The deposit is one of the more controversial aspects of making any vehicle purchase. However, it need not be so. Unfortunately, a poorly trained sales staff at many dealerships is usually the reason for issues related to deposits.

Let’s start with a discussion about what a deposit is. I’ll start with how we consider deposits at Freedom Ford and then I’ll compare that with how they are handled at some other stores. At Freedom Ford, a deposit is only discussed at the point that the customer has indicated they are ready to purchase the vehicle in question. This means that either the final price has been agreed upon or the customer has offered a price at which they will purchase the car. The main point of the deposit at this point is to ensure that if the car is removed from inventory and is no longer for sale, that the purchaser will fulfill their promise to buy the car.

Unfortunately, due to inadequate training, salespeople at some other stores bring up the deposit at inappropriate times. For example, I’ve had customers tell me that at other stores they were asked to provide a $1000 deposit just to find out the price of a used vehicle! When this happens it leaves customers with a bad taste and tends to put a negative spin on the whole concept of leaving a deposit.

After years of abuse of the deposit concept in the car sales industry, an interesting thing has happened. In the last few years, I have noticed an increased tendency for customers to offer deposits before they are asked for. In this case, some customers have learned that untrained salespeople will salivate at the offer of a deposit. However, in virtually all of these cases, the shoppers are hoping that their deposit will hold the vehicle while they shop to see if they can find something better. Of course, at well run dealerships these deposits are usually declined. It gets pretty tough to tell a prospective customer that they can’t buy a certain car because we are waiting to see if someone else finds something better.

A very important aspect of the whole deposit discussion is the ability to get a deposit back. Legally, a dealership does not have to return any deposit. This an excerpt from the FAQ section on the  AMVIC.org web site:

Q. I just bought a vehicle but have changed my mind.  Can I cancel the deal and get my deposit back?

• Under normal circumstances, no.  Your car purchase agreement is a legal contract.
• The only exception is if the agreement was signed with conditions: e.g. the vehicle must pass an inspection first or suitable financing had to be available.
• Speak to the dealer.  They may be willing to work out an arrangement concerning the agreement but will   probably keep the deposit

So be especially careful if leaving a deposit without the intention to follow through on your purchase. Although I would expect most dealers would return a deposit, they have no obligation to do so. If a consumer promises to buy a vehicle and then buys one elsewhere, they may have trouble getting a deposit back, especially if time has passes and the first dealer has turned away business because they thought the vehicle was sold.

Leaving a legitimate deposit protects both parties. After all, nobody would like to go pick up their new car only to hear that the dealer sold it to someone else.

But back to the rentals. In my experience, there is no evidence that one or two-year old ex-rentals have been any more abused than most trade-ins. In fact, the opposite is more likely. Since most trade-ins occur after the “honeymoon” period of car ownership they are usually the ones not washed regularly, oil change intervals drag out, and minor damage is ignored rather than repaired. Compare these to the ex-rentals you might find on our lot: most of these vehicles have been in service for less than a year and often only for six months or so. They usually come to us with very low mileage on them – often under 10,000 km. How much maintenance should a car like that have had? A couple of oil changes? They’re under warranty so they get repairs if they need it. And the rental companies themselves are motivated to keep them in top shape anyway. They can’t afford to have a car break down or perform poorly for their customers or they lose business. Yes, I know everybody has heard a story from a guy their uncle works with about some Darwin awards contestant that wrecked a rental car. And I also know that I can match each of those stories with ones I’ve witnessed where people have abused cars they’ve tried to trade in. (Don’t worry, those ones get shipped out to those public auctions where your uncle’s other work buddy claims to get all those great deals). I know that every time I’ve rented a car I’ve always been extra careful with it because I didn’t want to get dinged for extra charges. I’m confident that there are a lot more renters out there like me than there are like Tom Cruise.

So next time you’re looking at a used car of the same year as the brand new ones in the showroom, just remember that if it wasn’t for ex-rentals, you’d be looking at an empty parking spot. Take advantage of the savings over new and enjoy the car!

KBB Press Release.

I believe the reason that so many people still recite the cash price mantra is because many people also have a mistaken belief that if they pay off their car with monthly payments, that the dealer doesn’t get fully paid until they’ve made all their payments. They believe that  the dealer would much prefer getting paid now in cash rather than getting a bit every month. Of course, nothing could be further from the truth. When a finance contact is set up with a bank, the bank pays the dealer in full for the car – in cash!

So remember, the only thing that a dealer accepts as payment is cash, whether it’s from you or from your bank.

This is not the attitude that leads to a good credit rating.

Unfortunately, it appears that the importance of maintaining good credit is something that many people don’t think about. And for these people, the costs are enormous. Check out this comparison: A loan for a $30,000 vehicle financed over 60 months (5 years) at 7% will cost about $5900 in finance charges. That same loan at 21% will cost about $19,600 in finance charges over those 60 months! That’s a difference of $13,700! Makes skipping out on that $189 mobile phone bill look a little foolish doesn’t it? Add a couple more unpaid bills to the pile and the result may be that no one will loan you money at any interest rate.

That negative information on your credit history will follow you around for a long time too – six years in Alberta. This fact is easy for some, especially young people, to forget. Financing a vehicle may seem a long way off to many 20 year olds and it may seem like not paying that credit card bill is the right thing to do at the time. But looking back at the figures above, reality tells a very different story.

Ironically, there is another group that can have trouble getting loan approvals, but for completely different reasons. The person that manages their money so well that they never use credit and pay cash for everything can sometimes be in for a rude shock when the time comes to buy a big ticket item like a vehicle. That’s because without a history of borrowing and repaying, the bank has nothing to gauge the person’s ability to repay the loan. We see this every once in a while where a person has paid cash for everything their whole life and is justifiably proud of the fact. Often, they have reached a point in their life when they want to treat themselves to nice vehicle. Unfortunately, to the bank they are a blank slate and if they aren’t turned down, they often have to pay the higher interest rates usually reserved for those with a poor credit history. It’s not fair but it is the way it is.

Sure, if one can save up and pay cash for a vehicle then none of this matters. But even the most disciplined cash buyer may be hard pressed to save the tens of thousands of dollars required to buy the vehicle they want. For those with the discipline to pay cash for everything, a more effective strategy may be to apply for and use a credit card. Use the card and repay the total balance each month and there will be no interest charges. However, what there will be is a nice record of paying back the money each month which could result in a significant savings one day when borrowing a large sum like an auto loan.

Information about credit reports and credit scores is available from the Financial Consumer Agency of Canada.

“So if this car is so good, why are you getting rid of it?”

Now really, does this really have to be explained?  Unfortunately, for a segment of the population, it really does.  After 20+ years in the car business, I have found that there are a surprising number of people that truly have no concept of what a business is in general, or what a car dealership is, in particular. So, just for the record, we sell cars because that’s what we do and is the reason we exist. If all goes well, we sell them for a bit more than we paid for them. And that’s really all there is to it.

Have a Great Easter everyone.

There appears to be a fairly widespread belief that consumers are entitled to buy an item for whatever price appears in the paper. However, this isn’t the case. Mistakes happen and I believe that if more people understood the process of advertising they would understand why errors can occur. We run a used car ad almost everyday and everyday the process goes as follows:

1. The newspaper usually phones us to ask if we have any changes for our ad.
2. To make our changes we dictate the ad copy while the person on the other end of the conversation takes notes.
3. The newspaper person that takes the information then sends it on its journey through the newspaper’s process until it gets printed.

In Fred’s example above, someone along the chain read the “8″ as a “3″ and the rest is history.

Now most dealerships will want a mistake like that changed as soon as possible. Believe me, salespeople get pretty cranky when they are taking call after call about a pricing misprint. Generally, these types of mistakes can be corrected for the following day. Advertising deadlines for the next day’s ads are generally in the early afternoon. So if the error isn’t detected until late in the day, then the incorrect price might run one more day until it is fixed.

So next time you see an ad price that looks way too good to be true, take a second and consider whether you are looking at a typo. Perhaps someone thought that the “7″ was a “1″ or the “4″ was supposed to be a “9″

Sometimes ads will appear with prices based on using every possible discount and rebate that can be combined. What the car shopper has to be aware of is that these discounts may not apply to them. For example, an advertised price may be based on discounts for the buyer being in the military, having a relative that works in an auto plant, and being a member of a certain club. These discounts may all be legitimate but if none of them apply to you, the price can be substantially higher than the advertised price.

The last thing I want to mention about disclaimers is that you need to look at what they say is not included in the price. Here in Alberta there are rules about what can and what can’t be included in the price. These rules are based on the Fair Trading Act legislation and are enforced by the Alberta Motor Vehicle Industry Council (AMVIC). I’ll talk more next time about what is and isn’t allowed in a car ad.

Freedom Ford