This is the third of nine articles in our Blog Series Is Leasing Really Fleecing?
When the clock ran out on the Connecticut General Assembly's 2015 legislative session on June 3, many high-priority bills had not received final votes. A special session was called to consider revising the state budget and to address other issues. The legislature approved, and Governor Malloy signed, a massive "Implementer Bill" on June 30, 2015. The new law includes provisions that will dramatically change the way that car dealers charge consumers for dealer conveyance fees.
CLG In the News: Managing Attorney Dan Blinn was recently interviewed about the pitfalls of buying a car for a new online series called "Your Money CONNection." To see the series, which also includes interviews with various experts on topics such as investing for college, buying a home, mortgages, credit reports and credit scores, student loans, wage and salary issues, bankruptcy and more, sign up using this link. The program, whch is sponsored by Attorney Sarah Poriss, is free and available to all Connecticut residents.
VIN Etching may be the most profitable add-on that a car dealership offers. Consumers may spend perhaps $100 or more for a service that costs the dealership perhaps $10 - $20 to perform. And, because Connecticut state law permits the dealer to preprint the charge directly on the contract, many consumers do not even notice that they have been charged for this service.
In the typical Yo-Yo Scam, a car dealership tells the consumer that she is "all set" and that her credit application has been approved. She drives home in her new (or pre-owned) car and shows it off her to her friends, family, and co-workers. About a week later, the car dealer calls and says "There is a problem with the bank. Your application was not approved."
Many consumers contact us after they discover that they paid significantly more than the "sticker price", or the manufacturer's suggested retail price ("MSRP") for a new car.
Car dealers like to brag about their relationships with multiple banks and finance companies, and they often imply that these connections help consumers get low interest rates. But, many consumers would be surprised to learn that car dealers frequently mark-up the interest rates. In many deals, the dealership makes more money by marking up the interest rate than they profit from the sale itself.
One of the biggest tricks in the car business is the "dealer conveyance fee," which is supposed to compensate the dealership for its costs in processing the paperwork, taking care of the registration, and closing the deal. About 20 years ago, dealer conveyance fees were modest, with most dealerships charging less than $100. But, starting around the late 1990's, a few dealerships started to charge more. Others followed, and before long, many were charging $299 or more. The dealerships that kept their rates reasonable suffered from unfair competition, because other dealerships advertised cars at lower prices, only to make up the difference by charging a higher conveyance fee. So, more dealerships increased their fees to match their competitors. Soon, other dealerships raised their prices even higher. Today, we have some dealerships charging as much as $799, or about 10X the amount charged by many dealerships as recently as 15 years ago!
One trick played by auto dealers to boost their profits is to charge customers to etch the vehicle identification number (VIN) onto the windows of a car. The VIN is a 17 digit number that is unique to a specific motor vehicle. There is some evidence that car thieves are less likely to take a car with the VIN etched on the windows, and some insurance companies offer discounts for comprehensive insurance premiums if a car has VIN etching. So, this service may have some value.