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Friday, October 26, 2007

Nitrogen Scam Foisted on Palm Tran

I’m rerunning below the column I wrote last year about Nitrogen because it came to my attention that the Palm Beach County bus system, Palm Tran, was planning on investing over $80,000 for equipment to fill their bus’ tires with Nitrogen.

I wrote County Commissioner, Karen Marcus, an email explaining why this was a mistake and I sent her a copy of the column which you can read below, if you missed it last year. Below is a copy of my email:

Good morning, Mrs. Marcus,

Gary Todd, a friend of mine, told me this morning that Palm Tran had spent $65,000 on Nitrogen tire inflation systems purportedly to improve fuel economy and tire life in Palm Beach County buses.

I Googled the news article in last Friday’s PB Post and it gave as a reason for this decision to spend taxpayers’ money that “NASCAR and commercial and military aircraft” use Nitrogen in their tires.

NASCAR and commercial and military airplanes use Nitrogen in their tires for entirely different reasons than reducing tire wear and increasing fuel economy. Race cars and landing airplanes are subjected to extremely high temperatures never experienced in car or bus tires. Airplanes also experience extremes in atmospheric pressure which car and bus tires don’t.

I’ve attached a column that I wrote for the Hometown News last year, “Don’t Pay for Nitrogen in Your Tires”. I wrote this article to benefit those who might persuaded to pay for Nitrogen instead of free air [which is already 78% Nitrogen] to put in their tires. I even considered doing this for my customers at my Toyota dealerships and for my rental car fleet until I did some research on the pros and cons. I even bought canisters of Nitrogen and ran pure Nitrogen alternatively with air in my rental fleet for a period of time. The bottom line is that there is no measurable difference in fuel economy or tire wear with air v. s. Nitrogen.

Please read my article and feel free to call me to discuss this at any time. My cell number is 561 358-1474. I wouldn’t expect you to take my word for cancelling this expenditure, but if you instruct Palm Tran to conduct an actual test of fuel economy and tire wear with and without Nitrogen, I think they will come to the same conclusion as I.

Best wishes,
Earl


There was an article in the October 25th Wall Street Journal which concluded that Nitrogen was of no useful, measurable benefits to fuel economy, safety, or tire life. It concluded that if the Nitrogen was free, no harm can result from using it.

CNN recently ran a story exposing the Nitrogen scam you can see the video clip on this story by clicking on http://www.cnn.com/video/#/video/tech/2007/10/26/hunter.check.your.tires.cnn?iref=videosearch. The article discussed a study that Consumer Reports did on the effectiveness of Nitrogen in tires and interviewed the CR tester. Consumer Report filled a large number of tires of all makes and models, half with air and half with pure Nitrogen. After one year, there was only a 1.3 pound pressure difference in the tires filled with air and Nitrogen. The obvious conclusion was that Nitrogen for your tires is a waste of money.

Costco is often cited as a reason to buy Nitrogen for your tires. When you buy a set of tires from Costco, they fill the tires with Nitrogen free. When you bring your car back to Costco’s auto service center, they will top off your tires with Nitrogen for you free. I can understand Costco’s motive in this because I also operate an automotive service center and I also sell tires. All auto service center operators want to give their customers a good reason for bringing their cars back to them regularly for service. Why? Because we want to sell you more services. Need I say more?

Here's the original posting:

Don’t Pay for Nitrogen in Your Tires

It’s bad enough that gas stations now make you pay to inflate your own tires with air. But at least you are getting what you paid for…air which does what it’s supposed to do and that is to keep your tires inflated.

Many car dealers are now charging customers to fill their tires with “pure” nitrogen. They tell you that nitrogen does not leak from your tires as quickly as air and this means that your tires will stay properly inflated longer before you have to add more nitrogen (and pay the dealer for this). What the dealers don’t tell you is that the air that is already in your tires is mostly nitrogen anyway. In fact, 78% of the air you breathe is nitrogen. Oxygen represents only 12% of the air. The rest of air includes carbon dioxide and other inert gases. I’m not sure what the purity of the nitrogen is that they pump into your tires for $199 (this is not a typo…one hundred and ninety-nine dollars for filling four tires full of mainly air). But, you can be assured that the purity of the nitrogen is not 100% and is probably closer to the 78% that regular air consists of.

Even knowing all of the above, I have to admit that I was curious about whether or not nitrogen could prolong tire live and improve fuel economy because I knew that NASCAR drivers used nitrogen filled tires and I heard that Volvo’s came from the factory with nitrogen in their tires. I have a BS in Physics from the University of Florida and a Master of Science from Purdue and these kinds of things interest me. So, to find out for myself, my dealership conducted an experiment. We have a fleet of rental cars and we filled two tires of each car with pure nitrogen and 2 tires with regular air. Over the course of many weeks, we measured the pounds of inflation in the nitrogen and air filled tires. There was no difference in the inflations of the nitrogen v. s. the air filled tires. If there is no difference in the inflation, there can be no benefit from nitrogen of better gas mileage or fuel economy.

You may have read my column last week, “Beware the Phony Monroney”. In that column I warned you about car dealers that add a window sticker designed to look exactly like the federally mandated Monroney sticker. This is where you should look for dealer installed accessories and additional dealer markups over MSRP. Often these accessories have a high price but a very low cost. In the case of nitrogen in four tires selling for $199, this is exactly the case. Since air is already 78% nitrogen, it costs virtually nothing to extract nitrogen from the air. To be generous, let’s say the dealer’s cost is $10 including labor. That is a 2000% markup when he charges $199.

Just when I thought I’d seen it all, I actually saw window stickers on a car today from another dealer who had actually modified the Monroney label to show nitrogen filled tires. To do this, the dealer actually had to remove the real Monroney label, make the modification showing the nitrogen tires, and re-paste the Monroney label to the window. Federal law requires that a Monroney label not be removed until the vehicle is delivered to the customer. It also requires that it not be modified. This new vehicle was one we had traded for from another dealer and still had the counterfeit Monroney and the modified real Monroney attached to the window. The modified Monroney looked so authentic, that one of my technicians and my service manager inquired of Toyota about the necessity of our carrying nitrogen tanks so that we could refill these tires with Nitrogen. If this could fool a Toyota dealer’s technicians and service manager, it might fool you too.

This particular dealer also had another charge added to the counterfeit Monroney sticker, a $4,995.00 “Market Value Adjustment”. Most prospective customers think that this is part of the manufacturer’s recommended retail price. They either end up paying too much money for the vehicle or think they are getting more for their trade-in or a bigger discount than they really are. It’s easy to allow someone an extra $5,000 on their trade-in when you have already marked the car up an extra $5,000 over sticker price.

Friday, October 19, 2007

Always get an “Out the Door” Price (originally posted 4/23/06)

Many states have laws prohibiting car dealers from adding “fees” onto the prices they quote you. Unfortunately, Florida is not one of these states. The state law in Florida requires only that the dealers disclose on the buyers’ order that this additional charge is not a local, state, or federal fee, but is actually just profit to the dealer.

Almost every car dealership in Florida has this extra profit printed on their buyer’s order, under an assortment of labels like “Dealer Fee”, “Doc Fee”, and Dealer Prep”. You will not see it on the car’s price sticker you will probably not hear any verbal disclosure by the sales person or manager, unless you ask. If you ask, you will be told that “all other dealers charge this” and this is “almost” true.

Florida law also requires that when a dealer has this additional profit printed on his buyer’s order, he must not delete it for some customers and charge it to others. The only way he can effectively eliminate this extra profit is by reducing the quoted selling price of the car by this amount, but keep the dealer fee amount that is printed on the buyer’s order. This is rarely done because dealers do not pay their salesmen or managers a commission on the dealer fee. If you demand the price be reduced to compensate for the dealer fee, it cuts the salesman’s commission. Dealer fees range from $500 to $900 and a typical salesman’s commission is 25%, costing the salesman $125 to $225.

Florida law requires that a dealer include the dealer fee in the price of an advertised car. This is often ignored by dealers advertising on the Internet and in direct mail because it is below the “radar screen” of the Attorney General’s office. In newspaper, TV, and radio ads one car is advertised at a low price with a seemingly innocuous designation like “#1234B” (the stock # of the car) all there is to tell the buyer that only one car is available at this price. Another common tactic is a fine print disclosure at the bottom of the ad reading “price good on date of publication only”. The odds of being able to buy one of these cars at the advertised price are not good. Not only is there only one car with the price good for just one day, but the salesman receives no commission or a much smaller commission if he sells you this car.

My advice is not to pay much attention to advertised car prices. Do your shopping on the Internet or by telephone. Insist on an “out the door” price including everything except sales tax and license tag. If buying a new car, get several “out the door” prices quoted on the exact same year, make, model, and accessorized car. Two very good free Web sites to get information on dealer costs and fair retail prices are http://www.kbb.com/ and http://www.edmunds.com/. Consumer Reports is also an excellent source of product information and pricing information, but there is a fee for their Web site.

Friday, October 12, 2007

Earl Stewart Is Responsible for Car Dealers’ Bad Reputation?

The private feedback I get from other car dealers who read this column, listen to my radio talk show at 9 AM every Saturday on www.SeaviewAM960.com, or see my advertising [view all my TV commercials at www.YouTube.com/EarlStewartToyota] is that I am causing damage to their reputations. Let me hastily add that they won’t state this publicly. No car dealer has ever written a letter to the editor of Hometown News. They will post negative statements on my Blog, www.EarlStewartOnCars.com, but always anonymously. I’ve had only one call to my radio show from a car dealer and he wanted to remain anonymous.

First let me say that I have been doing my Hometown News column for less than two years and my Blog for about the same time. My advertisements against the dealer fee and such have only been running for 3 to 4 years. My radio show is less than a year old. Given this, how did car dealers earn such a bad reputation before I started talking about it?

I’ve been a car dealer since 1968 and I can never remember car dealers not having a bad reputation. Comedians joke about car dealers as much as they joke about lawyers and politicians. In fact, car dealers have even had movies made about their slimy way of doing business. Two of them are Cadillac Man, starring Robin Williams and Used Cars starring Kurt Russell. I’ve always been acutely aware of the generally bad image that car dealers have. That may be because I wasn’t always in the car business, although my father was a car dealer. I studied Physics in college, earning my BS from the University of Florida and my MS from Purdue. My first real job was as an Electronics Engineer for Westinghouse Electric Corporation. I had those early years working outside the car business to give me a better real life perspective when I came to work for my father in 1968.

Surely other car dealers are aware of their generally bad reputation. How do you suppose they think it came about? Can they believe that our reputation is a mistake and that most car dealers really treat their customers with integrity, courtesy, and respect? Do they believe that customers are simply not telling the truth about their bad experiences with car dealers? Anybody who has ever been to a party or other social event has to have overheard at least one horror story about someone buying a car or having their car serviced.

I’m going to assume that car dealers really did know that they had a bad reputation even before Earl Stewart came along. I think they are simply angry at me because I’m calling more attention to a problem that everybody already knows about. And they’re mad because I’m offering advice to customers about how to avoid the pitfalls in buying a car and having a car serviced. But the biggest reason they are furious with me is that they see my business growing relative to theirs. They see their customers coming to my dealership to buy their next car because they know they will be treated with respect, courtesy, and integrity.

I had one anonymous email from a dealer say that “the only reason I have four red phones around my dealership that customers can call me directly on is because I don’t trust my employees”. My answer to him was “the only possible way I would dare to have four red phones that customers can call me directly on seven days a week is because I do trust my employees”. Think about this. My dealership sells 400 to 500 cars every month and services thousands more, making it one of the largest car dealerships in the World. If my employees did not take very good care of all those customers, how could I possibly personally answer all those complaints? The fact is that the reason other dealers don’t allow customers to have direct contact with them is because they are afraid. In every organization there is a mentality of “never let the boss hear a complaint”. Of course, that could be a good thing if she never heard a complaint because all of her customers were happy. But 40 years of experience has taught me that the normal way that the boss never hears the complaints is by not allowing the customers access to the boss.

That’s your problem, Mr. Car Dealer. You think (or maybe you just want to think) your employees are doing a good job satisfying your customers because you don’t hear any complaints. Or maybe you think you are doing a good job in this category because the factory customer satisfaction surveys look good. Have you read the expose in Automotive News about how car dealers routinely rig customer satisfaction surveys? Salesmen offer customers a free tank of gas if they will bring them their “blank” survey so the salesman can fill it out themselves. Or, the salesman gives the manufacturer a phony email address so that the survey comes to a PC at the dealership instead of to the customers. There are lots of tricks like this to make a dealer’s customer satisfaction score look a lot better than it really is.

The only accurate way to measure customer satisfaction is by measuring how many customers who buy a car from you buy their next car from you…customer loyalty. In your service department how many customers bring the car they bought from you back to you for service…customer retention. Toyota has told their dealers that they will begin to measure customer satisfaction in this manner in 2008. My customer loyalty and customer retention is very, very high. If you are one of those car dealers who thinks everything is hunky dory, maybe you better take a look at these two numbers.

Friday, October 05, 2007

Earl Stewart on CNN Today - Friday 10/5

Check out Earl Stewart's interview with Susan Candiotti tonight during Wolf Blitzer's Situation Room. Between 7 - 8 PM EST.

Maybe Your Car Dealer is a Good Guy

I wrote the article below last year. It advises you what to do if you have a problem with a car dealership. I decided to run this article again after a conversation with Ted Smith, the president of the Florida Automobile Dealers Association.

Ted and I spoke the other day after he was called by a local reporter for the Palm Beach Post who is writing an article about me. This reporter told Ted that his research so far had found me to be a good and honest car dealer. Ted responded that, if he checked out any car dealer as carefully, this reporter would find that most car dealers are good and honest people too. I believe that.

The reason that car dealerships have a bad reputation, in general, is not because of direct dealings with the owners or general managers of the dealerships. It is though dealings with those employed by the owner/GM. This is why I give the advice you will read below about taking your complaint as high up the ladder of command as you can.



What to do if you are Treated Badly by a Car Dealer

Hopefully the sales or service experience with your car dealer went well. But, sometimes they don’t. Now what? The advice I give you applies to all business transactions, not just car dealerships.

Your first step should be to communicate your complaint ASAP to the General Manager or, preferably, the owner. Be sure that you are talking to the real owner or the real general manger. A General Manager is over all employees in the entire company. A general “sales” manager is not a General Manager. If you can’t reach the owner (Many car dealerships are either publicly owned or owned by absentee owners), ask to see the General Manager. Often times the owner or General Manager is not aware of everything that goes on with all of their customers and employees. They might have new employee that should not have been hired or received inadequate training. Or, they may simply have a “rotten apple” that should not be working there. The ease and speed with which you can meet and speak to a General Manager or an owner is a pretty good measure of the integrity of the company as whole. If the owner or General Manager cares enough about her customers to allow total access, it is probably a very good place to do business. In fact, it is a good idea to find this out before you do business.

If you cannot reach the owner or General Manager, contact the manufacturer who franchises the dealership. Car dealers have a contract with the manufacturer called a franchise agreement and this contractual agreement requires that they treat their customers with courtesy, efficiency and integrity. Most manufacturers have a customer hotline that allows you to call and register a complaint directly. The owner or General Manager of the dealership will be made aware of your complaint. As you might guess, the manufacturer has quite of bit of clout with their dealer. If a dealer does not live up to his side of the contract, his franchise could be canceled or not renewed.

The third step I recommend, if numbers one and two don’t work, is to contact a consumer agency like The Better Business Bureau or the County Office of Consumer Affairs. These agencies will send your complaint to the dealership and request a written reply. No car dealership or business wants an unanswered complaint in the file of a governmental or private consumer agency.

Your last resort is to contact an attorney. I list this last because hiring an attorney just about eliminates the possibility that you can quickly, amicably and inexpensively resolve your differences with the car dealer. Be very careful which attorney you choose. Try to choose one that is primarily interested in helping you and not in generating large fees for himself. Under the Florida Unfair and Deceptive Trade Practices Act, an attorney is entitled to his fees and costs from the defendant in a lawsuit if he wins. These fees can be much larger than the amount of your claim, motivating an unethical attorney to spend more time than is needed and dragging out a case to generate more fees than are necessary. This can be very dangerous for you because the car dealer’s attorney’s fees run roughly parallel to your lawyer’s and you can be held liable for those if you lose the case.

Hopefully you never have to resort to the final step of hiring a lawyer. In trying steps one, two, and three try to present your complaint as concisely and politely as possible. You have every right to be angry when you are taken advantage of, but try to let your anger subside before you speak to or write to someone about your problem. We all react negatively to someone who is profane, raises his voice, or is sarcastic. Your goal of communicating and resolving your complaint is best reached by communicating clearly, politely and concisely.