The roadmaster years are gone

Feb. 14, 2023

By Michael G. Charapp
Charapp & Weiss LLP


Consumer zealots like to accuse dealers of being dinosaurs. According to them, dealers don’t change. They engage in the same wrongdoing repeatedly, year after year.

That is nonsense. The dealership business is one of the most competitive in the country. One must constantly evolve, including compliance practices, to prosper. It is the consumer zealots that are dinosaurs, and a recent NPR news story is an example.

According to the NPR story that can be found here, a Florida couple bought a vehicle and were told that the financing could not be completed. They were asked to return and renegotiate the financing. The revised deal also apparently had a problem, and the buyers refused to renegotiate that. When they wanted out of the deal, they were told that their trade had been sold. The dealership repossessed the vehicle. The couple sued.

The story follows the script of dozens of screeds criticizing “yo-yo” sales that dealers have endured for more than half a century. According to the script, dealers sell vehicles with finance terms they know will not be accepted, lock in the buyer, sell the buyer’s trade, and then force the buyer to accept the deal with unacceptably inflated finance terms.

That depiction of practices was never true for legitimate car dealers. The activities identified in the story as commonplace simply cost dealers too much to be a regular course of business.

Today these practices are nearly unheard of for a variety of reasons. The author of the story, like dozens of authors before him writing on “yo-yo sales”, ignores evolution in industry practices and writes as if we are living in 1973. The complaint he highlights in his story reveals him as the dinosaur who still lives in the days when the preferred way to do business was have customers order their Roadmaster station wagons and wait weeks to take delivery until the vehicle arrived and financing was approved.

Do you think that’s overstated? Consider these points.

  1. Technology permits dealers to make better spot delivery decisions than they ever have. Often, financing is approved by the time the vehicle crosses the curb. When that is not the case, improved information makes a mistake about spot delivery terms the rare exception. The claim that “yo-yo sales” are a staple of modern dealership practices is nonsense.
  2. Dealers have improved their compliance activities on spot deliveries. In some states, that results from laws regulating spot deliveries. In other states, attorneys general have brought cases demonstrating the law to which dealers should adhere. Even in states where that has not happened, dealers have adopted best practices to avoid spot delivery disputes.
  3. Dealers today use paperwork that is clear about the rights of the parties. Agreements on spot delivery contain principles developed more than a decade ago based on minimum standards prescribed by state attorneys general:
    1. The rights of the parties must be clear in the agreement;
    2. The right to terminate a transaction must be bilateral;
    3. A dealer that does not hold onto the trade to return it and any down payment cannot rescind a transaction;
    4. There shall be no fees charged for use of a vehicle; and
    5. Any steps to retake a vehicle must be under the law.
  4. Consumer demands have changed dramatically. Customers expect overnight delivery from Amazon on products they buy, and they expect the same efficient service when they buy a car. Consumers are not willing to order their Roadmaster station wagon, wait for it to arrive at the dealership, and have their financing approved weeks later. They want to drive home in their new wheels the day they buy it. Spot delivery provides dealers the ability to permit that.
  5. A critical development is the readiness of decision-makers to punish wrongful behavior by dealers. In the NPR story, one must wade through thousands of words to get to the punch line. The couple who sued the dealer wound up arbitrating their claim. The arbitrator awarded the couple more than $225,000 because of the behavior of the employees of the dealership. That’s right … it was not a jury of untrained citizens confused by the facts and the law that decided the case. It was the decision of a trained, professional arbitrator to take the dealership to the woodshed and award damages that are a multiple of the price of the vehicle purchased.

So what is the point of this article? The dealer’s wrongdoing was punished. Clearly the author wishes to have stepped up penalties for dealers. But what is more effective than a damage award multiple times the value of the vehicle purchased? Should there be lifetime imprisonment for a spot delivery violation? With Woody Allen’s insurance salesman as a cell mate?

We probably should come to grips with the fact that occasionally dinosaurs in the media will give in to their need to sound off on their uninformed complaints about “yo-yo sales”. They will find an infinitesimally rare victim among the millions of vehicle buyers every year for whom the spot delivery system works well and write a story demanding … something. They will never be satisfied until sales are done as they were in 1973 when customers ordered their Roadmasters and waited weeks for the vehicle and financing approval before taking delivery. It is time to tune out the dinosaurs and recognize that we are not living in the Roadmaster years.