The Best Possible Deal?
(cont'd)

The Traylors were told that the best interest rate available to them was 19 percent. They also say they were led to believe that it was the finance company wouldn't go any lower based on their credit rating.

I said, Wow. That's high, recalls Cheryl Traylor. And he said, Yeah. Well, that's the best interest rate that we could get you.'"

In fact, the finance company, Toyota Motor Credit, had approved the Traylor's loan at 15 percent. It was the dealership that tacked on the additional 4 percentage points, adding $3,700 to the cost of buying the car.

The finance company, which was in on the arrangement, buried the additional interest in the Traylor's monthly payments, and then sent the dealership an upfront lump sum check for the difference. None of this appeared on the sales document, so the customers were none the wiser.

The document says you're paying all that to Toyota Motor Credit. That's what the document says. Doesn't mention anything getting kicked back to Covington Pike Toyota, says Andrews. Its a hidden charge. Its a kickback from the finance company to the dealership. And they never disclose it.

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Andrews says that's not the only deception. Danny Ewing and Andrew Barbee are both former finance managers at Covington Pike Toyota. They ended up suing the dealership for racial discrimination, and are witnesses for the plaintiffs in the current litigation.

They've testified they were trained to persuade car buyers that they were their allies in trying to secure the best loan rate possible when their real goal was just the opposite. Most people don't know it, but finance managers are paid on commission and earn a big chunk of their paycheck secretly padding as much interest as they can get away with onto the back end of auto loans.

You'd add a lot to it if you could, says Ewing.

Covington Pike Toyota and the United Auto Group insist that what they're doing isn't deceptive or illegal. Kent Ritchey is area manager for the United Auto Group, which owns Covington Pike Toyota and 137 other dealerships around the country.

Dealer reserve is an accepted industry practice. I've been in the business for 34 years. I've never seen a dealership that didn't have dealer reserves, says Ritchey.

He adds that automobile dealerships provide a service by arranging auto loans so they have a right to make a profit, and are under no legal obligation to disclose what he calls wholesale costs.

If someone goes in to buy a hamburger, they're not aware of what the hamburger chain pays the franchiser, or they're not aware of what they paid the middle man to get the hamburger there, says Ritchey. They're not aware of what the rancher makes. I think that they like the hamburger, they like the price & I think people understand all of the components of the transaction.