More and more automobile dealerships across the country are adding mandatory binding arbitration clauses to contracts for new and used vehicles as well as to financing contracts. By signing the contract, the consumer is agreeing to binding arbitration to settle any future dispute and also waiving the right to sue or appeal—even if the dealership committed fraud.
Although voluntary arbitration can be a good tool for some disputes, mandatory, pre-dispute arbitration poses several real dangers to consumers. In fact, the dealers must agree it poses dangers—after all, they fought hard for a federal law that prohibits automotive manufacturers from requiring dealers to accept mandatory binding arbitration in contracts between the manufacturers and dealers!
So let's look at what arbitration is and the dangers posed to consumers by pre-event mandatory binding arbitration requirements.
What is arbitration?
Arbitration is an alternative method of resolving disputes in which two parties present their individual sides of a complaint to an arbitrator or panel of arbitrators. The arbitrator, who is supposed to be neutral, then weighs the facts and arguments of both parties and decides the dispute. The decision may be binding (the usual case) or not. The arbitrator, who is often a retired judge or attorney, is paid a fee to resolve the dispute.
Arbitration may also be voluntary or mandatory. In voluntary arbitration, both sides in the dispute voluntarily agree to submit their disagreement to arbitration after it arises and after they have an opportunity to investigate their best options for resolving the claim. In mandatory arbitration, a company requires a consumer to submit any dispute that may arise to binding arbitration and to waive their right to sue, to participate in a class action law suit, or to appeal.
What's the problem with mandatory binding arbitration?
Consumer advocates point to the following problems and dangers.
Consumers are often unaware they've agreed to binding arbitration. Whether the mandatory arbitration agreement is tucked in a paragraph of fine print or provided as a separate form, dealerships often don't mention it until you're ready to take your new vehicle home. They know you're more likely to sign at that point. "Oh, if you don't sign it, we can't sell you the car," they're likely to say. A few dealers may "forget" to mention the arbitration requirement at all. These tactics deprive you of your right to make an informed decision.
Mandatory arbitration severely limits your options for resolving a dispute. Before any problem arises, you lock yourself into only one option—binding arbitration—for resolving all future disputes or problems. The contract typically also names the arbitration company that must be used.
Mandatory arbitration clauses generally bind you—not the dealership. The way most mandatory arbitration agreements are written, the seller retains its rights to take any complaint to court while the consumer can only initiate arbitration.
Arbitration does not follow clear, well-established, consistent rules and procedures such as those required for litigation in the court system. For example, arbitrators aren't required to follow procedures that enable one side in a dispute to request information from the other (what the courts call "discovery"). The result is that consumers, who usually have limited resources, may have difficulty getting information needed to support their claims. In addition, nothing absolutely requires arbitrators to take the law and legal precedent into account in making their decisions although they are supposed to do so. Most decisions cannot be appealed, and there are generally no review bodies or other oversight to ensure that they follow fair procedure or the law.
The dealership generally picks the arbitration company—"the judge." In theory, both parties agree to the selection of a neutral, independent arbitrator. In reality, the dealership designates the arbitration company in the contract. This situation can definitely affect the impartiality of the arbitrator. Studies show that any time one company depends on another company for a large percentage of their business livelihood, some systematic bias in favor of that company may develop.
Mandatory arbitration frequently costs more than taking a case to court. One of the benefits usually claimed for binding arbitration is that it costs less than litigation. Frequently this is not true. In many cases, for instance, a consumer may have to pay a large fee simply to initiate the arbitration process. This can deter a consumer from even bringing a complaint. Or on a small claim total fees for arbitration can easily exceed the amount you might be awarded if you win the dispute.
A recent report, "The Costs of Arbitration," prepared by Public Citizen's Congress Watch discusses the various potential costs of arbitration, shares case stories, and compares arbitration and court costs for similar cases.
How should you handle this problem when buying a car?
Remember that everything at a dealership is negotiable. Ask a dealership in advance if they require a mandatory binding arbitration agreement. If they require one, and if you don't want to sign it, tell the dealer your decision, and stick to it. If the dealership wants your business badly enough, they won't make you sign the agreement.
If the dealership won't budge, ask yourself why this has become so important to them. Have their customers been so dissatisfied they've had to resort to legal action? Think about it.
A cautionary note about a different type of arbitration: Under the Magnuson-Moss Warranty Act (that may apply to some aspects of an automotive purchase), consumers may be required to submit their complaint first to arbitration, but this arbitration is not binding. Consumers may reject the decision and take their claim to court. According to Public Citizen, this is the type of non-binding arbitration offered free by the Better Business Bureau. Watch out for confusion; don't let any dealership suggest that a blanket mandatory binding arbitration clause is Magnuson-Moss arbitration.
For more information
The following resources provide more information about various aspects of and issues in mandatory arbitration.
Auto Dealers and Consumers Agree: Mandatory Arbitration is Unfair Public Citizen takes the arguments that auto dealers made to Congress about why they should be protected from manufacturer's requirements for mandatory binding arbitration and shows how and why consumer arguments for the same protections are similar. At the end of this article, Public Citizen offers links to a number of other articles related to arbitration.
Remember that old saying, “A stitch in time saves nine?” It doesn’t apply just to clothes. Taking a few minutes regularly to perform some simple maintenance, can keep your car or truck looking and running like new for years. Here’s a quick checklist.
Check the vehicle’s “vital signs” every time you gas up.
When you fill the gas tank, pop the hood and check the levels of oil, coolant, brake fluid, and power steering fluid. You’ll need a paper towel for the oil; most of the others can be checked at a glance in most vehicles. If the vehicle has windshield washer fluid, check that level also.
Many people are keeping their cars longer. According to a recent report by the research company R. L. Polk & Co., the median age of operational passenger cars in 2007 was 9.2 years. Take good care of your car or truck and it will give you many years of service. Extra service years can save you money long-term. In the current economic climate, all of us are looking for ways to trim our spending. Here's how to stretch the good life for your wheels.
Dealerships just love it when you trade in your old vehicle. Why? They give you "wholesale" for it (if you're lucky) then "retail" it to another customer, charging that customer thousands more.
Why should the dealership make that extra money? Why not pocket that money yourself by "retailing" your car to an individual rather than trading it? You may particularly wish to consider selling your vehicle if it's older but nice and reliable. Many people are looking for very affordable, but reliable transportation. So you can take a vehicle that a dealer might give you just a few hundred or thousand for and make more money. Both you and your buyer can come out ahead. Of course, you can also do well selling a newer vehicle.
Next to a home, automotive vehicles represent the largest expenditure for most consumers. Keeping those vehicles well-maintained and, when necessary, properly repaired can ensure many years of reliable service.
Types of Auto Service Centers
Dealerships. The service centers of new car dealerships provide warranty service and repairs for the models the dealership sells. (Some dealerships may also service other make vehicles.) Positive reasons for choosing a dealership may include: they should be thoroughly familiar with your vehicle, they should offer factory-trained technicians, and original factory (OEM) parts are usually quickly available. Repairs under warranty must usually be performed by an authorized dealership. Most dealerships offer decent guarantees on parts and labor. On average, however, dealerships tend to charge a bit more than other types of service centers.
Consumers buying a new or used vehicle at most dealerships will face pressure to purchase an "extended warranty" on that vehicle. Extended warranties are also known as "service contracts." Dealerships like to sell extended warranties because they make good profits for the dealership. But do they make sense for you? And how do you use one, if you already purchased it?
What are "automotive extended warranties"?
In simple terms, they are service contracts with a warranty company that agree to provide, under certain conditions, certain repair services for a certain period of time from an identified provider. As you might assume from the very general terms of this definition, the provisions and quality of extended warranties can vary greatly. Some are provided by national manufacturers or companies who stand behind their agreement; others are provided by fly-by-night companies based in states with weak consumer protection laws—companies that often take the money and fold before consumers can make many claims against their "warranty." As a consequence, consumers must examine any contract carefully and look at all the pros and cons for their individual situation.
More and more automobile dealerships across the country are adding mandatory binding arbitration clauses to contracts for new and used vehicles as well as to financing contracts. By signing the contract, the consumer is agreeing to binding arbitration to settle any future dispute and also waiving the right to sue or appeal—even if the dealership committed fraud.
Although voluntary arbitration can be a good tool for some disputes, mandatory, pre-dispute arbitration poses several real dangers to consumers. In fact, the dealers must agree it poses dangers—after all, they fought hard for a federal law that prohibits automotive manufacturers from requiring dealers to accept mandatory binding arbitration in contracts between the manufacturers and dealers!
As if the economic times haven't been tough enough, gasoline prices hit record highs in recent months. Even a few extra cents a gallon can add up quickly into lots of dollars. But, with some attention to the following tips, you can keep your costs for gasoline and for operating your vehicle as low as possible.
Saving on gasoline
No matter whether you drive a compact that averages 30 mpg or a SUV that averages 13 mpg, you can cut gasoline costs by paying attention to where you buy gas, how you maintain your vehicle, and how you drive it.
eBay has become the gorilla of vehicle sales virtually overnight—they’ve facilitated over two million vehicle sales since starting their program. What’s not to like about that?
A lot of things. Before you even head to the eBay site to simply poke around, think about this:
When you buy on eBay, you’re typically buying “sight-unseen.”
You usually don’t get to drive the vehicle.
You’re typically buying from total strangers, and they are usually far away.
Dozens of radio and TV ads from many different charities are currently flooding the airwaves suggesting that you donate your used car or boat. Are you considering it? If so, then you need to know how the 2005 changes in IRS rules might affect the tax deductibility of your gift. You also need to know how to check out the charity you're considering. This month's review will help you do these things wisely. Planning to donate to a charity but not necessarily a vehicle? You'll want to read this review too. I'm going to start with the most important thing—how to check out the charity so that you know your dollars will go where you want them to. Then, I'll share the technical details about vehicle donation.
Yes, you read that headline correctly. If you are thinking of buying a new or used vehicle and you want to save money, I recommend first taking five steps before you even think of heading to a dealership showroom or website to shop. When many of us feel that first itch for a new vehicle, we think first about dropping by a dealership to browse—look at a few models, lift a few hoods, check out a few prices. Not a great idea—dealerships love to see innocent browsers pull on to the lot. Or maybe, you just like to cruise the local dealership websites. That's a better idea, but still not one designed to save you money or to really help you find the right car for you and your family. Instead, when that itch strikes, stop and take these five steps. Your wallet will thank you.
With the big spike in gas prices in the autumn and higher winter heating costs predicted for the rest of this winter, consumers everywhere are looking for ways to save on energy costs. In past reviews, I've offered you tips for saving on fuel costs. Now thanks to some old and new tax incentives, you may also be able to benefit from specific tax deductions or credits for purchasing "clean-fuel" vehicles or taking certain energy conservation measures at home.
Auto Dealership Pressure on Customers Never Goes Away
February/March 2005
Here’s a piece of StraightTalk: Stop right now if you’re thinking about buying or financing a vehicle. More than ever, everything in the car business has become negotiable: the price of the car; the price of the loan; the value of your car; the cost of “add-ons” — even the cost of insurance or service agreements. Quite frankly, you can’t relax for a minute if you want the best deal or the best vehicle.
That’s why we want you to stop and visit StraightTalk before you start the car buying process.
Consumer Affairs agencies across the country get more complaints about poor auto repair service than almost any other area. Repair services and the skills of mechanics can vary widely. But in addition to selecting a service center wisely (see StraightTalk tips), using these ten tips can help you get satisfactory results working with automotive service centers and technicians.
If you're in the market for a new or used car, then you're probably spending a good bit of time trying to discover what vehicle's right for you. If you're shopping the StraightTalk way, then you've figured what you can afford to purchase and are previewing models and makes in your price range in the ads, on the Internet, and down at the dealerships. In the shopping excitement, however, many buyers overlook one crucial question: Can you afford to drive the vehicle after you bring it home?
Would it surprise you to know that even if you are looking at two vehicles in the same class—say two compact pickups, midsize sedans, or minivans—that the cost to own the two similar vehicles can vary widely. Smart buyers will check out the cost to own and operate that great set of wheels. You'll need to consider these factors.
Your Available Cash is the maximum amount you have to spend on a vehicle. This calculator enables you to determine 1) the amount of cash a vehicle loan will yield and 2) the total Available Cash from all sources, including the loan, you have to purchase the vehicle.
If the estimated amount of Available Cash is too little for the vehicle you would like to purchase, you have several options. A higher monthly payment and/or a longer loan term will typically yield higher initial Loan Cash, thus increasing your Available Cash. You may also want to consider alternative vehicles that better fit your budget.
To estimate the value of your trade, visit the Edmunds web site.
Current rates and terms for CCU vehicle loans are available on our
rates page.
This calculator is solely for
informational purposes. It gives you reasonably accurate results of your Available Cash. Results for your actual loan will vary based on your final rate and loan amount.
Consumer Guides 
More and more automobile dealerships across the country are adding mandatory binding arbitration clauses to contracts for new and used vehicles as well as to financing contracts. By signing the contract, the consumer is agreeing to binding arbitration to settle any future dispute and also waiving the right to sue or appeal—even if the dealership committed fraud.
May 2008
Dealerships just love it when you trade in your old vehicle. Why? They give you "wholesale" for it (if you're lucky) then "retail" it to another customer, charging that customer thousands more.
Next to a home, automotive vehicles represent the largest expenditure for most consumers. Keeping those vehicles well-maintained and, when necessary, properly repaired can ensure many years of reliable service.
Consumers buying a new or used vehicle at most dealerships will face pressure to purchase an "extended warranty" on that vehicle. Extended warranties are also known as "service contracts." Dealerships like to sell extended warranties because they make good profits for the dealership. But do they make sense for you? And how do you use one, if you already purchased it?
As if the economic times haven't been tough enough, gasoline prices hit record highs in recent months. Even a few extra cents a gallon can add up quickly into lots of dollars. But, with some attention to the following tips, you can keep your costs for gasoline and for operating your vehicle as low as possible.
December 2006
July 2006
January 2006
Auto Dealership Pressure on Customers Never Goes Away
May 2004
April 2004