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Saturday, November 24, 2007

Grandma’s and Grandpa’s “Freedom Machine”

You may have read in the newspaper a couple of weeks ago about a 94 year old man who hit a woman riding a bicycle. It wasn’t the man’s fault; the woman, in her fifties, ran a stop sign. They put the old man in jail overnight and he was given probation because he was driving with no license. It had been taken away because he failed his driver’s test. He said he had to drive because he had to take his wife to the doctor and pick up medicine for her.

There is another reason that a lot of younger people don’t seem to understand why this old man still owned a car. If you are one of these people, think back to the first time you ever drove a car. Think back to the time you owned your first car. Can you recall that wonderful feeling of FREEDOM? No longer did Mom or Dad have to take you to school, to work, to the store, or to a friend’s house. Or, you didn’t have to take the bus, the street car, or impose on a friend who already owned a “freedom machine”. If you are a guy, do you remember how you felt when you first picked your girlfriend up at her home in your very own car? I don’t know about you, but I still feel a tingle when I think about it. I really can’t think of a more memorable experience in any young person’s life. Your first kiss is probably a close second [My first car was a 1951 Pontiac Chieftain & my first kiss was from Mary Ann Riggle during a “spin the bottle game”].

If you are one of those younger people who curse at that gray haired driver in front of you because she is driving too slowly, just remember that she is probably a safer driver than you. Newspapers like to feature stories of senior citizens having accidents and questioning their mental and physical faculties for driving but insurance companies charge senior citizens lower premiums than you. That means they have fewer accidents and cause fewer injuries. Admittedly that is partly because we seniors drive fewer miles but it’s also because most of us drive slower and more carefully than you.

My Uncle Charlie died eight years ago. He was 94. My Aunt Marion died within a year of Uncle Charlie. They lived in the same very modest, small house on Valencia Drive in West Palm Beach for fifty years. But they always owned a Cadillac and it was always parked outside in their driveway. Up until the time they were in their late eighties, the highlight of their week was to take a Sunday drive in their shiny Cadillac. Uncle Charlie always drove. When his eyesight got too bad to drive, he still kept that Cadillac in their driveway, always clean and shiny. His eyesight was still good enough so that, from his rocking chair in his living room, he could see that big Cadillac sitting outside (and so could his neighbors).

My father died when he was 86 and he drove a Pontiac TransAm up until the very last. He had cataracts removed from both eyes and back then, you had to wear “coke bottle” style glasses to see after this operation. He had no peripheral vision and there were a lot of scrapes, dings, and dents that appeared on both sides of that TransAm. Thank God he never had a serious accident. I saw Dad every day and I would see that the dents and scratches were regularly repaired. He always said he didn’t know where they came from and I never questioned him about that. Maybe I was wrong, but I didn’t have the heart to ask him not to drive anymore. I knew how important that car was to Dad and I knew how devastating it would be to him if he couldn’t drive anymore.

You may have heard of George Greenberg a. k. a. the “Mayor of Clematis”. He died a few months ago at the age of 91. He owned Pioneer Linens on Clematis Street in West Palm Beach, a store founded by his father, Max, in 1912. George and I were close friends and I delivered a eulogy at George’s funeral at the request of his grandson and daughter. George always drove an old Buick station wagon, although he was a wealthy man and could have bought any car he wanted. A couple of years ago, George finally treated himself to a new Mercedes Benz SLK-Class convertible! Boy did George look good in that car and he was always smiling when he drove it! When he was diagnosed with brain cancer and given only months to live, he finally had to stop driving his freedom machine. His grandson drove him to our monthly dinner at Carmine’s Ocean Grille and picked him up. It never was the same for George after that.

At my Toyota dealership in North Palm Beach, we have a lot of older customers. It’s just the demographics of northern Palm Beach County. My average customer is 55 and I have lots of customers in their seventies, eighties, and nineties. Maybe it’s because I’m a senior citizen too, but I especially like talking to my older customers and I’ve become personal friends with some. I can tell you from personal experience how important their cars are to them in their latter years. During your middle years when you have so much more going on in your life, your car becomes more utilitarian and you take it for granted. But when you retire and your life is not as hectic your car returns to the importance it had when you were sixteen…your “freedom machine”.

We recently leased a new Camry to one of our very good customers. This was the third car that she got from us over the last seven years and she had just turned 90. One of my managers, who has worked for me for 20 years and is a neighbor of hers, handled the lease. About a month after she took her new Camry home, her Grandson learned of the transaction and demanded that we rescind the lease. When we spoke to our customer, she let us know that her Grandson was very upset with her for leasing the car. He didn’t think she should be driving a car anymore and that she wouldn’t live long enough to make all the payments on a 4 year lease. We offered to refund all of the profit on the lease (about $850), but the Grandson insisted that we take the lease car back. This would cost my company thousands of dollars because of the depreciation a car takes on as soon as it is titled as a used car.

Yesterday afternoon my customer’s Grandson and Stepson visited me in my office. They continued to demand that I rescind the lease [Only the leasing company, Southeast Toyota Finance can rescind the lease] and absorb the thousands of dollars in depreciation on 1 month old used car. They suggested that I may have broken laws by exploiting the elderly and that if I did not succumb to their demands they would sue me. They had already called Toyota to complain about my actions. Not so politely, I asked them to leave my office.

This experience troubled me for the rest of the day and even last night and is what inspired this column. Now I understand why I was so angry at the actions of my customer’s Grandson and Stepson. They didn’t seem to understand how much that car meant to their Grandmother/Stepmother’s happiness and what an important thing her “freedom machine” was to her. I have to wonder how much of their ire was due to genuine concern for her or the potential financial impact on her estate. Her Grandson told me that she had put only 1,500 miles on her last car and what does she need a new car for? He just doesn’t get it! A new car is a lot more than just a way to get to the drug store. To a senior citizen it’s a source of pleasure, pride, and comfort, knowing that it’s in their driveway for everyone to see and it’s there if they need it.

One of my sons just called me to double check on the correct time for him to come over for Thanksgiving dinner today. I told him that I was writing this column and we discussed the subject. I also told him that I hoped that neither he, nor his two brothers would ever take away my “freedom machine”.

Thursday, November 15, 2007

Avoiding the Minefield of Fine Print in Car Ads

I wrote a column for this paper on September 7 entitled “Quick reference Guide to Fine Print in Car Ads”. Since then dealers have come up with so many more gimmicks and trickery that I felt compelled to write another column adding the latest bait and switch fine print disclaimers. All of these are taken directly from the PB Post auto classified section. You will probably need a magnifying glass to read some of these. I do.

Several of the fine print disclaimers you will read below are illegal under Florida law but the dealers constantly run them with impunity. For example, Florida law requires that the advertised price of the car must include all charges except for sales tax and license tag. The dealer fee must be included in the advertised price and some dealers either are ignorant of this law or just ignore.

I don’t understand why the Florida Attorney General’s office ignores this. In fact, I don’t understand why the local newspapers that run these ads don’t take a stand. I guess Bill McCollum and Tom Giuffrida don’t read my column.

Smart buyers read the fine print What do you suppose motivates this dealer to hide this sentence in the fine print of his very deceptive newspaper ads? Is this just a very bad joke on his customers? Does he think that the customer will forgive him for being baited and switched because he has also included this sarcastic phrase?

Some vehicles listed may be pre-owned This dealer will have used cars mixed in among the new cars that he has advertised. Unless you can read the fine print, you don’t find out until you come into the dealership.

“$1,000 cash offer” paid out in any form or combination of forms I’m not exactly sure what the dealer intends to communicate here, but interpreting this literally means he can pay you with a credit toward the purchase of another car, in extended payments over time, or maybe even in shiny beads and trinkets like we used when we bought Manhattan from the Indians.

Must take delivery today To get the advertised price you have to drive it home the same day. If you take delivery you also have to sign all of the papers including finance arrangements. This precludes you from doing any do diligence in getting competitive bids on the car you’re buying, the interest rate and trade in allowance.

Price includes $2,000 cash or trade equity This simply means that the price that you can read in the full sized print has been reduced by $2,000. If you find and can read the fine print, it tells you have to pay an extra $2,000 above the advertised price.

Hazardous Waste Disposal Fee This is just one of many phony fees you can be charged in dealers’ service departments. Other names dealers dreamed up for this extra, surprise profit to the dealer are shop supplies, miscellaneous supplies, and sundry supplies. This fee added by taking a percent of your total service bill up to 10%. If you take issue with this charge, there is a good chance the dealer will waive it.

700 miles per month This is a limitation on the number of miles you can accumulate on your lease car without paying a penalty at the end of your lease. The amount of miles allowed varies but they usually are much less than an average driver drives. If you average 15,000 miles per year, your penalty on a 36 month lease with a 700 mile per month limit and a $.25 per mile penalty would be $4,950!

Offers may be cancelled at any time without notice This is pretty self explanatory if you can read the fine print. If the dealer decides that he doesn’t want to honor the price offered in the his ad, he can just say “I changed my mind”.

Very short lease term & 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 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.

Military Rebate If you are on active duty in the US Armed Forces you qualify for this rebate. Of course the price you read in the paper already discounts the price by this amount and the dealer increases it if you are not a “soldier”.

College Graduate Rebate If you have graduated from an accredited 4 year college within the last six months, you qualify for this rebate. And the price in the paper is discounted by this amount.

Dealer Loyalty Rebate To qualify for this rebate that is already taken out of the advertised price you must have bought a car from this particularly dealer within the last year.

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.

Offer not available on advertised cars Folks, it’s hard to believe that even a car dealer would have the unmitigated gall to print an offer in his newspaper advertisement with an asterisk that referred to fine print saying it doesn’t apply to any cars in this advertisement.



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.

Friday, November 02, 2007

Results of Florida Senate Dealer Fee Investigation

An attorney, Renee Gordon, from the committee formed by Senator Ken Pruitt to investigate fees that car dealers add to the prices of their cars in Florida sent me a copy of this study last week. You can access this study directly by clicking on this Web link, http://www.earlstewart.com/ and then “Results of Florida Senate Dealer Fee Investigation” in red.

(1) The report defines these dealer fees as a “discretionary charge that represents costs and profit to the dealer for items such as inspecting, cleaning, and adjusting vehicles, and preparing documents related to the sale.” My argument with this definition is that when a business charges a customer for a business expense/cost, that charge becomes a profit to the business. Why is it necessary to use the phrase “costs for items such as inspecting, cleaning, and adjusting vehicles, and preparing documents related to the sale?” Once a customer pays the business for these costs, that payment becomes profit to the dealer. This profit is no different than the markup included in the price of the product the business is selling. And this is exactly where the dealer fee should be, included in the price of the car as part of the profit margin.
(2) All new car manufacturers that I know of reimburse the dealers for “such items as inspecting, cleaning, and adjusting new vehicles”. Charging the customers for this doubles the profit to the dealer for these items. This senate study notes that Florida law “prohibits dealers from charging customers for any pre-delivery service required by the manufacturer, distributor, or importer, for which they are reimbursed by the manufacturer, distributor, or importer.” Since all new cars dealers are reimbursed, why is this part of the disclosure that the dealer must print on his buyer’s order?
(3) The study says that the dealer fee varies among customers of the same dealership. And in a footnote, the study says “as with all charges imposed by the dealer, this fee may be negotiable.” This contradicts my understanding of the regulations on dealer fees. My understanding is that if the dealer elects to charge a dealer fee, he must charge every customer the exact same dealer fee. It is my understanding that if he removes the dealer fee from one transaction, he exposes himself to the liability of having to refund the dealer fee to all of his past customers. The way a dealer can get around this is to lower the price of the car by the amount of the dealer fee, but leave the dealer fee on the buyer’s order.
(4) The Florida Automobile Dealers Association is quoted in the study as saying that the dealer fee must be included in all advertising. This is not being done and, in fact, the rules leave “what is advertising” up to subjective interpretation. For example, prices on the Internet do not have to include dealer fees. Take a look at any South Florida newspaper, read the fine print, and you will see many ads excluding dealer fees from the advertised prices.
(5) FADA, the Florida Automobile Dealers Association spokesman told this study that a reason for the dealer fee was because manufacturers had reduced dealers’ profit margins. The fact is that manufacturers have no say so as to a dealer’s profit margin. A dealer may charge his customer any price he decides for a new car. A manufacturer can set the suggested retail price of a car, but it’s exactly that…suggested. In the first place most dealers would be thrilled to sell all of their cars at the MSRP and many dealers add price addendums beside the Monroney label marking the MSRP up.
(6) The study said that the state had no record of complaints on the dealer fee because they don’t separately categorize such complaints! This kind of makes me wonder how they do categorize complaints or do the sort them at all! There are two reasons why there aren’t more complaints. The first is that many car buyers don’t even know that they did pay a dealer fee and the second is that almost all dealers charge a dealer fee and tell the customers that they cannot remove the charge by Florida law.
(7) The study says that dealer fees in Florida range from $189 to $699. This is based on a very small sample (67 responses) from well over 1,000 car dealers in Florida. I know of several car dealers in Palm Beach County that charge over $699 in fees. At least one local dealer charges two fees…a $699 dealer fee and a $199 doc fee totaling $898. My guess is that the dealers with the higher dealer fees opted not to fill out and return the survey.

I was encouraged by these statements by the senate committee: “There is enough ambiguity in current law to allow that the consumers may not be specifically aware that the pre-delivery service fee is imposed, and the amount of the fee, prior to receipt of the Buyer’s Order. The law requires the fee to be “included” rather than “specifically delineated” in the advertised price. Furthermore, the fee is not required to be delineated on the dealer window sticker.”

Also, “Should the Legislature choose to address the issues identified in this report, it may consider expanding the notice requirements for the dealer imposed pre-delivery service fee, or, as other states have done, impose a cap on such fees.”

The ball is in your court now. You are the car buyers and you are the ones that are being deprived of full information on the prices of the cars you are buying. You are being lured into car dealerships by a car advertised at one price and when you come in, you are told that that car is no longer available but there are several more “just like it”. The only problem is that Florida law now allows the dealer to add their dealer fee to those cars “just like” the advertised car because they were not advertised. This is “bait and switch” pure and simple. No dealer in Florida should be allowed to quote a price on a car to any customer unless it is an “out the door price” plus tax and tag only.

If you agree with me, call, write or email your legislator and tell him so. If you remain silent, the chances are the Florida legislature will do nothing.