Two new reports from the Federal Trade Commission highlight some of the challenges and confusion consumers can face in buying and financing a car, particularly relating to charges for add-on items after the initial price negotiation.

The reports are based, in part, on a study of auto buyers conducted by the FTC that consisted of in-depth interviews with 38 consumers about the car buying and financing process.

A staff report from the FTC’s Bureau of Consumer Protection (BCP) notes a number of issues that arose in the study, from the advertising that draws consumers in through the entire car buying experience.

The BCP report notes that consumers were sometimes not aware of key terms of sales and financing contracts, and it points in particular to issues that potentially keep them from having an accurate picture of the amount they are paying. One of those issues was focusing on monthly payments rather than considering other important terms as well, like the total price of the vehicle and the amount and length of the financing.

The later stages of the buying and financing process, including the sale of “add-ons” like extended warranties, service plans, and GAP (guaranteed asset protection), and meeting with the dealer’s financing office for additional negotiations after seemingly negotiating a price with a salesperson, also present issues, according to the report.

When it comes to add-ons, the BCP report notes a number of issues that caused consumers significant confusion in the study, including limited or no discussion of charges for add-on products, questions about whether the add-ons are a mandatory part of the purchase or financing, and unexpected limitations on add-on products such as extended warranties or service plans.  

The BCP report also cites issues after consumers negotiate a price with the dealership sales staff and are sent to meet with the “finance and insurance” office, pointing to multiple instances in the study where the previously negotiated price was changed during this process. The report notes that dealers should honor discounts and sales terms promised to consumers through the entire sales process, or not make them in the first place.

The report also states that consumers were at times not aware of the terms they had agreed to, with some only discovering key elements of their contracts while reviewing the documents as part of the FTC study. The report notes that the sheer length of the car sales process can overwhelm consumers and make it difficult for them to adequately review the paperwork presented to them.

Dealer Specialties announced it has teamed with Experian to make C.A.R.Score reports available within Experian’s AutoCheck vehicle history reports. This new relationship is an added benefit to mutual clients as it gives dealers the opportunity to show C.A.R.Score vehicle condition reports in the VHR, allowing consumers to make their next car purchase decision with confidence.

C.A.R.Score is an all-new, consumer-facing vehicle condition report that displays the exterior and interior condition of the vehicle, including instrument and control panels, mirrors, upholstery, even the scent of the vehicle. These interactive condition reports show specific details that car shoppers are looking for, yet, until now, were not available on vehicle history reports. 

Dealer Specialties vehicle inspectors perform a full, cosmetic vehicle evaluation, which includes photographs of any visual damage. After inspection is completed, the car is rated from 1 to 5 Stars, giving consumers a clear understanding of the vehicle’s current condition.

C.A.R.Score reports will be displayed under the ‘Inspection History Check’ and ‘Detailed Vehicle History’ sections of Experian’s AutoCheck vehicle history report. Each section provides inspection data, location, and a link to the full C.A.R.Score report.

The Federal Trade Commission reported that Volkswagen and Porsche repaid a total of more than $9.5 billion since 2016 to car buyers stemming from the companies’ deceptive “clean diesel” advertising of VWs and Audis fitted with illegal emission defeat devices.

Given a choice between returning their vehicle to VW or Porsche in exchange for compensation, or having the car modified to comply with clean-air rules, more than 86 percent of those who concluded the claims process chose to return their car through a buyback or early lease termination, the FTC noted in a Final Status Report filed with the U.S. District Court for the Northern District of California. 

“Most important, the FTC orders and related private class settlements provided redress sufficient to compensate consumers fully,” the FTC said in its July 27 final summary report.

VW's clean diesel Golf TDI
VW's clean diesel Golf TDI won World Car of the Year 2009

The FTC’s final report to the court marks the end of the largest consumer redress program in U.S. history, set up in 2016 and 2017 to compensate purchasers and lessees of more than 550,000 deceptively marketed “clean diesel” VW and Audi cars. In a complaint filed in federal court in March 2016, the FTC alleged that Volkswagen’s seven-year ad campaign was based on false claims that the cars were low-emission, environmentally friendly, met emissions standards, and would maintain a high resale value. In reality, however, the cars were fitted with illegal emission defeat devices designed to mask high emissions during government tests.

The FTC orders settling the case, approved in conjunction with class action plaintiffs, required payments to consumers that included compensation for their vehicles’ full retail value, plus all other losses they suffered because of the deception, such as time spent shopping for new vehicles, sales taxes and registration fees, and the additional amount consumers paid for a low-emissions vehicle feature. 

In addition to the FTC order on consumer redress, the Department of Justice and the Environmental Protection Agency obtained court orders providing billions more for environmental relief. In the final report, the FTC reported to the court that despite the large volume of claims, Volkswagen had “successfully managed the settlement administration process effectively,” working together with a court-appointed independent claims supervisor tasked with monitoring compliance. 

A woman was sentenced to state prison for her role in a theft scheme in which “straw buyers” obtained car loans and high-end cars by fraud. The leader of the scheme previously pleaded guilty and was sentenced to state prison.

Jacqueline Reyes-Keegan, 60, formerly of Fairview, N.J., now of Sherman Oaks, Calif., was sentenced to six years in state prison by Superior Court Judge Robert M. Vinci in Bergen County. She was found guilty on Feb. 4 following a jury trial of second-degree conspiracy related to thefts from one car dealership. She was acquitted of a theft charge. On June 11, 2020, Reyes-Keegan pleaded guilty to an additional charge of second-degree theft by deception contained in a separate indictment involving thefts from a second dealership. She was sentenced to six years in state prison on the trial conviction and a concurrent six years in prison on the guilty plea.

The leader of the scheme, Spencer Crump, 45, of Teaneck, N.J., pleaded guilty to second-degree conspiracy and was sentenced to five years in prison on July 12, 2019. Another man, Abdul B. Seedat, 64, of Fairview, N.J., pleaded guilty to third-degree theft by deception and is awaiting sentencing.

Crump and a company he controlled, SLC Logistics LLC, recruited “straw buyers” with assistance from Reyes-Keegan. The scheme targeted a car dealership in Tenafly and a second dealership in Hackensack. The trial of Reyes-Keegan related to the Tenafly dealership, where the defendants stole $275,191 in loan proceeds to purchase four luxury vehicles. The straw buyers were promised payments from Crump to sign for the car loans, and the cars were turned over to Crump and Reyes-Keegan. There was never any intention that the loans would be paid back. The thefts occurred between June and December 2015. Reyes-Keegan’s guilty plea related to the Hackensack dealership, where loans totaling $301,213 were fraudulently obtained to buy five vehicles. Seedat, a dealership employee, participated in that scheme.

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