover his hourly salary in about 2 pictures, or 30 seconds. It’s a joke, but people actually pay this fee….

      • 0 avatar
        Scoutdude

        Well thankfully in our state the doc fee is capped at $150 and the dealer must state at least in advertising that it is a negotiable fee.

        Either way I agree with you in that I don’t care if they want to brake show that fee or not I negotiate on the total price or if I might trade in the price less trade too.

  • avatar
    Jimal

    I feel like these stories are regular enough on here that no one should be shocked. When I did marketing for a dealer group that sold higher end German automobiles, I spent a lot of my time updating websites and writing up the monthly incentives for the websites and advertising. Then I would pull go into the CRM and create the email campaign to promote said incentives. The difference between the APRs I saw on customer records and what was being advertised was striking, never mind the outstanding balances from rolling in existing notes.

    And doc fees. Here in Connecticut there is is no limit on what they can be, or the limit is really high (I wasn’t in sales, so it isn’t burned into my psyche) but I seem to recall the number being up around $700. New York, right over the border from us, doesn’t allow doc fees, so the dealers just over the line would use that to their advantage. When management would complain about this, I would ask if doc fees were mandatory, and if they weren’t, why didn’t we just stop charging them in order to compete. Never got a straight answer about that.

    • 0 avatar
      NoID

      Well consider: Even if the dealer makes only one sale per working day, and captures that $700 doc fee:

      Figure 300 sales days in a year (52 weeks, minus Sundays and holidays)

      300 sales * $700 = $210,000. That’s not an untidy sum of money. it would easily cover the wages/salaries of a few heads at the dealer, and it’s easy money. They get that money on any sale, regardless of purchase price, invoice cost, used or new, finance incentives…$700 of pure bogus profit if they’ve done the rest of the sale properly.

  • avatar
    Joss

    +

    A car’s a chance. It can get stolen or wrecked in an accident that’s not your fault. Any dealer add-ons like rustproofing or extended warranty vaporize.

  • avatar
    incautious

    This is why I usually buy from a private party. Downside, you only get remainder of the factory warranty( you can purchase an extended now a days if you desire on your own) and one must know what one is doing mechanically wise. But you don’t get screwed by shady dealer practices. For instance in NJ one VW dealer besides charging the $300plus documentation fee also charged a $795 reconditioning fee and a $1200 fee if you did not finance thru them. That’s right over $2000 in fees on top of the purchase price. I found the exact same car (color mileage ect)for $5000 less privately. buyer beware.

    • 0 avatar
      NoID

      I’ve heard of dealers baking in penalties for independent financing into the base price (so they can magically find money to take out if they finance through the dealer and want to negotiate the price down), but never a separate line item. That sounds like something that a shrewd person could easily wipe out, but I’m sure they fleece people out of the know with that junk every week, if not every day.

    • 0 avatar
      MeaMaximaCulpa

      A document fee, a reconditioning fee and a non financing fee? Sweet jebus! Imagine buying a five dollar six pack and the cashier adding a 50 cent fee for the receipt, a two dollar “inventory dusting fee” and, in case you pay with anything except the store branded credit card, a four dollar non financing fee.

  • avatar
    Compaq Deskpro

    Dealer sold me the lifetime warranty with $100 deductible for $2500, which can be bought on the internet for $2185, doc fee was $1000, interest rate was 11%.

    This was with no attempts to negotiate, and I’m about as good at math as Destiny.

    After 6 months of exhorbitant payments I went to the credit union, they gave me 2% and shaved a third off of the bill.

    I don’t think I did too bad.

  • avatar
    bullnuke

    Jeff Wyler…serving the credit challenged of Southwest and South Springfield for many years. Can’t afford our Toyotas? Take a 34-step walk over to the Chevy store. Chevy too pricey? 19 more steps over to the Hyundai place. Man, that Hyundai is a beauty but could you get my payment number down? Right this way, 14 steps to the left into Kia heaven. Oh, and up at the other end of our building is the FCA place for your Chrysler, Dodge, Jeep and Ram needs!

  • avatar
    mankyman

    Great story.

    These types of things do happen to young white dudes too though. It’s not just financial illiteracy that makes dealers happy. They also like to see naive people walk through the door.

    When I was 22 and had a job that paid just enough for me to get a car I went to the dealer and bought a 1988 Jetta GLI with 90,000 miles. (This was in 1995.) I got hosed over bad by the dealer. Paid at least $1000 more than I should have and got suckered into the extended warranty. I think I paid $6500 total. The car had a ton of problems, from bad rear calipers, to bad wiper motors, to electrical gremlins. I finally unloaded it to some VW enthusiast for about $1700 (in 1997). The salesman is still at that dealer, and was a smooth [email protected]

    My dad wanted me to learn about buying cars and negotiating for bigger ticket items so he wanted me to go by myself.

    • 0 avatar
      Kendahl

      It’s a pity your dad didn’t go with you, let you make your deal but, just before you signed, took over the negotiations to get you a fair one. You would have seen what an unscrupulous dealer will do if given the chance and how to keep him honest.

      • 0 avatar
        mankyman

        Yeah, my dad was a “hands off” sort of parent. Leaned a little too much to the “let them fall, so they learn how to pick themselves up again” direction, but then there are positives to that.
        Now I’m a pretty good negotiator and might not have been if I hadn’t had that hard lesson.

  • avatar
    Kendahl

    The only thing Destiny and her mother might salvage from this disaster is interest on the loan. Destiny should put every spare dime into paying off the loan early. Better yet, go find a customer-oriented lender, like a credit union, and refinance at fair terms. (I’m guessing that Destiny’s loan agreement doesn’t prohibit early payoff. That’s a favorite trick of banks when a borrower with marginal credit takes out a home loan. It locks him into exorbitant terms long after he could qualify to refinance at better ones.)

    In fairness to Kia, someone should explain to Destiny that it was the dealer who took advantage, not Kia itself. She needs to make that distinction when she shares her tale of woe.

    • 0 avatar
      87 Morgan

      Nobody took advantage of anyone.

      She bought a Kia Soul; with $500 down on a 72 month loan. The most mark up the dealer could have made on the rate was 2 points. Period. That amounts to $22 difference per month. Not enough to matter. At best, if the dealer wrote the deal at the buy rate of 9.4% AND wrote the loan at 66 months, the payment would have been $399. That $2,394 still does not solve the fact the car is worth 7k today. That is not the dealers fault.

      All this piece proves is being poor is expensive. The question, is it more expensive to be poor and drive a beater OR poor and make a $400 stroke on a car that *should* give you 7 years of service *IF* you maintain it reasonably?

      • 0 avatar

        I thought some states allow a 3 point markup? I will agree 2 is most common. But you also don’t know other back ends like acquisition costs and fees that may have pushed to a higher interest lender. You also get lender spiffs not sure they are that common any more but when I did boat finance back in the day one local lender used to send a $100 check direct to my house for any finance over 40k. I imagine that must exist in some form in auto.

      • 0 avatar
        stuki

        It also proves, or at least very, very strongly indicates, that the laws banning any other mode of car distribution than through franchised dealers, cut down on competition sufficiently to enable gratuitous screwing of the poor by the well connected. Amazon very rarely charges poor people more, after all….

    • 0 avatar
      Scoutdude

      As others have mentioned she is so upside down in the loan that it is unlikely she can refinance for anywhere near the amount due.

      In general I agree that she should put every spare dime into paying down the loan to at least the point where she can refinance. However it would not surprise me in the least if she is carrying a balance on a credit card or two at an even higher interest rate. If that is the case paying down that first would be the best plan instead of paying down the car. The chances are that the Kia will last the rest of the length of the loan though she also needs to put some money away for those tires and brakes that it will almost certainly need before the loan is done.

      Otherwise living rent and utility bill free then she should be able to kick in a little extra and get it paid off early.

  • avatar

    High schools should make sure that every student has a good grasp on 8-9th grade algebra. Unless the kid is a computer nerd or wants to be a carpenter or engineer, don’t worry about trig or calculus. Maybe throw in a week or two of geometry, but make sure they can solve for X, and make sure they know how it will apply to every facet of their adult life.

    • 0 avatar
      319583076

      Think about why personal finance isn’t compulsory – it’s highlighted in this very article.

      Good parents teach their children skills like personal finance. Indifferent parents expect other people, or worse, institutions to do this. Bad parents don’t care.

      There are people in this world that want to take advantage of you. It is largely your responsibility to avoid them or stop them.

      • 0 avatar

        I agree parents should be a big part of a kids education, but if a kid is going to spend 30 hours a week for 12 years at school, they should at least stress what is important.

      • 0 avatar
        JimZ

        “Good parents teach their children skills like personal finance. Indifferent parents expect other people, or worse, institutions to do this. Bad parents don’t care.”

        or more likely are terrible at personal finance themselves.

      • 0 avatar
        Paragon

        There’s another aspect of people that rarely is discussed. People that are basically, trustworthy, good, honest, decent people often are naive and expect to be able to trust other people when they are clean-cut and dressed nice. So, it’s always a shock when other people don’t treat them in a decent manner, which they only discover after-the-fact didn’t happen. They didn’t perceive the person at the time to be a greedy, self-serving, take advantage of everybody and their grandma in every way possible type.

    • 0 avatar
      thunderjet

      Yup. Having a good grasp on algebra would help tremendously when it comes to personal finance and budgeting. There are, unfortunately, some people who no matter how hard they try won’t get the concepts. They are the ones who will be taken advantage of in life, financially.

      • 0 avatar
        JimC2

        Algebra and “applied math for life” notwithstanding, if you’re out of your element buying a car then bring a friend or family member who knows what they’re doing!

        Plenty of people will seek advice before they buy a computer (much different consequences) or buying a house. Common sense and buying a car should be no different.

        “Applied math for life” is important. I don’t know if it’s different now, but I remember a lot of “a dozen apples for $3 or one apple for $0.35” kind of questions in younger grades, then questions about compound interest and simple interest in high school. Then again, Teen Talk Barbie infamously asserted that “math class is tough!” before she was censored and reprogrammed for her defeatist mentality, so don’t just blame the education system…

        • 0 avatar
          JimZ

          that can be a real problem; when I was in high school they did have a class called “Consumer Math” or “Math for Consumers” or something like that. Problem was that it was viewed by everyone (faculty, parents, and students) as class for “f*ck-ups” while the kids with a future went up the algebra-calculus ladder.

          • 0 avatar
            JimC2

            Yep- both of us are preaching to the choir about this. There’s no reason why any and all difficulties of primary and secondary school math class shouldn’t include applications for life math. Algebra is algebra, whether it’s abstract “solve for x” equations or applied “how many months [x] of car payments with a certain down payment [y]” problem solving.

            The “smart kids” get more practice at it because they use it in more classes, physics for example.

            Where I grew up, you needed one semester of business/shop to get a high school diploma. There were lots of ways to satisfy getting that single credit, but not all of the ways were equally useful in life: typing class, auto shop, wood shop, machine shop, economics 101, home economics (cooking/homemaking/traditional girl stuff), and probably a one or two others I forgot. But there was plenty of opportunity to take more than one of those classes…

            Choices have consequences in life!

          • 0 avatar
            Scoutdude

            When I was in HS there was a class that IIRC was called personal finance. We learned about budgets, ect. For the big project we had to look in the paper and find a job that we could realistically qualify for, figure out how much that $x per hour you would actually take home and then try and find an apt you could afford and it better allow you to get there on the bus, or by walking at least until you were able to save up for that car either a used beater and the attendent maintenance, repairs, fuel and insurance, or a new car and its monthly payments, higher insurance ect.

            The interesting thing was my much younger brother took the same class and I remember him telling me how stupid it was to buy a house because at the interest rates of the time your payments would total 3 or 4 times the purchase price of the house. Somehow he missed the part that it would probably appreciate and that since you have to live somewhere in the long run it may start out a little more expensive than rent but once you are there a few years it will be cheaper than rent. He eventually figured it out and we bought a duplex together and he has since bought a house on his own.

            Now by the time my kids were in HS a few years ago there was no such class at their school. Of course I’ve taught them all about personal finance.

        • 0 avatar
          stuki

          Completely unconstrained competition solves problems such as these for consumers. Which is, of course, why it’s generally banned in favor of feelgood-for-the-easily-indoctrinated nonsense, like dealer franchise protections, zoning/land use laws and bans on drug reimportation.

  • avatar
    davewg

    This story makes me so angry I want to go shopping for a car just so I can punch a sales manager for the asshole behavior of his industry cohort.

    It also still astounds me that in two-thousand-and-sixteen people don’t know the difference between dealer (independent business) and the company that builds the product.

    Rough, rough story and unfortunately, it’s true, and happening right now…somewhere…

    • 0 avatar
      Paragon

      I’m with you, brother. This kind of unacceptable behavior should not be going on. Many times all average folks can afford for years and years is a used car. Then the time comes for them to get a new car at a new car dealership, they’re not prepared for all the different ways things get tacked on to the advertised price of a new car. I will say my dad often recommended buying from a private owner, when the car was still clean and in decent shape, and they had receipts for any and all work done. You know, a one-owner car. Many, though not all private owners will let you take a car to your trusted mechanic to have it looked over.

  • avatar
    Alfisti

    Why are interest rates quoted on ttac so damned high? Aren’t rates barely above 0%?

    I just secured a line of credit to purchase a vehicle and it’s at 3.2%, and that in Canada where rates are a touch higher.

    Is it just a function of credit rating that the ‘mericans so seem so obsessive about?

    • 0 avatar
      zanzibar

      I think when buying a completely new car you can oftentimes get an interest rate that is very low (under 5%). I bought a new vehicle earlier in the year and got 0% interest on it, and have a friend who bought a couple year old vehicle with around a 4% rate. However, I think if your credit score is really bad or they can tell you are naive you will get raked over the coals for it. I have a friend with a low credit score who bought a 2013 used car earlier this year from Carmax with an interest rate of 18%… If people are willing to agree to it, these lots will sell it to you with those rates. Although I don’t think my friend had much negotiating room on it since his score is so awful and nobody co-signed for him. Truly he should not have bought it though since I don’t believe he can afford it, but people are apt to make dumb decisions. In the end he is paying far more than that car was worth.

    • 0 avatar
      sirwired

      If you have good credit, know it, and know where to look, car loans in the US are easily obtained for 2%.

      If you have poor credit, or have good credit but don’t know it, or you don’t know where to shop, the sky’s the limit.

    • 0 avatar
      DukeGanote

      Interest rates are based on the GICO score: “Gullibility Incentivizes Complete Opprobrium.”

      Sure I was offered 7% a couple of years ago by a dealer because my credit rating was poor (long story)– at first. However, I told him to check with my credit union or I’d be walking out. I got 3% or so from them.

    • 0 avatar
      notwhoithink

      I bought a new car last month, and most banks were advertising between 2.5%-3.5%. I ended up going with the captive finance offer at 0% (there was no option to take a bigger rebate/incentive in lieu of the 0% at that time). But my credit score is about 830, so I can pretty much get whatever the lowest available rate is.

      As to why the rates quoted here are so high, usually it’s in a story about someone getting screwed by a dealer because they had bad credit or didn’t know how good their credit was. Jack can’t get much mileage from doing stories about people who financed at 0%.

    • 0 avatar
      thunderjet

      Most banks (in the US) are offering 2-3% interest for customers with good credit. Automotive captive finance arms are offering 0-1.9% on new cars with good credit. My wife and myself have always financed through captive finance arms and the most we’ve paid on interest in 0.9%. I never even bother looking at banks because I know walking in that I can get the captive finance arms low, low interest rate.

      It helps to have good credit and not be poor. Being poor costs more money.

  • avatar
    John

    Amen. Bring back Home Economics, make it a mandatory high school course for the boys and girls. How to manage a bank account, credit card, loan, grocery shop, basic cooking, basic sewing, how to change a light bulb, etc. etc..

    • 0 avatar
      mankyman

      ^ This.
      Basic financial illiteracy is part of what keeps poor people poor, not just predatory capitalism.

      I have a childhood friend who has made pretty good money (now $70K/year) for the last 20 years. yet he has declared Chapter 13 and lost a house and has no savings to speak of. I have no idea where his money has gone!

      • 0 avatar
        DeadWeight

        It’s not just a poor thing; it’s a keeping up with the Goldstones, Petruzellos, Vander Hoss thing, too.

        I’ve got a close friend who is twice divorced, has now lost two large homes ($700,000 purchased in 2000 and $1,300,000 purchased in 2007) to ex-wives, has a salary with a bonus that fluctuates between $500,000 and $800,000 per year, yet has filed for bankruptcy, is constantly borrowing money (he has no drug/coke habits – he’s fitness obsessed), and yet is always driving a $80,000+ vehicle (he had a 2006 Maserati Quattroporte Sport GT that was a laughable POS; I was driving in it back in 2007 on M59 in Auburn Hills when the front axle sheared in half), and wears hand-made $7k to $10k suits.

        • 0 avatar
          Sam Hell Jr

          DW, if you should need further proof of your point, ask a bank teller. I worked through school as a teller in an affluent neighborhood. Rare was the customer who could have produced $1000 cash on short notice. Whenever I feel the twinge of bi-xenon envy behind the wheel of my prolemobile tC, I remind myself that at least I’m not renting it.

          Getting pretty far afield from the post, however, unless we’re contending that the purchaser should have been looking for a ~$10k car instead of a new Soul.

          • 0 avatar
            DeadWeight

            She should have bought her mom’s car for the just-under-10k that the dealer snagged it for.

            She would’ve save $17,000 and had a nicer ride.

            Boom!

        • 0 avatar
          DukeGanote

          DW, your friend sounds like a poster boy for “He who dies with the most debt wins!” Which does have truth, albeit uncommendable, to offer; (no surprise if you have a church that doesn’t skip over the Parable of the Shrewd Steward).

        • 0 avatar
          JimZ

          it’s the same reason so many pro athletes go bankrupt soon after retiring. they live like they make $15 million a year and have no plan on what to do once they’re no longer making that money.

    • 0 avatar
      S197GT

      i’ve sewed numerous buttons on shirts over the years after learning how to do it in middle school home ec.

      just fixed some jcrew shirts last month; tightened up the cuffs!

      one of the few things i learned in middle school that i know for a fact i use!

    • 0 avatar
      zamoti

      Hey, how are we supposed to breed a generation of consumers if you show them how to manage their money?!
      The idea is to just make sure they want the latest shiny thing and double down by making sure that they’re too ignorant to fix it when it goes kaflooie as soon as the warranty is up. It perpetuates the circle of purchasing fueling debt and lining the pockets of those who think this is a sustainable practice. Those in debt will have to continue to work longer and harder for less and less (or else someone else might get their job). This is also effective to ensure that nobody does anything naughty like protest, complain, compose a thought, organize or run for office. Keep ’em on the treadmill until they drop.
      So just zip your lip mister, there’s an economy to stimulate here!

  • avatar
    DeadWeight

    “And you wonder why the manufacturers would tear down the pillars of heaven to get to a direct-sales model? The first automaker to turn that particular trick will have a very bright future; everybody else will just have a Destiny.”

    OMFG!!! That’s the sound of Ruggles having a coronary!

    Ruggles would like to have a word with you – OUTSIDE – since you’re too naive to ever be dispelled of the quaint notion that NEW AUTOMOTIVE FRANCHISE DEALERS are the lifeblood, heart & soul of the auto industry, writ large, and that state-level legislation PROHIBITING manufacturers from engaging in direct sales are only fossilized Elvis,action of a by-gone era, no longer needed (but let’s insist on keeping, rather than repealing, those statutes AMIRIGHT?).

  • avatar
    28-Cars-Later

    Mama needed to hang onto that creampuff Max a few more years.

    “So she owes $15,000 on a $7,000 car,” he clarified.”

    Fate, she was not kind to Destiny.

    I think my opinion of most dealers is well known, but I will add a Southern pearl of wisdom I picked up: poor people, will always be, poor people.

  • avatar

    It appears some have to pay too much so some can pay too little. The OEMs put tremendous pressure on dealers to achieve certain market penetration. If all the deals are “minis” the dealer doesn’t stay in business long. With so much information about dealerships I’m surprised Mr. Baruth isn’t operating his own new car store, Moral Motors, with his own money. He could charge everyone the same margin and make it up on volume.

    As a matter of information, most well known banks cap interest rates on a tier basis. I don’t know for certain about 5th Third. If so, the tier is specified by the lender, not the dealer. The usual cap on rate margin is 2%.

    RE: “The 2006 Maxima was valued at $9,957 against a payoff of $10,498. How much was the Maxima really worth? Using a sort of holistic method that involves checking sale prices at the time, evaluating current sale prices for 2009 Maximas, and holding my finger up in the wind to check which way I think it’s blowing, I’m going to say that they took a little money out of Destiny’s mother’s pocket there. This was a car they could have probably sold for $13,500 without too much trouble, which meant that they could have given her the payoff and simply left it out of the deal.”

    It might also help to know whether or not the Maxima is a 2006 or a 2009. The author seems to be confused about that. It might also be helpful to know how a dealer might just have “given her the payoff and simply left the Maxima out of the deal.” I presume the author is trying to say the dealership should have just bought the used car from the mother. Of course, when that happens, the sales tax rises, Sales Tax or Use Tax is generally calculated on the difference price except in a very few states. What’s 6.75% on $10K? The answer to that simple math question might also answer why the trade was included in the deal. Everyone’s trade in is a cream puff.

    Conveniently missing in this hatchet job is any mention of used vehicle reconditioning. Also missing are other details of the sales paperwork. I seem to recall this same author doing another hatchet job on a Buick sale a few months ago. He also left out critical information in that one in an attempt to further his agenda.

    • 0 avatar
      28-Cars-Later

      Ruggles returns!

      “Everyone’s trade in is a cream puff.”

      Just like every customer is important, and your opinion matters, and your voice will be heard.

    • 0 avatar
      gasser

      “Some have to pay too much so some can pay too little”.
      Please remember this paradigm the next time you go to an emergency room and get a $5K bill for being there 3 hours and going home with two prescriptions. (My experience last month).

    • 0 avatar
      sirwired

      It’s quite clear in the article that it was regarding an ’06 Maxima. But since he doesn’t have ready access to information as to what ’06’s sold for three years ago, what ’09’s sell for today is a not-unreasonable proxy. The only person that’s confused on that point is you.

      And absent extraordinary circumstances, (body damage, vomit stained interior, etc.)a 6-7 year old Maxima driven by a nice old lady should not have required much in the way of reconditioning at all.

      And what “other details of the sales paperwork” are you thinking about? It’s not real informative to say that the article has insufficient detail but remain mysterious as to what these details might be.

      And there is never any excuse, anywhere, for crazy-high doc fees, other than dealers wanting to make cars appear cheaper than they are.

      • 0 avatar
        Jack Baruth

        Ssshhhh… Ruggles thinks he’s making an eloquent point.

      • 0 avatar
        Eiriksmal

        I bought my fully-loaded (leather, elite package consisting of 2+2 heated buckets instead of the rear bench/rear powersunshade, navigation, BOSE audio, heated steering wheel, power folding mirrors, sunroof, bi-xenon lights, OEM chrome wheels… literally every option.) 6MT ’05 Maxima in 2011. I paid $10.5K in a private deal.

        I could have gotten it for $10K even, but I was desperate for a high-torque 6MT sedan, so I didn’t push him on the price. Heck, I’d already had to extend my search range for a car from Louisville to Cincy and Nashville, and had to go to frickin’ Lexington (BOO, YOU SUCK SO MUCH LEXINGTON!) to get this ultra-rare edition of what’s a thorough old-lady car.

        Maximas don’t hold their value very well, even if her car was an ’06 SL with the most common options (leather, xenon lamps, moonroof). Most autotragic 6-year-old Maximas when I was looking were $14-16K, for a car that cost $26-$36K new.

        Fun fact: My car came with a sticker showing a listed price of $34K in 2005, which is ~$44K in 2015 dollars. That could give you a heck of a sports sedan these days. :(

    • 0 avatar
      notwhoithink

      “What’s 6.75% on $10K? The answer to that simple math question might also answer why the trade was included in the deal.”

      $675 is hardly a deal breaker. Yes, it probably helped the deal a tiny, tiny bit. But as close as they were to giving the payoff value as the trade-in value, they might as well have done it. The tax savings would still be there. The fact that the difference between trade-in value and payoff was only $500 on a car that (allegedly) could have had close to $4k markup from trade-in seems to indicate a dealer more interested in taking every penny that they think they can get away with on every possible line item. No dealer is going to let someone walk over $500, and if she had asked for it she would have no doubt gotten it.

  • avatar
    Alfisti

    A lot of the issues outlined are the result of the absurd north American practice of allowing businesses to sell things for more than they are advertised. I knew you are all used to it but it is immensely stupid.

    How a $30000 vehicle is really $35000 once taxes, fees and charges are added is just ridiculous. I will never understand why you’ve settled into the system. Mind you I don’t understand tipping which is an even greater level of stupid.

    • 0 avatar
      Mandalorian

      This is because taxes/fees differ by state for cars and state/county/municipal level for most smaller purchases (ex: tires, toilet paper, pencils, etc). There are no uniform national taxes on these things.

      • 0 avatar
        duffman13

        @Alfisti,

        Piggybacking on you Mandalorian.

        I live in Maryland, but close enough to DC, VA, and Delaware that buying a car in either state or the District is really my choice, and the dealers here have to be ready with the paperwork to register it in any of the 3. Heck, Baltimore is a destination for buyers from the York, PA area too.

        SO you’re looking at the following:

        MD: 6% tax, dealer fee $300
        DC: 5.75% tax, dealer fee $300
        VA: 3% at purchase, annual use tax, $5-600 dealer fee
        DE: 0% tax, but a “fee” of 4.25% of purchase price to title the vehicle. dealer fee $295
        PA: 8% tax, $130 dealer fee

        It is to the point that dealers in the DC beltway advertise different document fees dependent on the buyer’s registration address. Also hence the reason Mandalorian said – dealers in my area have to service buyers from all of these locales, which have different laws regarding taxes and fees, and comply with all of them.

        Not to mention, in most states, your trade-in deducts from the purchase price, not the final price. Doing this actually cuts your taxable sale price, meaning you can’t technically advertise a realistic final price – it always has to be before taxes, fees, and trade-in.

        • 0 avatar
          mtmmo

          PA tax is 6%, it’s 8% in Philly. Also you pay the tax rate where the car is registered NOT where you buy it.

          • 0 avatar
            Wheeljack

            ^ This. I bought my new Challenger in Florida and had to pay the 6% Michigan sales tax just as if I had bought it in Michigan.

          • 0 avatar
            Paragon

            Yes, because some of us go out-of-town or even out-of-state to get just the right, hard-to-find car.

          • 0 avatar
            duffman13

            That’s what I’m saying – it is impossible for a dealer to advertise a “final” price, particularity in this area, since they have to contend with potentially 5 different tax/fee structures based on where their buyer pool would register their vehicles.

            With the current internet advice to email/call every Edsel dealer in a 100 mile radius that has the car model you want to get the best price, there are probably more cross-border shoppers than ever before, further complicating this.

            Not to mention the trade-in affecting taxable sale price factor; those laws differ by state too.

  • avatar
    87 Morgan

    As someone who has spent 15 +- years in the retail auto business, with specific emphasis in F&I, I really don’t see a problem with this car deal. Jack, you make some broad assumptions or perhaps you have all the information, you just left it out of your piece for brevity.
    1. credit score of both + income of both at the time of signing
    2. condition of the trade. did it need tires, brakes, dents, windshield.

    You indicated that it was a 2006 Maxima, as noted in a previous article it is entirely possible this car was sold in 2005 and traded in 2013. An 8 year old Maxima, I am sorry is not a full book car. Tires, brakes, and windshield could run a grand or better, easy. The dealer is entitled to make a profit.

    Gap, perhaps a little expensive, but as noted she owes 15k and it is worth 7k. That is 8k in drink if your friend totals the car. Seems to me that is a good trade, as we can both most likely agree she does not have the 8k to pay off the loan.

    11% for a cosigned loan with $500 down? Help me understand where the problem is. Interest rate is a measure of risk, and it seems the bank is the one taking the risk. They financed a 72 (6 YEAR LOAN) for a young lady, who at the time, had demonstrated a propensity to not pay anyone. Why does she deserve 3%? I pay my bills, you pay your bills; we deserve 3%. We have earned that right. She, at the time has not. The cosigner means jack squat when it comes right down to it. All it did was provide the bank a bit more leverage. Honestly, can mom really afford to make the car payment for her if the deal goes bad? Will she continue to do so for an extended period of time? We know the car is sale proof due to the inequity, so you can’t play the ‘mom will make the payment until daughter sells the car’ card.

    I fully agree that the retail auto business is by and large a dirty place. Writing articles condemning a dealer or a specific transaction without all of the facts is unfair and should be beneath you Jack.

    • 0 avatar
      sirwired

      Your analysis of gap insurance is faulty. Yeah, it might be nice for the buyer to not have the balance hanging over her head, but that doesn’t justify the “the bank requires it” lie. (It’s a convenient lie because it avoids having to explain to the buyer how long they are going to owe more than the car’s worth.)

      And why go all caps on a 6 YEAR LOAN? This car should easily last well past that point. It’s as utterly unremarkable as a 4 YEAR LOAN would have been twenty years ago, perhaps even less so.

      And Jack’s not saying she should get 3%. Where did you get that? He specifically used 6.9% as the interest rate he estimates she sould have qualified for (and he knows the details of the parties involved better than you do.)

      • 0 avatar
        notwhoithink

        “that doesn’t justify the “the bank requires it” lie. (It’s a convenient lie because it avoids having to explain to the buyer how long they are going to owe more than the car’s worth.)”

        Heck, maybe the bank actually DID require it. But if it did, it’s worth asking what about this deal is so bad that the bank would only touch it with GAP insurance attached?

        As to the interest rate, maybe the dealer only marked it up 2%. Maybe she would have qualified for 6.9% somewhere. I wouldn’t think of it as being beneath a dealer to look at the deal and say “since this might be tricky to get financed I’m going to go with that company that charges crazy rates but is guaranteed to approve anyone, and if the customer has a problem with the rate we can go back and try to get a lower rate elsewhere. Dealers like things to be quick and easy.

        • 0 avatar
          sirwired

          The “upside down risk” to the bank is supposed to be covered by the interest rate. I can’t say I’ve ever heard of a bank requiring it for a purchase transaction (I believe in some states that’s actually illegal), although it is quite common for leases.

    • 0 avatar
      yamahog

      “The dealer is entitled to make a profit.”

      And if that weren’t the natural case, it would be necessary for car dealerships to lobby state legislatures to make it so.

      • 0 avatar
        vvk

        “The dealer is entitled to make a profit.”

        Yeah, this is what I would argue against. The question is how much profit is acceptable. 1%? 5%? 10%? Yeah, maybe. However, in this case the various parties are making over $11k on a $17k car. So 65%+ profit. Is this legit and ethical? Especially considering that in no way is this made clear to the person being ripped off.

        I recently went to a dealer to test drive a used car. In all honesty, I was not seriously considering buying that car. I just wanted to drive it. Out of curiosity I asked about the deal they would make with my current car as a trade-in. Without taking finance charges into consideration, I estimated that they wanted $10k in profit on the combination. Of course I would not touch that with a ten foot pole. But this is rather typical.

        • 0 avatar
          Middle-Aged Miata Man

          In that scenario, you would have been wise enough to walk away anyway.

          The onus is on the consumer to be informed, so I don’t necessarily begrudge anyone from attempting to profit from a person’s stupidity. In Jack’s story, both the girl and her mother had multiple chances to be smacked upside their heads by common sense throughout this process, and most notably by the “Total Amount of all Payments” box on the contract.

          It shouldn’t take any great understanding of math to comprehend that they’re being taken advantage of when that value is nearly twice the amount of the purchase price of the vehicle. The dealer’s sole concern is to make money for the dealer, not for the manufacturer, and it’s certainly not their job to save customers from themselves.

        • 0 avatar
          bikegoesbaa

          “Especially considering that in no way is this made clear to the person being ripped off.”

          The first photo at the top of the article shows very clearly that the buyer was informed of:

          -Their interest rate
          -Their payment amount
          -The total number of payments
          -The total finance charge

          Nobody got ripped off, an adult made an adult decision with full disclosure of all the relevant terms.

          The fact that it was an objectively bad decision does not make it unethical on the part of the dealership.

    • 0 avatar
      ajla

      “The dealer is entitled to make a profit.”

      The dealer isn’t “entitled” to get anything. They don’t have an inherent right to make money just by virtue of existing.

      • 0 avatar
        Middle-Aged Miata Man

        Right, they need to work for it… which is exactly what this dealer did.

        • 0 avatar
          87 Morgan

          I will attempt to respond to each of you:

          SirWired: ‘Your analysis of gap insurance is faulty.’
          per the piece:
          Destiny doesn’t have much recollection of why this happened, except that it was necessary. My guess is that the F&I department told her the bank wouldn’t buy the deal without it, which is of course a lie.
          We don’t know if the GAP policy was sold or not. Destiny doesn’t remember which means they said do you want GAP? Explained and it to her and told her it raises her payment $9 and she most likely said ‘ugh sure’.
          I suspect the bank put a limit to the amount financed on the deal since their is not extended warranty, you can bet they would have one if the bank would have given the advance. So, that tells you their credit is/was not as good as JB claims which makes sense due to the deal structure. Without seeing credit scores it is impossible to know.
          I put the 72 months in CAPS as the bank takes the risk here. Kia is not known for resale; it is well known they are half price in 3 years; interest is front loaded so you know she will be upside down. The math is easy.

          vvk: come on man, your assertion is ignores just about every economic principle known to man. 11k in profit. The bank carries the note, not the dealer. 11k is the interest returned over 6 years. The profit is earned annually or monthly on the banks books. 65% return?

          Finally, JB puts this at the end…Which all of us missed..
          ‘My friend, who is effectively financing Destiny’s life in exchange for certain other salutary qualities which she possesses;’

          So, Destiny is a mooch. Once the ‘Friend’ bounces her who is going to make the payment? Mom? Will Destiny be able to line up another man fiance her quick enough?

          In the end, mooches pay high rates because their loans go bad every now and again because they have no plan and rely on someone else to survive. Destiny currently has salutary qualities. She won’t always.

          • 0 avatar
            sirwired

            “I put the 72 months in CAPS as the bank takes the risk here. Kia is not known for resale; it is well known they are half price in 3 years; interest is front loaded so you know she will be upside down. The math is easy.”

            What matters to the bank is if THEY are upside down, they don’t really care how upside down the buyer is. That risk to the bank can be covered with a heck of a lot lower of a rate.

  • avatar
    nels0300

    I don’t know, it’s not right that dealers do this, but at the same time, I don’t understand why people don’t do their homework.

    You don’t need to be a genius at math, all of the tools and information for consumers are available online.

    It’d be interesting to know how much time Destiny spent researching what might’ve been the biggest purchase she’s ever made.

    My wife was also hosed by a Kia dealership before I met her. She didn’t do her homework, she was just too excited to get a new car. She has time for scrapbooking, pinterest, etc. but didn’t even spend an hour researching the car buying process.

    • 0 avatar
      kvndoom

      I think some people are too proud to ask for help, even when they know it doesn’t smell right. And others (like myself, up until 5 or 6 years ago), are drawn to new car smell like flies to feces.

      • 0 avatar
        Wheeljack

        Pride is definitely a big part of it. Many years ago (approximately late 2000/early 2001) a friend of mine leased a USED car…yes, you heard that right, a used car lease. The car was a lease return ’98 Taurus, fairly lightly equipped with the only option being the 24V V6.

        His payment was $300 a month for 48 months, so $14,400 all said and done. Worst part was that when the lease was up, his mother needed a car at the time so he paid the buyout of $4,900. So….$19,300 for a Taurus GL, and that’s not even factoring in tax/title/license when he made the buyout.

        When he told me what he’d done, I was nice about it, but I wanted to scream. I told him he should have called me before signing the paperwork and I would have helped him out, but pride got in the way. I’ve worked in automotive in some capacity for my whole career, and that includes selling cars and servicing them too.

        My personal policy is always go to the expert in your circle of friends/acquaintances when making a significant purchase. Don’t let pride get in the way or you could be paying a heavy price for being headstrong. As an example, a friend of mine sold tools for years and even worked for a power tool manufacturer. I wouldn’t consider buying a power tool of any significance without discussing it with him first.

  • avatar
    28-Cars-Later

    I’d be curious to know what the additional kickback to the actual salesperson/F&I guy happens to be (aside from any commission on the actual sale). Banks used to pay a nice reward for a juicy contract like this.

  • avatar
    Arthur Dailey

    Jack, that is a brilliant piece of informative writing. Maybe not as creative as your fiction but still well written and something that every consumer should read. Bravo!

    I have posted this link before. In 2010 Mazda dealership in Southern Ontario which totally ripped a woman with some challenges, living on a disability pension on a car purchase. A vehicle with an MSRP of $39.969 that would have cost her over $66k.

    Luckily someone found out, the government intervened, the sales rep and the managers were charged, the deal rescinded and Mazda eventually revoked the dealership agreement.

    https://www.thestar.com/business/2010/05/06/salesmen_charged_for_selling_41000_car_for_66000.html

  • avatar

    The first thing any dealer will do is run a credit report on the prospective buyer with challenged credit.

    The dealer will try to structure a deal that fits the buyer and its usually around a monthly payment, at a specific rate, from a specific financial service provider.

    Then the dealer will select a vehicle that fits the deal.

    Many folks that have challenged credit are as creative as the dealer in structuring deals for themselves. “OK its a deal I need 2,000 back to pay off another loan”.

    If the customer is making the payments the astute dealer will try to “pull ahead” put them in another vehicle, roll over deficiencies, and at a lower rate.

  • avatar
    deanst

    As much as I would like to hate the dealer, I have to ask – why do people go into one dealership, not negotiate, and expect to get a great deal on their biggest or second biggest purchase of their lifetime? Nothing on this contract was hidden or difficult to understand – with the possible exception of the implication of a high interest rate over time. The same people who will cross the street to save a penny per gallon on gas will walk into a dealership and just buy a car? I know many people are math illiterate, but if this describes you, don’t you realize it, and try to get help?

    • 0 avatar
      notwhoithink

      Because with nearly everything else people purchase the price is fixed, the price of service plans are fixed, and in general people are not used to negotiating on purchases. The two exceptions are houses and cars, and most of these subprime types rent.

  • avatar
    bunkie

    George Orwell, writing in “Down and out in Paris and London” wrote that “there is more money to be made taking pennies from the poor than pounds from the rich”. This observation came from his experience in a London flophouse where he calculated that the nightly revenue was greater than that of the finest hotel.

    And, yes, it’s easy to say that consumers should do a better job of educating themselves. But the sad reality is that many of today’s large fortunes are built upon the narrowing of choices for those at the economic fringes.

  • avatar
    bunkie

    One more point. My son, a recent computer science graduate, bought a new Accord last year from a Central Ohio dealership. He has a good job. A couple of months back, he texted me that he had hit a pothole and that the sidewall of a tire was damaged and the wheel picked up some rash. Being a dad, I told him to replace the tire immediately. He went back to the dealer (who quoted him a reasonably fair price on the tire and an alignment, which I approved). While there he got pulled aside by a saleswoman who suggested that he trade in his Accord on a new one. He was skeptical. When he told me this I said: “Don’t go back there, they are sharks”. My son is a smart kid and is, by nature, skeptical. But he lacks experience. He did however have an advantage, he had me to back up his suspicion. It’s easy to see how the game is designed to identify those low-information customers so as to fleece them.

    In the five years I lived near Columbus, I bought/leased a number of cars. I ran into a lot of shady dealers.

    • 0 avatar
      IHateCars

      “…While there he got pulled aside by a saleswoman who suggested that he trade in his Accord on a new one.”

      Not sure that this, in and of itself, is a sign of a shady dealer. I mean, car salespeople are paid to sell cars. If they can get someone to trade in their used car for a new one….that is their job. I get letters and calls frequently from my dealer saying that my truck is in high demand on the used market and to come in right away to trade it in for a new one. I don’t think that they are shady because of that, they are trying to generate business.

      • 0 avatar
        JimC2

        Fair enough- for that one salesman, it takes only a minute out of his day to test the waters with a service department customer. Pretty easy risk/reward to hit up a dozen or dozens of folks each day in the waiting area.

      • 0 avatar
        duffman13

        There are enough people who view car maintenance as an “optional” that decide to trade in their car because it needs a brake job and new tires. Let’s call it $1500 worst case scenario for rotors, pads, tires, and an alignment.

        Yeah, the things I listed off are consumables. You should be budgeting for their eventual replacement, especially in a paid off car where the mileage is getting up there. However, there are enough people that $1500 will wreck their monthly, maybe even quarterly budget to the point that trading in a perfectly good vehicle that needs tires and brakes for something new that won’t for a few years, and gives you a predictable outlay seems like the better option.

        I call these people idiots, but it doesn’t change the fact that they exist.

        • 0 avatar

          If you are trading it in just because it needs work, then yes, that’s dumb. But let’s say someone has been thinking about buying a new car in a couple months. In that case, it would make sense to trade it in now rather than get the work done and then trade it in in a few months.

  • avatar
    DeadWeight

    One last thing –

    THIS (AND WORSE) IS WHAT HAPPENS WHEN A SOCIETY OF SHEEPLE CONSUMERS IS CONDITIONED TO BUY A MONTHLY PAYMENT INSTEAD OF putting in research, time and effort to NEGOTIATE A TOTAL PURCHASE PRICE.

    Must have the shiny new baubles, too, that usually don’t improve happiness, and often diminish it through financial stress, clutter, etc.. (I fly so far under my means I’m stealth)

    Aaron’s Rent-A-Center LOVES POORS and does fantastically well, thank you very much.

    • 0 avatar
      bunkie

      It’s easy to call people “sheeple” when you have the advantage of time, resources and other built-in advantages (social class, a support network, etc.) This does not excuse gross, willful ignorance, but an awful lot of people simply lack the resources (one of which is energy as being stressed financially is very draining) to be really educated consumers.

    • 0 avatar
      dal20402

      Go back and read Jack’s article about the Million Mile Lexus. It’s one of the best things he ever wrote and totally relevant here.

  • avatar
    JimC2

    It would have been financially wiser to keep the Maxima and put away $400/month for the last three years. The $10-15k in payments to date could have kept that Maxima in very good shape. But almost nobody likes to spend their money that way; most people would rather watch their ride age, lament, and envy shiny new things.

    I’m not sure it really hurts Kia the most. This is the market segment and business model that “Big Kia” has chosen. It hurts them, but they could choose to lift themselves out of this segment just as Hyundai has. (Hyundai started off even worse- I remember. Some of my high school friends drove Ponys…)

  • avatar
    FerrariLaFerrariFace

    “The alpha example of that would be the “Salt Life” sticker; I’ve never seen one in proximity to someone with an IQ above median.”

    Just gonna say that I have a few Rallycross friends that have this sticker on their cars ironically, because rust. If not for the fact that they own several rusty old barely running Subarus, I would not question their intelligence. :)

    Also… Jeff Wyler… holy shit. Biggest bunch of crooks I’ve ever dealt with. I’ve walked out of their offices pissed off and insulted so many times I’ve lost count. Last time they actually tried to sell me a $1000 “TruCoat” equivalent… on a rusty Miata. “EPA” they called it. I though they were trying to push some sort of government regulation fee on me, but no: “Environmental Protection Application” is what I was told it was. Basically, TruCoat. I literally laughed in the salesman’s face as I got up and left.
    “Aren’t you going to at least make me an offer?” he asked with the saddest puppy-dog eyes I’ve ever seen.
    “HA! No,” I replied as I then questioned my own intelligence for ever bothering to drive into their sales lot again.

    • 0 avatar
      S2k Chris

      I have a picture somewhere of a jacked-up F-250 with a Salt Life sticker on it, on a suburban Chicagoland highway with Illinois plates. Bro, you are literally a thousand miles from salt water. You are not living the Salt Life.

    • 0 avatar
      DeadWeight

      I refuse to stereotype…

      …I lie….

      …Kia dealerships, more than any other automotive brand I have ever witnessed, are staffed full of the scummiest looking sales and service staff, by far, which is saying A LOT, as we’re talking vehicle dealerships, here.

      • 0 avatar
        sgeffe

        DW, don’t know if you have a chance to see commercials for a Monroe-area dealer, I believe, Taylor Kia.

        This Toledo-area piece of human debris has dealerships peddling HyundKias clear down to Findlay, OH. I went into the local Hyundai store, and needed a shower at the end! This idiot screams “sleazeball” from the word “go!” Even if I could be convinced to pull the trigger on a Hyundai, I’d go out of my home region to not buy it through this idiot!

  • avatar
    greaseyknight

    11% is pretty good for an interest rate for someone with “challenged” credit, I work in the bankruptcy field and I don’t blink an eye at anything less than 12-13%. In my world, 20-25% is not uncommon, often from a local buy here pay here or our friends at Santander/Ally/GM Financial. Some of the local credit unions are getting into the high-interest car loans as well.

    Not that I necessarily blame them….we’re talking about some high-risk customers here.

    What boggles my mind are the people who are upset with owing a deficiency after they give back the car or its repoed. “They got the car back, its not fair that I still owe money on this car”

  • avatar
    pwrwrench

    I have had discussions about sales contracts with people over many decades. Those that sell insurance, cars, motorcycles, appliances and so on.
    The overall finding was that 90% of buyers have one question, after size and color are selected, “What’s my monthly payment?”.
    Obviously this leaves those buyers open to the sort of ‘deal’ that is outlined here.
    I have no sympathy for those who have defended the dealer in this case.
    I do not think that dealers would go out of business if they sold cars at the ‘sticker’ price.
    If that was really true then raise the price and be up front about it.

    • 0 avatar
      LS1Fan

      If this mythical “moralist motors” sold cars at sticker , they’d be undercut and put out of business by the dealer(s) who cut the price and hide it in the paperwork. Consumers don’t care about sales floor integrity, and neither do banks or automotive suppliers.

      Money talks and hot air walks.

  • avatar
    LS1Fan

    Bravo.

    Seriously, I’m offering a hand to the dealer. They did a great job , and I mean that with no sarcasm.

    Why? ****Because that’s their job****. The duty of a sales team isn’t to prepare the most consumer friendly sale. Their job is not to provide charity automotive services for downtrodden souls. A dealer doesn’t exist to donate cars for the greater good.

    Their overall purpose in life is to make money selling cars. Looks like -wonders of all wonders- they did exactly that. Customer ignorance is an expensive tax to pay for everyone regardless of income bracket or social standing.

    Good job ,random Ohio car dealer. Dont mind these moralistic hypocrites moaning about “capitalist exploitation” while drinking $10 coffees made with plants farmed in third world nations for pennies on the dollar , typing away on their smartphones and computers built by Chinese sweatshop labor. Your only crime is making a profit where people can see you do it.

  • avatar
    PRNDLOL

    I don’t understand the point of this article. Did this person not have the freedom to go into any new or used car dealer and negotiate a deal acceptable to her? If an adult consumer can’t be bothered to do the basic research or cross-shop then I’m not really interested in hearing their plight. Take it to Judge Judy.

  • avatar
    05lgt

    My thanks for writing this Jack. I know you think the OEM’s are the answer, but why not something like a CFPB to level the field when there’s massive information asymmetry? I’m curious about your views.

    • 0 avatar
      sirwired

      Interesting how you bring up the CFPB. The law creating the agency was originally supposed to also cover car dealers, but that got written out after fierce lobbying. (The usual claptrap about how dealers are job-creating special flowers who will all mysteriously be unemployed should any but the lightest touch be applied to regulate them.)

  • avatar
    Steve Lynch

    Average auction price this AM on Manheim for 2006 Maximas in above average condition was $3,315, so it sounds like dealer stepped up on trade.

    Would anyone on this board pay $9,957 retail for a 10 year old Maxima, much less wholesale?

  • avatar
    HeyILikemySaturnOK

    Filing this under “Cautionary Tales” for future reference…Props to Jack for this one.

  • avatar
    Stumpaster

    It’s a fun tale, and well written, but what is so cautionary about it? That a “mindless young consumer” must be able to add the numbers listed on a sheet of paper into a total? Or that our lives are so invaluable that we must wrangle over $30 tags fee?

    Jack’s big discount starts with him asserting he could have negotiated down from sticker price to $17K. OK, maybe, but not everyone has the stamina to negotiate that part. So caution or not, that’s not gonna change.

    The rest of dealer’s fees and surcharges simply add up to the total price. She could have performed that addition, and went to another dealer if she wanted to, but she didn’t. Maybe all those dealers apply similar fees. The loan terms were written in black and yellow, right in front of her. She could have walked away from all those papers, right when they handed her the pen. But she didn’t. There was a reason for that.

    But you tell her that you’re blaming the dealer? You just perpetuated her ineptitude, because she now thinks that it was the dealer who was at fault, not herself.

    • 0 avatar
      sirwired

      I don’t think Jack’s saying you should spend a half-hour negotiating over some stupid $30 fee; rather it shows the general contempt they have for customers that they slap a $30 fee for something and pretend it’s needed to pay for something the state sells for 3% of that. If they want to charge $29 more for the car, so be it, but it’s nauseating the games they play to pretend they are making less than they are on the car.

    • 0 avatar
      Jack Baruth

      I’m always surprised at posts like this.

      The average person will buy maybe five new cars in his or her life. And she’s supposed to be an expert? Are we an expert when we go to the emergency room? When we need a new water heater? When we call the police?

      I’m very good at buying cars but I don’t think that makes me morally better than people who aren’t.

      • 0 avatar
        dwford

        Jack, it’s a major purchase. Common sense says do a little research ahead of time.

        • 0 avatar
          HeyILikemySaturnOK

          You can do “a little research” and still get fleeced if you aren’t aware of every trick that a dealer can play. Experience does matter, especially for a purchase that one makes a handful of times in their life under normal circumstances.

      • 0 avatar
        Stumpaster

        Not sure what’s so surprising about my post. You blame the dealer. While doing that, you completely absolve her of any responsibility. If she were my friend, I would have told her that she always has the option of going to another dealer if the total amount at the bottom of her papers does not satisfy her. I think your approach propagates the victim mentality that our country is so famous for.

  • avatar
    PrincipalDan

    Dirt or clutter in the car…

    Mrs. PrincipalDan has finally had her fill of the 2005 Vibe she has owned since it rolled off the transporter. This weekend it will be detailed top to bottom, inside and out. She’s great about preventative but can’t be bothered to care about the appearance of her car until either someone “important” will be riding in it or its time for trade in. Having a two year old doesn’t help.

    Destiny is unfortunately your typical low information consumer. Educating yourself before purchasing is essential for many purchases in life. Heck I didn’t even buy a flat screen to replace my old 32 in RCA tube TV until I had visited every place that I could buy one either online or in person.

    • 0 avatar
      dwford

      I didn’t even buy my last mass quantity of paper towels until I figured out how to get them for half off. My garbage bag purchase yesterday was only 1/3 off and I was pissed at myself for messing up the deal.

    • 0 avatar
      thunderjet

      I just got rid of my 32″ Zenith tube TV for a 65″ Sony flat screen. I looked around before buying and got a decent deal. Did it cost money, a little more than I was expecting? Sure. But hey in life sometimes it’s worth it. I’m just glad to be rid of the tube TV. The flat screen is much better. Plus I’m finally out of the TV stone age.

  • avatar
    ajla

    I hope she at least gives them all “0” scores on all surveys from now on.

  • avatar
    dwford

    Jack. This deal isn’t as much of a home run. Selling an $18k Kia Soul for sticker price isn’t getting the salesman a $500 commission. There’s probably not even $500 gross in the MSRP. The $250 doc fee is very low, here in Connecticut the doc fee is generally $499, some states are more. The minor ding on the trade in value could easily be explained by the condition of the car, which you have no idea about. The GAP at $895 is a typical price for that. As for the interest rate, most states now cap the dealer markup (CT is 2.5 percentage points), so yes the dealer will add their points.

    I don’t see this deal as any obscene screwing of the customer. Yeah, the finance guy is happy and the salesman got his unit, but this is nothing like some of the other stories we have read about.

    If the dealer was really out to make a profit, they would’ve flipped her to a used car and made $4-5,000 front end plus another $2 on the back end. If anything, this dealer was an honest one (aside from lying about the GAP, which she actually needed anyway)

    It’s hard to get too worked up about people not getting the best possible deal when they choose to not be informed about their purchase.

    • 0 avatar
      Jack Baruth

      I’ve bought a million dollars’ worth of new cars. Not an exaggeration.

      I’ve never paid more than $49 doc fee. Not never.

      • 0 avatar
        dwford

        It is a BS pure profit fee, but pretty common. Not every state has a law against it. I probably have never paid less than $299 doc fee, but my 30 year car buying experience has been 100% in Connecticut.

        • 0 avatar
          87 Morgan

          Colorado requires a disclosure for Dealer Handling and it can not be waived, ever. It CAN not come off the buyers order. Some dealers here charge $799 some charge 0 or somewhere in between. Even if you negotiate it ‘out’ it stays on the buyers order and they lower the purchase price of the car. So, JB depending on where you buy the doc fee remains.

          Every state is different.

  • avatar
    Troggie42

    RE: the Salt Life sticker:

    The first time I saw one of those stickers, I asked the driver of the pickup truck on which it was affixed what it meant. He told me in no uncertain terms to fornicate with myself.

    I am therefore forced to assume that Salt Life is when people embrace the slang-term meaning of salty, and therefore are perpetually angry clownshoes.

    • 0 avatar
      JimC2

      Those salt life stickers almost always seem to be on a left lane slowpoke. Therefore, when I see one it is like a signal to me to get around that person ASAP because it is a safe assumption that they are not paying attention to their driving and they lack the skill, inclination, or courtesy to consider faster drivers behind them. There are exceptions to the rule but they are always exceptions that *make* the rule.

      Draw your own conclusions about IQ.

  • avatar
    Peter Voyd

    Not a dealer here, but was shopping for a used car for offspring this year – $13,500 for a 10+ old Maxima is not a realistic retail asking price, IMHO, let alone the “trade-in allowance.” Agree with the other assessments of the dealer, but it seems they were generous in almost-paying-off it off.

    “The good news was that the Max was a creampuff and she didn’t owe much money on it compared to its likely retail price.”

    Not sure about that – owing about 1/3 of the likely TMV on a 10-year old vehicle does not sound like “not much.”

    • 0 avatar
      Jack Baruth

      Sometimes I think that I should make some parts of an article

      REALLY BIG

      so everybody gets the point.

      This Soul was purchased early in the 2013 model year. We are now early in the 2017 model year.

      Go buy a 2010 Maxima and see how much under $13,500 you pay.

  • avatar
    Click REPLY to reload page

    This article is just one more reminder of why I’ll never buy a new car, or make payments on one. There are so many good used cars out there, you just have to know how to separate the wheat from the chaff. Additionally, you don’t have to cross your fingers and hope your shiny new Depreciationmobile will be reliable, and not a first-year Fiesta with a defectively designed auto-clutch.

    • 0 avatar
      S2k Chris

      “This article is just one more reminder of why I’ll never buy a new car, or make payments on one. There are so many good used cars out there, you just have to know how to separate the wheat from the chaff.”

      Seems silly to me. Granted, I’m an accountant and work in finance, so the numbers come easier to me, but it takes FAR less time and skill and luck to learn basic consumer finance to determine if you are getting a good screwing or not than it does to mechanically vet a used car.

      Here’s an easy thing to do: take your total purchase price divided by your number of months of payments; that’s the cost to pay off your loan principle. You can do that with your iPhone calculator in 2 seconds. Ideally, your payment number is like $20 more than that number, meaning you’re paying $20/mo to have a loan instead of pay cash.

      • 0 avatar
        Click REPLY to reload page

        When you can buy a car for literally pennies on the dollar, the math makes much more sense.
        I bought my latest daily driver for literally 3% of its price when new, and have put over forty thousand miles on it.
        Now my commute is less than two miles each way. Buying a new car would just be silly.

        • 0 avatar
          thunderjet

          Then you have people like me who will buy a new car, pay it off in 4-5 years, and keep it another 5-10 years after it’s paid off. So basically until it dies or the cost of repairs exceeds the value of the car. The way I look at it is if I buy a brand new car for $30000 with low (under 2%) financing and keep it for 10 years it’s virtually the same as buying a different $3000 car each year for 10 years.

        • 0 avatar
          duffman13

          @Click Reply

          You got very lucky. At 3% of it’s new price you’re talking about a $500 civic, $1000 Camcord, or $3000 S-class, all in the 150-200k mile range.

          At those prices, close to 99% of what is on the used market is around one oil change from a pick&pull. I haven’t seen a car in that price range that didn’t need an immediate $500-1000 to get roadworthy, or depending on where you live, pass a state inspection to even get registered.

          With a <2 mile commute, unless you live somewhere with insane winters I'd say you'd be financially better off on a bicycle considering what liability insurance and registration costs.

  • avatar
    ToorusGT500

    Two months ago was driving up I-77 in southern OH (Marietta/Parkersburg WV area) and heard a Kia ad. The pitch was, “If you take home $350 a week we can get you credit up to $30,000”. That come-on just amazed me. (Yes, I realize the “up to” is a huge escape hatch qualifier for the dealer) But $350 a week take home probably means you’re making $10 bucks an hour, maybe 11 or 12, if you work fulltime that’s maybe $18,000-$24,000 gross/year? ….it seems if you’re even contemplating borrowing $30k for a car you need your head examined. (Didn’t catch the name of the dealer; got home and Googled and I’m guessing it was the Kia store in Lancaster or Parkersburg).

    • 0 avatar
      S2k Chris

      I take home $350 A DAY, plus my wife’s income, and I drive a car that cost $30k (that I bought 5 years ago and will keep for several more). Wow.

      • 0 avatar
        duffman13

        I I’m in your same income bracket and I’ll accept no more than $500 in car payments at a time. And we own 3 vehicles, albeit 1 is paid off and 1 was bought in cash.

        Priorities are priorities – I’d rather have liquid money for fun and be able to fill my retirement accounts and kid’s college fund.

    • 0 avatar
      thunderjet

      Jebus people fall for that?

    • 0 avatar
      Paragon

      ToorusGT500, I’ve heard that radio ad, too. And, like you I thought that most people need to pay for food and rent and utility bills, along with gas and insurance. So, a new car seem really out of the question.

    • 0 avatar
      brettc

      I heard that ad as well yesterday driving through either NY or MA. Either way, it was the same Kia ad. I told my wife that people making $350/week should be buying a $5000 car at the most. Ridiculous.

  • avatar
    OneAlpha

    I have a theory that for any given field – artist, athlete, soldier, salesman, whatever – there are only a very few people who are meant by God or nature to do that thing. We’re talking one percent of any given industry’s existing population, max.

    Everybody else who works in that field doesn’t really belong there. That’s why most salesmen – and car salesmen in particular – lie. They can’t be honest salesmen because they’re not supposed to be salesmen at all.

    A born salesman can do that work honestly, because he’s naturally talented at it, fascinated by it and doesn’t need to lie to move metal. Just like a born soldier loves to sweat and shoot, a born artist loves to draw, a born pilot thinks in terms of piloting, etc.

    There are enough different professions out there that everyone can find their niche – at least theoretically. But sales is full of liars because the world is full of people who can’t earn a good living in a proper industry.

    Maybe they partied their college years away and are desperate for work that doesn’t care about credentials.

    Maybe all they’ve got to work with is that they’re good at scoring with hot chicks, even though they look like one of the main characters in Superbad.

    Maybe they just suck at math.

    Doesn’t matter, but they definitely shouldn’t be salesmen.

    • 0 avatar
      Jack Baruth

      “Maybe all they’ve got to work with is that they’re good at scoring with hot chicks, even though they look like one of the main characters in Superbad.”

      hey hey now

      let’s not get personal

      he’s my brother

    • 0 avatar
      ToorusGT500

      My theory is a little different. My contention is this: There are many commission-based professional sales jobs out there. Many of these are sales-type jobs are not reviled but are considered respectable. (e.g., B2B big ticket sales of many kinds.)

      I’d contend that sooner or later, maybe often, maybe rare, but sooner or later, in any of these positions the salesperson has a situation where they have an advantage over the customer and could “stick it to them” if they wanted (they have more info, the customer is in a time crunch, etc.). and maybe sometimes they do take advantage of them. But I contend that in the better-respected fields there are built in checks and balances that keep the salesperson (reasonably) in check. (One example: I used to deal w/commissioned mfg reps at one of the OEMs. They each had just 4 customers; the same dept at GM, Ford, Chrysler and VW. Burn a bridge at one of them and become persona non grata and you’ve lost 25% of your customer base, as just one example. Plus B2B purchases were done less emotionally, we took our time, a team worked on the details and asked all the right questions, etc.).

      I’d contend that there are far fewer checks and balances in retail auto. The salesman/F&I have all the incentive in the world to max out each and every deal as much as possible and (comparatively) little in the way of checks to keep him or her in check. …so they do.

      • 0 avatar
        duffman13

        @ToorusGT500,

        Agreed. More and more consumers are making this a reality too. As much as car sellers still tout the “form a relationship with your local X dealer” line, many more buyers are shopping on price only and going outside of their local area. They may come back to the local guy for service, but they’re not going to buy there if the dealer 45 minutes away will undercut them by $500. On the same token, losing a handful of individual buyers for repeat business because of an unethical salesperson isn’t going to tank a dealership. Especially not one that caters significantly to sub-prime buyers like a Kia or Dodge/Chrysler.

        Subprime car dealers generally have high enough staff turnover that a shitty salesperson will be gone without much lasting damage, and sub-prime buyers don’t have anywhere else to go unless they start making better long term financial decisions aka not buying a new car you can barely afford at the one place that will finance you.

    • 0 avatar
      wsn

      “There are enough different professions out there that everyone can find their niche – at least theoretically.”

      I don’t agree with that.

      IMO, some people’s DNAs are good enough that they can excel in more than one field. While at the same time, some people’s DNAs are just of lower quality that they are good for nothing.

    • 0 avatar
      azmtbkr81

      Realistically the sales staff at a Kia dealership probably aren’t in a much stronger financial position than Destiny. Any profit foregone is likely literally food from their mouths. It is really the dealership owners that allow these practices to take place that are to blame.

  • avatar
    April S

    When I was shopping for a new car earlier this year the Kia Soul was on my short list of cars I was interested in but our two local Kia dealers were a real turn-off. Both did the overpriced pinstripe garbage and one did the mandatory undercoating garbage. Plus the salesmen at both places tried the high pressure nonsense.

    No thanks (I ended up buying a new Honda).

    P.S. In my former life I seriously thought about selling cars for a career but considering the tricks Management would push I doubted my conscience could handle it.

  • avatar
    StarAZ

    This is interesting as I asked your brother during the first Ask Bark live session whether more car makers would follow Tesla’s route. He answered no and explained that the dealerships absorb the risk of the market for the car makers and that outweighs the benefits of direct-sales.

    • 0 avatar
      JimC2

      Unless you’re selling a boutique product, as Tesla does, the yes, a dealership network is a smart business model because it distributes the risk.

      • 0 avatar
        Jack Baruth

        I would suggest that what the manufacturers want is a hybrid model: direct sales in DoublePlusGoodThinkLand where population densities are thick and money is plentiful, then dealers to cover flyover country.

        • 0 avatar

          Maybe they can do something like Dell – you can go to Staples and buy an off the shelf one, or you can configure one online and have it shipped to you.

          I’d love if that meant more choices as far as colors and options.

          • 0 avatar
            PrincipalDan

            @madanthony, that’s really what I want. But I don’t know if the percentage of the US population who really wants to order a car and wait for it is large enough.

  • avatar
    wsn

    That’s why you need to actually learn stuff in your English and Math classes. I have no sympathy for people who don’t.

  • avatar
    Kyree S. Williams

    I worked as a web developer for a particular Kia dealership that did this sort of stuff. The dealership basically operates like a glorified buy-here-pay-here, and it’s a wonder Kia hasn’t figured out how to revoke its franchise. Prior to me working there, we bought our 2014 Kia Soul + with Nav from a different Kia dealership (formerly Bob Moore Kia of Edmond, now Kyle Hill Kia), and the folks there were wonderful.

  • avatar
    DC Bruce

    Well, most people budget on a monthly basis, because that’s the frequency of bills they have to pay: utilities, rent or mortgage, credit card, etc. So, you can’t fairly slam someone for thinking of a car in those terms. Even a house — the biggest ticket item that just about anyone will buy (and many will never own) — is calculated in monthly payments of mortgage, taxes and insurance. There’s nothing inherently wrong with saying, “I can afford $400 month in car payment.” What’s wrong is not shopping around to see what your $400 can get.

    Sure, there are a minority of folks who pay cash for a car but most people don’t. So, a salesman’s use of the “four-square” doesn’t seem to me to be inherently unfair. He/she is just communicating in a way that’s most relevant to the customer.

    There seem to be three lessons here for the average customer, who has a trade and is going to finance:

    1. Have some reliable idea of what your car is worth as a trade-in, if that’s what you’re doing. This seems — based on my experience — to be harder than it looks, although Carmax’s 24-offer is a real public service in that respect and, unlike the various colored “books” is real, cash-on-the-barrelhead.

    2. Line up financing from some 3rd party source, so you have a benchmark for whatever the dealer offers you. I’ve had dealers be very candid with me and tell me they can work a better price if I use their financing . . . even if I pay the loan off in two months. This is where the buyer’s credit rating and the percentage of the vehicle price financed are important. So, the interest rate will reflect the buyers credit rating; and the buyer will know if he/she has to purchase “gap” coverage because the loan will be underwater for X years.

    3. Don’t have your heart set on one particular make and model of vehicle. I find that I’ve done best when I didn’t have to have a particular make and model, although there are times when I did (’92 SHO, purchased new). And, obviously, shop.

    There are some fees that are legitimate and some that are garbage: “dealer processing fee,” “” and “reconditioning fee” come to mind. They should go off the table at the beginning of the discussion.

    In a transaction involving a trade-in, what the buyer wants is a net price. I don’t think the buyer should care whether the dealer offers a screaming deal on the price of the car or an inflated trade-in to make the deal work. I’m not sure that all states’ tax is based on the net transaction price. If it is, that’s a relatively small number unless you’re trading a Yugo in on the purchase of a new S-Classe.

    • 0 avatar
      DeadWeight

      “Well, most people budget on a monthly basis, because that’s the frequency of bills they have to pay: utilities, rent or mortgage, credit card, etc. So, you can’t fairly slam someone for thinking of a car in those terms. Even a house — the biggest ticket item that just about anyone will buy (and many will never own) — is calculated in monthly payments of mortgage, taxes and insurance. There’s nothing inherently wrong with saying, “I can afford $400 month in car payment.” What’s wrong is not shopping around to see what your $400 can get.”

      People who have this mentality, versus negotiating a cash purchase price – even if they’re financing the purchase – have stepped into the biggest open trap of negotiations from the start.

      By agreeing to “buy a monthly payment,” focus is lost on the end purchase price, games are played, shenanigans of all kinds are unfurled, and voila, another hamster on the never-ending, paid-too-much-for-a-depreciating-asset-wheel that is the reason why Americans (and many others) find themselves so hopelessly eyeball deep in debt.

      Financialization of the economy is a malignant cancer; anytime the financing costs, that go to the largely unproductive (and arguably net-negative producing) financial sector, equal anything close to 7% of a purchase, let alone 11%, or 22% or more, the economy suffers.

      Financialization of economies, whereby a greater and greater proportion of money being circulated is drained off by rentiers, banks, finance companies, and others not producing the tangible, value-added things (in this case, the vehicle and components supplied by many others in the tangible product chain), is a disease and with its growth comes terminal illness.

      • 0 avatar
        Kyree S. Williams

        You’re both right. It’s important to know how much you can comfortably afford and are willing to pay per month for a car (including insurance and all that jazz), but that’s information you should keep to yourself. Do the calculations beforehand and focus on getting the price and interest rate right; the monthly payment amount will take care of itself.

      • 0 avatar
        duffman13

        @DW

        This. This, so hard.

        If the average payment shopper would do a tiny bit of math beforehand, and maybe get a feel from their local bank what their likely interest rate will be, they can figure out a number for how much car they can afford before they step foot in the dealer.

        There is not all than much difference in the payment between 2 and 5% (excellent to good), but there’s a huge difference at 10 and 15% for someone with marginal to bad credit.

        As Kyree says below – get the price and interest rate right and the payment takes care of itself.

    • 0 avatar
      thunderjet

      Final price. Final price. That’s what people have to consider. If you can afford a 400 a month car payment over, lets say, 60 months, work backwards and figure out how much your loan total can be ($400 x 60 months = $24000). That’s what you can afford. A $24000 loan over 60 months. Not a car that costs $24000 but a loan amount (car price + tax + license + interest payments) of $24000. If you work on getting the total purchase price you want instead of the monthly payment you can afford you’ll get more for your money.

      • 0 avatar
        duffman13

        With all of the credit reporting/monitoring/score stuff you see advertised right now, I’m surprised someone isn’t putting out numbers on expected interest rates for x item purchase for Y credit scores. It seems like top tier rates are the only ones advertised.

        I’m in a situation where I have outstanding credit, so I know I’m going to qualify for the best promo rates. If I wasn’t in that situation though, it would be plenty useful to have a tool that says if you have a 600 FICO, expect a range of 5-7% on a car purchase, 4-4.5 on a mortgage, etc.

        The way things are now, it seems like top teir buyers know what they’ll get, but anyone under that is walking in to see what’s in the mystery box.

        • 0 avatar
          Scoutdude

          You do see the occasional offer that says with a credit score over xxx. Most though particularly Audi ads around here say those terms are for people with exceptional credit.

          You can be sure that the dealers who sell loans don’t want you to be able to look at a table with credit scores and a rate range. They need their mark up and often tell the customer that with your score we can’t give you lower than x but not really share where that score lands in the grand scheme of things.

          For home loans there are lots of websites out there that will give you blind quotes of rates if you put in a credit score. Here is a good one http://www.bankrate.com/mortgage.aspx?type=refinance&market=28&propertyvalue=312500&loan=250000&perc=20&prods=216&fico=740&points=Zero&cs=1 From the numbers based on my area the low score isn’t that much higher of a rate than the best scores. ~.2% more for the 680-699 vs 700 up and another .2% bump for the 660-679 bracket.

  • avatar
    brn

    “You can’t judge a dealer based on how he treats a middle-aged white guy with a spotless credit rating, a laptop full of information, and a thorough knowledge of the laws in his state regarding new-car sales.”

    WTF does race and gender have to do with it? It’s all those other things you list (BEING PREPARED) that make it so someone is less likely to get shafted.

    http://www.nbc.com/saturday-night-live/video/white-like-me/n9308?snl=1

  • avatar
    ToddAtlasF1

    I’ve got a friend who is a Subaru salesman. He has a wife a little more than half his age and just bought a big home in California. There are less informed customers than Kia’s.

  • avatar

    Cue “Come And Get It” by Badfinger.

    I bet Destiny shops very carefully for some things in her life. I have a hard time feeling sympathetic for her since she appears to have done no car shopping at all. Right now Cars.com is showing at least 50 brand new 2016 Kia Souls for less than $12,000, some from a nearby dealer. At the very least, going to cars.com or a similar site will give you a decent idea of what real world pricing is like and keep you from getting gouged.

  • avatar
    marmot

    You actually used “proximity” without first using “close.” Nice!

  • avatar
    Paragon

    Oh, man, Jack, you always write some good stuff. Haven’t yet bothered to read any other comments, but as any normal human being I am positively outraged that this kind of stuff, which we all know has been going on for many years, still goes on! In reality, people who have the opportunity to treat people THE WAY THEY WOULD WANT TO BE TREATED, or THEY CAN RIP THEM OFF FOR ALL THEY CAN GET OUT OF THEM, and when some fool chooses the latter, it just totally outrages me. And, what’s worse, even if the dealership actually fires that sorry excuse for a human being, we will all be telling everybody we know to never, ever visit that dealership for as long as we live. I am an Ohio guy myself. The dirtbag salesman doesn’t seem to comprehend that EVERYBODY loses when he pulls that crap. When will it ever end???

    • 0 avatar
      Scoutdude

      I’m sorry but I don’t think that she was particularly scammed. Sure she could have probably negotiated a little better price and rate but it sounds like she signed on the dotted line of the first deal they offered and at the first dealership she visited.

  • avatar
    -Nate

    Wow ~ so informative in all aspects of new vehicle purchasing .
    .
    No wonder the three times I’ve purchased new were for cash and even then I prolly got hosed on the document fees .
    .
    -Nate

  • avatar
    rpn453

    Here’s an ad for a private sale 2016 Mazda3 GS with 6k miles for cdn$27k. “Only reason for selling is that I can’t afford payments anymore.”

    http://www.kijiji.ca/v-cars-trucks/saskatoon/2016-mazda-mazda3-gs-sedan/1222292685#

    My friend bought the same car this spring, in hatchback form, brand new for cdn$25k total, including 0% financing for 60 months. And that was only $900 below MSRP, plus she got free tint.

    Makes me wonder how badly this person got hosed.

    • 0 avatar
      bikegoesbaa

      I recently called a guy who was posting for somebody to “take over payments” on his one year old Fiesta ST because he just had a kid.

      Total loan amount outstanding: $26,000

      When I asked him why I would pay him that much for a used ST vs buying a new one for under $20k his reasoning was essentially “Derp, this one costs more because that’s what I owe”.

      The mind boggles.

  • avatar

    Late to the game and being a bit pedantic, but that Maxima – depending on mileage, trim, and condition – was worth exactly what she got for it, if not a bit less.

    A similar ’09 Maxima S today brings $6900-7100 at the sale with average (80-90k) mileage.

  • avatar
    DeadWeight

    *COMMON SENSE ALERT*

    NEW 2017 KIA SOULS SIMILARLY EQUIPPED CAN BE HAD FOR UNDER 16K (PLUS TAX & PLATE TRANSFER) ALL DAY AT ANY METRO-DETROIT (SCUMBAG) KIA DEALERSHIP (*if one has a iQ of 96 or greater).

    So, she paid $18,637 for a 2013 Killed-In-Action Soul, plus approx $10,000 in financing and misc costs, for a total of $28,6xx.

    #SAD

    *THIS IS THE END OF THE COMMON SENSE ALERT SYSTEM*

  • avatar
    JW9000

    When I saw the 11% APR and the yellow-ish paper, I thought that was something from the early 80’s. Some things never go out of style.

  • avatar
    wumpus

    “The first automaker to turn that particular trick will have a very bright future; everybody else will just have a Destiny.”

    Please tell me the “European Delivery” option (popular in the 1970s-80s and probably earlier) didn’t involve a US dealer…

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