Steve Moskos' Blog

Why you should never take a newly-purchased car home if the financing isn't complete

5/22/2019

You wouldn't drive a car that's not fully insured, and you wouldn't operate a vehicle without a driver's license. So why do people take home new cars before the financing is finished when they don’t truly know how much that shiny new car will cost them in the long-run? The scary thing is, even if you prepare yourself, you can still get fooled because a car dealership can may tell you a car is financed – even if it’s really not.

After dropping thousands on a new car, you'll want to hop in and get on the road immediately, which makes sense. Few can resist the temptation of the new car smell. Car dealerships know that, and they can use it to charge you a lot more money than you thought you were going to pay for that car. This tactic is called yo-yo financing, and although it's not legal, 27% of people reported being victims of these scams. One Miami auto fraud lawyer even claims that 30% of his law practice deals with these cases.

What usually happens is a dealership and buyer agree to a sales price. The buyer leaves thinking the deal is final. Days or even weeks later, the dealership contacts the buyer to let them know the car has not been financed with the original loan options. They have, however, found another finance option with a new rate that's much less favorable. If a buyer refuses to cooperate, the dealership may threaten legal action. At that point, most buyers will start to feel the pressure and agree to the dealership's demands, which usually means a loan contract at a higher rate or a higher down payment than the one they initially discussed. Meanwhile, the dealership can might still sell the buyer's trade-in vehicle (or just say they did, since the buyer can’t be sure). They may even try to keep the down payment to get the buyer to agree to their terms.

This scam is also known as spot delivery. After agreeing to purchase the car, your dealership might tell you the financing is all set and that the car is yours. That may not be a problem for people with good credit scores, but someone with a lower credit score could get a call days after driving their new car off the lot letting them know the bank would not buy the contract from the Dealer. If the financing institution will not buy the contract, the sale may not close, and the buyer in this situation may have to return the car or pay the balance in full. The Dealer may even try to claim the buyer owes money for the mileage he put on the car.

Is it really worth it to pay thousands more down the road just to get your new car a few days early? Certainly not. Going into a deal, a buyer should know and understand what they're agreeing to – no matter how fine the print. You may even want to get pre-approved for a loan from a local credit union or your bank so you know what the terms of the loan are before you even set foot on a dealership's lot. And if you're desperate for a car, rent one until the paperwork is signed. A couple hundred dollars on a rental can save much more than you think down the road.

Why you should always test drive before you buy

3/11/2019

It might sound like a no-brainer to you: of course you should test drive a car before you buy it. You're likely spending thousands on one so you need to know what you're getting. But the shocking truth is that 11.4% of car buyers don't test drive their car before they drive off the lot. There are several reasons why that's not a good idea.

It might be tempting to skip the part of a car purchase that involves talking to salespeople at the dealership, but it's just not a practical or financially sound decision because you can actually negotiate the price down based on what you learn. When you test drive a car, you can determine whether it's a smooth and comfortable ride. If you have a long commute, you don't want to spend a month's pay on a car only to find out that the driver's seat is extremely uncomfortable, your head hits the roof, and the windows don't block out any traffic sounds.

More importantly, test driving a car gives you the opportunity to make sure it runs smoothly. Does it accelerate and brake easily? Is the steering wheel easy to turn, or do you have to spin it around ten times just to make a slight right, which might be impractical if you need to do a lot of parallel street parking or three point turns in your neighborhood.

Even beyond these basics, which may not feel important to every driver, it's important to make sure every component of the car works correctly. Test driving a vehicle gives you the opportunity to check out the headlights, windshield wipers, radio, seat warmers, and any other feature that might be prone to malfunction. Once you've checked all of these things, the knowledge you gain will give you the upper hand when it comes to negotiating with salespeople.

Are car dealership special events really special?

3/4/2019

Every few months your local dealership probably hits you with wall-to-wall advertising about their latest holiday sales promotion. These ads are all over the TV, radio, billboards, and newspapers and pressure you into a purchase decision by making it seem like the offer is too good to last. The reality is that these deals are no better than a dealership's typical prices on any other day for the most part.

In fact, a lot of dealerships use these holiday opportunities to hire marketing specialists who then help the dealer increase their profit. You might see advertising language that emphasizes financing options or add-ons like prepaid maintenance. Don't buy into the temptation because this is where dealerships make most of their money, and it's an easy way to get a consumer to pay more than they're willing to by making them feel like they're getting a great deal. For example, a dealership may offer something like "pre-delivery inspection," and they can make it seem like it's mandatory, but you can always opt out of paying these bogus charges.

So what should you keep in mind when buying a car?

Forget sales and financing offers. Always consider how much money is being added in interest and other fees when it comes to monthly payments.
Don't even look at monthly payments – always add up the long-term cost of the car and focus on that number as daunting as it may be. And if that number feels high, remember that monthly payments are designed to make a car seem cheaper than it really us.
And when you figure out what you can afford each month, do not forget to calculate your insurance and taxes you will have to pay, especially if your purchase is a newer model vehicle.

To get a good deal on a car, a consumer needs to create their own list without a dealership's input. They should focus on cars known to be reliable, safe, and strong in road tests. It also helps to shop specifically for cars that carry high owner satisfaction rates and ones that don't depreciate quickly.

Apple reports its first self-driving car crash. Are self-driving cars a bad idea?

2/19/2019

Self-driving cars have been all over the news lately, especially because of the minor accidents some of them have experienced. But media coverage of these collisions is a bit sensational. For example, Apple’s first self-driving car crash was widely reported – but most headlines failed to note that Apple’s car was actually rear-ended by a human driver in another vehicle. In that instance, all the humans involved were okay, though the cars did suffer some slight damage.

Critics of autonomous cars might point out that the Apple vehicle, a modified Lexus, was traveling less than one mile per hour to merge when it was rear-ended at about fifteen miles per hour.. One of the major concerns people have voiced about these cars is that they tend to drive too cautiously in their attempts to stay safe. For example, they tend to stop abruptly when they think humans might appear, which can lead to rear-end collisions, as aggressive drivers aren’t used to that kind of defensive behavior.

On the other hand, the cars do set a good example, and perhaps it’s better that human drivers learn to accommodate overly-cautious vehicles. After all, most car accidents aren’t caused by drivers being too careful on the road. The biggest problem on the horizon for autonomous cars right now is going to be the fact that they have to drive alongside human-operated cars, which come with their own slew of variables. While both are on the road, there are bound to be accidents.

With that said, Apple’s self-driving program consists of 66 cars on the roads, with 111 drivers registered to operate them. One accident involving one autonomous vehicle out of countless driving hours is a pretty good track record, all things considered. The average number of car accidents in one year in the United States is six million, and that’s with more than 250 million vehicles on the road, driven by people who are all tired, overworked, distracted, and even intoxicated. As long as an autonomous car can’t get drunk or answer a text while driving, they’ll likely be a much safer mode of transportation.

Consumer Reports Issued a List of Must-have Car Features

2/12/2019

If you’re in the market for a new car, it can be hard to choose exactly what you need in a ride. There are so many different makes, models, and years to examine, and each vehicle has its own unique set of features – plus, your needs will vary depending on where you live and whether you have a big family. Most of the time, you’ll have to prioritize which features you consider essential, versus the ones that would just be pretty nice to have.

According to Consumer Reports, there are eight features you absolutely need to have in your car. Unsurprisingly, most of them are safety features – after all, safety comes first. The most important feature on their list is automatic emergency braking, which can soften the impact of a collision or even prevent it. They also suggest looking for forward-collision warning (those little alerts that let you know when your car is about to bump into something) and blind-spot warning (so you don’t accidentally sideswipe anyone while changing lanes). They also suggest getting a vehicle that offers lane-keeping assist, which can track lane markings on the road and provide corrective steering if a driver changes lanes without activating the turn signal.

Not everything about a new car has to be practical though. You could also invest in convenience features like a nice audio system with physical knobs, mirrors that automatically adjust for bright lights in the rearview, and a greater range of driver’s seat back support adjustments. While these things may not help prevent a car accident, they’ll help you fight fatigue and discomfort while driving for long periods.

There are some features you should definitely skip, and they’re the ones the dealership will try to upsell. Don’t pay extra for bigger wheels – they’re so expensive to replace, and they’ll give you a stiff ride. Also, avoid built-in navigation systems. These can come at a cost, but they don’t really offer anything you don’t already have on your smartphone. A lot of parents may be tempted to invest in features for the kids like rear entertainment units, but in today’s world, it’s easier to just get them a tablet for lengthy trips.

The trouble with airbags—the recalls seem to be non-stop.

1/14/2019

You never know when a car accident might happen, but you can make sure you’re protected when it does thanks to safety features like airbags. Although airbags save lives, they’re not always foolproof – especially in recent years, as airbag recalls seem to permeate the news without signs of slowing down. Recently, Toyota and Subaru recalled more than 1 million vehicles with faulty airbags worldwide. Similarly, Mazda expanded its Takata airbag recall to an additional 155,000 cars. Not long ago, GM and Audi announced airbag recalls as well, with more than 100,000 cars affected. With all these car manufacturers announcing recalls, which cars are actually safe to drive?

A lot of the smaller recalls, such as GM and Audi’s, affect newer models – so if you bought an Audi in recent years, it’s worth checking whether your airbag has been recalled. However, the largest recall of 2018 by Toyota and Subaru affects a lot more drivers. But don’t worry. While 1 million vehicles worldwide is a huge number to recall, keep in mind that only about 17,000 of those are in the United States. Here, the recall only covers about 17,000 Scion xA vehicles released from 2004 through 2006. Usually, you won’t have to look up for yourself whether a part of your car has been recalled because your dealer or manufacturer should contact you. But it is concerning to know that so many cars are not as safe as we thought they were.

So why are all of these airbag recalls happening all of a sudden? There’s actually a simple explanation. The recalled airbags all come from a company called Takata, which provides airbags for multiple manufacturers. The issue at hand is specific to Takata’s airbags – basically, the ammonium nitrate used in the airbags becomes unstable and can cause them to suddenly inflate, launching metal shrapnel in the process. At least fifteen people have died because of this airbag issue in the United States, so it’s a serious issue. Takata’s airbags first started getting recalled about ten years ago, and regulators even launched an investigation. All in all, the recalls have affected nineteen manufacturers and 37 million vehicles across the world. If you haven’t checked already, now is a good time to make sure your car isn’t among them.

How to file a Vehicle Safety Complaint with the National Highway Traffic Safety Administration

1/7/2019

If something isn’t working correctly in your vehicle, it’s your responsibility to report it to the proper authorities. That’s how a lot of recalls end up happening – enough consumers complain and a company is forced to correct the problem. It’s actually a lot easier than you might think – all you have to do is file a Vehicle Safety Complaint with the National Highway Traffic Safety Administration at this website.

The process is simple, and all you need to have on hand is your email address, Vehicle Identification Number, Make, Model, Year, and documentation related to the complaint like photos or a police report. It takes about five minutes to fill out the form on the site. The NHTSA insists that all complaints are reviewed; however, only some will lead to an investigation and potential recalls. The review process can take a long time, but you should be notified if there is a recall based on your complaint. People whose cars have had a recall due to Takata airbag safety issues should make sure to note that on their complaint, as the NHTSA already has an open investigation.

What counts as a valid vehicle safety complaint? Faulty airbags, brakes that don’t function as intended, widespread ignition issues, and all kinds of other things that go wrong. You may not even realize that your car’s problem is a safety complaint, which is why it’s good to fill out the form. Note that the NHTSA will never share your personal information with the public after you file a complaint. It is added to a public database, but all of your personal information is removed first.

It’s important to notify the NHTSA if you think there’s something wrong with your car, like an airbag issue that could potentially be dangerous. If the NHTSA receives similar reports from multiple people about the same product, they can open an investigation to determine whether the defect should result in a recall. If you don’t report car safety issues, then the NHTSA can’t do anything to make sure car manufacturers are held responsible.

Am I allowed to take the Retail Installment Sales Contract home with me before signing it, especially if I don't understand everything in it?

9/19/2018

Yes, you are allowed and, of course, you should never sign any contract you do not fully understand. The Truth-in-Lending Act and its regulations require a creditor to make the required disclosures “clearly and conspicuously in writing, in a form that the consumer may keep”.

Those disclosures include the Annual Percentage Rate, the amount financed (the amount of the credit being extended or money being loaned), the finance charge (how much interest you are paying back), the total of the payments, and the total amount paid (payments plus down payment).

Taking the contract home before you sign it is a great idea. This allows you step back, away from the pressure of the salesman and his boss, and examine whether the deal is good for you, such as whether you can afford the payments. Second, you can determine what other costs may be incurred like property taxes (not the same as sales tax) and higher insurance expenses. You may decide the monthly expense is too high. Third, you can shop the interest rate to see if you can get a better deal. Fourth, if there are any terms you don’t understand, you can find someone to explain them to you.

The Retail Installment Sales Contract is going to state there is no “cooling off” period so take your time. There really isn’t a rush to buy a car.

What happens to vehicles involved in floods and how to avoid buying one

9/8/2018

During hurricane season, it’s common to see news footage of cars getting washed away by storms. But few people understand what really happens to those flooded cars once the owners get them back.

While cars seem pretty strong and sturdy, they are basically just large electronics – especially if they’re newer models. And you know what happens if you throw a TV into a pool – there’s little that can be done to salvage it, and even if you can fix it, it’ll never run as well. A lot of cars that get damaged in floods will end up totaled, and about half of them will get re-sold on the market through salvage auctions, which means a lot of people have no idea they might be purchasing a used car that was previously in a flood.

So how can you avoid purchasing a vehicle that was involved in a flood? First, make sure to track down the car’s Vehicle Identification Number, which is on the dashboard and title. There are many databases such as National Motor Vehicle Title Information System and VINcheck that allow you to look up a vehicle’s VIN to see where it’s been. Some cars do slip through the cracks thanks to state-by-state inconsistencies in salvaged vehicle branding so it’s important to look for other telltale signs.

When looking at cars, buyers should first and foremost check for caked-on mud or any kind of peculiar odors in the carpets and other difficult-to-clean places. The headlights may also feature a visible water line on their lens, which is a major giveaway that the vehicle is flood-damaged. Another big clue is rust, especially in screws under the dashboard.

While states have certainly made moves to protect consumers from unsuspectingly purchasing flood-damaged vehicles, there’s always a risk when it comes to buying used cars and a smart buyer will know to keep an eye out for suspicious signs.

Subprime Lending on Cars

8/31/2018

We are almost out of the woods regarding the mortgage debacle, right? I mean, the banks are stronger. They aren’t handing out loans to just anyone any more. They are being responsible, right? Well sort of.

The banks and investors have moved away from real estate. Now they are into auto loans. They have moved from loaning money on something that doesn’t move and will hopefully go up in value to loaning money on something that moves a lot and definitely goes down in value each month. Banks and lending institutions are moving into sub-prime lending on cars. That’s right. What they did before with real estate, they are now doing with automobiles. The banks and lending institutions loan money to lots of sub-prime folk. They stretch out the loans longer than before. (It used to be loans were for no more than 5 years (60 months). Now they are moving towards 72 months and longer.) These lenders bundle these loans then take them to Wall Street where they are sold as securities. If the economy falters, what is going to happen with these loans? What will happen if a bunch of these cars get repossessed?

Take a look at the Truth About Cars http://www.thetruthaboutcars.com/2013/06/all-is-fine-in-sub-prime-land-says-some-with-a-vested-interest-in-its-success/ citing the Detroit Free Press at http://www.freep.com/article/20130620/BUSINESS0104/306200121/auto-sales-lending-subprime. The credit and car folk say there is nothing to worry about. Can you believe that? Do you believe that? People are spending money, yes. Is it wise? That remains to be seen. Have people paid down their debts? Has the government? Remember, when the banks started to fail, they went to the government...to us. We bailed them out. Now it appears they want to do it again. What will happen this time?

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