When Buying a Car, the Buyer Must Be Aware
Sometimes, suspicions that one has been “had” in a deal fester past the point where any reasonable remedy is attainable.
That seems to be the case with Charles Deen of Culver City, who had an experience at Mike Miller Toyota more than 15 months ago that still leaves him uncertain over just how much he should have paid for a slightly used 1997 Kia Sportage.
Bargaining over the price of a car, though often ticklish, is commonplace. Yet W. James Bragg, author of a book on buying cars, notes: “Research shows that one in seven people who plan to buy a new car in the next year is unaware the price is negotiable.”
In an e-mail, Deen said that when he and his wife went to the Culver City dealer about midday on May 2, 1998, “We told [them] upfront that our credit was ‘spotty’ since we had problems recovering from the Northridge earthquake.”
So he wasn’t particularly surprised that when Miller Toyota arranged a six-year loan on the Kia, Deen had to pay the Rockwell Federal Credit Union 13.74% interest.
But he was taken aback when after selecting his car--a repossessed vehicle with 700 miles on the odometer and a sticker price of $17,988--its price changed.
“We waited and waited, in the holding room area, until after 6 p.m.,” he recalled. “Finally, we [were] brought into the finance manager’s office. . . . The price to be financed was now $19,988 plus $4,000 ‘for accessories.’
“When we objected, the explanation was twofold: ‘Someone had made an error on the windshield price [by $2,000],’ and the $4,000 ‘accessories’ actually reflected the cost of having the car financed with the credit union.
“I strongly objected to this. [But] my wife had not eaten since 8 a.m. She said, ‘If you want the car, sign it, and let’s go to dinner.’ ”
At dinner, “we both calmed down and agreed that we had been ‘had.’ We returned to the dealership,” and ultimately a manager rewrote the contract with the price at $17,988 plus $2,000 for accessories, in this case a security system.
Deen signed the deal. But to this day he has bad feelings about it, which is why he contacted The Times.
When I drove out to the dealer, Michael Salas, the general sales manager, quickly brought the sale up on a computer screen and said the profit on it had only been $131. He added that careless employees sometimes put the wrong prices on cars.
I later asked Bragg, an expert on the subject, for an evaluation of the pricing issue: What was the likely profit on this sale?
Bragg interviewed Deen on the specifications of the car, looked up the Western edition of the Kelley Blue Book of Used Car Values, and wrote me a three-page memo.
“The wholesale value of a 1997 Sportage configured as Charles Deen’s, and with the same mileage on the odometer, was about $13,500,” he concluded. “So the dealer’s used car sticker of $17,988 had a 25% gross profit built into the asking price . . . a $4,500 profit.”
Bragg, however, said he would not criticize the dealer’s margin on the vehicle.
“This was a financial transaction between two consenting adults,” he said. “Even an outrageous profit is not a dirty word. It is not illegal to take advantage of people who don’t know what they’re doing.”
Meanwhile, I had received an invitation from the dealer’s general manager, Dave Hutton, to meet.
When I arrived at his office, carrying Bragg’s evaluation, the owner of the nine Miller dealerships in L.A., Mike Miller, joined us.
“A reasonable profit,” he told me, “is what the market will bear.”
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The thing that bothered him most, Miller said, was that under his policies, “if a customer is unhappy, we’ll take the car back. We’ll give him his money back. But not 15 months later.”
Why, Miller wondered, had the customer waited so long to complain?
Hutton said Bragg misunderstood the situation. When the Kia was first sold in 1997, Miller Toyota was also a Kia dealer, he said, so it never purchased the car as used nor paid a used car price.
Hutton said it acquired it at the new car invoice price of $15,598.
Also, he said, Miller Toyota paid a $404 fee to the Department of Motor Vehicles, never charged to Deen, serviced the car for $300 and paid a $12 transfer fee.
So, he said, the cost of the car to the dealership was a little over $16,300, making the gross profit for the Deen sale, before deducting dealer costs, a little under $1,700.
This, of course, is above the $131 figure I was first given by Salas.
Hutton contended that the Deens had gotten a good price, particularly when the credit deal secured for them is taken into account. He said they were lucky to get a 13.74% rate with credit troubles and that it could easily have been at a 19.91% interest rate.
Bragg agreed that while car loans for those with good credit can be as low as 7% or 8%, for those with poor credit records, “15% to 20% may not be out of line.”
Bragg’s view was that a customer who skillfully negotiates a price on a car may be able to obtain it for about $500 over invoice.
Hutton agreed that some buyers might get a car for that amount, but insisted, “I can’t sell every car for $500 more and still stay in business.”
So, what are the conclusions to be drawn from this?
One, obviously, is that a poor credit rating--whatever its cause--puts a consumer in a weak position, foreclosing options enjoyed by people with good credit histories.
Second, it is necessary to be deliberate and watchful when making costly purchases, such as a car. If Deen felt at any point that he was being unfairly treated, he should have gone elsewhere.
Finally, it does strike me that Miller has a good point when he says Deen is complaining too late. A complaint should be lodged within a reasonable time, or dropped as water inevitably under the bridge.
Ken Reich can be contacted with your accounts of true consumer adventures at (213) 237-7060 or by e-mail at ken.reich@latimes.com
