APA catches shady dealers in the act

COURTESY OF CTV, W5

CTV and APA investigators say this Toyota Corolla that was being sold on a Toronto used-car lot was welded together using two halves of two separate vehicles. The W5 investigation will air on CTV March 6 at 7 p.m.

Mark Toljagic

SPECIAL TO THE STAR

If you think plaid jackets and corny openers are the worst aspects of buying a used vehicle, think again.

It's undisclosed collision damage and misrepresented dealer fees that continue to taint the used-car purchasing experience.

On the bright side, new industry regulations may help curtail shady dealer practices.

Those were among the conclusions of the latest undercover investigation by the Automobile Protection Association (APA.ca), whose mystery shoppers approached 16 Toronto used-car lots and five curbsiders late last fall.

Only one lot earned a "pass" rating after the APA examined numerous second-hand vehicles offered for sale by the dealers. The investigation is the subject of a W5 report airing tonight at 7 p.m. on CTV.

"The pass/fail results are numerically poor, but qualitatively better," says George Iny, the outspoken president of the APA who noted greater transparency in the process.

"Historical information on vehicles, though incomplete, is much easier to come by than it was five years ago. You can relatively easily find out if the vehicle is from out of province or written off."

The APA focused on smaller used-car lots rather than those affiliated with new-car dealerships. It scrutinized their advertised deals found in free-circulation auto dealer magazines.

Perhaps the most disheartening discovery was the realization that Toronto's discount used-car lots are brimming with collision-repaired vehicles.

The APA sought low-priced examples of popular models, such as the Mazda3 and Toyota Corolla, and anticipated finding cars with some repaired collision damage. Disconcertingly, one dealer admitted to APA staff that 15 of the 20 vehicles on his lot had been in a collision.

"That's not a problem if damage is cosmetic," maintains Iny.

While some consumers shy away from vehicles that show evidence of paint overspray – the telltale sign of collision repair – many others will snap up a repainted Japanese or European car if the sticker price is low enough.

"There's a ready market for rebuilt cars in the $4,000-to-$7,000 range," says Bob Pierce, director of member services for the Used Car Dealers Association of Ontario (UCDA).

"Some dealers are buying up the hitters because they know they can sell them easily and quickly. Cars with $3,000 to $5,000 in body damage is not serious.

"The standards for rebuilding vehicles are pretty good since 2003."

The good news is accident disclosure information is more readily available, thanks to services such as Carfax and CarProof that scour government and insurance records to uncover vehicle histories.

But the APA points out the information is not always shared properly. Investigators noted a few dealers underreported collision damage by showing a history search – but without a critical page or two of the report.

In other instances, dealers failed to draw attention to any damage repair not listed in the history report. A weakness endemic to the report itself, it will not disclose collision repairs previous owners made privately without the knowledge of their insurance companies (estimated to be as common as half of all bodyshop work).

One dealer added the words "structural damage" to an offer of sale after he and the secret shoppers had signed the agreement (he originally claimed the car only had a rear bumper replaced). According to the APA, the total value of the two accident claims on that one vehicle was about $14,000.

Beyond collision-repaired vehicles, the APA noted ongoing problems with dealer fees that inflate the final transaction price.

"Extra fees are the highest ever observed for e-test, safety and administration, frequently totalling in excess of $600, and occasionally as much as $1,000," says Iny. "These are frequently misrepresented as remittances to third parties, when most of the charge is in fact retained by the dealer."

The APA also checked for accuracy of representation of financing offers. One lot advertised 0 per cent financing, but the ad failed to mention that a 50 per cent downpayment was required.

Only one dealer was found selling a car with an odometer that had been rolled back. The APA's criteria for failing a dealer include:

Advertising a bait-and-switch price that was not honoured because the car was "sold."

Failing to disclose structural (or frame) damage, or four or more repainted body panels.

Charging more than $350 in misrepresented extra fees.

Preventing the consumer from taking the car offsite for a third-party inspection.

In addition to assessing used-car dealers, the APA investigators approached five "curbsiders" – suspicious characters who sell vehicles from their home, or elsewhere, while posing as private sellers.

"The curbsiders in Toronto appear to be more professionalized," says Iny.

At one home with two vehicles for sale, the APA investigator spotted a dealer plate in use.

"One location was a towing company and collision repair shop that looked like a licensed facility, with cars for sale in the parking area in front," he says.

"Over 20 per cent of classified advertising by so-called private parties is actually placed either by auto dealers who are failing to identify themselves, or by unlicensed retailers."

If the study sounds like a resounding condemnation of the entire used-car retailing industry, Iny and the APA want to give consumers some hope, too.

"Sweeping new rules are supposed to clean up a lot of the misrepresentations APA saw and dramatically improve retailing practices," says Iny.

The revamped Motor Vehicle Dealers Act, which came into effect on Jan. 1, ushered in welcome changes, including full disclosure obligations for sellers and retailers, as well as "all-in" inclusive pricing, increased Compensation Fund claim coverage to $45,000 and stiffer penalties for convictions.

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