Report: Some dealers making C4C shoppers sign rebate payback contracts
Some car dealerships have a lousy reputation in the honesty and integrity department, and often the rep is well earned. It's unfortunate for the honest dealers out there, but every time a slimy story surfaces, it casts a bad light on the entire business of selling cars. With Cash for Clunkers adding over 300,000 sales in just a few weeks, some issues were bound to occur, and it appears that consumer advocates have turned on the black lights at the roach hotel.
Consumer Action in San Francisco is among the groups that's complained to the federal government about a questionable C4C practice that is reportedly being carried out by some dealers. Angry customers have reported that dealers are demanding they sign waivers relieving the dealerships of any financial risk from C4C deals in the event that a trade-in is rejected by the federal government for its rebate. In one case, a woman in South Carolina signed one of the agreements, and when the vehicle she turned in didn't qualify, the dealer reportedly demanded $2,500.
These contracts are being issued at some dealerships in spite of a government advisory stating that consumers are not required to sign such agreements. Dealerships say that the forms have become necessary due to the slowness of the government in reimbursing the C4C money.
Consumer Action told the LA Times that it has only seen "20 or 30" complaints so far out of 300,000 C4C transactions, so it's difficult to determine how wide-spread the matter actually is. Chances are that far more customers have had to sign the forms than that, though, as the majority of C4C transactions are likely being approved by the government, rendering the documents irrelevant.
It's also not entirely accurate to state that dealers are "forcing" customers to sign the forms, considering the fact that car buyers have every right to walk away from the deal instead of signing the forms. What bothers us is that dealers should be all too aware of which vehicles qualify under C4C, and customers are depending on them to get these matters right. After all, it's not like the customer can ask for their vehicle back after it's engine has already taken a Sodium Silicate bath.
[Source: LA Times | Photo by Ethan Miller/Getty]
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Reader Comments (Page 1 of 2)
Chris O 11:14AM (8/14/2009)
I guess I'm missing something here.
It seems like the criteria for C4C are pretty well defined (age of vehicle, running condition, mileage differential between new vehicle and old, etc.). So, aside from the government running our of rebate funds, why in the world would a dealer not know in advance if they would be able to get reimbursed?
Also, I don't see how having the financial contract woth the buyer does anything to help with the SPEED with whih the reimbursements occur (that was a cited reason).
If anything, it sounds like the dealerships are trying to put the burden of checking for C4C compliance on the consumer. If so, that's pretty shady because unless you read one of these websites, all a normal consumer is going to know about C4C is that they can get $4500 towards a car.... I seriously doubt most people know the conditions.
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Jei 12:41PM (8/14/2009)
Well, maybe...
A few days after the CFC was approved by the govt, the qualifying requirements were "tweaked" a bit for some car categories. In some cases, those minor modifications disqualified many vehicles that had been in the approved column beforehand.
And many dealerships started their CFC-oriented "mega" sales before the govt nailed down the fine points of which vehicles would qualify for the program. That meant consumers (and dealers) were gambling on the fact that their trade-in would eventually qualify and the consumer would get $3500-4500 for the new car purchase. In the end, the anxious (and impatient) dealer was taking the most risk.
But on the flip side --- if a customer's trade-in was disqualified and the dealer had already permanently disabled the engine, what is the legal recourse? As the customer, I wouldn't be inclined to return my new car for a worthless non-running used one.
jim 1:38PM (8/14/2009)
Don't forget the dealer just being a crook. It would work something like this
Customer signs the rebate contract. The deal is made and the trade disabled. In a couple of weeks the dealer contacts the customer and says the Feds rejected the clunker and the dealer wants to be paid back. If the customer challenges the dealer, the dealer goes, gee we made a mistake. But there are some who will pay.
This happens frequently with health insurance.
Steven 11:22AM (8/14/2009)
Incoherent headline! I've read it like 5 times and still don't understand...
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Ray 11:24AM (8/14/2009)
Dealer management talking to there salesman. "Remember you are looking for a no, if a potential customer comes on our lot. I want you salesman to tell these potential customers, yes ma am we have a Yaris for sale, it is specially priced at 35k. Now if that customer says, no that is to much money, your not fired. If that customer says yes, I'll take it, you are fired because you were looking for a no and could have gotten much more for the Yaris. If you salesman would have said 50k for the Yaris, you most likely would have gotten a no but by offering it for 35k and getting a yes you are fired.
Dealer management goes on to instruct their salesman, "once you have gotten the no from the potential customer you say, well I tell you what I'm gonna do, you seem like a nice person, I might get fired but I will ask my manager if we can make you a deal etc...
Poor dealers, most are just out to make a dishonest living.
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Tonystarks22 11:25AM (8/14/2009)
Its pretty simple whats happening, dealerships are worried that the gov wont come through. That they will be behind on the number of deals, they will get through half of the paperwork when they realize they are out of funds and tell the dealerships to "pound salt" on the remaining deals that have been completed but they have not received funding for.
Me and my fiance purchased (well its her car) a 2010 Mazda3s (great car btw!) (not under C4C) and I had a chance to speak to sales manager and GM of the store. They told me they had about 250k worth of metal on the road that they had not been reimbursed for. When they heard the gov was running out of money the first time, they suspended the program at the dealership for about a week and said the lost about 15-20 deals becuase of it.
Looks like these dealerships with the waivers are trying to CYA in case they dont get reimbursed. This is what they get for wanting to spot the cars so fast.
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Ray 11:30AM (8/14/2009)
Rebate Payback Contracts. You know a term made up by the dealers, where if for any reason the dealer doesn't get reimbursed by the government they have recourse to extract that money from the unsuspecting customer that they value so much.
Forget about the fact that any judge would laugh it out on court.
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Chris O 11:44AM (8/14/2009)
Not only that - I would love to see the counter-suit that would be the result of the destruction of a car that the dealer ended up not getting reimbursed for.
Photo Phil 11:41AM (8/14/2009)
Dealers are out to make money. Some dealers will do whatever it takes, some will be nice and help their customers. The dealer I am dealing with (St. Charles Pontiac/Buick/GMC in St. Charles, IL) will do anything they can to screw over their customers. I bought my car almost a year ago, and still dealing with bad sales and service issues. Long story, but some dealers will make you sign whatever it takes just to make money from you. What happened to customer support and satisfaction?
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Epyx 11:58AM (8/14/2009)
Why would anyone sign one? Just go to the one of the OTHER 10 Ford (fill in other brand) dealers in town that do not require the agreement.
A good consumer would be bidding the dealers among various dealers anyway.
I can see if the dealer makes it look official and part of the deal,. but I would want a guarantee of the payment before I would even consider using the C4C.
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ryan 12:01PM (8/14/2009)
ok, no surprise what industry i work in based on the comment i'm about to post...
i don't get it. my dealership is pretty much doing the same thing, but there ARE reasons. in one instance, i called the "hotline" for a question, had it answered that she qualified, and then when i asked for them to fax me something giving authorization for that person for the C.A.R.S. program, they wouldn't. so, should i let this person have a car that the nice lady that answered the phone said she qualified for, when everything that i've read in the rules says she shouldn't (transferred title three days before the program began from father to daughter)?
wouldn't it be a GOOD business practice to have something to fall back on, just in case? I had a deal kicked because the customer signed the wrong date on the form for C.A.R.S., and now he won't return my phone call to get a new one signed. is that MY fault that he signed it incorrectly, and now we may not get our reimbursement? I mean, i guess i could have looked at EVERY signature and date, but that's probably not reasonable.
don't MOST places have paperwork saying that if some government program doesn't work out, that they can go after you? so why is it a big deal that car dealerships would do the same?
I seem to recall signing something similar when i bought my first house using a government program a year ago....
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Gloria 1:42PM (8/14/2009)
Yes, some situations have clauses such as that. The difference is, the customers property isn't destroyed.
The reality is, the burden of proof does not fall on the customer. They sign their name a few times, and hand over the keys to their vehicle. It is the dealerships responsibility, to make sure that forms are signed correctly (or if not, that the customer is bound to resign said form, as is done in the mortgage industry).
Basically, if your dealership wants to participate in the program, they will have to be willing to absorb a little risk.
The other side of this is, if the trade is rejected, then the contract the customer signed is invalid. Thus, they should return the car, or cough up the cash (fat chance). If the dealership has already destroyed their vehicle, then the dealership eats it, as they were stupid enough to destroy said vehicle before they had their money from the government.
Frankly, if I was a GM at a dealership, no vehicle would get destroyed, until I had my reimbursement from the government. This way, if it is ultimately rejected, I could sell said vehicle. This way, I would at least recoup some of my loss. The customer keeps said new car............. but is sent a letter, letting them know of the dealerships kindness. You couldn't buy that type of positive publicity, for any amount of money. It is certainly better than strong arm tactics that do nothing buy drive customers away, and perpetuate the believe that all car salesman are slimes.
Carguy 2:38PM (8/14/2009)
"I mean, i guess i could have looked at EVERY signature and date, but that's probably not reasonable. "
Um, yes it is, it is your job. Besides, if you don't, you could be out $4500, just like you are. The liability of this program is on the dealers. No amount of hem hawing, moaning, tactics, phone calls, contracts or manipulation changes that.
I find it mind boggling what the goddam dealer will complain about in this. They are getting tons and tons of sales, and biting the hands that feed them. The rules EXPLICITLY state all of this paperwork must be exact or it will be rejected. Quit BITC**ING and make sure it is exact before putting the deals together...
BigWill 6:26PM (8/14/2009)
"If the dealership has already destroyed their vehicle, then the dealership eats it, as they were stupid enough to destroy said vehicle before they had their money from the government."
Wrong. The first revision of the multiple CARS rules stated the cars had to be destroyed before the government would pay.
I'm not a dealer advocate at all, but considering how inconsistent those rules have been - the EPA juggling fuel economy numbers AFTER the CARS program started, figuring out when the government wants the car destroyed - I'm not surprised dealers are getting some backup before gambling $200-300K on an assumption that the government knowing what it's doing.
mikemaj82 12:03PM (8/14/2009)
these dealerships should be thankful people are even buying cars. Getting $4500 back from the government should be the last thing on their minds.
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Richard 12:19PM (8/14/2009)
You're kidding, right? I mean, in this case the dealership is basically giving the consumer $4,500 off the price of the car (generally far more than their profit, unless you're completely crap at negotiating). If the government doesn't pay, why should the dealer be out of pocket?
Its like health care. If you have insurance, technically you owe the doctor the full amount of the treatment and the insurance company will reimburse you. Damn near all doctor's will take the cost (in time-value of money) and risk and let you just pay the difference to them, and file on your behalf. If it turns out that the insurance company doesn't pay them, you still owe the balance.
bgsterling 2:06PM (8/14/2009)
@ Richard
It's not like medical insurance. In your medical insurance example, I made the agreement with the doctor (e.g. You help me and I'll pay you) and *I* made the agreement with the insurance (e.g. If I pay a doctor, you'll pay me back). You're right. The doctor is doing you the favor of letting you pay the difference and billing the insurance.
In the Clunkers setup, I made the agreement with the dealer (e.g. You give me a car and I'll pay you) and the *dealer* made the agreement with the government (e.g. If we destroy a qualified used car, you'll send us money). If the dealer and the government can't come to terms on their agreement, that's their problem.
That being said, I can appreciate that the dealer wants to avoid being on the hook if their agreement with the government falls through for whatever reason. It's perfectly logical to look to pass the potential cost onto the end customer. But like other's have said, it's also perfectly logical for the customer to walk away from the deal because they don't like the terms.
Carguy 2:55PM (8/14/2009)
You have got to be kidding me. It isn't like the government is looking not to pay. The rules are explicit. Follow them, and the dealer gets the money. I can tell you whether or not a deal qualifies in 2 minutes, and I'm not a dealer....
miles.j.m.anthony 12:29PM (8/14/2009)
I am heavily engulfed into this C4C program. I am a consultant at a local Ford Lincoln Mercury dealership. Our local company has not been affected by the current recession , largely due to the level of customer satisfaction we strive to acheive.
We have conveyed to all of our C4C customers that if the government denies their trade in the program, then they will be responsible for paying the amount that their voucher was supposed to be worth. Our customers do not see a problem with our company for expecting these terms. For it is the government whom is granting these vouchers and has placed the majority of the responsibility in the dealerships' laps. We (US Auto dealers) encourage subsidies to help more people afford a higher quality of vehicles, however do not expect us to swallow $3500-4500 losses in exchange for a $1000 overall average gross profit made on these vehicles.
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Carguy 3:08PM (8/14/2009)
From the Department of Transportation:
"We’ve heard that dealers are asking consumers to sign agreements with contingencies when they participate in the CARS program.
CONSUMERS ARE NOT REQUIRED TO SIGN CONTINGENCY AGREEMENTS TO PAY BACK THE DEALER SHOULD THE CARS CREDIT BE REJECTED."
You as a car dealer are going against the explicit instructions of the department of transportation. I'm guessing you could probably get in trouble for that. And by the way, it isn't the "custome'rs" trade to the government, it is the dealer's. The customer is NOT LIABLE, unless they lie to the dealer by forging paperwork. Freekin dealers are unreal....