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