The Big "Rebate" War Begins
By Remar Sutton, DCU StreetWise Spokesperson
General Motors, running out of gas with its "Zero" percent financing promotions, is now falling back on "rebates" to keep auto sales moving. GM will be heavily promoting "$2002 in 2002." And you can bet other manufacturers will be jumping on the rebate wagon, too. Trouble is, many times rebate promotions end up benefiting dealers, not consumers.
Rebates, when they're used the right way, are really good for the consumer. Rebate money is a direct payment from the manufacturer to the customer that theoretically has nothing to do with the price a consumer pays for a particular car and nothing to do with the dealer.
But there's a problem: some dealers unfortunately keep the rebate money as extra profit for the dealership rather than actually credit the rebate money as a down payment. For example, you agree to pay $30,000 for a new car. The car also has a $2,000 rebate on it from the factory. When a rebate is done the right way, the $2,000 is credited against the $30,000 you owe the dealership. In this example, you'd owe the dealership $28,000.
Some dealers do it a little differently, however. Their actions in effect say, "Okay, you owe us $30,000. Give us the $2,000 rebate money, and you still owe us $30,000."
Dealerships who do this use many tactics to cover the fact that they are not using the rebate to benefit you as they should. For instance, they may raise the selling price of the car by the amount of the rebate (in our example, raising the selling price to $32,000), or they may "low ball" you on your trade-in: give you less money than your trade is worth. In our example, the dealer might give you $6,000 for your trade when in reality they have valued it at $8,000.
Such rebate theft has been the subject of dozens of individual and class action lawsuits. In the past four years, I've been an expert witness on a dozen of these cases. And it's hard to detect and prove at times.
How to keep rebate theft from happening to you:
The safest way is to have the manufacturer send the money directly to you rather than the dealership. But doing it like this means you can't use the money as a down payment. If you don't need the rebate money for your down payment (for instance, if your old car is getting you enough down payment), this is the way to go. When your rebate check comes in the mail, just use the money to make your first payments, put it in your savings account, or spend it on something else.
In the real world, most people want to use rebates as part of their down payment. If that's you, do it like this:
- Let the seller know you've been reading a lot about "rebate theft," and you're glad the seller doesn't do that. Just putting a seller on notice can prevent problems.
- Make sure you keep a copy of any "draft" Buyers Orders on the desk at all times, and compare the figures on the draft Buyers Orders to the final Buyers order. The final one is the one signed by the manager. These figures should remain the same:
– the "allowance" for your trade-in, if you have one.
– the "balance due" figure. The Buyer's Order will normally use these exact words. - Make sure the seller hasn't listed "add-ons" without your permission. For instance, if the final Buyers Orders has fees on it that aren't on your draft Buyers Orders, question them to make sure they are legitimate.
- Don't fall for lines like this: "Well, since you're getting the rebate, we can't discount the car."
- Take your time! If you're at all confused, go home and take a break!
So, what do you think?
If you find this review helpful, please pass the word to your friends. Also email me with any comments or suggestions.
Remar Sutton
