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Friday, September 28, 2007

Senate Investigates Florida Car Dealer Fees

I just learned last week that Florida State Senator, Ken Pruitt, has called for an investigation of the propriety of fees charge by dealers to car buyers that are not federal, state, or local fees. If you are interested in viewing the information posted on the official state Web site on this subject, click on http://www.flsenate.gov/Publications/2008/Senate/reports/Workprogram/pdf/workprogram.pdf and then click on “Commerce” on the left side of the page. I salute Ken Pruitt for this effort. Senator Pruitt, as you probably know, is the President of the Florida Senate, a very powerful position. You should feel very pleased that our State government has taken the first step toward making the dealer fee illegal in Florida as it is in several other states.

If you are a reader of my weekly column in the Hometown News, a reader of my Blog, http://www.earlstewartoncars.com/, or a listener to my weekly radio show [9 AM every Saturday on Seaview AM 960], you already know all about dealer fees. If not, dealer fees are profit for the car dealer disguised as an official fee. The disguise consists of naming this profit documentary fee, doc fee, dealer prep fee, pre-delivery fee, dealer fee, etc. Some dealers use a combination. These fees vary from as little as $500 to nearly $1,000. In fact, there is no legal limit on the amount of these fees. Theoretically a dealer could charge you $10,000 or more!

I discuss this in a recent television ad you can view at http://www.youtube.com/watch?v=JeIuFEMgWJs

Florida law currently has some regulation on dealer fees. The amount of the fee must be printed on the buyer’s order, next to the real fees, like sales tax and licenses. Next to the dealer fee must be printed “These charges represent costs and profit to dealer”. This statement is misleading because it says costs and profits. Obviously, when the dealer charges you money to cover some of his expenses, you are increasing his profits. The statement should be, “These charges represent profit for the dealer” period. You know how many pieces of paper are involved in buying a car…lots and lots. A car buyer cannot possibly read every document he signs [unless he is a retired lawyer with nothing but time on his hands]. In my experience, most buyers are not even aware that they paid a dealer fee. It is buried in the morass of legitimate local, state, and federal fees.

Another element of Florida law is that the dealer fee must be included in the price of a specific advertised car. This law is simply being ignored by many car dealers. If you doubt this, just pick up a copy of any local Florida news paper and read the fine print in the car ads. In my local paper, The Palm Beach Post, about half the ads do not include the dealer fee in the price. But, even if it is included, it’s still a “gotcha”. That’s because dealers will advertise just one, or maybe two, cars at that price. That number that you see next to the picture of the car is the stock number of one particular vehicle. You have two chances of buying that particular car…slim and none. In the first place there’s only one or two of these cars and in the second place the salesman is typically paid no commission for selling this car. How can you believe him when he says, “That car has been sold”? If you don’t believe him what is there you can do about it? The salesman will tell you that he can show you one exactly like it. The only problem now is that the dealer can legally add the dealer fee to the advertised price you are expecting because it was not the advertised car. Of course, that’s the whole idea behind the ad.

Another Florida law associated with dealer fees is that the dealer must charge every customer the dealer fee if he charges just one customer. This is a really stupid law that probably was well intended when it was passed. It’s stupid because it provides the dealer with an excuse when the occasional astute car buyer spots the fact that the dealer fee is really only more profit for the dealer and not an official fee. The salesman tells the objecting customer, “I’m sorry but Florida law prohibits us from removing the dealer fee from our invoice”. This is only technically true because the salesman can always decrease the price of the car by the amount of the dealer fee which is perfectly legal. This almost never happens because salesmen are not paid on the profit the dealer realizes from the dealer fee. They typically earn 25% of the profit on the car. If the salesman reduces the price of the car by the amount of the dealer fee, 25% of that amount comes out of his pocket.

Now, I have a confession to make. I know of only one other dealer in South Florida that doesn’t charge a dealer fee…Sawgrass Ford. Since I stopped charging a dealer fee several years ago my business has soared. I’m making less on each car but I’m selling a lot more cars. I have a huge competitive advantage over virtually every car dealer in Florida. My confession is this. I truly have mixed emotions [Like seeing your mother-in-law drive your new Lexus Ls 460 over a cliff] about Ken Pruitt and his Senate Committee succeeding in making dealer fees illegal. On the one hand, I know it’s the right thing to do because the dealer fee is a deceptive sales practice. On the other hand, banning the dealer fee removes a great competitive advantage.

Friday, September 21, 2007

Positive Backlash to Negativism on Hispanic TV Commercial

I wasn’t going to write another column about the TV commercial that I did a couple of months ago in which I spoke Spanish with English subtitles but recent developments changed my mind.

I aired the commercial on English speaking TV channels, not Hispanic. Just in case you were out of the country or were somehow totally incommunicado for the past two months, there was a hue and cry to this ad like I’ve never seen to any commercial I’ve done in my 40+ years as a car dealer. It started with lots of very negative phone calls to me and the TV channels. One TV channel, fearing controversy, initially refused to run my commercial, but recanted when I threatened them with exposing their refusal to run my ad to their competition and the FCC. The negative groundswell grew to emails and letters. I have to admit that during the first two or three weeks, I began to doubt that I was doing the right thing. Almost every call, email, or letter threatened me with boycotting my dealership. After all, I’m a car dealer and my commercial was meant to help me sell more Toyotas, not make a political statement.

The negativism grew so intense that the media picked up on it. The Ft. Lauderdale Sun Sentinel did a feature story on this, documenting a lot of the negative ads. The Palm Beach Post followed suit with a similar story. Channel 5 TV ran several news stories. Fox News interviewed me and this was carried on the network, nationwide, as well as XM and Sirius worldwide. Magazines, the Internet chat groups, blogs, World Net Daily, YouTube, and about every other kind of media jumped on this story.

That’s when the “positive backlash” began. What I had hoped for actually came to pass. The “silent majority” that we always hear about suddenly found their voice. The average American is a good person without prejudice and has lots of common sense, but she doesn’t get motivated enough from a TV commercial to make phone calls or send emails. The average American does get motivated when she sees someone being unjustly accused of being a traitor, called vulgar names, and being threatened with boycotts to his business. These good folks rallied to my support and now I am getting a steady flow of emails, blog postings, and phone calls supporting my Hispanic TV ad. The negative comments have died off to an occasional whimper.

Ironically, my initial motivation was only to sell more Toyotas. Not only did I do this [Last month I sold 375 new Toyotas, one of the best months in my 32 years as a Toyota dealer], but I got a bonus. That was a much better understanding of what makes us Americans tick. Don’t get me wrong. I was always proud to be an American, but after so many people sprang to my defense, after I was so viciously attached because of my Hispanic TV commercial, I was even more proud. Americans like to root for the underdog and they believe in standing up for what’s right. When they saw me being piled on by a bunch of nuts and bigots (not all of them were of this ilk; a few were simply uninformed or misunderstood my ad). 99% of Americans understand that we are all immigrants; we only differ in how long ago we, our parents, grandparents, et al were fortunate enough to find sanctuary in the land of the free and the home of the brave.

Friday, September 14, 2007

When a Car Dealer Crosses the Line II

This is a follow-up on my last column which exposed a direct mail scam by a local car dealer. After the General Manager of this dealership mailed this letter out a short time ago, some recipients sent me copies. They either recognized that it was phony or they wanted my opinion. I did some research which proved that the claims this General Manager was making were false and discussed this in my last column.

After I wrote my last column, a customer sent me another letter he received from a different General Manager of a different car dealership which was the exact same letter as the first dealership mailed out. For clarification, I will repeat the text of both, identical letters below:

Dear ______,

You are receiving this letter because I have some very timely and important information about your vehicle. As General Manager of [Name of Dealership], I am making a personal appeal to purchase your vehicle. Because of a unique wholesale market condition, I have allocated additional funds and I am now in the position of being able to offer you over book value for your vehicle—whether you trade it in or I purchase it outright. My dilemma simply means that right now your vehicle is worth more than it was last month. Here’s why:

Normally, we purchase over 200 pre-owned vehicles per month at nationally recognized automotive auctions. Unfortunately, flood damaged Katrina vehicles (see enclosed article) are currently showing up at these auctions. I simply will not allow my auction buyers to risk our reputation by inadvertently purchasing one of these units and reselling it to one of our customers. Therefore, I have put a moratorium on any auction purchases until I am confident flood damaged vehicles are properly disclosed to our wholesale buyers.

This is a straight forward, genuine appeal to purchase your vehicle. I need local vehicles with local histories—vehicles with a pedigree so to speak. As always, [Name of Dealership] will pay off your trade balance as part of any final retail transaction. My purchase offer is in addition to all [Name of make of car] incentives, should you decide to maximize your market timing. But hurry, my appraisers have from now until the close of business, 6:00PM [Date] to extend thee purchase offers. Call me at [Dealership number] to receive a no obligation, written trade or purchase estimate.

Sincerely,

[Signature of General Manager]

As I said this exact letter was mailed out by two dealerships within 10 miles of each other. One was a Ford dealership and one was a Toyota dealership. One is owned by a public corporation and one is owned by a local person. There is no affiliation between the two. Obviously this direct mail scam is being sold to car dealers by some unscrupulous marketing company. Neither of these dealerships sells even close to 200 used cars a month and there would be no reason in the world for them to purchase “over 200 pre-owned vehicles per month at nationally recognized automotive auctions”. There are very likely lots of other dealerships sending out this same letter. If you receive the letter above, throw it in the trash. It is absolutely and shamelessly false.

Letters of this nature are peddled to dealers with promises of how many “suckers” they will bring into the dealers’ showrooms. Oftentimes they have a guarantee of a certain minimum percentage…3% would be a very effective mailer. The direct mail marketing company would guarantee that if the 10,000 mailers didn’t bring in at least 300 potential victims, they would run another promotion free. Dealers usually count on selling about one out of every five prospects, which means that this mailer could result in about 60 sales resulting from this lie.
You may ask how car dealers get away with something like this. The answer is that direct mail usually falls beneath the “radar” of the regulators. When you consider all of the deceptive advertising out there, the regulators have a hard enough time keeping the TV, radio, and newspaper advertising clean, advertising that is very visible to all. Only the unfortunate addressees usually see the direct mail advertising. My advice to you is to ignore all direct mail advertising unless you have personal knowledge of the integrity of the company

Friday, September 07, 2007

QUICK REFERENCE GUIDE TO FINE PRINT IN CAR ADS

If you look down at the bottom of virtually every car advertisement in your local newspaper, you will see some fine print. Sometimes you literally cannot read the print because it is so small. The disclaimers you read below were taken from today’s PB Post. I didn’t make any of these up. Basically what these disclaimers do is to totally negate the validity of all of the prices and payments the car dealers are advertising. The prices and payments are always much higher when you factor in the almost invisible fine print.

Combining a very short lease term with a high down payment. Nothing sells cars like low monthly payments. A car dealer can make a monthly lease payment as low as he wants by both reducing the number of months of the lease and increasing the down payment. I’m looking at an ad in the PB Post right now advertising an SUV for $19,999 or just $199 per month. In the fine print it says 27 month lease and $3,000 down plus a $799 dealer fee.

"Plus dealer installed options" The price you see advertised in the paper is not the full price. This loophole allows the dealer to tack on thousands of dollars in overpriced accessories to the price that was advertised.

"With approved credit". The lease payment or purchase payment you see advertised is based on someone with very, very good credit. Sometimes the ad will specify a minimum Beacon score of 750 or even 760. An almost negligible percent of people have a credit score that high. This payment gets you in the door and then they tell you your credit isn’t good enough to qualify for that payment.

"Advertised offer good on select in-stock vehicles only" Dealers often advertise just one car at a price below their cost. They don’t pay the salesman a commission if he sells that vehicle. The chances of that car being available for you to buy are “slim and none”. Even if the car was still there, the salesman would do everything in his power to sell you a different car that he could earn a commission on.

"Owner Loyalty Rebate". Manufacturers offer special cash rebates to current owners of their car. These rebates are not available to you if you don’t currently own that particular make of car. For example, if you own a Honda, and want to buy a Toyota, you don’t qualify for a Toyota loyalty rebate. That price you see advertised won’t be available.

"Price …plus, tax, tag, and fees". The red flag word here is “fees”. The fees these dealers refer to is a “dealer fee” which is synonymous for dealer profit. Most people think it’s a federal or state tax of some kind. It’s nothing more than more money for the dealer that is not disclosed in the price of the car.

"Offers expire date of publication or may be cancelled at any time without notice". This simply means that the prices, payments, etc. you have read have no validity whatsoever. The prices are not good tomorrow, but they aren’t even any good today because the dealer can cancel the offer without notice.

"Not responsible for typographical errors". This is just one more way for a dealer to explain why they can’t sell you the car for the advertised price…We don’t have to honor that price because it was a “typographical error”.

"Vehicle Art for illustrations only". This means that that car you are looking at with the really great looking wheels might not have those wheels on the one you buy. Or, maybe it doesn’t even have that sunroof you see in the picture.

"Minimum trade based on dealer list price". The dealer list price is not the same thing as the manufacturer’s suggest price. Dealers add markups to the Monroney label also known as MSRP or manufacturer’s suggested retail price. They label this markup (often on a sticker designed to imitate the official federal Monroney label). Dealer markups of $3,000 and much more are common on such “counterfeit Monroney” labels. In this case, the dealer has marked up the MSRP far enough so that he can offer a minimum $10,000 trade-in allowance.

My advice to you is to ignore all car dealers’ newspaper advertising. Most car ads are designed to “get you in the door” so that they can sell you some other car than the one advertised so that they can make more money. If you must respond to a dealer’s newspaper ad, please be sure you break out your magnifying glass and carefully read the fine print.

Monday, September 03, 2007

Earl Stewart's Response to Typical Critics of Spanish Ad

Dear E and M,

Thanks very much for voicing your opinion. Because your remarks are so typical of those who object to my Spanish-speaking TV commercial, I have taken the liberty of posting this email on my Blog, http://www.earlstewartoncars.com/. You might enjoy reading some of the postings.

E's & M's comments in blue italic:

We are offended by your Spanish TV commercial and believe the way you went about it is anti-American.We want to respond to some of your posted explanations for showing the commercial on ENGLISH TV:

I am truly sorry that I offended you. It was not my intent and I, too, believe strongly in what I have done and don’t believe I’m wrong…just as strongly as you take the opposite view.

You say you are not targeting Spanish speaking people, why he Spanish commercials then?If virtually all Hispanics living here in Palm Beach Co. are bilingual and fluent in both Spanish and ENGLISH, why the Spanish commercial?

There are four reasons why I chose to speak Spanish in my commercials on English speaking TV:

(1) The market research I did showed that most Hispanics living in Palm Beach County watch English speaking TV channels almost exclusively. This is because there are very few Spanish channels…only 6 in total in all of South Florida and they all originate from Miami. The programming on these channels is far inferior in quality and diversity to the dozens of English speaking channels. Bilingual Hispanic American citizens, just like you and I, prefer to watch better quality and more variety on their TV.
(2) Anyone who has traveled abroad will tell you that it is considered a sign of respect to address bilingual citizens of other countries (virtually all citizens of other countries are at least bilingual and most speak English) in their native tongue. Those Americans who travel abroad and “expect” everybody to be able to speak English is one of the reasons for the phrase “Ugly American”. By learning a few phrases in the language of the country you are visiting and attempting to speak it is a courtesy and a sign of respect.
(3) By speaking Spanish in my commercial, I was able to “cut the clutter” of the too large number of commercials that most people (including me) ignore. I mute out most commercials or change channels. I wanted to get peoples attention which is the primary goal of any advertiser.
(4) Ads on Spanish channels are much more expensive than ads on Palm Beach County channels because they all originate from Miami and cover a much large audience in all of South Florida. A 30 second commercial on a local PB County channel is about $350 compared to about $5,000 for a Spanish channel. I’m wasting my money by advertising to all of the Hispanics in Dade and Broward…especially when my market research has told me that most are watching English channels anyhow.

Hell yea, the commercial get's the attention of the illegal Hispanic's attention. You are speaking the language they want to ALWAYS speak.Funny how you may not have gotten their (Hispanic's) attention if you spoke ENGLISH, when you say most are fluent in ENGLISH?Also, why is there a vast audience on Spanish channels when you say most are fluent in ENGLISH - again because they don't want to speak the language of the USA - ENGLISH!!

I am not trying to advertise to illegal aliens if or no other reason than they can’t buy new Toyotas. They don’t even have driver’s licensees and they can’t afford to buy a new car. Illegal aliens comprise only a small fraction of the Palm Beach County Hispanic community.

Yes, America is the land of free enterprise and capitalism, but America is much more than that.As part of our identity, Border - Language - Culture, we feel you are helping to destroy it. Do you realize how important it is being united by one common language? We are not talking about what you speak or sing in church, your home, another country, but here, the USA as a united country?

Do you think we should pass a law making it illegal to speak another language except English except in church or another country? We are united in America by a lot of things, including our common language. Far more important than a common language is our freedom and freedom means our right to express ourselves freely without fear of oppression. If a free American citizen wishes to speak German, Italian, or Japanese to another person who welcomes this, she should be allowed to express herself in this manner even if you don’t like to listen to it.

You say in one of your post that there are very few illegal aliens (there not illegal immigrants, as immigrants are legal) and they can't buy cars - WHAT ARE YOU SMOKING????

What kind of a trite response is, “WHAT ARE YOU SMOKING????” Quit being cute and try to deal with the facts. In South Florida there are nearly two million American citizens of Hispanic descent, aka legal immigrants. These are the folks I’m advertising to. In South Florida, the best estimate of the number of Hispanics who entered illegally is less than 100,000. These illegal immigrants have very low paying jobs, no driver’s licenses, cannot obtain credit, and CANNOT BUY A CAR.

If you respect people by speaking in their native tongue, which should be insulting to those that have accepted America as their new identity, why did you disrespect us American's by showing the commercial on ENGLISH TV????? You can put your tongue on THIS!

First let me say that your vulgar references do not enhance the credibility of your argument. If you feel I have shown you a lack of respect by speaking Spanish in a 30 second TV commercial, I suggest that you look into your heart for the answer as to why you feel that the Spanish language is offensive to you.

You should thank about moving your business to where the national language is Spanish, as we want miss you, your business, or your commercial.There are always traitors to this country, and you always will be Earl.

My business is thriving. Last month I sold 477 cars, one of the best months in my 32 years as a Toyota dealer. My sales to Hispanics and non Hispanics has increased considerably since I began running my Spanish speaking TV ad. There is no reason for me to move the location of my dealership. In fact, I have just embarked on a major expansion…more than doubling my present size.

Once again, I won’t dignify your name calling with a reply, but I will say again that it does not enhance your credibility to our readers