by Lucy Baker, Consumer Defense Associate
March 5, 2021
As William Shakespeare once said, “How does a pandemic affect consumers? Let me count the ways.” We did the counting for the Bard in our new report, aptly called “Consumers in Peril.” It contains shocking statistics like the 444,551 complaints submitted by consumers in 2020. Every month in 2020 shattered the record of complaints of the month that came before it; imagine if the Beatles came out with Here Comes the Sun, Lucy in the Sky with Diamonds, All You Need Is Love, Come Together, Let It Be, and Hey Jude all in one week. Your ears would be bleeding, and you would be so completely overwhelmed that the individual genius of those songs would be lost on you. Consumers’ wallets are bleeding, and all the records 2020 have broken almost seem normal.
Another record shattered was the number of complaints about vehicle lending and leasing. For National Consumer Protection Week, here’s an update on our work on car buying and leasing.
We spoke a little about what it's like to buy a car during the pandemic in 2020. I co-wrote our report, Auto Loan Complaints Rise. I wrote an earlier blog and even made a vlog (!) about it. Taking loans out to buy a car opens up consumers to predatory and deceitful lending practices, high-pressure sales tactics, and broken billing and payment systems. A review of complaints to the Consumer Financial Protection Bureau’s (CFPB) Consumer Complaint Database reveals a sharp spike in consumer complaints about auto purchasing, leasing and finance since the beginning of the pandemic.
Why is this happening? At the end of 2020, outstanding auto debt hit $1.37 trillion, a $43 billion rise from 2019. Longer loan terms and expensive add-on products leave more Americans owing more on their vehicles than they are worth. All of this makes it hard for consumers to weather economic shocks like this pandemic. And the structure of our society -- the car-dependent design of our cities -- means that for many Americans having a car is a must. We discuss a lot more on the problems of our car-dependent society in our previous report, Driving Into Debt. As our colleague R.J. Cross, the lead author of that report, said in another vlog, "You can sleep in your car, but you can't drive your house."
Car salespeople and leasing agents know this, and they use it to their advantage. They can (and do!) stick consumers in tiny rooms, using stress as a way to pressure consumers into buying extra products that are expensive and unnecessary. Some of their billing and payment systems don’t work or are hard to navigate, making it difficult to make payments. And there is this particularly panic-inducing tactic called “yo-yo financing’. Here lenders and leasing agents turn consumers into a yo-yo, yanking them back into the dealership saying “your financing has fallen through” and “you must pay us more or you won’t get your car”.
This doesn't have to be your reality. We have some helpful tips should you run into any of the issues we mentioned above:
When buying a car, some tips:
With poor or no credit, you may think you have to purchase a car from a dealer advertising “no credit-check” loans. Often this is not the case, and exploring options from traditional lending companies may result in a more affordable and safer loan.
Never sign any documents unless you are told what it is, or you are told what the condition is and you agree to it. Then, read all documents you are asked to sign and do not sign any document that states the transaction is different than you were told. Always keep a copy of everything you sign.
If you get a call that your financing has fallen through and you have to return your car or pay more than what you agreed, call a lawyer.
Say no to overpriced add-on products! You don’t need extra insurance products or service plans!
Shop for financing before you shop for a car. If you find a car you like and then have to scramble to find a lender, you may be faced with settling for lousy terms.
Don't sign anything called "conditional delivery" or "spot delivery" that says your terms, including your interest rate, aren't final. If you feel like you have no choice but to sign a document like this, consider telling the dealership you don't want to drive your car off the lot until financing is final.
For more tips, visit our Buying a Car consumer guide!
Cover image credit, Quote Inspector, Creative Commons License, Some Rights Reserved.