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HOWNOT.TXT
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1995-01-15
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How Not to Buy a Used Car
or
Let's Not Make a Deal (Like This One)
_________________________________________________________
NOTE: All persons and places in this story are entirely
fictitious. Any resemblance to actual persons or places
is entirely coincidental.
There is no intent to imply that a large number of car
dealers use the tactics of Monty Vernon, or that small or
independent dealers are more likely to do so. But though
the number of occurrences is small, the potential buyer
should be aware that these things sometimes happen.
_________________________________________________________
So you're thinking of buying a used car, or pre-owned
as the high class dealers say. Let us observe a
hypothetical uninformed, super-gullible citizen as he
buys a car, and thereby learn what NOT to do. His name is
Booby J. Dullard. You know Booby, the man who won the two
hundred dollar waste basket on a TV game show...
It's a sunny spring day, Booby, and your eight year
old buggy is starting to look a little rusty. New brakes
will be needed soon. Maybe even a muffler. So you decide
to look around the car lots to get an idea of current
prices on later models. You pull up to Monty Vernon's
used car lot. There are prices on some of the windshields.
What a shock! A 3-year-old model costs more than you
paid new for your present bucket of bolts. Well, if you
can do without power steering and air conditioning,
settle for a 5-year-old model, and get a good trade-in
allowance, maybe you can swing a deal without risking
bankruptcy.
As you are pondering this and kicking the tires of a
middle-aged 6 cylinder Typhoon GS, a tall character in a
wash-and-wear suit comes crunching across the white
gravel. "She's a beauty, isn't she," he sighs, as he
pulls out a handkerchief and flicks a speck of dust from
the hood.
"W-well," you stutter, "I'm just looking right now. I
haven't really decided to buy anything just yet."
"That's all right, friend. I'm Monty Vernon, and I
don't believe in high pressure salesmanship. Just let me
tell you about this cream puff. Then if you're not
interested I won't pressure you.
"That sounds fair enough," you reply.
Monty shakes your hand and says, "I'm kind of new in
this car business. I was studying to be a priest until my
father died, then I had to go to work to support my
mother. I borrowed the money to start this business a few
years ago and have been just eking out a living for me
and Mom. But I refuse to raise my prices like the other
dealers..."
Eventually Monty gets around to offering you a
demonstration ride in the Typhoon. When you're in the
driver's seat with Monty beside you, you notice that the
oil pressure light flickers red as you cruise along at 35
mph. You mention this.
"Don't give it a thought," says Monty. That's just a
peculiarity of this model. They all do it. Nothing wrong
with the engine, it's just that the oil pressure sensor
has a weak spring. Nothing to worry about unless the
light stays on.
The exhaust noise sounds a little loud. You mention
this. "That sounds like a Mellopurr Muffler. I'll have to
check that. No extra charge if it is..."
"Is this a one owner car," you ask.
"Ah, One careful owner, you bet," says Monty.
When you get back to the lot, you ask to see the
certificate of title. "Gee, No one has ever asked that
before. The titles are kept in my safe deposit box at the
bank."
You think it over. The Typhoon runs pretty good and
it looks a lot better than your old bus. And Monty will
give you wholesale book for your trade. You go into the
office and Monty goes to work with his pencil and
calculator.
"Well, let's see now....the price of your new car is
4995.00 plus 100.00 closing costs..."
"Excuse me," you say. "What are closing costs for?"
"That's to cover our cost of handling the paper
work," says Monty. "I only charge a hundred. Most of the
other dealers charge a hundred and a quarter." You get a
hollow feeling inside.
"Now then, that's 4995.00 plus 100.00...that's
5095.00 less your trade of 495.00....that's 4600.00,
times 6% state tax....that's $4876..."
"Hold on," you say, "why are you figuring tax on the
closing costs?"
"We always do it," says Monty. "Now then, where were
we? Oh, yes, the balance due is 4876.00. Now I guess you
want to finance for 36 months, right?"
"Yes," you answer in a hoarse whisper.
"Here it is in the financing book. Look here, 4876
for 36 months comes to exactly $ 176.27 per month."
"What percent is that," you ask.
"I'm giving you our preferred rate of 11 percent,"
says Monty. "Now, here's your copy of the sales
agreement. I'll have the girl type up the final papers
and you can come back tomorrow to sign and pick up your
new car. I'll have her washed and shined up pretty for
you. The car, that is. Ha, ha."
The next evening you drive to Monty's lot and there's
the Typhoon sitting out front, all shined up just as
Monty promised. He takes you inside and introduces you to
a young lady. "This is Sally Jane, my accountant. She'll
take care of the paper work with you, then I'll see you
out front." He leaves.
Sally Jane gives you a big smile and proceeds to lay
a half dozen legal-looking documents in front of you for
your signature, pointing to each spot to be signed. You
know you should read each one, but you hate to keep Sally
Jane waiting.
When you are done signing, Sally Jane asks for your
copy of yesterday's agreement, then starts folding your
copies of the documents just signed and handing them to
you. Something catches your eye. The final agreement is
not stated as simply as the original. This one is much
more complicated. And you notice that the price of the
car is now 5475.00 instead of 4995.00.
You mention this to Sally Jane. She assures you this
is just an adjustment for their books to more truly
reflect their cost of the vehicle. After all, the payment
hasn't gone up. It is still $ 176.27 isn't it? You have
to admit this is so.
Out front, as Monty hands you the keys to your new
car, a thought occurs to you. "Pardon me, Mr. Vernon,"
you ask, "What kind of warranty do I have?"
"I thought I mentioned to you earlier that this
particular car was being sold As Is. That means no
warranty. That way I kept the price at rock bottom for
you."
"Oh, well thank you."
You climb into the car, put the key in the ignition
and turn it. You hear a faint growl. Monty says, "The
battery is run down from sitting around the lot. I'll
give you a jump start."
Ten minutes later you drive off the lot in your new
car. You notice that the state inspection sticker expires
next month, the needle of the gas gage rests on empty,
the exhaust seems a little louder and a little less
mellow, and the oil pressure light seems to be staying
lit longer. Hmmm. The odometer says 83,000 miles. Funny
you didn't notice that before. Your old car only had
56,000 miles on it. You start looking for a gas
station....
Now then, how many things did Booby do wrong? Let's
check them off.
1. Rule number one for any business transaction:
Never sign any paper without first reading and
understanding it. Trite but true.
2. Without having done business previously with Monty
or knowing anyone who has, he should have checked out the
business with the local better business bureau, to see if
they have received complaints from customers. Some states
may have a consumer protection agency which will give you
this information. My state has such an agency but I was
told when I called that they will not give out
information about any business unless they actually have
an action at law in process against the business.
3. He should have discussed the warranty before
putting any money down. If the car was sold with a
warranty, he should have insisted on a copy of the
warranty agreement in writing.
4. He should have been smart enough not to buy a car
with as ominous a symptom as an oil pressure light that
flickers at cruising speed, which is usually a sign of a
badly worn engine.
5. Considering the dead battery, he should have
looked at the battery and tires to make sure they were
the same ones that were on the car the previous day. A
few unscrupulous dealers (and, to be fair, some customers
on their trade-ins) have been known to change them after
the sale and before delivery.
6. Finally...hold onto your hat...He was taken to the
cleaners on the financing. The price increase of $ 480.00
on the final papers confirms it. Sure, the monthly
payment didn't increase. It was high enough to cover the
higher price in the first place. Monty just lied about
the interest rate. With a financed balance of $ 5,384.00
(5475.00 + 100 - 495 x 1.06) and a monthly payment of
176.27, the interest rate would be 11 percent, but with a
balance of $ 4,876.00, and a monthly payment of $ 176.27,
the interest rate is 18 percent. The page he showed Booby
in the financing book was the 18 percent page. The
monthly payment on the amount financed, 4,876.00, for 36
months at 11 percent should have been 159.63 instead of
176.27. Booby was taken for an extra 599.00 dollars.
Multiply each payment out for 36 months and see the
difference. If you find this confusing, keep in mind that
if the monthly payment remains constant, the interest
rate goes down as the amount of the loan goes up. Monty
just raised the price on the contract until the interest
rate he lied about (11%) became a fact. The monthly
payment remained the same, and everything on the contract
became legitimate. Then, by taking back Booby's copy of
the original sales agreement and giving him a copy of the
new one, it would, hereafter, only be Booby's word that
the price was actually raised. This trick is used oftener
than you might think, and is fallen for by people who
should know better.
Now that we have watched Booby J. Dullard stumble and
bumble his way through the purchase of a used car, we
feel thankful that we have never been dumb enough to buy
a car from a con man like Monty, or to buy a piece of
junk like the Typhoon, or to fall for the old interest
switch trick. Right? Hey, why is everybody blushing?
End
