Monthly Archives: December 2016

Know More About Vehicle Repossession

Chances are you rely on your vehicle to get you where you need to go — and when you need to go — whether it’s to work, school, the grocery store, or the soccer field. But if you’re late with your car payments, or in some states, if you don’t have adequate auto insurance, your vehicle could be taken away from you.

When you finance or lease a vehicle, your creditor or lessor has important rights that end once you’ve paid off your loan or lease obligation. These rights are established by the contract you signed and the law of your state. For example, if you don’t make timely payments on the vehicle, your creditor may have the right to “repossess” — ­or take back your car without going to court or warning you in advance. Your creditor also may be able to sell your contract to a third party, called an assignee, who may have the same right to seize the car as the original creditor.

The Federal Trade Commission, the nation’s consumer protection agency, wants you to know that your creditor’s rights may be limited. Some states impose rules about how your creditor may repossess the vehicle and resell it to reduce or eliminate your debt. Creditors that violate any rules may lose other rights against you, or have to pay you damages.

Seizing the Vehicle

In many states, your creditor can seize your vehicle as soon as you default on your loan or lease. Your contract should state what constitutes a default, but failure to make a payment on time is a typical example.

However, if your creditor agrees to change your payment date, the terms of your original contract may not apply any longer. If your creditor agrees to such a change, make sure you have it in writing. Oral agreements are difficult to prove.

Once you are in default, the laws of most states permit the creditor to repossess your car at any time, without notice, and to come onto your property to do so. But when seizing the vehicle, your creditor may not commit a “breach of the peace.” In some states, that means using physical force, threats of force, or even removing your car from a closed garage without your permission.

Should there be a breach of the peace in seizing your car, your creditor may be required to pay a penalty or to compensate you if any harm is done to you or your property. A breach of peace also may give you a legal defense if your creditor sues you to collect a “deficiency judgment” — that is, the difference between what you owe on the contract (plus repossession and sale expenses) and what your creditor gets from the resale of your vehicle.

Selling the Vehicle

Once your vehicle has been repossessed, your creditor may decide to either keep it as compensation for your debt or resell it in a public or private sale. In some states, your creditor must let you know what will happen to the car. For example, if the car will be sold at public auction, state law may require that the creditor tell you the time and place of the sale so that you can attend and participate in the bidding. If the vehicle will be sold privately, you may have a right to know the date of the sale.

In any of these circumstances, you may be entitled to “redeem” — or buy back — the vehicle by paying the full amount you owe (usually, that includes your past due payments and the entire remaining debt), in addition to the expenses connected with the repossession, like storage, preparation for sale, and attorney fees. Or you could try to buy back the vehicle by bidding on it at the repossession sale.

Some states have consumer protection laws that allow you to “reinstate” your loan. This means you can reclaim your car by paying the amount you are behind on your loan, together with your creditor’s repossession expenses. Of course, if you reclaim your car, your future payments must be made on time, and you must meet the terms of your reinstated contract to avoid another repossession.

Any resale of a repossessed vehicle must be conducted in a “commercially reasonable manner.” Your creditor doesn’t have to get the highest possible price for the vehicle — or even a good price. But a resale price that is below fair market value may indicate that the sale was not commercially reasonable. “Commercially reasonable” may depend on the standard sales practices in your area. A creditor’s failure to resell your car in a commercially reasonable manner may give you a claim against that creditor for damages or a defense against a deficiency judgment.

Personal Property in the Vehicle

Regardless of the method used to dispose of a repossessed car, a creditor may not keep or sell any personal property found inside. In some states, your creditor must tell you what personal items were found in your car and how you can retrieve them. Your creditor also may be required to use reasonable care to prevent anyone else from removing your property from the car. If your creditor can’t account for articles left in your vehicle, you may want to speak to an attorney about your right to compensation.

Paying the Deficiency

Any difference between what you owe on your contract (plus certain expenses) and what your creditor gets for reselling the vehicle is called a “deficiency.” For example, if you owe $10,000 on the car and your creditor sells it for $7,500, the deficiency is $2,500 plus any other fees you owe under the contract. Those might include fees related to the repossession and early termination of your lease or early payoff of your financing. In most states, your creditor is allowed to sue you for a deficiency judgment to collect the remaining amount owed as long as it followed the proper procedures for repossession and sale. Similarly, your creditor must pay you if there are surplus funds after the sale proceeds are applied to the outstanding contract obligation and related expenses, but this situation is less common.

You may have a legal defense against a deficiency judgment if, for example, your creditor breached the peace when seizing the vehicle, failed to sell the car in a commercially reasonable manner, or waited too long before suing you. An attorney will be able to tell you whether you have grounds to contest a deficiency judgment.

Electronic Disabling Devices

Some creditors might not provide you with financing unless you agree to the installation of an electronic device that prevents your car from starting if you do not make your payments on time. Depending on your contract with the lender and your state’s laws, using that sort of device may be considered the same as a repossession or a breach of the peace. How your state treats the use of these devices could affect your rights. Contact your state consumer protection agency or an attorney if you have questions about the use of these devices in your state.

Talking with Your Creditor or Lessor

It’s easier to try to prevent a vehicle repossession from taking place than to dispute it after the fact. Contact your creditor as soon as you realize you will be late with a payment. Many creditors work with consumers they believe will be able to pay soon, even if slightly late. You may be able to negotiate a delay in your payment or a revised schedule of payments. If you can reach an agreement to change your original contract, get it in writing to avoid questions later.

However, your creditor or lessor may refuse to accept late payments or make other changes in your contract — and may demand that you return the car. If you agree to a “voluntary repossession,” you may reduce your creditor’s expenses, which you would be responsible for paying. But even if you return the car voluntarily, you still are responsible for paying any deficiency on your contract, and your creditor still may enter the late payments or repossession on your credit report.

Finally, if you are facing, or already in, bankruptcy, ask an attorney for information about your rights to the vehicle during that process.

Know More About Auto Service Contracts and Warranties

If you’re shopping for a new or used car, the salesperson may encourage you to buy an auto service contract to help protect against unexpected or costly repairs. While a service contract may sound like a good idea, it may overlap with the vehicle’s existing manufacturer’s warranty. So before you spend the extra money, do some research to see if an auto service contract makes sense. Coverage varies widely.

  • Auto Service Contracts 101
  • Research Your Options
  • Beware of Auto Warranty Scams
  • Used Cars: Warranty Protection
  • Complaints

Auto Service Contracts 101

A service contract is a promise to perform (or pay for) certain repairs or services. Sometimes called an “extended warranty,” a service contract is not a warranty as defined by federal law. A service contract may be arranged at any time and always costs extra; a warranty comes with a new car and is included in the purchase price. Used cars also may come with some type of warranty coverage.

Research Your Options

Auto service contracts are sold by vehicle manufacturers, auto dealers, and independent providers. If you’re considering a service contract, shop around so you understand exactly what you’re buying.

Do I have to buy a service contract?

You are generally not required to buy an auto service contract when you buy a car. You also are generally not required to buy a service contract to get financing. If the dealer tells you that you have to buy a service contract to qualify for financing, contact the lender to find out if this is true. Some people have had trouble canceling their service contract after learning that the lender didn’t require one.

Also beware of unscrupulous dealers who may try to include an auto service contract in your loan without your consent. If you see a charge for a service contract that you didn’t agree to, tell the dealer to take it out before you sign the loan agreement.

Does the service contract duplicate any warranty coverage?

Compare service contracts with the manufacturer’s warranty. New cars come with a manufacturer’s warranty, which usually offers coverage for at least three years or 36,000 miles, whichever comes first. A service contract likely will not provide benefits until the manufacturer’s warranty expires. Check over the documents to make sure this is true before you agree to buy a service contract.

What is the length of the service contract?

If the service contract lasts longer than you expect to own the car, ask if it can be transferred when you sell the car and whether there is a fee, or if a shorter contract is available. If you’re buying a “demonstrator” — a new car that hasn’t been owned, leased, or used as a rental, but has been driven by dealer staff — ask when the warranty coverage begins and ends. It may have begun when the dealer put the car into service.

Who backs the service contract?

Find out who performs or pays for repairs under the terms of the service contract. It may be the manufacturer, the dealer, or an independent company. Many service contracts are handled by companies called administrators, that authorize the payment of claims to any dealers under the contract. If you have a dispute over whether a claim should be paid, deal with the administrator. If the administrator goes out of business, the dealership still may be obligated to perform under the contract. The reverse also may be true: If the dealer goes out of business, the administrator may be required to fulfill the terms of the contract. Whether you have any legal remedies depends on your contract’s terms and/or your state’s laws.

Find out if the auto service contract is underwritten by an insurance company. It’s required in some states. If the contract is backed by an insurance company, contact your state insurance commission to ask about the solvency of the company and whether any complaints are on file.

Insurance regulations generally require companies to:

  • maintain an adequate financial reserve to pay claims.
  • base their contract fees on expected claims. Some service contract providers have been known to make huge profits because the cost of their contracts far exceeds the cost of repairs or services they provide.
  • seek approval from the state insurance office for premiums or contract fees.

Check out the dealer and the administrator with your local or state consumer protection office or local automobile dealers association to see if any complaints are on file against the company. You also can search online for complaints.

If you decide to buy a service contract through a dealership — and the contract is backed by an administrator or a third party — make sure the dealer forwards your payment and you get written confirmation. Some people discovered too late that the dealer failed to forward their payment, leaving them with no coverage months after they signed a contract. Contact your local or state consumer protection office if you have reason to believe that your contract wasn’t put into effect as agreed.

How much does it cost?

Usually, the price of the service contract is based on the car make, model, condition (new or used), coverage, and length of contract. The upfront cost can range from one to several thousand dollars. In addition, you may need to pay a deductible. Find out if the deductible is charged on a per visit or per repair basis. This can make a big difference. For example, assume you have a $100 deductible and your car needs three parts repaired. With the deductible per visit, you pay $100. If you have a deductible per repair, you pay $300.

Service contracts often limit how much they will pay for towing or related rental car expenses — meaning you have to cover the remaining cost. There also may be transfer or cancellation fees if you sell your car or end the contract early.

What’s covered?

Few service contracts cover all repairs. Common repairs for parts like brakes and clutches generally are not included in auto service contracts. The best advice: If an item isn’t listed, assume it’s not covered. Watch out for absolute exclusions that deny coverage for any reason. For example: If a covered part is damaged by a non-covered part, the claim may be denied. Or if the contract specifies that only “mechanical breakdowns” will be covered, problems caused by “normal wear and tear” may be excluded. If the engine has to be taken apart to diagnose a problem and during the process the mechanic discovers non-covered parts that need to be repaired or replaced, you may have to pay for the labor involved in the tear-down and re-assembling of the engine.

You may not have full protection even for parts that are covered in the contract. Some companies use a “depreciation factor” in calculating coverage: the company may pay only partial repair or replacement costs based on your car’s mileage.

How are claims handled?

When your car needs to be repaired or serviced, you may be able to choose among several service dealers or authorized repair centers. Or, you may have to take it to the dealer you bought it from. That could be inconvenient if you bought the car from a dealership in another town. Find out if your car will be covered if it breaks down while you’re using it on a trip or if you take it when you move out of town.

Some auto service contract companies and dealers offer service only in specific geographical areas. Find out if you need prior authorization from the contract provider for any repair work or towing services. Be sure to ask: how long it takes to get authorization, whether you can get authorization outside of normal business hours, and whether the company has a toll-free number for authorization. Test the toll-free number before you buy the contract to see if you can get through easily.

You may have to pay for covered repairs and then wait for the service company to reimburse you. If the auto service contract doesn’t specify how long reimbursement usually takes, ask. Find out who settles claims in case you have a dispute with the service contract provider and need to use a dispute resolution program.

Are new or reconditioned parts authorized for use in covered repairs?

If this concerns you, you will want to know whether the authorized repair facility maintains an adequate stock of parts. Repair delays may occur if authorized parts are not readily available and must be ordered.

What are my responsibilities?

Under the service contract, you may have to follow all the manufacturer’s recommendations for routine maintenance, like oil changes. If you don’t, it could void the contract. To prove you have maintained the car properly, keep detailed records, including receipts. Find out if the contract prohibits you from taking the car to an independent station for routine maintenance or performing the work yourself. The contract may specify that the dealer that sold you the car is the only authorized facility for servicing the car.

Beware of Auto Warranty Scams

Be skeptical of mail and phone calls warning that the warranty on your car is about to expire. The companies behind the letters and calls may give the impression they represent your car dealer or manufacturer. With phrases like Motor Vehicle Notification, Final Warranty Notice or Notice of Interruption, they are trying to make the offer seem urgent — and to get you to call a toll-free number for more information. Investigate before you buy.

More than likely, these pitches are from unrelated businesses that want to sell you extended warranties — more accurately known as service contracts — that often sell for hundreds or thousands of dollars. If you respond to a call from a business pitching so-called extended warranties, you’re likely to hear high-pressure sales tactics, as well as demands for personal financial information and a down payment, before you get any details about the service contract. And if you buy a service contract, you may find that the company behind it won’t be in business long enough to fulfill its commitments.

Steer Clear of Auto Warranty Scams

If you get mail or phone calls about renewing your vehicle warranty, don’t take the information at face value. Your vehicle’s warranty may be far from expiring — or it may have expired already. If you have a question about your warranty, check your owner’s manual, call the dealer who sold you the car, or contact the vehicle manufacturer.

Be alert to fast talkers. Telemarketers pitching auto warranties often use high-pressure tactics to hide their true motive. Take your time. Most legitimate businesses will give you time and written information about an offer before asking you to commit to a purchase.

Never give out personal financial or other sensitive information like your bank account, credit card or Social Security numbers – even your driver’s license number or Vehicle Identification Number (VIN) – unless you know who you’re dealing with. Scam artists often ask for this information during an unsolicited sales pitch, and then use it to commit other frauds against you.

Be skeptical of any unsolicited sales calls and recorded messages. If your phone number is on the National Do Not Call Registry: You shouldn’t get live or recorded sales pitches unless you have specifically agreed to accept such calls, bought something from the company within the last 18 months, or asked the company for information within the last three months. Read Robocalls to learn more. To report violations of the National Do Not Call Registry or to register a phone number, visit DoNotCall.gov or call 1-888-382-1222.

Used Cars: Warranty Protection

When shopping for a used car, look for the Buyer’s Guide posted on the side window. The FTC requires the Guide on all used cars sold by dealers. It tells whether a service contract is available. It also indicates whether the vehicle is being sold with a warranty, with implied warranties only, or “as is.”

Warranty. If the manufacturer’s warranty is still in effect on the used car, you may have to pay a fee to get coverage, making it a service contract. However, if the dealer absorbs the cost of the manufacturer’s fee, the coverage is considered a warranty.

Implied Warranties Only. There are two common types of implied warranties. Both are unspoken and unwritten, and based on the principle that the seller stands behind the product. Under a “warranty of merchantability,” the seller promises the product will do what it is supposed to do. For example, a toaster will toast, or a car will run. If the car doesn’t run, implied-warranties law says that the dealer must fix it (unless it was sold “as is”) so that the buyer gets a working car. A “warranty of fitness for a particular purpose” applies when you buy a vehicle on a dealer’s advice that it is suitable for a certain use, like hauling a trailer. Used cars usually are covered by implied warranties under state law.

As Is – No Warranty. If you buy a car “as is,” you must pay for all repairs, even if the car breaks down on the way home from the dealership. However, if you buy a dealer-service contract within 90 days of buying the used car, state law “implied warranties” may give you additional rights.

Some states prohibit “as is” sales on most or all used cars. Other states require the use of specific words to disclaim implied warranties. In addition, some states have used car “lemon laws” under which a consumer can receive a refund or replacement if the vehicle is seriously defective. To find out about your state laws, check with your local or state consumer protection office or attorney general.

Premium for High Octane Gasoline

Unless it’s recommended by your owner’s manual, don’t spend the money on high octane gas. In most cases, there’s no benefit. Higher octane helps only if you have problems with your engine “knocking.”

  • Read Your Owner’s Manual
  • About Octane Ratings
  • Report Labeling Problems

Read Your Owner’s Manual

Unless your engine is knocking, buying higher octane gasoline is a waste of money. Premium gas costs 15 to 20 cents per gallon more than regular. That can add up to $100 or more a year in extra costs. Studies indicate that altogether, drivers may be spending hundreds of millions of dollars each year for higher octane gas than they need.

It may seem like buying higher octane “premium” gas is like giving your car a treat, or boosting its performance. But take note: the recommended gasoline for most cars is regular octane. In fact, in most cases, using a higher octane gasoline than your owner’s manual recommends offers absolutely no benefit. It won’t make your car perform better, go faster, get better mileage, or run cleaner. Your best bet: listen to your owner’s manual.

The only time you might need to switch to a higher octane level is if your car engine knocks when you use the recommended fuel. This happens to a small percentage of cars.

About Octane Ratings

What are octane ratings?

Octane ratings measure a gasoline’s ability to resist engine knock — a rattling or pinging sound that results from premature ignition of the compressed fuel-air mixture in one or more cylinders. Most gas stations offer three octane grades: regular (usually 87 octane), mid-grade (usually 89 octane), and premium (usually 92 or 93). The ratings are posted on bright yellow stickers on each gas pump.

What’s the right octane level for your car?

Check your owner’s manual. Regular octane is recommended for most cars. However, some cars with high compression engines, like sports cars and certain luxury cars, need mid-grade or premium gasoline to prevent knocking.

How can you tell if you’re using the right octane level? Listen to your car’s engine. If it doesn’t knock when you use the recommended octane, you’re using the right grade of gasoline.

Will higher octane gasoline clean your engine better?

No, as a rule, high octane gasoline doesn’t outperform regular octane in preventing engine deposits from forming, in removing them, or in cleaning your car’s engine. In fact, the U.S. Environmental Protection Agency requires that all octane grades of all brands of gasoline contain engine cleaning detergent additives to protect against the build-up of harmful levels of engine deposits during the expected life of your car.

Should you ever switch to a higher octane gasoline?

A few car engines may knock or ping even if you use the recommended octane. If this happens, try switching to the next highest octane grade. In many cases, switching to the mid-grade or premium-grade gasoline will eliminate the knock. If the knocking or pinging continues after one or two fill-ups, you may need a tune-up or some other repair. After that work is done, go back to the lowest octane grade at which your engine runs without knocking.

Will knocking harm my engine?

Occasional light knocking or pinging won’t harm your engine, and doesn’t mean you need a higher octane. But a heavy or persistent knock can lead to engine damage.

Is all “premium” or “regular” gasoline the same?

The octane rating of gas labeled “premium” or “regular” isn’t the same across the country. One state may require a minimum octane rating of 92 for all premium gasoline, while another may allow 90 octane to be called premium. To make sure you know what you’re buying, check the octane rating on the yellow sticker on the gas pump.

Report Labeling Problems

If you don’t see a yellow octane sticker on a gasoline pump, file a complaint with the FTC. The FTC enforces the Fuel Rating Rule, designed to ensure producers and marketers give you the information you need at the pump.