Article

I’m Supposed to Pay You $20,000 to Take My Trade?

July 2010, Auto Dealer Today - WebXclusive

by Thomas B. Hudson, Esq. - Also by this author

Dissecting a “Special Offer” Mailer


I excitedly ripped open the “Owner Notification” from an area car dealer who sells the sort of SUV that we use to haul ourselves and the dogs to and from our place in South Carolina. Our old bus is pushing 70,000 miles, so I’m thinking that in this market, maybe I’ll get a real steal.

Well, I might, but it won’t be the deal described in this mailer. Paraphrasing, it read: This is our most aggressive Belchfire incentive program in history and it’s available to 2002 - 2007 Belchfire owners. Customers trading in their 2004 Belchfire will receive 100 percent of the original base model MSRP when new (as provided by NADA). Obviously your vehicle must be in safe operating condition with normal wear and tear. The only deductions will be for mileage (20¢ to 85¢ per mile depending on model and condition). We are not here to nit-pick your trade. We are here to sell new Belchfire models at disposal prices.

The ad went on to announce, in big type, that it was available for, “THREE DAYS ONLY.”

Oh my. Where to start?

My Belchfire SUV had an original window sticker that topped out north of $48,000. The “original base model MSRP,” though, was considerably less, probably about $40,000. If these nice folks docked me 20¢ a mile for my 70,000 miles, they’d take off $14,000 of my original $40,000, meaning my trade is worth $26,000. Not too bad, huh?

If, however, they deduct 85¢ a mile, they’d subtract $59,900 from $40,000, meaning I’d need to pay the dealer $20,000 to take my keys. I’m thinking, “Maybe not.”

Talk about cash for clunkers!

Basically, this “special offer” leaves my friendly Belchfire dealer in a position to offer me anything he wants to for my trade—business as usual. Is there anything wrong with this promotion?

I’m not sure I know the answer to that. We always tell dealers to tell the truth in their ads, and to be prepared to back up any statement in an ad that could be challenged.

Here, I’m not sure that you can challenge the truthfulness of many of the individual statements in the ad. But could a plaintiffs’ lawyer or an attorney general claim that the overall message of this part of the ad – a trade-in allowance of the original base model MSRP reduced by a cents-per-mile formula and ballyhooed as a good deal – constituted an unfair or deceptive act or practice because the cents-per-mile formula permitted the dealer to compute any trade-in value that he felt like computing?

Other parts of the ad make statements that could be challenged for truthfulness. Is this event really “the most aggressive incentive program” in the dealership’s history? Are the vehicles sold at “disposal prices,” whatever that means? And is the three-day period real, or just a bogus claim designed to invite a sense of urgency?

The answer to these questions will depend on what actually happened at the dealership over the three-day period the event was to run. Will customers who buy during that three-day period end up with trade-in allowances that give them the dealer’s “most aggressive incentive program in history”? Are the car prices lower enough than usual to qualify as “disposal prices”? Or will the dealership’s deals during that three-day period look just like the deals the dealership does for the weeks preceding and the weeks following the three-day period?

If it’s business as usual, count on the AG or a plaintiffs’ lawyer to argue that the overall impression of the ad program – that something special awaited buyers who bought during the three-day period – was false and misleading, and a violation of state unfair and deceptive practices laws.

How can they prove that the so-called special program was “business as usual”? I can think of three ways.

It’s always possible that “mystery shopper” buyers are visiting the dealership, gathering information. Recently-fired employees looking for payback often rat out dealers whose business practices aren’t on the square. And there’s always the subpoena or discovery process that can be used to delve deeply into the actual numbers of all the deal jackets for the last umpteen months.
 
Vol. 7, Issue 5 

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