Strategies for Smart Car Buyers^SM

Unwinding the Deal — What Are Your Rights?

Our undercover car salesman, Chandler Phillips, recalls this incident from his days on the car lot:

"It was a Sunday afternoon when a couple suddenly appeared on the showroom floor and began yelling at the top of their lungs and waving a contract. A group of sales managers surrounded them and escorted them to an area in the back near the service department.

"I walked past the group several times, trying to find out what the problem was. Apparently, they had bought a car the day before, went home and reviewed the contract. When they worked the numbers they realized they had been hosed — big time. Now, they wanted to unwind the deal.

"At one point, I heard one of the sales managers say: 'Buying a car is like going to Vegas — sometimes you win and sometimes you lose. In this case you lost. You signed the contract and we're not taking the car back.'"

Here at Edmunds.com, we sometimes get e-mail from car buyers who have purchased or leased cars and find themselves in a similar situation. They want to know what their rights are — and how they can unwind the deal.

In this great country of ours, we're used to the concept of customer satisfaction. In most cases, if we aren't pleased with a product, the store from which you bought it will take it back for a refund. Why? The store wants to build good will and encourage us to shop there again in the future.

For bigger purchases there is a federal "cooling-off law" to protect consumers from high-pressure sales tactics. An elderly couple who signs a contract to have aluminum siding installed on their house by a door-to-door salesperson, for example, can back out of the deal up to three days later, no questions asked. Null and void. Case closed.

There are two notable exceptions to the federal cooling-off law, however: buying cars (and all motor vehicles) and houses. Though consumers often buy cars under pressure from salespeople, the cooling-off law can't be invoked. If you go into a sales office in a dealership in California, a prominently placed sign warns buyers, "There is no cooling-off period in California. The contract is binding."

So, am I saying that car buyers have no rights? Not exactly. But first, let's divide disgruntled car buyers into two categories.

First is the group that feels they have purchased a lemon, either as a new or used car. Interestingly, 2002 was the 20th anniversary of the federal lemon law act, a spokesperson for the California Department of Consumer Affairs told us.

The lemon law functions differently from state to state. In general, however, cars that are proved to be defective will be bought back by the manufacturer. Check here to find the regulations in your state. Enforcing the lemon law is a hassle, sure, but there are specific guidelines and, in the end, you might get your money back.

Now let's consider a different scenario. A buyer signs a contract, drives off in a new or used car, and then has a change of heart. Perhaps she has reviewed the contract and concluded she paid more than she thought she was paying. Perhaps a verbal promise was made that was not put into writing. Perhaps the terms of the contract (the dreaded "fine print") don't match the salesperson's description.

In most cases, you can't just go back to the dealer and say, "I've changed my mind," or even, "You guys ripped me off." If you do, you might get the "just like going to Vegas" speech.

If you really want to do something at this point, there are a few places you can turn to for help. First of all, experts recommend you try working with the dealership to resolve the problem. If you go back to the salesperson who sold you the car, you will likely get little concrete action. So try contacting the general manager (the "GM") of the dealership. The GM has ultimate power on the car lot. Additionally, the GM sees the big picture and recognizes the need for good "C.S.I." (Customer Satisfaction Index, as compiled by the car's manufacturer).

Let's assume, however, that your grievances are deep, or that you've already complained to the dealership — to no avail. Obviously, you can hire a lawyer and sue the dealership. But this is costly and time consuming. So let's look at other options.

You can register a complaint against the dealership through several local and state agencies. If your complaint alleges illegal practices, these agencies might investigate your claim and bring charges against the dealership. In some cases, restitution payments have been made to consumers who were defrauded.

An investigation by the California attorney general's office led to charges being filed against a Toyota dealership in the Los Angeles area, said Hallye Jordan, a department spokesperson. The dealership was ordered to make $1.5 million in restitution payments to former buyers. The press release of that investigation describes an assortment of illegal practices the dealership committed.

"We do accept these complaints and we will investigate them," Jordan said. "In some cases, we can sometimes put a stop to it with a phone call to the dealer. If there are a lot of complaints, we will investigate the dealership and possibly file suit."

Your state's attorney general's office is a good place to look for information on how to file a complaint against a car dealership. Your state attorney general's Web site will provide information on local laws and the complaint process.

The Massachusetts attorney general's office provides solid general information for car buyers who have had a problem. In Massachusetts, for example, a used car can be returned to the seller, and the contract voided, if it fails to pass a safety inspection test during the first seven days of ownership.

In most states, the DMV oversees another agency called the Department of New Motor Vehicles, which will mediate disputes between buyers and the dealership. A very helpful carbuyer's FAQ section is posted on California's NMVB website.

Another active consumer organization is the Better Business Bureau. Before buying a car, you should check the dealership's past performance to see if there are any complaints against it. Find your local Better Business Bureau for more information.

"We are a powerful organization and we can bring some pressure to bear on the dealership," said Lona Luckett, senior trade practices consultant for the Southern California Better Business Bureau. "In the event that the company is a BBB member, we tell them they can't have unresolved complaints. If it is a nonmember, we can give them an 'unsatisfactory rating.'"

Luckett said the Bureau is very active, adding "we get thousands of inquiries daily."

For another opinion on this matter, we contacted a former car salesman. He said there is a chance the dealer will take the car back if the buyer "plays hard ball by threatening to contact the Department of Motor Vehicles, Better Business Bureau or the manufacturer (who should have a toll-free number consumers can call). But nowadays, some finance offices have video and audio taping in order to 'protect' themselves against claims by consumers who think that they are getting ripped off."

However, this car salesman scoffed at the effectiveness of the BBB. "What are they going to do, slap them on the wrist? I don't know how much the dealership really cares."

The salesman added, "It's tough to unwind a deal. But, if the customer does not understand the contract, there's nothing thing to prevent him from taking the contract home to read over. The dealer won't like this, but the consumer may feel more comfortable in a controlled environment at home."

At Edmunds, we generally ask to have the contract faxed to our offices before a salesperson delivers a new car to us — or we go to pick it up. This gives us a chance to review the contract and all the prices. We plug the numbers into our own calculator (which can be reached from the tools section of our homepage) and make sure everything adds up correctly. This process is becoming increasingly accepted, particularly when a buyer shops through the "Internet department" at a dealership.

While a savvy consumer might be able to force a dealership to take a car back, it's far better to avoid such difficulties in the first place. Reading the contract carefully, and fully inspecting a new or used car before taking ownership, is the best way to avoid problems down the road.

For this, and other buying and leasing strategies, pick up a copy of STRATEGIES FOR SMART CAR BUYERS, by the editors at Edmunds.com.