Bad Deal? Squeaky Wheel Gets the Grease

Tom Hirko’s head was spinning when he left the auto dealership. And after discussing the deal with a customer at his barbershop the next day, his stomach was spinning too.

He had walked into Sheridan Toyota near his shop in Santa Monica last summer with $12,000 in cash and a trade-in, ready to purchase the $20,800 RAV4 sport-utility he had seen on the lot.

But after the sales team had finished with him, he’d paid more than $25,000 for the same RAV4, with no added features. And he had agreed to finance it for 72 months at almost 12% interest--much higher than justified by his credit history. Altogether, he’d be paying about $36,000 by the time the pink slip was his.

He was what industry insiders call a “lay-out,” a customer anxious to buy and ripe for exploitation.

With his excellent credit rating and upfront cash outlay, most dealers would have negotiated a four-year loan for Hirko at an interest rate of about 9%. And most Toyota dealers at the time were cutting prices on similarly equipped RAV4s to about $19,000 to clear inventory. A deal like that would have saved Hirko almost $9,000 over the life of the contract.

“What can I say? I was naive and gullible,” he said in retrospect. “I was overwhelmed by the pressure. They kept putting one deal after another in front of me, including pressure to lease. I was overwhelmed and didn’t look at the figures carefully enough.”

Hirko’s story has a happy ending--he persevered and got through to dealership owner Daniel Sheridan, who tore up the old deal and wrote a new one. But many similar stories don’t end well.

Certainly, only a small portion of auto dealers are shady operators. A recent national Gallup survey of new-car buyers for the trade journal Automotive Retailing Today found that 85% of new-car buyers had positive feelings about the experience and that 94% were happy with the dealership where they bought their vehicle.

But that still leaves 2.7 million car buyers with negative feelings about the purchase process and 1 million who didn’t much like the dealership they used.

A bad car deal can happen to anyone.

California has no cooling-off period for car purchases. You’re expected to be prepared and to live with the consequences when you sign a lease or purchase contract.

But if you truly believe you were taken advantage of and are willing to push and know where and how to apply pressure, undoing a bad deal--or at least obtaining a compromise you and your budget can live with--is not impossible.

The state attorney general’s office is in the midst of an intense statewide investigation of auto dealerships based on scores of consumer complaints.

Most recently, two Southern California Toyota dealerships agreed to pay fines to settle civil fraud charges by the attorney general’s office. It was alleged last summer that South Bay Toyota in Gardena and South Coast Toyota in Costa Mesa defrauded almost 150 customers. The suspect deals included pressuring customers to switch from buying to leasing cars and then inflating prices by as much as $10,000.

Both those dealerships were recently sold and are under new ownership.

“Our office and the [Los Angeles] district attorney are looking into a number of dealers who engage in questionable practices,” said Herschel Elkins, head of the attorney general’s consumer law section.

Although most dealers run clean operations, consumer fraud occurs “with enough regularity that it creates a major problem in California, not only for automobile purchasers but for all dealers, because they all get painted with the same brush,” Elkins said.

The Department of Motor Vehicles also regulates car dealers. Just last week it filed fraud charges against Gunderson Chevrolet in El Monte, charging the company with systematically forging customer signatures to deals that inflated the purchase prices by adding unauthorized options. Gunderson, now owned by the AutoNation chain, is negotiating a settlement in hopes of avoiding the ultimate penalty: loss of its dealership license. The DMV says more than 1,400 customers were defrauded.

With a tough regulatory climate in place and at a time most auto makers are using customer satisfaction scores to reward dealerships that keep car buyers happy, complaints are being listened to as never before.

Most dealerships, after all, depend on their reputations. They are loathe to have someone with a well-documented case complaining about them--particularly if the complaints are heard in the right places.

Auto dealers have no obligation to talk a customer out of spending too much money.

If, however, you’ve been victim of a deal involving excessive pressure, underhanded tactics or over-the-top terms, you need to act.

Some salespeople wobble on the line between aggressive tactics and misrepresentation. Knowing which got you to sign the contract is what can get a deal reversed.

In Hirko’s case, a sales team swamped him with proposals and counterproposals until he couldn’t keep track of the numbers, he said.

“At one point they had three deals on the table and five people in the room with me. . . . I had given them my $12,000 check [brought along as a down payment], and they wouldn’t give it back. They just kept showing me new proposals.”

Even if everything is legal, pointing out unsavory tactics and terms can provide leverage in trying to correct a deal because dealers know that they reflect adversely on the dealership and can raise a warning flag with regulators.

So to start unraveling a bad deal, first reconstruct the sales session in as much detail as possible. Break it down into tactics and terms.

“Even if the contract appears legal and legitimate on its face, there may very well have been misrepresentations during the negotiations,” said Adam Radinsky, Santa Monica’s deputy city attorney.

“And if the dealer commits fraud in negotiating, not only is the deal voidable, the dealer may be liable for substantial penalties,” he said.

Peter Welch, director of government and legal affairs for the California Motor Car Dealers Assn., offers the example of a salesperson who promises that a truck will pull a 2,000-pound boat, “and based on that representation, you bought it and now you can’t pull [the boat] up the road. That would be legal cause to rescind.”

Make a note of any terms that seem excessive and could help show that there was a sales process that took advantage of your innocence.

Then start complaining to the dealer and to authorities. An aggressive campaign to notify consumer agencies, the media and the dealership’s owner of a bad deal often can do what the law can’t.

In Hirko’s case, Sheridan Toyota’s manager initially agreed to rewrite the deal a few weeks after Hirko began complaining.

But the new deal still undervalued the car he had traded in and the dealership failed to file the new contract with Toyota, so Hirko began receiving overdue payment notices on the original contract.

When that happened and Hirko’s repeated phone calls to the dealership manager were ignored, he wrote directly to Sheridan, the owner.

“He should have contacted me directly at first,” Sheridan said in an interview. “We’re the ones who own the business.”

Sheridan tore up the prior deals and wrote a new one that cut total costs to Hirko by almost $9,000.

He said he eventually fired the salesman who had handled the deal.

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Cliff Rothman is a frequent contributor to The Times. He can be reached at highway1@latimes.com.

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Questionable Tactics

The state attorney general’s office is soliciting complaints from consumers who suspect they have been victimized by unscrupulous car dealerships.

The complaints most frequently filed against dealers fall into five broad categories, said Herschel Elkins, head of the attorney general’s consumer law unit. In order of frequency, they are:

1. Bait-and-switch: sales agents switching the deal from a sale to a lease.

2. Unavailability of advertised cars.

3. Being charged for products and services not ordered.

4. Oral misrepresentation by a salesperson or finance manager-- usually promised goods or services that do not appear on the completed contract.

5. Undue sales pressure that exhausts and confuses the consumer.

Deal Gone Wrong

Where to go when you have a complaint about a car deal:

NEW MOTOR VEHICLE BOARD

This Department of Motor Vehicles unit can intervene on your behalf in questionable deals. “We provide a forum for the public who are not happy with a new-car deal or transaction to request that the issue be mediated,” said Tom Novi, the board’s assistant executive secretary. He said that of 1,400 calls his department receives on average each year, 450 result in formal complaints. New Motor Vehicle Board Mediation Services Program, 1507 21st St., #330, Sacramento, CA 95814. Phone (916) 445-1888; e-mail nmvb@pacbell.net.

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STATE ATTORNEY GENERAL

Herschel Elkins, head of the attorney general’s consumer law section, said his office wants to hear from consumers by mail, fax or e-mail in order to identify questionable dealerships. The office will not intervene in your case specifically, but your letter will help flag a dealership with multiple complaints. Your notification will also give you leverage when you inform the dealership that the attorney general’s office has been

alerted. Attorney General’s Consumer Law Section, 300 S. Spring St., Los Angeles, CA 90013. Phone (213) 897-2000; fax (213) 897-2802; e-mail piu@hdcdojnet.state.ca.us.

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DEPARTMENT OF CONSUMER AFFAIRS OR DISTRICT ATTORNEY

File a claim in Los Angeles County through the Consumer Affairs Department. The agency will contact a business to mediate a solution. Companies are not legally required to comply, but filing a complaint signals that you are prepared to fight.

Information, (213) 974-1452; Web site, consumer-affairs.co.la.ca.us. Outside of Los Angeles, other counties funnel consumer issues through their local district attorney’s office.

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CAR MAKERS

Auto companies publish toll-free numbers for consumers to use to complain about a deal or a dealership. Because dealerships are franchises, manufacturers cannot exert direct control, but few dealers like the idea of complaints going to their supplier. So complaining to a car maker is one more piece of ammunition.