Ever wonder why the deck is stacked in favor of the car dealer? Payola!

October 2017 Fourteen teams of National Independent Automobile Dealers Association’s (NIADA) dealers and industry partners took to Capitol Hill and met with more than 110 members of the Senate and House of Representatives.


NIADA wants:

TO GUT the Consumer Financial Protection Bureau;

REPEAL the CFPB’s arbitration rule (a measure that has already passed the House and is awaiting a vote in the Senate); and,

FIGHT THE BAN on sales of unsafe recalled vehicles.

CFPB has been the representative of YOU the CONSUMER and Banks and Car Dealers are angry that such a watchdog agency exists. They are targeting the CFPB to have Congress stop funding this important agency.

ARBITRATION  – CFPB has written a rule banning arbitration provisions in car sales contracts to address the problem of YOU being forced to give up your right to have your day in court – and have disputes resolved by arbitration companies. These arbitration companies are bought and paid for by the Car Dealers and Banks. Arbitration is bad for consumers.

UNSAFE VEHICLES  – Consumer groups are demanding safety recalls be completed before you buy a used vehicle. NIADA wants to continue selling unsafe vehicles to consumers with NO DISCLOSURE.

While you are busy with your everyday life, these Banks and Car Dealers are donating money to your legislators to pass laws that hurt you. Let your Representative know you support the CFPB and are against any effort to get rid of the little protection we consumers have.

How Much “Interest” Am I Being Charged For My Lease?

Calculating the Money Factor Rate

You need the following information to calculate the Money Factor on your lease:

Total Rent Charge

Lease Term in Months

Adjusted Cap Cost


The formula is: (Rent Charge/Lease Term)/(Adjusted Cap Cost + Residual)

 Assume that a dealer shows you a lease contract with the following information:

Total Rent Charge = $5,000

Lease Term in Months = 48 months

Adjusted Cap Cost = $31,000

Residual = $14,000


Money Factor = (Rent Charge/Lease Term)/(Adjusted Cap Cost + Residual)

Money Factor = (5,000/48)/(31,000 + 14,000)

Money Factor = .00231


To determine the equivalent Interest Rate = Money Factor * 2400

Interest Rate = .00231 * 2400

Interest Rate = 5.544%

Truth In Lending

You have the right to have the dealer disclose to you in writing, ALL of the finance terms of your purchase BEFORE you agree to buy a car – and then you are able to walk out with the written disclosure and compare financing rates. Then you may return to purchase the car.

The Truth in Lending Act

15 USC §1601

(a) Informed use of credit The Congress finds that economic stabilization would be enhanced and the competition among the various financial institutions and other firms engaged in the extension of consumer credit would be strengthened by the informed use of credit. The informed use of credit results from an awareness of the cost thereof by consumers. It is the purpose of this subchapter to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him….

More Dirty Dealer Tricks – Not Getting the Advertised Price

I am posting this because this issue has come up several times in the last week.

The scam works like this: You go into a dealership and pick out a car you are interested in. The salesperson soon realizes you do not know the car is an advertised special. So, as soon as she realizes it, she goes onto the computer and changes the price to match she is quoting you.

The law states you are entitled to the sales price even if you are unaware of the advertised price. To protect yourself, ask the dealer if the car is being advertised and at what price. Then Google® the VIN and check for yourself and/or go to the dealer’s website and look up the car.

Also, a good place to check is Craigslist® as Craigslist® ads seem to disappear almost immediately.

Remember- the dealer cannot charge you more than the advertised price because she says “You do not qualify” because of your credit. They do this to add bank fees, etc.


Good luck.

Don’t worry, you may refinance in six months

A client called in with a problem with her dealer. She had been asked to co-sign for a friend who did not qualify for financing. When she hesitated to sign, the car dealer told her “Don’t worry, after six months, you can return to the dealership and have your name removed from the loan”. The client fell for this lie and found out when she returned to the dealership that this was a lie. Worse, the car dealer denied telling her this.

Don’t fall into this trap. A dealer signs a contract with you to purchase a car and you agree to make payments to the dealer. The dealer sells the contract to a finance company. You then start making payments to the finance company. The dealer has nothing more to do with that contract and has no authority to make changes to the contract that is now owned by the finance company.

This happens all the time. A dealer will tell you anything to get you to sign the documents and drive the car away. You are then stuck with the consequences.

Trading in Your Car to a Dealer? Watch out! The 10 day payoff rip-off.

Trading in your car and you owe money on it? Be prepared to get ripped off.

The typical dealer will add a 10-day payoff meaning he will add ten days of interest to your payoff thereby charging you for his carrying costs.

Let’s look at your trade in lien payoff:

On must distinguish between a consumer asking for a payoff and a dealer asking for a payoff. A consumer who is quoted a payoff has the luxury to decide if she wishes to pay this amount immediately, or allow interest charges to accrue. In that instance, a 10 day payoff quote, while technically unfair as some would interpret that as a grace period, without a contemporaneous disclosure that interest or finance charges would continue to accumulate during this ten day period. A decision to pay immediately, even if the quote was a 10 day payoff, would result in a refund of excess finance charges. The scenario is completely different when one puts an automobile dealer in the middle.

When a dealer takes a vehicle in on trade (Trade-in), as part of the down payment, the dealer is purchasing the trade-in that day. Historically and without even asking the consumer, the dealer calls a trade-in lien holder and ask for a 10 day payoff and inserts that amount on the RISC as the “prior credit or lease balance”. This means even though finance charges are beginning to accrue on Day 1 for Vehicle 1 ( the newly acquired vehicle) finance charges are continuing to accrue on the Trade-in for 10 days. This is hardly fair for the consumer.

The NEW 15-20 day payoff.

What is most egregious is the hidden reason for the 15 and 20 day payoffs that have become pervasive in the last 3 years. As a result of the financial crisis of 2008, many dealers went out of business. On their way out, many took trade-in vehicles and failed to pay off the trade-in lien leaving thousands of Californians with two car payments despite having sold their trade-ins to the dealers.

In 2008, the California legislature created the Consumer Motor Vehicle Recovery Corporation to compensate these consumers funded by a $1.00 DMV fee for every car sold in California. In 2010 added Vehicle Code §11709.4. requiring dealers to pay off the trade-in lien within 21 days from the date the vehicle is traded in and prohibit the dealer from selling, or transferring ownership until the trade in is paid off.

Instead of asking for the common, yet illegal 10 day payoff, some unscrupulous and inefficient dealers began asking trade-in lien holders for 15 and 20 day payoffs as they misread the new law to allow for charging consumers for finance charges on trade-in liens for up to 20 days. Did the finance companies comply? Of course, they readily quoted 10, 15, and 20 day payoffs to these dealers and in order to make it even easier, changed their own policies of quoting 10 day payoffs to 15 day payoffs as standard. Some, like Westlake Financial and Wells Fargo Bank refuse to quote a same day payoff with a per diem amount for a consumer to decide when and how much to pay, and will only quote a 15 day payoff.

Your protection is to demand a same day payoff for your trade-in lien – and if they refuse – sue them. By the way, this fraud allows you to sue the dealer and the banks and you may be able to cancel your contract, return the car, get a full refund and all of your attorney’s fees.

The Cash Customer vs. the Credit Customer

“If we raise the price of the car the bank will be happy and give you a lower interest rate because of your prior bankruptcy… and your payments will go down.”

I know most of you would not believe this, but I just got off the phone with a new client. According to the client , an Infiniti dealer near Fairfield beat him up (mentally) because of his credit score and prior bankruptcy and increased the price of the car $2,000.00 over the sticker price on a used car.

In this scenario the only way to make the monthly payment drop while increasing the price of the car is to lengthen the term (say 60 months to 72 months). Or, ask for a larger down payment, but that is not what happened here.

So, what the dealer did in effect, (smell any FRAUD?), is to charge a credit customer more than they would have charged a cash Customer. They also charged him for a service contract using the same logic (lie).

The Rule: A dealer may not charge a credit customer more for a vehicle than they would a customer paying cash. This is illegal and violates several California statutes including the Vehicle Code. Louis A. Liberty Liberty & Associates, a PLC

Selling Etch or Phantom Footprints or other Theft Protection

The cost of this is about $20 and consists of a strip of plastic, or acid etching onto doors, hoods, windows or some combination. Yet dealers charge between $199 and $399. The DMV allows dealers to apply “anti-theft devices” as only accessory pre-installed. The dealer is supposed to remove it if the customer does not want it. Some dealers refuse to remove it and will give you a variety of excuses as to why it cannot be removed and the charges to you remain. This is another lie. You have the right to have it removed and not be charged for this high profit rip off.

The 4 Square

The 4 Square is the equivalent of the “hide the pea” shell game. There are 4 squares on the paper. Trade-in, Sale Price of the New Vehicle, Down Payment and Monthly Payment. The more you put down, the lower the monthly payment is supposed to go. These are defined as “Trigger Terms”, i.e., a monthly payment amount triggers TILA, meaning once TILA is triggered, the document you are signing must contain all Truth In Lending disclosures. Of course, they do not.

Get a copy of this 4 Square for your records. The Department of Motor Vehicles requires the dealer to give you a copy of all documents that you sign.

So you sign or initial the 4 Square and Bingo… it transforms into a purchase agreement under ASFA that may not comply with TILA or ASFA giving you all your Truth-In-Lending disclosures and the whole deal is now unenforceable. So if you discover this violation, you may be able to return the vehicle and get all of your money back.

The 4 Square is also the roadmap to prove Payment Packing or LEG. That is why the Sales Desk or the F&I manager shreds these documents. That is also why it is so important for you to demand a copy. If they will not give you one, walk away.