Fleet – Think Like a Used-Car Sales Manager

When resale prices soften, there is a pendulum-like resurgence in marketing used vehicles to employees. On the other hand, when the resale market is strong, employee sales programs at many fleets are on auto-pilot, so to speak. These fleets are complacent about employee sales (waiting for buyers come to them) and do not aggressively market the program to new buyers. The national average of vehicles sold to employees is 23 percent. However, by aggressively marketing employee sales, many fleets could sell as much as 50 percent of their vehicles in-house. This can be achieved by expanding sales beyond drivers to other employees, family members, friends, and the surrounding community. Some companies even market used vehicles to the employees of other companies. The competitive-bidding environment of an auction is the best way to establish a vehicle’s fair market value; however, this is a wholesale value. Employee sales, if done correctly, are priced above wholesale.

Pricing is the Critical Element

Most companies allow employees to purchase vehicles at wholesale market value or a percentage back of Black Book or other guidebook. The lower price is possible by eliminating auction fees, transport charges, and recon expenses. A few companies sell vehicles at steeper discounts, far below fair market value, viewing the reduced pricing as an employee perk. Fleets that price aggressively below market value need to think twice before complaining about depreciation rates. In a similar vein, other companies price vehicles sold to employees at the remaining book value rather than fair-market value. The problem with these two pricing strategies is that if a vehicle is sold to an employee for substantially less than market value, the difference is taxable income and should be treated as imputed income on an employee’s W-2. In addition, this is a potential Sarbanes-Oxley issue. No special allowances should be made in an employee sales program; such exceptions are a "red flag" for a skeptical SOX auditor.

At the opposite extreme, some companies price vehicles higher than fair market value – at the equivalent retail price. Needless to say, profiting at the expense of your employees is detrimental to corporate morale. You need balance when establishing employee pricing. End-of-service vehicles need to be offered at a price higher than wholesale, but lower than retail. It is important to remember that all quotes will be "shopped" against similar vehicles available for sale in the retail market.

Most employees consider it a perk to buy company vehicles at near-wholesale prices. However, do not use the word "benefit" in describing an employee sales program since the IRS could perceive it as a taxable benefit. Also, a successful employee sales program must have a non-negotiable pricing policy. Although 17 percent of the nation’s fleets allow employees to submit bids and negotiate the vehicle’s ultimate selling prices, this is "thin ice" and can easily become a Sarbanes-Oxley compliance issue, especially if your recordkeeping isn’t up to snuff.

Market Aggressively to Employees

Fleet management creates a product — a used vehicle, which is "produced" during its term in service. A fleet manager must be a "used-car salesman" to maximize the percentage sold to employees. You must market vehicles rather than just sell them. One mistake many fleets make is waiting for employees to request pricing. For every vehicle coming out of service, a formal price quote should be provided to the driver, whether or not the driver requests one. This gives drivers time to deliberate the purchase and arrange funding if they are interested in buying. Also, drivers who weren’t initially interested may be swayed upon seeing the price. It is not necessary to offer extended warranty/service contracts with used fleet vehicles, but doing so will create additional value for the purchaser. Approximately 14 percent of commercial fleets offer an extended warranty program for out-of-service vehicles sold to employees. However, it is important to give drivers the option to buy an extended warranty program. For example, the cost of the service contract should be built into the vehicle’s selling price, but permit the buyer to eliminate the option, which would correspondingly reduce the selling price.

Employee sales are the best way to reduce your days-to-sale, and it represents the fastest cash flow in recouping resale proceeds. In the final analysis, employees represent the strongest resale market for company vehicles. They know the history of the vehicle and, as a result, have a high comfort level in making the purchase decision. Employee sales also encourage better care of vehicles during their service lives. However, you should be "street smart" and monitor maintenance histories on an ongoing basis to prevent "over-maintained vehicles" by drivers in anticipation of purchase, such as purchasing of four new tires prior to turn-in.

Mike Antich has been covering the fleet management and vehicle remarketing markets for more than 20 years. During this period, Mike has written or edited more than 4,600 articles on the subjects of fleet management, manufacturer fleet activities, the fleet leasing industry, and vehicle remarketing.


Fleet – How to Develop a Culture of Fleet Policy Compliance

Fleet managers have countless stories of drivers blatantly violating fleet policy with the refrain, “I didn’t know we weren’t supposed to do that.” Whether it is using a cell phone while driving or buying premium fuel instead of regular unleaded, fleet managers refer to this phenomenon as “driver amnesia.” In my discussions with fleet management companies over the years, they tell me the best managed fleets tend to be those whose drivers adhere to a written fleet policy. Does your corporate culture encourage compliance with fleet policy?

Adherence to fleet policy is crucial and it should be part of each company’s overall business strategy. Once a policy is established, it is the fleet manager’s responsibility to communicate it to drivers. Each of your drivers should know the rules governing the use of a company vehicle and what actions will be taken for noncompliance. An all too common problem is that the fleet manager communicates policy to the drivers’ managers, but the policy doesn’t get communicated to individual drivers. To avoid this problem, many companies teach policies and procedures regarding company vehicles as part of new-employee orientations and provide printed fleet policy manuals with each vehicle.

A Culture that Encourages Compliance

The fleet manager must have the authority and backing of senior management to address a driver’s inability to operate and maintain an assigned vehicle in conformance with fleet policy. This authority allows the fleet manager to address violations of fleet policy without approval or direction from upper management. With this in mind, it is critical a fleet manager makes sure all drivers uniformly adhere to company fleet policy. There should be no exceptions to your company vehicle policies.

To ensure drivers observe fleet policy it needs senior management backing. It is only when senior management communicates this message to the rank-and-file and begins to hold drivers accountable can you expect to see the emergence of a corporate culture conducive to policy compliance.

Are Your Drivers Following Fleet Policy?

Just because your company has a written fleet policy and procedures manual doesn’t mean your drivers are following it. As fleet manager, one of your responsibilities is to promote driver compliance with fleet policy. This not only controls expenditures, but also protects your company from potential liability exposure. To ensure fleet policy remains uppermost in the minds of drivers, many companies stress the need to regularly re-communicate it to them. When policy is constantly re-communicated, you will find you spend less time disciplining drivers for policy infractions. Companies use a variety of methods to reinforce fleet policy such as e-mail reminders, the corporate Intranet, paycheck stuffers, teleconferences with regional office employees, or setting aside time at annual company meetings for fleet policy presentations. It makes no difference how you do it, the important point is to understand the need to consistently remind drivers about these corporate policies.

How do you increase driver compliance with fleet policy?

Here are 10 suggestions:

[list:rxdgxi3f]1. When developing or reevaluating fleet policy, solicit the participation of all affected departments, such as sales, administration, purchasing, HR, and accounting, along with all vehicle user groups. By involving them in the decision-making process, you increase the likelihood of their buy-in and support of fleet policies.

2. Make fleet policy easily accessible to drivers and managers by posting it on the company Intranet.

3. Your fleet policy manual should be a living document updated annually. As changes occur within your company, revise your procedures to reflect these changes. Likewise, eliminate those policies that have become outdated. What was right yesterday may not be right today. Also, as part of your annual fleet policy review, you should survey your drivers to give them an opportunity to express their opinions or dissatisfaction about fleet policies that govern them.

4. Set aside time at company meetings to make fleet policy presentations to the drivers and managers. Also, conduct teleconferences with drivers who work at regional offices. Use these meetings to reemphasize the importance of policy and cost control.

5. Develop a summarized fleet policy pocket manual that drivers can keep in the glove compartment of their vehicle. However, if you do this, it is critically important to keep it updated.

6. Send periodic e-mails or voicemail messages to drivers on specific fleet policy reminders, in particular, on those issues that have higher-than-normal incidents. Also, cc the driver’s supervisor on important items or those supervisors of drivers who were not within policy.

7. Issue a fleet policy summary sheet when distributing gas cards to drivers. This helps reinforce fleet policy with drivers.

8. Create a newsletter that is mailed or e-mailed to company drivers to promote awareness of fleet policies by providing helpful suggestions on driver safety, vehicle care, and other topics. Likewise, use the company Intranet for similar effect. Also, post information on cost savings on the driver Web site, such as maintenance and fuel savings programs and how drivers can take advantage of them.

9. Leave a weekly or monthly message on your voicemail greeting advising drivers of new policies and reminders. Another way to communicate fleet policy changes is to use paycheck stuffers.

10. How you organize your fleet policy Web site can also help increase readership and awareness. For instance, if your company offers a safe driving award, place the application on the last page of the fleet policy manual (as well as on its Intranet site) to force drivers to look through the sections to find the award requirements. The rationale is to get drivers to read the fleet policy manual after they receive it.[/list:u:rxdgxi3f]
If you want to increase the likelihood that your drivers follow fleet policy, you need not only to communicate it to them, but, more importantly, re-communicate it on a regular basis. When it comes to fleet policy, there is no such thing as being redundant. In fact, the secret to increasing driver compliance with fleet policy is just that — redundant communication.

Cost Control Starts With the Company Driver

Another important aspect of policy compliance is that it helps reduce unnecessary costs. It is very expensive to operate a company-provided fleet. Typically, fleet operations is one of the top five categories of nonproduct-related spending at most corporations. All too often, however, managers attempt to control fleet costs on the backend. The best time to control cost is before it occurs and the way to do this is by establishing policies and procedures that inhibit unnecessary spending and protect corporate assets.

Mike Antich has been covering the fleet management and vehicle remarketing markets for more than 20 years. During this period, Mike has written or edited more than 4,600 articles on the subjects of fleet management, manufacturer fleet activities, the fleet leasing industry, and vehicle remarketing.


Bleak New-Vehicle Sales Ushers a Strong Used-Vehicle Market

Today’s new-vehicle market will generate (ultimately) the used-vehicle market of tomorrow. If there is a decrease in new-vehicle sales, there will be a corresponding decrease in the future number of used vehicles in the marketplace.

Even though there is a lot of nervousness in the market, no one is anticipating a dramatic decrease in new-vehicle commercial fleet orders for the 2009 model-year. However, the same cannot be said for the retail new-vehicle market. The projection is for the 2008 model-year to close out with an anemic 14.7 million new-vehicle sales, perhaps lower. This compares to16.1 million new-vehicle sales in 2007, 16.5 in 2006, and 17 million in 2005.

New-vehicle sales seem to be moving from weak to weaker. "New-vehicle sales in June represented a seasonally adjusted annual selling rate of just 13.6 million units. That is the slowest pace since August 1993," said Tom Kontos, executive VP customer strategies & analytics for ADESA. Kontos blames the drop in new-vehicle sales on macroeconomic conditions – tighter credit, higher fuel prices, and a weaker labor market.

In a July 14 press conference, GM said it is prepared for total U.S. new-vehicle sales to be as low as 14 million for the next two years. One thing is certain, in the near-term, there will be much fewer trucks built than in the immediate past. GM Chief Operating Officer Fritz Henderson said the automaker intends to reduce truck production capacity by 300,000 units. Likewise, all other OEMs are also reducing their truck production.

Manufacturing Used Vehicles

The wholesale used-vehicle market has been a real challenge for fleet managers since the first of the year. However, if you accept the truism that new-vehicle retail sales "manufactures" the used vehicles of tomorrow, then we should anticipate a smaller inventory of used vehicles in the wholesale market in the future.

"If we’re not building as many new vehicles, where will the future used-vehicle supply come from?" said Darrin Aiken, assistant vice president, remarketing for Wheels Inc. "If we have weak new-vehicle markets in 2009 and 2010, there is a distinct possibility there may be a shortage of used cars three years afterwards. When there is a shortage of inventory, experience tells us that resale prices will increase."

Others agree with this assessment. "With the recent announcements by Ford and GM, some vehicle segments are dropping drastically for 2008, 2009, and beyond. Will this lower supply of future used vehicles be the catalyst for higher used values two to four years down the road? Quite possibly," said Ricky Beggs, VP and managing editor of Black Book.

Light at the End of the Tunnel

There is a lag time in the "used-vehicle manufacturing" process. For instance, the 2009-model vehicles that fleets are starting to order will not enter the wholesale used-vehicle market until 2011 or 2012. It’s safe to say that the market conditions of 2012 will not be the same as 2009. (If they are, then we’re all in a lot of trouble.) Once the economy begins its inevitable cyclical upswing, the secondary fleet market should return to its historical purchasing levels. In that case, there may be a tight supply of used vehicles, especially trucks, due to the pent-up needs of the construction industry, which is deferring the purchase of replacement vehicles.

Beggs also cites the country’s growing population as another factor that will stoke used-vehicle demand. "With the country’s population and the number of drivers expected to grow to significant levels in the next four to five years, the need for used vehicles is expected to increase, thus creating an upward push on values," said Beggs.

These and other factors will be the catalysts triggering market supply-and-demand dynamics. A lower supply of used vehicles means that demand (especially in a recovering economy) will exceed supply. This will create a rising tide effect of stronger demand for all used vehicles, resulting in higher resale prices.

This is the light at the end of the dreary tunnel through which we are currently trudging.

Written by Mike Antich

Auto Fleet Sales Runaround

Many automakers are slamming the brakes on any increases in fleet ad spending, as sales to rental and commercial customers plummet amid the general bottoming out of the automobile business.

U.S. auto sales overall dropped 18% in 2008 to 13.24 million vehicles, with Chrysler down 30%, General Motors Corp. down 23%, Ford Motor Co. down 21% and Toyota Motor Corp.’s U.S. sales down 15%, according to figures compiled by Autodata Corp.

Fleet-specific data mirror those numbers. According to JATO Dynamic U.S.’ Model Mix data, GM’s fleet sales were down 31% to 436,672 year-to-date through September; Ford’s fell 15% to 347,511, and Chrysler’s declined 25% to 294,615. The anomaly, Toyota, saw its fleet sales increase 13% to 200,680.

The reining in of spending is especially hurting publications that cover the fleet sector. “2008 was a record year for us up till September, and then we limped across the finish line,” said Sherb Brown, group publisher of Bobit Business Media’s Automotive Group, whose titles include Automotive Fleet and Business Fleet.

But the picture may not be so bleak after all, now that the federal bailout package for the auto industry has been approved. Before it was green-lighted, the Big Three automakers were “slashing their budgets,” Brown said. “Now we’re at least talking about budgets and ad programs for 2009. Now there’s going to be a 2009 for all of them,” he said.

Fleet sales have suffered across the board, from the corporate and government sectors to the daily rental market. Many credit-strapped businesses and government entities are putting off new-car orders and letting the odometer run a little longer on current vehicles. Business Fleet News recently reported that the recession caused nearly 800 trucking companies to fold during the third quarter of 2008.

Auto Rental News reported that rental car companies purchased 1.5 million new vehicles in 2008, down 21% from 2007. According to Automotive News, Enterprise Rent-A-Car, the nation’s largest rental company, plans to buy 400,000 new vehicles in the 2009 model year, about half as many as it bought in the previous year. (Automotive News is a sibling publication of BtoB.)

Automakers will argue that some of the drops in rental sales were planned, as the Big Three vowed to reduce such sales in 2008 to less than 20%. Historically, automakers have unloaded their excess inventory at discounts to the rental fleet market to make up for weak retail sales. But those vehicles ultimately flood back into the market at auction, potentially driving down the brand value of the most recent model year vehicles.

“Fleet sales aren’t inherently bad,” said Jesse Toprak, senior analyst for Edmunds.com. “A controlled number of fleet sales are good. How many times have you heard of someone who rented a vehicle and liked it so much, they ended up buying it? Done properly it can control inventory.”

Chrysler, which, along with GM, is participating in the federal government’s $17.4 billion bailout of the industry, attributes a sharp drop in December fleet sales to its plan to reduce its reliance on daily rental sales.

“That was planned before the market went into recession,” said Steven Landry, Chrysler’s exec VP-North American sales, marketing and Mopar parts and service, who has taken over the VP-CMO responsibilities of Deborah Meyer, who left the company last month.

“Most of [the December decline] was daily rental,” Landry said, adding that Chrysler had wanted to reduce daily-rental sales to 200,000 units and that the final tally for the month was 197,000.

Landry said Chrysler has no intention of changing its ad messaging in light of the economic slump. Current advertising, created by Troy, Mich.-based BBDO Detroit, focuses on the company’s fleet vehicles and their capabilities, in particular its truck lines.

And while it’s planning at least one launch this year, with a new Dodge Ram Heavy Duty pickup truck expected to be unveiled in September, the company doesn’t anticipate increasing its budget in an effort to gain market share, Landry said. “We’ll have to adjust our budgets to where the industry will be, which is relatively flat,” he said.

Ford is standing by its fleet ad spending plans despite the downturn. “We haven’t diminished our spending levels year over year,” said Gerald Koss, marketing manager, Ford North America Fleet Lease and Remarketing Operations.

This month the company debuted a new fleet ad campaign, created by JWT Team Detroit, Dearborn, Mich., that marks a departure from typical productcentric ads. The campaign focuses on Ford’s brand positioning: quality, safe, green and smart, to represent its strides in technology. One ad shows a chalkboard filled with mathematical equations, with the suffix “ER” imposed over them, to show that adding “ER” to each of its brand values enhances them.

“We added "ER’ to smart ideas and made them smarter,” reads the copy. It goes on to detail Ford’s technological advancements through its Ford Work Solutions, which provides tools to help companies better track their fleets’ performance. The call-to-action tagline is in line with its corporate message: “Drive one.”

GM is sticking with its current fleet marketing budget as well and doesn’t plan on any major strategy changes. “It’s steady Eddie,” said Brian McVeigh, GM fleet and commercial operations general manager. Fleet customers “don’t buy on style or trim; they buy function,” he said.

GM’s fleet marketing relies mainly on print and Web advertising created by its agency of record, Perich Advertising & Design, Ann Arbor, Mich. Also key to GM’s communications strategy, McVeigh said, is its network of 500 fleet-focused dealerships around the U.S. that run co-op advertising in local media.

“We concentrate on growing at the dealership level,” McVeigh said, adding that GM’s “Works for you” message has to resonate in all of the dealers’ communications. “The message has to be consistent with the one-voice concept,” he said.

McVeigh blames the year’s fleet sales decline on a strike by American Axle & Manufacturing, a key supplier, that put GM’s production four months behind schedule. He also cited the cooling of the building boom in formerly hot markets, such as Fort Myers, Fla., and New Orleans.

All these factors make GM’s participation in trade shows and alliances with organizations such as the American Home Builders more important than ever, McVeigh said. “Most of these folks capitalize their vehicles—they buy them,” he said. “It’s a very steady business. It’s down particularly because of home building, but it’s still pretty solid.” M

by Patricia Riedman

Theft Rings Scam Dealers Out of Vehicles

It was an auto dealer’s dream: an auto brokerage that referred dozens of buyers with six-figure incomes and top credit scores to Atlanta dealerships.

The brokerage "seemed like a good customer," says a dealer who did business with the company, Xquisite Empire Inc.
The transactions "involved real numbers on real people with real credit," says the dealer, who asked not to be identified.

Just one catch: Xquisite Empire was a theft ring, prosecutors say.

Here’s how they describe the alleged scheme:

Spot Delivery Puts the Dealer In the Driver’s Seat

Be warned: Just because you put down cash and roll away from the dealership with a new vehicle doesn’t mean you’ll get to keep driving it. In fact, as the complaints to ConsumerAffairs.com vividly illustrate, leaving a dealership with the car – and keeping it – can sometimes be far more complex than you’ve bargained for.

Increasingly, buyers are signing purchase papers and driving happily away in their new cars, only to find out that the financing they agreed on didn’t fall into place. At that point, they’re usually told that they must either return the car or sign up for sub-par financing at extremely high rates, sometimes approaching 20 percent per year.

Often, the people squeezed by these spot delivery schemes are the most vulnerable, those with tarnished credit or low income who don’t have a lot of alternatives. At other times, they’re victims of dealer fraud or other bad faith dealings. Regardless, it’s an ugly situation for the consumer.

Consider the experience of Michelle of San Jose, who put down $3K on a used Ford Explorer, signed a finance contract and took the car. The next day, she was told that the financing fell through, and that she had to get a co-signer or return the vehicle.

Michelle wasn’t having it. "I told them that if my application didn’t qualify with only my information, then I wasn’t interested in keeping the car," she says. Despite her resolve, Michelle didn’t get her money back, though she did get to keep the car.

Michelle was one of the luckier spot delivery customers. More typical is Brandon of Tarpon Springs, FL. He was aghast when his mother-in-law was pressured to get newer, much higher-rate financing and threatened with repossession when she balked.

According to Brandon, it all began when his mother-in-law decided to buy a Ford truck. She put down $3K and traded in a Dodge truck, then took her new truck home from the dealership, which, she believed, had approved her for financing. Instead, within a couple of days she was contacted by a lender, who asked for W-2s, tax returns and other financial documentation.

When that lender refused to finance her, she gave the dealership $12,000 more in cash, leaving a $13,000 balance, so far still unfinanced. The dealer continues to threaten, and the family still doesn’t know if the mother-in-law will get her trade or cash back.

"The dealer has told her that the repossession department is already looking for her truck, and that she must sign new papers immediately," Brandon says.

A Rare Problem?
Dealer industry reps say that spot delivery problems are rare, and that the issues that do come up usually could have been avoided if consumers took the message of the conditional sales rider to heart.

"Unfortunately, some consumers pay more attention to the check they get for dinner than they do to the second-highest priced deal they’re going to do in their lives," notes Alex Kurkin, a partner with the Miami law firm of Pathman Lewis LLP.

While there are few statistics available, Kurkin argues that spot delivery returns and refinancing conflicts couldn’t be happening very often. After all, he says, a dealership doesn’t benefit from letting consumers drive cars when the dealer hasn’t been paid.

"A dealer can’t afford to have that car out there for a month and a half and not get paid," says Kurkin, who represents the Florida Automotive Dealers Association. "They won’t have enough to buy new inventory. The banks that finance them might even call in the inventory loan."

But Kurkin may be understating the problem. In fact, given the unclear legal status of conditional sales riders, it’s not surprising that the issue will crop up from time to time. According to consumer attorneys and consultants familiar with spot delivery issues, state law is still unclear as to whether conditional sale riders will stick, leaving buyers in limbo.

In fact, observers say the law hasn’t caught up to the intricacies of spot deliveries. For example, state law in New Hampshire is unclear on something as simple as whether you should put temporary tags on a vehicle that’s been spot delivered but not financed, notes attorney Peter Wright, professor at Franklin Pierce Law Center in Concord, NH.

Even in transactions that flow smoothly, the papers get back-dated to the date of sale, rather than to the date the financing finally comes through. During those prior weeks, should the car have had temporary tags on it or not? According to Wright, no one’s really sure.

Consumer Misery
How can car dealers get away with this? The answer, Wright says, is that many consumers end up signing their rights away. Spot buyers are typically asked to sign a contract addendum, known as a conditional sale rider, stating that the car sale doesn’t close until the dealer gets financing approval from the bank.

Too often, many consumers don’t understand what they’re signing – or what it means for them if financing falls through.

Though the dealer may describe financing as a done deal, the finance contract is actually based on an educated guess as to what the banks the dealer works with will accept. In reality, banks usually take a few days or weeks to make their lending decision.

If the preferred bank bounces the contract, the dealer will attempt to place the loan with a different bank — usually a "subprime" lender who charges extremely high interest — and if the consumer balks, the dealership may attempt to yank back the car.

As if that wasn’t painful enough, some consumers find that the rider they’ve signed forces them to accept whatever loan arrangements the dealer makes. Not surprisingly, the financing the consumer gets in that situation is seldom attractive.

Boosted by the dealer’s finance commission, which usually piles a few points of interest on top of the bank’s charges, a buyer’s monthly payments can climb dramatically.

"We’ve seen evidence that when somebody is called back to sign new financing papers, the new rate is higher than what that financing company would have done [if the dealer wasn’t involved,]" says Wright, who runs the consumer law clinic at Franklin Pierce. "Basically, people have to sign any deal that the dealer digs up."

That was certainly the case when Melissa of Wheaton, MD attempted to buy a Nissan Altima.

When Melissa first signed her contract, she agreed to pay $388 a month for the Altima. Accepting that, she took the car home. Three weeks later, the dealer called back — and told her that she’d have to pay $477 a month if she couldn’t get a co-signer. "I feel that I have been misled and I should not have to do [either one]," she says. "I would like to keep the car and pay what was the original agreement."

Fighting Back
Are these contract riders legal? At the moment, the courts are still sorting that out. While many dealers manage to push through these provisions and make them stick — sometimes with the backing of state retail sales laws — federal courts have raised some questions as to whether these conditional sales riders are fair or enforceable.

In at least one recent case, a federal court found that the deal is complete when a dealer signs the sales contract, rather than when the banks come through with a loan. "The court realized that the dealer has recourse," notes Duane Overholt, president of consumer advocacy firm Stop Auto Fraud. "For example, they have the ability to consummate the deal as agreed by simply signing the deal with the bank and accepting responsibility for the loan."

Bolstered by rulings like these, consumers like Julie and Carl are fighting back. When the Bullhead City, AZ couple bought their used car, they put $300 down and agreed to a 31-month repayment term. About two weeks after they drove the car off the lot, the dealer asked them to bring back the car or sign up for payments nearly double what they’d expected.

They didn’t do either. Instead, they two contacted Overholt, who put them in touch with a lawyer.

Since then, the dealership’s offer has gone from cutting the loan term in half and requiring an additional $1,000 down, to asking for $300 more down and cutting only one year off the financing period. Under the new terms, payments would actually drop slightly.

Still, Julie isn’t satisfied. She plans to fight until the dealer abides by the deal she and Carl agreed to in the first place. "The dealer did this on a Monday afternoon, and they had time to communicate with the bank before we took the car," she says. "The way I see it, it’s their problem now."

Written by Anne Zieger


Ohio has a long and technical definition for "fraud" but, really, fraud is just a lie that costs you money.

Generally, there are three kinds of fraud:

Outright Fraud. This is where you ask a question and they give you an answer and, when they do, they know they are lying to you. This is generally known as a "bold faced lie."

The half-truth fraud. This is where you ask a question and they give you an answer and, when they do, they really do not know if their answer is true or not—they just don’t care. In other words, a "sin of omission."

Fraud by concealment. This is where you may not ask the right question and they certainly don’t give you the answer because they know that if they did then you wouldn’t buy what they are selling. This is another way of hiding the truth.

Any one of these can be an act of fraud and can cost you hundreds or thousands of dollars.

When the fraud involves a car dealer, we usually call it "auto fraud" and car dealers have a hundred ways to do it! Browse through our car dealer glossary of terms for a real eye opener.

Other businesses commit fraud on consumers, too. Web site scams, repair shops, time share rip-offs, telephone solicitors, door-to-door salespeople—just about anybody can rip you off if you’re not careful.

Car Dealerships Prime Target for Identity Thieves

The thieves who struck Serramonte Infiniti in suburban San Francisco in April ignored the dealership’s cash and costly equipment. But they hit the jackpot anyway.

They reached into an unlocked cabinet and stole 57 files of customer transactions. The files included credit reports, bank statements, driver’s license numbers, credit card information and Social Security numbers.

Two suspects in the theft are charged with burglary and credit card fraud. They allegedly used the stolen data to make illegal purchases at department stores.

Fifteen customers of the dealership told police that the suspects tried to steal their identities. The crime embarrassed Sonic Automotive, the nation’s third-largest auto retail group, which owns the store in Colma.

Each year, nearly 10 million Americans are victims of identity theft, a crime that costs them about $5 billion a year, the Federal Trade Commission estimates.

The FTC does not offer specific figures for dealerships, but dealerships and their customers are increasingly vulnerable to thieves and computer hackers, security experts say.

Security breaches can subject dealerships to consumer lawsuits, federal and state penalties and lost sales. Dealerships are attractive targets because of the personal information they collect about customers.

Financial institutions that compile similar data have made conspicuous efforts to fight identity theft. Citibank has built an advertising campaign around the issue.

But many dealerships are lagging in their efforts to safeguard their customers’ sensitive financial records, experts warn.

"When you buy a vehicle, you have to give about everything but your blood type," says Charles Dodd, CEO of the Center for Information Systems Security Research of Tampa, Fla. His computer security firm works with dealerships and other businesses.

"A car dealer might have 10,000 customers," Dodd says. "For a thief, that’s a candy store."

Bruce Townsend, deputy director of the U.S. Secret Service, says, "There is no question" identity thieves are targeting dealerships. The Secret Service investigates ID theft cases.

"The information (dealerships) have has value," he says. "It is just as valuable as currency."

Townsend headed the West Tennessee office of the Secret Service from 1997 to 2000. At least a third of the ID theft cases that crossed his desk involved dealerships, he says.

The federal Safeguards Rule requires dealerships and other businesses to protect customer information. Some states require additional measures. The FTC can fine dealerships $11,000 for each failure to comply with the rule, which took effect in May 2003.

"We think identity theft is a big problem," says Rodney Nettles, business manager of Bob Taylor Chevrolet and Bob Taylor Jeep in Naples, Fla. He says the dealerships have revamped the way they handle customer data.

They have spent $15,000 on computer technology designed to repel fraud. Professionals monitor their networks. The stores scan rather than photocopy driver’s licenses. They no longer keep transaction files on paper.

"This is a bear to keep up with," Nettles says.

Many other dealerships are reluctant to acknowledge the problem of identity theft.

Beth Givens, director of the nonprofit Privacy Rights Clearinghouse, a consumer advocacy group in San Diego, says customers could shun businesses that are shown to play fast and loose with sensitive information.

The Safeguards Rule does not authorize private civil suits. But legal analysts believe customers could sue dealerships for negligence if they compromise financial data.

"One could easily argue that the rule establishes a duty to the customer," says Jim Ganther, a lawyer for Continental-National Service of Tampa, which supplies finance and insurance products to dealerships.

"Breach of that duty resulting in damages all adds up to negligence," Ganther says. "That’s all a lawyer needs to open the courthouse doors."

Consumers have sued other businesses they allege were negligent in handling personal information, Givens says.

Jessica Rich, assistant director of the FTC’s division of financial practices, says the agency is investigating dealerships, but declines to say how many. The commission soon could cite stores for violating the Safeguards Rule, she says.

The National Automobile Dealers Association advises dealers on complying with federal privacy rules. NADA recently sponsored a two-hour conference call with FTC privacy experts.

"Identity theft, through whatever means, continues to be a significant concern for dealers," NADA lawyer Paul Metrey says.

Sonic says Serramonte Infiniti contacted police and notified customers whose information was compromised after the April burglary.

Serramonte Infiniti now keeps those customer files in a locked, windowless room, says Bill Steers, a Sonic spokesman. Only a few employees have access to that room. The dealership also changed locks on its building, file cabinets and employee desks. It installed a security camera system.

All Sonic dealerships comply with the Safeguards Rule, Steers says. "Sonic recognizes the critical importance of protecting our customers’ personal information," he says. "Our dealerships have implemented rigorous procedures and controls to safeguard customer information."

Asbury Automotive of New York, the nation’s fifth-largest auto retailer, also endured a recent alleged incident of identity theft at one of its dealerships in Orlando, Fla.

A former salesman was among 15 suspects charged in June with participating in an identity theft ring. The ex-employee allegedly tapped dealership records, providing financial data that enabled other members of the ring to make illegal purchases with false documents.

Customer records remained intact, says Allen Levenson, Asbury’s vice president of marketing. But thieves used stolen identities to buy seven used vehicles from a dealership through the indicted salesman, Levenson says. Police recovered the vehicles.

Levenson says Asbury couldn’t have anticipated the thefts. The salesman had no police record. He passed background checks and a drug test before he was hired. "You can only go so far," Levenson says.

Even if a thief is not on a dealership’s payroll, employees remain the chief source of vulnerability to identity theft, experts say.

"Employees are the biggest risk," says Brian Bentz, a partner with the Dixon Hughes accounting firm in Memphis, Tenn. The firm has 2,000 dealership clients.

Bentz says he urges clients to restrict access to sensitive information to guard against dishonest or careless employees. He cites a case in which a dealership employee left customer files on a desk while he got coffee. Someone walked in off the street and walked off with the information.

Employees have left copies of customers’ credit reports on top of a photocopier, Bentz says. Or they have tossed sensitive data in the trash without shredding the papers, an oversight that led to identity theft.

"Dealers have a better awareness and understanding of how rampant identity theft is" because of the Safeguards Rule, Bentz says. "But is everyone where they need to be? No. To change policies and procedures overnight is not easy."

The FTC’s Rich concedes that "there is no such thing as perfect security." But she says dealerships need to install reasonable policies and procedures.

Computer hacking can pose a greater potential threat for identify theft at dealerships than a physical break-in. Hackers can penetrate files from a remote location. A dealership may not even know its data are compromised.

"I witnessed a horror story with my own eyes," Ganther says. He visited a Florida dealership to assess its computer network’s compliance with the Safeguards Rule.

"While I was there, I saw the (security) consultant’s laptop indicate a hack attack was under way," Ganther says. "A signal was coming in through the dealer’s high-speed T1 line, and sweeping across every computer on the network every six seconds."

Dealership managers watched the attack but could not stop it, he says.

Ganther refuses to disclose the dealership’s name and location. He says the store’s general manager thought such an attack was impossible because it had spent $13,000 on a computer firewall.

Alan Andreu, president of Dealership Defense, a software security firm in Plant City, Fla., says firewalls can give dealers a false sense of security. They still must monitor their systems for potential hackers, he adds. Andreu sells software that assesses network security and alerts dealerships to intruders.

"If the firewall is improperly configured, it is next to useless," Andreu says. "It is nothing more than a box with lights on it."

Written by Donna Harris

Beware of the Spot Delivery!

The "spot delivery" is a technique that car dealers use to get you to take delivery of a vehicle immediately after you agree on a car deal.

Car dealers know that if you make a deal, then wait a day or two before picking up your vehicle – which is fairly common – there’s a good chance you are going to have second thoughts and may possibly cancel the deal and start looking elsewhere.

If you make a car deal and wait a few days before picking it up you may mention the deal to someone who proceeds to tell you that you are getting ripped-off! You might also start thinking about all those car payments and decide you want to hold off.

There are countless scenarios that may cause you to change your mind or get a case of "Buyer’s Remorse" as car people like to call it. This is the car sales persons worst nightmare!

Car sales people know they have to get you when you’re "HOT," or when you’re all worked up emotionally. They don’t want to give you time to think it over. They are going to do everything they can to get you down the road in your new vehicle "Right Now!"

Everything is Now, Now, Now! In the Car Business There’s No Tomorrow!

From my own experience, I have noted that no matter how apprehensive the customer gets when you rush them into their new car, they clearly sigh in relief once the paperwork is signed and they are about to leave in their new vehicle. In their own mind the deal is done, so there is no reason to give it any more thought!

SO BEWARE. . . the Psychology Works!

Often, if you are allowing the car dealer to handle the financing (Bad Idea), the Finance Manager will throw together some bank papers for you to sign, and then, usually, after you’re down the road, he’ll get the deal approved at the bank, and hope they go along with the rate and terms that he signed you up for!

Now this is where it can get real sticky; If for some reason they can’t get the deal put together with the bank whose paperwork you signed, they have to go to another bank then get you back in to sign new paperwork!

If this happens Watch Out! I guarantee you the payment is going up, or the term is going to be longer. In other words it’s going to cost you more money! If they can’t get the loan bought anywhere then they have to get the car back from you! Not a pleasant situation for them or you!

It’s a crazy, high pressure system and you don’t want to get caught up in it. This is why it is so important for you to be fully prepared before you ever step foot on the car lot!

The bottom line is this: Take your time, think it through and don’t let the sales person rush you into anything. You want to be sure you are making the best decision for you . . . not for the car dealer’s bank account!

Written by Insidercarsecrets.com

Beware of Spot Delivery! Don’t Be Put on the Spot

So you purchased a beautiful new car, signed all the necessary paperwork and drove it right off the lot with a big smile on your face. The dealer got you approved on the "spot". Or so you thought.

A few days or weeks later, the dealer calls and asks you to return to "sign a few more papers". "Mr. Smith", they say, "we couldn’t get the car financed and you need to sign a new loan with another bank" or "you need someone to co-sign", or "give us another $1000 and we can do the deal", or "Mr Smith, we need to increase your monthly payment to get this done". The dealer may even have delayed paying off a traded vehicle loan or refused to mail registration papers, all to place additional pressure on the consumer to do as they are instructed or to face dire consequences to their credit.

Sound familiar? It gets worse.

If you refuse, the dealer may threaten to repossess the car, tell you that you have no legal entitlement to keep it or even make you wait for hours at the dealership under some excuse, to wear you down. This situation is most common involving consumers with bad credit, since dealers perceive that such people are vulnerable and easy to take advantage of.

Most consumers assume the dealer is telling the truth and will do whatever the dealer says, resulting in higher payments, additional money being spent over the life of the loan and/or thousands of dollars in increased "hidden" costs. Those who refuse, see their cars repossessed.

What is happening here? It’s a Scam. Dealer Fraud. Unlawful. Illegal. Call it what you will. The industry has given it a name: Spot Delivery, a description which refers to the dealer placing a consumer in a car "on the spot", to get the sale, only to "yo-yo" them back at a later date for additional funds. Played to perfection, a dealer can reap thousands of dollars in unearned fraudulent gain.

What to know about Spot Delivery: If you signed purchase documents and registration applications and if you obtained insurance for the vehicle, had a new license plate put on the car and/or had your old plate transferred, the car belongs to you.

Spot Delivery happens to unsuspecting consumers throughout the United States. It is very popular with dealers in Pennsylvania, New Jersey and Delaware. If you find yourself in this situation, the chances are good that you have legal remedies available to right this wrong.

Tools to Protect Yourself from Spot Delivery or Dealer Fraud:

– Remember that if you have signed papers, you own the car, regardless of whether the vehicle has been financed.

– Your credit was good or the dealer would not have delivered the car to you at the price you agreed to pay

– A finance document showing payments, deposit, interest rate and other financial items is a binding contract, giving you specific legal rights.

– You own the car subject to making payments only. The dealer cannot change that once you take possession.

– Keep all copies of your paperwork and anything else associated with the sale (including calendars, photographs, advertisements). If the finance manager asks for your papers at any time for any reason, refuse! Keep these documents in a safe place, not the car.

– If you are called back to the dealership to sign additional papers, either do not go or do so in a different car than the one you bought.

– Have a friend or spouse drive you and witness whatever is being told to you. This will prevent the dealer from taking your car as hostage, an all too common happening.

– If a dispute arises with the dealer over the contract and the dealer demands the car is returned, park it in a garage or remote location until the matter is resolved, to prevent it from being taken against your wishes.

– Put together a complete timeline of everything that happened from the time you thought of purchasing the car until the car was taken away. Try to remember specific names of dealership personnel and any statements that were made to you during conversations with the sales and finance staff.

– Keep track of all monies you had invested into the purchase, including registration, insurance, down payment and trade. Never pay cash and always get a receipt!

If you believe you are a victim of a Spot Delivery scam and wish to discuss it with a consumer attorney, call 1-800-LEMON-LAW (1-800-536-6652) or contact us by e-mail. Remember to leave a daytime telephone number where you can be reached. Based on the information you provide us, an attorney will meet with you to discuss your claim. If we do decide to represent you, the process will be cost-free.