Used-car leasing and solar panel sales and installation — two emerging industries now reaching the consumer mainstream — were highlighted as problem areas to watch in an annual survey released Thursday by the Consumer Federation of America and the North American Consumer Protection Investigators.
Fraud, home improvement and used cars were dubbed the three “worst” consumer problems, based on the number of complaints, the monetary value involved, the effect on victims or “the sheer outrageousness of the situation.”
The survey is based on about 200,000 complaints made in 2016 to state and local consumer protection agencies in 23 states, as reported by 39 agencies.
The survey singled out two growing industries as worthy of caution.
Used-car leasing can be a great deal for consumers. Since depreciation slows dramatically once a car is 2 to 3 years old, used-car lease payments are typically smaller. Well-qualified lessees don’t have to put any money down. And insurance can cost less because the car is worth less than a comparable new one.
However, used-car leases are sometimes offered to customers who have credit challenges and pay the dealer directly, says Susan Grant, director of consumer protection and privacy at the CFA. That opens up several potential pitfalls:
- Interest rates for leases are usually expressed as “money factors,” rather than APR, making it difficult to spot an excessive interest rate.
- Consumer protection laws that apply to new cars and to purchases may not cover a used-car lease.
- A leased used car may not carry the balance of its new-car warranty or certified pre-owned coverage, leaving the borrower liable for repairs as the car ages. As with any lease, the car must be returned in good condition at lease end.
What can consumers do? NerdWallet recommends that you:
- Make sure you understand the warranty, and get it in writing
- Understand what your maintenance costs are likely to be
- Check an auto lease calculator to see what monthly payments would be on a new car to make sure you are actually saving money
- As with any used car, get a vehicle history to learn more about the car’s past
Solar panel sales and installation
Solar panel sales and installation, which were included in both home improvement and solicitation categories, are a growing problem as public interest increases and prices drop. Survey organizers noted complaints about misleading contract terms and faulty installation. The watchdogs called out one example — an 84-year-old man persuaded to sign a 20-year-lease that would obligate his heirs if he dies or buyers if he decides to sell his home.
If you’re considering solar panels, make sure you understand your financing options and carefully screen the installation company.
The top 10 complaint areas
The top 10 overall (with last year’s ranking in parentheses) complaints were:
- Auto (1)
- Home improvement/construction (2)
- Utilities (3)
- Retail sales (5)
- Credit/debt (4)
- Health products/services (9)
- Services (6)
- Tie: Landlord/tenant (7) and Household goods (8)
- Internet sales (10)
- Home solicitations (not in top 10 last year)
Imposter scams, which were highlighted last year, remain a big problem, the groups say. In these scams, someone attempts to gain trust or intimidate by posing as, for example, an IT professional, IRS agent or law enforcement officer.
“As a state employee, I’m particularly perturbed about fraudsters who pretend to be from the government and use scare tactics, or promises of grants or unclaimed funds, to get people to send them money,” says Amber Capoun, NACPI president and a legal assistant in the Office of the State Banking Commission in Kansas.
Often, she says, they ask for gift cards.
“Crooks are looking for ways to get cash fast and avoid being traced,” Capoun says. “Gift cards should only be used to buy something for you or someone you know, not to send payments to strangers.”
More consumer advice