Monday, March 01, 2021

Three Rules to Follow When Financing Your Car

Car dealers make much more money financing your car than they do selling or leasing it to you. Most buyers concentrate on the price they pay or the monthly lease payment, but you should focus and concentrate even more if you’re thinking about letting the dealer “arrange” your financing. Most people do this and they shouldn’t.
 
  • First, the good news about dealer financing. If you’re buying a new vehicle, most manufacturers offer very low interest rates to induce you to buy…often as low as 0%. If you’re buying a new vehicle, you should always find out if the model you’re buying has special low financing offered by the manufacturer. You also need to know if you’re credit score will qualify you for this low rate. If so, remember that there’s usually a special discount offered as an ALTERNATIVE to the low interest rate. You can’t have both the discount and the low interest rate. The dealer’s advertising doesn’t make this clear because he wants you to believe you can have both. You need to do the arithmetic, taking into consideration the amount you’ll be financing, the number of months you finance, and how the difference between the low rate and your bank or credit union’s rate. Remember, the 0% may be offered for 60 months, but you’re going to trade the car in after 48 months.
  • If the manufacturer doesn’t offer a very low interest rate on the model you’re buying, that you can use, always get a rate from your bank and credit union. If you’re not a member of a credit union, consider joining one. Just because the company you work for doesn’t have a credit union, there are credit unions you can join without the affiliation of your company. If you don’t have a banking relationship with a specific bank, contact one and ask. Be sure that you understand that the dealer is getting the money he wants to loan you from a bank (often owned by his manufacturer). The dealer then MARKS UP the interest rate the bank charges him and applies that to your car loan. The dealer “pockets” the mark-up. The amount of the mark-up varies, but 2% is common. If you’re financing $30,000 for 60 months, the dealer’s mark-up is about $1,700. Some dealers retain all of that, but most keep about 75% or $1,275. The dealer will usually make another $1,000 in warranties, maintenance and “products” like GAP insurance. The dealer averages less than $1,000 on the sale of a new car. He’s making twice as much financing the as he did selling it 
  • If you were raised like me, your parents told you never to borrow more money than you absolutely must. When you do borrow, you should always make as large a down payment as you can afford. This doesn’t always hold true today because interest rates are at historical lows and sometimes manufacturers offer even lower rates. If you have excellent credit, your down payment should be as low as the bank will accept…hopefully zero. Today, you can conservatively invest your money to earn a higher return than you must pay to finance your car. But, if you’re going to finance with the dealer and intend to make a large down payment, NEVER TELL THAT TO THE DEALER before he gives you his final out-the-door price. Why? Because the banks dealers finance your car through limit the amount they will finance based on your credit and, the more you put down, the higher the dealer can increase his profit margin. Dealers will often push you for a larger down payment because they can’t finance as much profit as they’d like. They’re likely to tell you that the bank requires a larger down payment which is true, but they don’t tell you it’s because they’re making a huge profit on the car.

Monday, February 15, 2021

Seven Dirty Little Auto Leasing SecretCar Dealers Don’t Want You to Know

You may have noticed that almost all new car advertising today focuses on leasing. A few years ago, leasing a car was rare…less than 10% of total sales, and usually done by businesses. Businesses lease often because of tax deduction and balance sheet considerations. Business leases virtually never required a down payment. Following are the reasons that retail auto leasing to individuals has surged to more than one-third of all car sales. Some dealers are leasing over half of all their sales.

I’m not suggesting that a lease can never be as good a value as a purchase or even better. To the informed, sophisticated lessor, leases can be the way to go. Manufacturers do sometimes offer special lease rates and residual values which can make a lease cheaper than a purchase. But fewer lessors/buyers can navigate the following “complications and deceptions” of leasing.
  • Car dealers make more than TWICE as much when they lease you a vehicle rather than selling it. This is largely because they can attract you on a falsely low monthly payment, and your focus isn’t on the actual total cost of leasing.
  • Every advertised lease you see has a large down payment hidden in the fine print.
  • Customers are coerced and enticed to lease or buy another car from their dealer after their first lease. This is because the dealer never loses contact with you. You must return the lease car to him and he remains in close contact with you every time you make a lease payment. If you don’t buy or lease another vehicle from the dealer/manufacturer, you’re penalized with a “lease disposition fee” of several hundred dollars.
  • There are many more hidden fees in a lease contract than a purchase contract. There’s an “acquisition fee” for several hundred dollars, lease disposition fee at the end of the lease, charge for above “normal” wear and tear when you turn in your lease car, and a mileage charge for exceeding a certain number of miles per year. Of course, the dealer still charges the same hidden dealer fees he charges you when you buy the car. Most of these charges should be included in the monthly lease payments up front, but they aren’t.
  • Despite popular belief, you must make all the lease payments you signed the contract for. It doesn’t matter if you decide you don’t like the car or if it breaks down a lot and/or runs terribly. The leasing company (usually owned by the manufacturer) is separate legal entity. You still must make every lease payment even when the reason you can’t drive your lease car is the fault of the manufacturer or dealer. You also must make all the lease payments even if you’re disabled and can’t drive or die (your estate is liable for all remaining lease payments). The leasing company will insist that you make your monthly car insurance payments even if you can’t drive the car and it’s sitting in your garage.
  • Because your monthly lease payments build no equity as they do on a purchase, you will always have to make a large down payment when you buy or lease another vehicle. Basically, once you lease a car, you can be trapped into leasing again and again. Today’s new vehicles are so reliable and maintenance free that many buyers are keeping their cars for five years and more. Furthermore, they have no more monthly payments!
  • The dealer that leased you the car and other competing car dealers will be calling you to lease or buy another car when they know you have only a few more payments left. They’ll also tell you not to worry about the remaining lease payments because they’ll make those to the leasing company for you. Yes, they will pay the leasing company the remaining payments that you owe, but WITH YOUR MONEY, because they add those payments onto the price of the next car they lease or sell you. Remember that the dealer, the leasing company, and the manufacturer are all separate legal entities. Each has their own selfish interests, and you’re not one of them.

Monday, February 08, 2021

Auto Dealers Think and Act Differently from their Manufacturers

A new car dealership is a franchise unlike any other. Most franchised businesses are rigidly controlled by the parent company like Marriott, McDonalds, Ace Hardware, Century 21, Midas Muffler, H&R Block, and Tire Kingdom. New car dealers are more independent and able to do business the way they want to than any other franchised business.

This is important for you to know and understand, because what a car dealer tells you and how he treats you isn’t always the way his manufacturer would have it. If you have problems with your dealer you should communicate your dissatisfaction to his manufacturer and consider trying another dealer of that same franchise. The manufacturer will communicate your dissatisfaction to the dealership owner and/or general manager, and will sometimes (off the record) direct you to a better dealership. The manufacturer has no power or control over the dealer to force him to do the right thing, but sometimes the mere communication to the dealership management can have a positive effect. Your best bet is to simply try a different dealer. He might be a better dealer, but, if even if he’s not, he’ll be competitively motivated to make you see him in a more favorable light.

Fortunately for you, there’re lots of car dealerships that sell the same make you want to buy. There are about 18,000 new car dealerships in the US. If you’re a Chevy buyer, there’s about 3,000 to choose from, and probably 3 or 4 nearby. Online, you have an almost unlimited number of dealer choices.

The lack of the ability of auto manufacturers to control their dealers is unique among all other franchised businesses. The control and protection of new car dealerships is in the hands of our 50 state governments. Each individual state government department of motor vehicles insulates new car dealers from any real control by auto manufacturers. This was accomplished in the first half of the twentieth century by powerful dealership lobbying groups to protect dealers against unfair and punitive bad behavior directed at car dealers by auto manufacturers. This legislative protection against manufacturers has had the unintended consequences to protect dealers from control against bad behavior by them against car-buyers.

You might be wondering why the states don’t do a better job of protecting car buyers against predatory car dealers. The answer lies in the same powerful lobbying that insulated dealers from their manufacturers. Car dealers, their PACS, and associations are numerous, very wealthy, and very politically powerful.

You can file a complaint with the state Attorney General and/or Department of Motor Vehicles, but that’s time consuming and it’s often after-the-fact. Your best bet is, after you’ve chosen the right car, invest some time in choosing the right dealer.

Monday, January 25, 2021

You Don’t Know What You Paid for Your Car

You might think you do, but you’re probably wrong. You think you paid the advertised price, or the one quoted you by your salesperson, but you paid a lot more. No, I’m not talking about added sales tax and the license plate which you expected to be added to the advertised price. I’m talking about hidden, additional profit to the dealer disguised as government fees and added accessories that you didn’t ask for or even know about. If you bought your car in Florida, you probably paid between $1,000 and $2,000 in added profit to the dealer. You paid less in other states that have some restrictions and limits on hidden fees. Florida has virtually no restrictions and the few they have aren’t enforced.

If you doubt me, look at the signed documents you should have been given when you purchased your car…specifically the Vehicle Buyer’s Order, Installment Sales Contract, or Lease Contract. Near the top will be the supposed “Selling Price” and below that there’ll be several additions. Two are legitimate government fees which are not profit to the dealer, because he must pass these along to the state government. These are sales tax and license/registration. But some of the “fees” are disguised profit to the dealership. Florida has a law that that this added profit must be disclosed to the buyer as such, but this disclosure is disguised and hidden in the fine print. If you look closely, you’ll see “fees” named tag agency fee, doc fee, notary fee, electronic filing fee, dealer prep fee, administrative fee, service fee, and delivery fee. Florida law allows dealers to make up any name they wish and that’s just what they do. The surefire test if a “fee” is really dealer profit, is whether you were charged state sales tax on it. The state does not collect sales tax on a real government fee, just on the true price of the car including the dealer’s profit.

The other bogus price increase, in addition to hidden fees, are dealer-installed accessories. These consist of overpriced, virtually worthless items pre-installed on the car you bought, but not included in the advertised or quoted price. Some examples are nitrogen in tires, roadside assistance, pinstripes, road hazard insurance, fabric protection, and paint sealant. You didn’t ask for these, but you bought them anyway because they were added to your car before you bought it.

I’d love to hear from anybody reading this if they actually paid the advertised or quoted price. Call or text me at 561 358-1474. I’m not concerned about my “phone ringing off the hook” because I know almost everybody was tricked by their car dealer.

Monday, January 18, 2021

Answers to Top Ten Devious Statements Made by Car Salesmen


Salesperson Says: “I’ll give you the price only if you’ll commit to buy today.” 

Your answer: I’ll ask you once more for your best price. There are 3 car dealerships that sell this same make within a half-hour drive of here. If I don’t get your best price right now, I’ll walk out of your showroom and you’ll never see me again. 

Salesperson Says: “I’m sorry, but we just sold that car we advertised, but we have others just like it”. 

Your answer: I know that Florida law now allows you to add your $999 dealer fee to the advertised price, because, technically, I’m not buying the advertised car. I also know that you can now legally add “dealer installed options” to the low ad price. However, if you do not sell me the car I came in to buy for the advertised price, I will walk out that door and you will never see me again. 

Salesperson Says: “This price is good for today only”.

Your answer: I don’t believe you and I won’t make my decision to buy today. I want to shop and compare your price with your competition and, if yours is the best price, I will call you to see if I can buy it for that price. If you tell me that I can’t, I’ll buy it from your competitor. 

Salesperson Says: “This price is so low that I’m willing to guarantee it or pay you $1,000 [or some other amount] if you can find a better one”. 

Your answer: First of all, no retailer can always have the lowest prices. If they did, they could not make a profit and remain in business. I’ll bet you can’t give me the name of just one customer that you paid your $1,000 guarantee to. I also know that you ‘reserve the right to buy the exact car from the dealer that I say has the lower price.’ What makes you think that I would believe your competitor would sell you that car so that you could steal his customer?” You must think I’m really stupid and I don’t want to buy a car from somebody who thinks his customers are stupid. 

Salesperson Says: “I can give you this price only if you take a car from my present inventory. If I have to order a car or dealer-trade a car, the price will be higher.” 

Your answer: My car is very important to me. I want the exact color and accessories that will satisfy me and not a compromise. I will buy the car from you only if you agree to get me the exact car I want at the price you just quoted me. If not, I’ll bet that your competitor will. 

Salesperson Says: “I can’t give you this price in writing unless you will give me a deposit”. 

Your answer: I know that Florida law allows you to keep my deposit if I change my mind about buying. I also know that you do not want to commit to a price in writing because I might show your price to your competitor who may beat it. That’s the risk you have to take if you want my business. If you do, you have a chance at my buying a car from you. If you don’t, you have no chance because you will never see me again. 

Salesperson Says:“What will you pay for this car today? Or, make me an offer on this car and I’ll take it to my manager for approval”. 

Your answer: This is not a game that we’re playing. I’m about to make the 2nd largest purchase of my life. If I was shopping for a TV set and the salesman said that to me, I would walk out without another word and buy from his competitor. And that’s exactly what I’m about to do to you unless you give me your best price in writing. 

Salesperson Says: “We cannot quote you a price over the phone”. 

Your answer: It makes no sense to me that I should have to drive 10 miles and back to your dealership just so that you can tell me the price of the car I want to buy. I can get prices on the Internet so why can’t I get them on the telephone? I think the reason you want me to drive to your dealership is so that you can pressure me into buying today without competitive shopping. If you won’t give me your best price right this minute, you will never hear from me again because I will buy from your competitor. 

Salesperson Says: “I’m sorry but the owner isn’t available right now and we are not allowed to give out his cell phone number”. 

Your answer: If the owner of this dealership is too busy to speak to his customers than I’m too busy to buy my next car from him. 

Salesperson Says: “The reason that this $999 item labeled dealer fee [or doc fee, dealer prep, handling fee, admin fee, pre-delivery fee, etc] was not included in the price that I quoted you is because it is ‘to cover our costs of inspecting, cleaning, and adjusting vehicles and preparing documents for sale’.” 

Your answer: The price quoted to a customer for any product should include all of the costs of the seller. Furthermore, I know that the manufacturers of all cars reimburse their dealers for “inspecting, cleaning, and adjusting vehicles”. I also know that now you’re going to tell me that you must charge me your dealer fee because you charge all customers this same fee. But, I also know that you can deduct the amount of your fee from the price you quoted me and leave the dealer fee on the buyers’ order which will have the same net effect of removing it. If you do not agree, I will walk out of your dealership and never return.

Monday, January 11, 2021

Choosing and Buying Cars in the Digital Age

I turned 80 last month and I have many friends and associates that are around my age. We grew up, were educated, and worked from the 1940’s through the 1990’s. We lived in a world where we wrote letters, listened to radios, watched black and white TV, called friends on old fashioned telephones, and if we had a computer, it had a dial up modem. The Internet didn’t exist until 1983 and Google was born in 1998. We Baby Boomers entered the 21st century without a clue about the DIGITAL EXPLOSION that would transform the World. Some of us were able to adapt, but most of us haven’t.

2021 is the perfect example of “The Best of Times and the Worst of Times”. This applies to almost everything, but I’m a consumer advocate and a car dealer (no, that’s not an oxymoron). My goal is to help you digitally buy or lease your next vehicle without being ripped off by a car dealer. Following are some tips on buying or leasing a new or used vehicle utilizing all the support you can find online.

  • Find a friend that’s digitally savvy. Your children and grandchildren will probably qualify.
  • Your digitally qualified assistant will enable you to communicate with online sources to choose the best year-make-model vehicle for you. They will also help you find the lowest out-the-door price. Definition: The price you can write out a check for, give it to the dealer, and have him deliver your new car to your front door.
  • Be prepared to buy your next vehicle entirely online. You should not visit a car dealership except to test drive the vehicles you’re considering. In fact, many progressive car dealers offer to bring vehicles to you for test driving and evaluation. Most car dealers are reluctant to sell you a car completely online becauseyou have control and they don’t; however, if you insist, they have no alternative but to comply.
  • The best sources of online information for your digitally savvy assistant are www.ConsumerReports.com,www.CostcoAuto.com, www.TrueCar.com,www.AutoTrader.com, www.Edmunts.com, www.Kbb.com, and, last but not least, www.EarlOnCars.com.
  • Your total control over the dealer online is because he understands that his one and only chance to sell you a car is to give you his best out-the-door price online. Be sure to tell your cyber-savvy assistant to keep you anonymous by not revealing your real phone number or email address. She can create a functional email address just for this purpose and use a fictious phone number if necessary. This way, you can contact as many dealers as you like without fear of being hounded salesmen.
  • Arrange your financing online using your credit union or bank. Today, everything can be done digitally including exchange of documents and signatures. In some cases, the new car dealers’ manufacturers offer lower financing rates than your bank or credit union, as low as zero percent. Confirm that this is offered by the manufacturer, not the dealer and conduct that transaction online also.
  • Establish the value of your trade-in online also.www.Carvana.com, www.WeBuyAnyCar.com, andwww.CarMax.com are three good sources for getting bids on your current used car. You can also shop your car with the dealers of your same make used car departments. A Honda dealer used car manager will usually pay more for a used Honda than a Chevrolet dealer.

I hope this works for you and I wish you the best of luck. If you can’t find a “cyber-savvy” digital assistant, I’m always available for advice. I’m one of the few baby boomers who’s cyber-savvy, thanks largely to a scientific education and a lifetime fascination with science.

Monday, January 04, 2021

Let Me Help You Buy Your Next New Car Online

I promise you that you’ll get a lower price on your next new car if you buy it online. Many people, especially those born and raised before the “digital revolution” may feel nervous or are incapable of this technological challenge. If you do, I’ll personally walk you through the process. Because I have no idea how many people will take me up on this offer, I must limit it to the first 100 to ask. 
  • Call, email, or text me with the Year, Make, Model, and MSRP (manufacturer’s suggested retail price).
  • Please furnish me with your zip code and, if there’s a new car dealership that you’d prefer to buy from.
  • I’ll need your name, email address, and phone number. I promise to keep this information private. I’ll be using a fictious name, email address, and phone number when contacting dealers on your behalf. This will avoid you receiving a deluge of car salesmen hounding you. 
  • If you’re a Costco member, please furnish me with your Costco membership number. The Costco auto buying program is your best source of getting the lowest price. If you’re not a member of Costco, I recommend you buy an annual membership for $60 just for their auto buying program.
In less than three days, I’ll advise you of the lowest out-the-door price of the car you told me you wanted to buy. This out-the-door price is the amount you can write a check for, hand it to the salesman, and drive your new car home.

If you don’t know me, you’re probably asking yourself “Why would he go to the time and trouble to do this?” The answer is that I like to help people like you. If you’ll read my blog, www.EarlOnCars.com you’ll understand.

You might also be saying to yourself, “This guy’s a car dealer and he’s just trying to trick me into buying a new Toyota from him!” You’d be right that I’m a Toyota dealer, but you’re wrong that I’ll try to sell you a car. Read my blog, buy my book (Confessions of a Recovering Car Dealer, available on Amazon… 100% of the proceeds go to the charity, Big Dog Ranch Rescue) or ask anybody that knows me, and you’ll learn the truth.

Finally, you might wonder if the price I find for you is truly the LOWEST. The answer is “not necessarily”. But it’s lower (likely much lower) than the price you would have paid had you not let me obtain the price online. You might be able to obtain an even lower price if you want to invest the time and aggravation in shopping my out-the-door price with even more car dealers. Just remember the definition of my out-the-door price…the price you can write your check out for and drive your car home.