Saturday, December 27, 2008
This morning I was on my treadmill trying to work off some our Christmas feast and watching CNBC. A General Motors commercial came on about their “Red Tag” sale. The announcer said that the price on the red tag is the price you pay”. He says that these are not just the lowest prices of the year but the lowest prices ever! Now, bear in mind that this is a General Motors TV advertisement, not a GM dealer advertisement. What the ad did not say was that the dealers charge an additional profit called a dealer fee, doc fee, dealer prep fee, or any other name they care to give this extra, after-the-fact profit.
In this morning’s PB Post there was a print GM factory ad for the same red tag sale. In the fine print there was a statement that the red tag price was plus tax, tag, and “dealer fees”. Now this same disclosure was probably on the TV ad too, but I don’t have time to read this with my magnifying glass which is what I have to use on the newspaper ads. The bottom line is that General Motors Corporation is lying to its customers when they say that the red tag price is the price you pay. The red tag price is not the price a Florida car buyer pays. In addition, she also pays any amount the dealer chooses to add to the red tag price which he can also name anything he wants. In Florida there is no limit on how much a dealer can charge for a dealer fee. I know of Florida dealers charging at least $1,000 and I know of one Georgia dealer charging $2,350! These two dealers happen to be Toyota dealers but I’ll bet there are GM dealers who have fees in that ballpark.
Have you noticed how many Wall Street people are going to jail lately? How about that Bernie Madoff? Not only did he carry off the biggest swindle in the history of the world, but he mainly swindled his friends and charities. The Investment Banks lost so much trust that they have had to convert to conventional banks. The public has lost so much trust in the government that anytime a government official goes on TV, the stock market drops. I actually heard a commentator on CNBC says that traders are making profit by shorting the market whenever Hank Paulson appears live on TV and then covering as soon as he’s off the air.
The banks don’t trust the borrowers and are afraid to lend money. They don’t believe the appraisals and they don’t believe the accuracy of the credit statement. The borrowers don’t trust government so, even those who are credit worthy, are afraid to borrow money for fear things will get much, much worse. We have lots of companies and individuals with large sums of cash just sitting by because they have no trust in our country’s future.
I can’t solve the problems of the world, but I can offer some very good advice to car manufacturers and dealers. When your customers trust you, they will part with their money and do business with you. Unfortunately, it’s not easy to restore trust. You can’t run an ad that says “Trust Me” when you’ve been lying to your customers for years. You can only earn back that trust a little bit at a time. The good news is that once you earn the trust of one customer he will tell a dozen or more of his friends. Trust grows exponentially. However trust requires sacrifice. You have to forego the “fast buck”. You can’t advertise a sale unless it’s real. That means you really are selling your cars for less than you did last week and it usually helps to have an honest reason for why you will do that. You need to quit charging that dealer fee and include all of your profit in the price you quote your customers. You need to give your customers your best price when they ask for it by email, over the phone, or in person. If they ask for copy of their paper work, the buyer’s order, give them a copy. Yes, they might use that to compare your price with the competition, but that is their right in our free marketplace. Never give a prospective customer a price below what you know is possible to bring him back and then try to raise it when she does [this is called the low-ball].
By just being honest, respectful, and courteous to each of your customers you will eventually win back their trust and when that happens there will be no more recession.
Thursday, November 20, 2008
Comments to Florida Senate Commerce CommitteeTuesday, March 4, 2008, 2:30 PM, Tallahassee
My name is Earl Stewart. I was born in Ft. Lauderdale, FL in 1940. I graduated from PBHS in 1958, University of Florida in 1963, BS Physics, and Purdue University, 1964, MSIA. I worked for Westinghouse for four years as an Electronics Engineer. I jointed my father in business in 1968. He founded Stewart Pontiac in West Palm Beach in 1937. I’ve been primarily in the retail automobile business for the last 40 years. I’m currently the sole owner and general manager of Earl Stewart Toyota in North Palm Beach and have been in the same location for the last 33 years. My three sons are employed in my business and my wife, Nancy, is also involved part time.
I’ve been a member of the SFADA and the FADA for my entire career and have serviced as a director for both organizations and on the Executive committee of FADA. I am currently chairman of the board of FLADCO, a Florida dealer-owned cooperative buying company.
(1) What’s bad about the dealer fee?
(a) In most cases the customer either does not know he paid the dealer fee or believes it is some kind of federal, state, or local “official fee”.
(b) In practice dealers do not include the dealer fee in the price of the car that is quoted to the customer. It isn’t included in Internet quotes and also not in verbal quotes over the telephone or in person.
(c) Although Florida law says that the dealer fee must be included in the advertised price, this is not happening in most cases. In the first place, there is virtually no enforcement of this part of the law. I’ve shown Senators Jeff Atwater and Alex Diaz de la Portilla copies of auto classified ads flagrantly violating this part of the law addressing dealer fees. Those dealers who do technically comply, get around it in practice by what I call “the old stock number trick” [Explain].
(d) There is no cap on the dealer fee and each dealer chooses whatever fee he likes. There is no one name for the fee. The Senate Investigative Report discovered 22 names and they only scratched the surface.
(2) Why the Dealer Fee Law is a Bad Law?
(a) It is written in such a way that dealers’ legal counsel have advised them “If you charge one customer a dealer fee, you must charge all customers the same fee”. Now, when the rare very astute consumer questions the legitimacy of the dealer fee, the sales person is instructed to reply, “All dealers charge this fee” and “We are required by law to charge everybody this same fee”.
(b) There is a provision that a “group ad” does not have to include the dealer fee in the advertised price. The argument for the exception to this part of the law on advertised prices is that it would be “too confusing” to list all of the different prices resulting from different dealer fees by different dealers.
(c) The law does not address ads which show discounts from MSRP instead of an actual price. Because the MSRP is standardized, a discount from MSRP is no different than a quoted price.
(d) The law allows dealers to advertise just one car at the advertised price. Dealers don’t disclose this by using an obscure alpha numeric code, usually included along with all of the listed options and accessories. This, unknown to the reader of the ad, is a “stock number” which means that the dealer is advertising only this one car at the price which includes the dealer fee. A typical stock number looks like this…#A23554B. The ads often also say, “12 more models available at this price”. But the other models are not the advertised car and now the dealer can add the dealer fee on top of the advertised price. Car salesmen are not paid a commission on this advertised car. Car salesmen work on 100% commission and have no incentive to sell an advertised car. In fact, their incentive is to be sure that you buy a different car. The odds of a customer actually being able to buy an advertised car are “slim and none”.
(3) What is my true motivation for opposing the Dealer Fee?
(a) I strongly believe that I’m doing the right thing. The dealer fee is a profit to the dealer…pure and simple. The law alludes to it covering certain costs of the dealer and requires that the dealer so state next to his dealer fee, but this is fallacious. When a customer pays me a sum to cover one of my expenses, she is increasing my profits. Saying that a customer should pay for a dealers cost of paperwork or preparation of the car is no different than saying the customer should pay the salesman’s commission, the dealer’s advertising, or part of his power bill. Any business’s overhead costs should be priced into the price of its product…not passed along to their customer separately from the pricing of their product.
(b) Because all car dealers have different dealer fees and some range up to at least $1,000, we cannot compete fairly on a level playing field. I am unable to advertise prices because those dealers who have dealer fees can understate their real price, knowing that they can add their dealer fee on at the last minute. For example, a Toyota Yaris with an MSRP of $15,145 has a profit to the dealer of only $584. Al Hendrickson Toyota in Coconut Creek, FL has a $999 dealer fee. This dealer can advertise a new Yaris for below his cost and make better profit than I can if I advertised and sold the car at MSRP.
(c) Our customers should have the right to shop and compare prices of cars just like they do TV’s, refrigerators, computers, or any other product. The Monroney label made a standardized MSRP the law for new car manufacturers over 50 years ago. The purpose for this law was to give the consumer the ability to accurately compare prices between different car dealers. If a car buyer is considering a Chevrolet Impala with a specific MSRP, he can shop for the dealer who gives him the biggest discount. Now, with virtually every dealer adding a dealer fee of a different amount, the intent of this federal law is circumvented.
(d) I would be less than honest if I didn’t confess that I’m benefiting from the positive publicity I get by opposing the dealer fee. If I’m not successful, I’m still a winner because the car buyers of Florida do agree with me. Any dealer could achieve the same status as I by unilaterally giving up the dealer fee.
(e) Car dealers rank among the most vilified businesses and professions. Along with lawyers and politicians, we are commonly ridiculed by comedians like Jay Leno and David Letterman. My sons will take over my business one day and I have four grandchildren who may continue it even further. My oldest son, Earl III, told me something a few years ago that I will never forget. He said that he enjoyed working for me and he enjoyed his job very much but what was most important to him was that he was proud to tell his son, Jake, my grandson, what he did for a living.
Thursday, October 16, 2008
Some dealers add $250 to $1,000 in fees to a vehicle's price. Earl Stewart did, too. He had an epiphany and now he rails against those fees. Dealers are angry. They say he campaigns for his own profits, not for consumers
Toyota dealer Earl Stewart uses his radio talk show to blast what he calls dealers’ “dirty little secret” -- fees that are added to a vehicle’s agreed-on price.Photo credit: MIKE HAMEL
LIndsay Chappell Automotive News October 13, 2008 - 12:01 am ET
Sunshine and sea breezes characterize the cozy auto retailing world of southern Florida. That and contempt for auto dealer Earl Stewart.
Stewart, 67, whose father was selling Pontiacs in West Palm Beach when Franklin Roosevelt was in the White House, is a pariah in his palm-treed world.
Hoping to make auto retailing more desirable for his children, he launched a public crusade against the document fees that many dealers tack onto sales contracts. Many of his retailing brethren, who say he is using the do-gooder campaign to sell more autos, wish he would just shut up.
Dealers across Florida are aghast that Stewart wants them to stop a practice he calls "their dirty little secret": charging $250, $500 or $1,000 on top of an agreed-upon sales price for vaguely labeled "dealer service fees" or "document processing fees."
But the white-haired owner of Earl Stewart Toyota in North Palm Beach does more than just want them to stop. He buys TV time to needle them about it. He runs print ads to call attention to it. He has created an Internet blog, http://www.earlstewartoncars.com/ , to vent about it.
Stewart is using his AM-radio talk show, www.seaviewam960.com/EarlStewart.asp to drum up consumer awareness of it. He is pressing the Florida Automobile Dealers Association to end to the practice.
And last year, he led a one-man campaign to get Florida's legislature to make the practice illegal. As a result, half a dozen dealers were put on the hot seat in state Senate hearings.
All of that effort was to no avail — except that most of Florida's auto industry elite are now irritated at him.
"I guess I'm not very popular with the other dealers around here," Stewart says. "I haven't lost any friends over this. My attitude is that the people who have dropped me weren't my friends to begin with."
But if document fees were the whole story, Stewart would merely be part of a long-simmering consumer issue that flares up occasionally. For example, consumers in Missouri are suing dozens of dealers in that state and demanding dealer document fee refunds that could cost individual retailers millions of dollars.
No, Stewart's crusade is more personal.
Four years ago, at 63, Stewart found himself at the same frustrating crossroads as many other dealers. He presided over a prosperous dealership, just like the one he had taken over from his father. But Stewart's own children had no interest in taking over.
He turned to the oldest of his three sons, Stu. After majoring in anthropology at the University of Florida, Stu Stewart wanted to teach for a living. He also was interested in a career in Florida's luxury home business.
What is it, Stewart asked his son, that you don't like about the car business? His son was blunt, Stewart says: "He told me he thought car dealers sometimes have a dishonest image. And I had to admit he was right."
From left, Earl Stewart said sons Jason, Stu and Josh initially weren't interested in going into the car business. Stewart says Stu "told me he thought car dealers sometimes have a dishonest image." So he decided to alter his business practices to make the family business more appealing to them.Photo credit: MIKE HAMEL
Then Stewart had a scare. "I almost died," he says.
Stewart was diagnosed with colon cancer. The cancer prompted him to take a hard look at his priorities. He decided to remake the auto industry — or at least his corner of it — into something more appealing to his sons.
He stopped tacking $495 dealer fees onto his customer contracts. He acknowledges that store profits initially dropped $200 a unit as a result, although they have improved since then. But a gratifying thing happened: More customers came into the dealership in response to his no-fee practice. Since dropping the fees, store volumes have more than doubled, he says.
In 2003, the last full year of charging fees, his dealership sold 2,039 new vehicles. In 2006, he sold 4,172 new cars and trucks. Through August 2008, he has sold 2,492 new vehicles.
He began to speak out publicly about what he believes is wrong with auto retailing. He recently railed in his blog about the sale of nitrogen tire refills as a deluxe service, decrying claims that nitrogen refills, at $25 a tire in some cases, are any better than ordinary air refills.
Many of his competitors have been baffled by his zeal. Even those who agree with him wish he wasn't making such a stink. Stewart is convinced that many of his critics who post anonymously on his blog are fellow Florida retailers. One of them recently chided him for criticizing his fellow dealers and of trying to be a "modern-day Robin Hood."
"The world doesn't need Robin Hood anymore," the critic told Stewart. "What we also don't need is a one-man show trying to run down every dealer on the planet for the good of his own profits."
In August, Stewart's campaign escalated into a courthouse fight over not only the document fee issue but his integrity. On Aug. 12, Stewart filed a lawsuit in Palm Beach County Circuit Court alleging that Ed Morse Honda in Riviera Beach slandered him in a radio ad over the issue.
The ad did not mention Stewart or his dealership by name. But according to the lawsuit, an announcer said that "a car dealer" claims in his ads that he doesn't add a "dealer fee," but "he packs the equivalent of a dealer fee — or more — in your price. Where you can't see it."
Ted Morse, CEO of Ed Morse Automotive Group and another pillar of the southern Florida industry, declined to discuss the ad, the lawsuit and Stewart's campaign in general.
Ted Smith, president of the Florida dealers association in Tallahassee, is willing to get into it. Smith's organization has been taking criticism from Stewart for years.
"Earl Stewart is a great auto dealer," Smith begins. "And I've had discussions with him about this. I've tried to make the point with him that, look, we've got enough problems with our image in this business without giving air to them in public.
"I'm glad that Earl adheres to positive pricing practices at his dealership. I applaud that. But I don't applaud him striking out at others."
What's the problem?
Smith and the Florida dealers association heartily defend the practice of adding dealer fees to sales contracts as customers wait in the dealership finance department. "It is legal and it is not a deceptive practice," Smith says.
Smith vows to fight any effort to end the practice or have legislation clamp down on it. He believes it will continue to roil the Florida industry as long as Earl Stewart continues to campaign about it.
Meanwhile, Stewart is measuring success by a different yardstick. His no-fee policy and his public stance on dealer habits helped draw his son into a management role at the dealership. Stu Stewart is now running the company's Scion operations. Stu's two younger brothers also have joined the business.
And three years after having colon cancer surgery, the elder Stewart reports that he is cancer-free.
"The general rule is that if you make it for five years, you've beaten it," he says. "But it sure puts your life in perspective. It makes you think about what you're doing and why you're doing it.
"I know a lot of guys out there depend on these dealer fees — especially right now when the economy is so bad. But I did away with them, and my business got better. I can be proud to talk to my kids about what I do for a living. That's important to me, and it's important to my sons."
Thursday, September 18, 2008
The answer is actually quite complex. The solution is not.
The first point to remember is that the EPA mileage estimates are derived using pure gasoline. Consumer gasoline (that which is available on the open market for general use) contains up to 10% Ethanol. You can do nothing about this. EPA estimates are also done on a test track, not in “real world” driving situations. They do not take into account traffic, trains, weather, other drivers or the countless other factors we encounter in daily life.
Here are some tips to help maximize fuel economy. They are geared primarily for the Prius, but most work just as well on other cars.
Tip #1. Inflate your tires. Low tire pressure causes increased resistance and wastes fuel. Low tire pressure also causes excessive edge wear on your tires, shortening their life.
This sticker is located on the driver’s door opening. Note the recommended pressure is 35 front and 33 rear. This is the MINIMUM pressure that should be in your tires. On the sidewall of the tire is another number, 44 psi. This is the MAXIMUM pressure that should be in your tire. A tire with less pressure rides softer and uses more fuel. A tire with more pressure rides slightly harder and uses less fuel. Set your tires at 40 psi and watch your mileage increase!
Tip #2 Air Conditioning. Prius air conditioning uses electricity to turn the compressor, while conventional cars use a belt on the engine. When the compressor is running, it uses power. Power that comes from gasoline. Automatic air conditioning means the ECU (the computer) can turn the compressor off when less cooling is needed. Set your A/C to a level you find comfortable. 76 degrees is comfortable for most people. “Lo” temp setting runs the compressor much more and uses more power. Remember, everything that uses electricity uses more gasoline. The power has to come from somewhere! The gasoline engine supplies the electricity for everything on both Hybrids and Conventional cars. Headlights, radios, blower fans, all want their share of power.
Tip #3 Slow Down and Smell the Roses. Excessive speed uses more gasoline than anything else. “Jackrabbit” starts and hard acceleration combined with hard braking wastes fuel. Prius is designed to get the best economy in the city. Slow, easy acceleration means the car needs less electricity to get up to speed and therefore less gasoline. Coasting allows the gasoline engine to turn off and not use any fuel at all! Sitting at traffic lights, the gasoline engine will also shut off and save fuel. Driving at steady speeds between 30 and 40 mph allow Prius to opportunity to make use of the electric motors and not use the gasoline engine for additional power.
Tip #4 Avoid little trips. Some people tend to drive only 1-2 miles to the store then the car sits for an hour or more. Then they drive 1-2 miles home again and again the car sits. These trips do not allow the gasoline engine to be run to operating temperature. Therefore, the engine is never shut off during the travel times! Plan your trips to make them in one big circle. Make the best use of Prius’ capabilities.
Tip #5 Lighten the Load. The more weight you carry in the car, the more gasoline needed to move it down the road. Do you really need those golf clubs every day? What about that bag of clothes you will take to the Goodwill someday soon? Every little bit helps.
Tip #6 Oil Changes. Dirt doesn’t weigh very much. Dirty oil, however, weighs more than you think. Old oil has collected dirt from your engine and holds most of the small particles in suspension. Changing your oil can improve your fuel economy. Regular maintenance is important.
Try these tips and track your fuel mileage the proper way. Fill your tank and record the mileage on the odometer. Drive until empty then refill and record the mileage again. Calculate how many miles driven divided by the number of gallons of gasoline pumped. That is your proper mileage. Get 6-8 readings and find the average. Remember to always stop pumping fuel when the pump clicks off. Do not top it up. Be consistent.
And always remember to drive safely!
-Rick Kearney is one of three Toyota Certified Master Diagnostic Technicians at Earl Stewart Toyota and the dealerships Resident Hybrid Genius. Rick travels with Earl regularly on the Lecture Circuit dispensing advice and answering questions for Florida consumers about their vehicles. Rick is now in the process of training Palm Becah County first responders about hybrid vehicles so they may safely conduct their rescue operations.
Monday, September 15, 2008
At that time, he said the tests would take up to a year, and he promised to share the test results with me and everybody else.
Readers of this blog and my Hometown News column are familiar with two previous articles I wrote on nitrogen in tires: “Don’t pay for nitrogen in tour tires” and “Nitrogen scam foisted on Palm Tran.”
You can read or re-read both of those articles by clicking on my blog, www.EarlStewartOnCars.com (or go to the archives section on HTN’s Web site).
I also posted the “Consumer Reports” article, “Tires-Nitrogen air loss study,” from Oct. 4, 2007 on www.EarlStewart.com (click on nitrogen-filled tires information).
This one-year study is the strongest, most authoritative proof that there is no measurable advantage to using nitrogen instead of regular air in your tires.
I sent Chuck Cohen three e-mails, beginning last March, asking him for any information he might have about the results of his testing. I received no replies until he finally answered my last e-mail this morning, Sept. 12. He wrote, “I will get back to you in the next day or so with a longer response.”
I received the below e-mail from Mr. Cohen, just before the deadline for this column. It’s now clear to me why he did not answer my e-mails but it’s not clear why he did not publicly announce the six-month delay in testing as he did the earlier erroneous date.
“Sorry for any delay in getting back to you, but as you are probably aware, we had several major things going on over the last week or so, including a fare hearing on our proposed fare increase for our paratransit service, that had to take precedence.
“While we did publicly announce that we were going to be testing the use of nitrogen in 2007, the actual testing did not begin until 2008. That was due to a delay in getting the nitrogen units installed in our North County (WPB) facility until January 2008.
“Our fleet conversion then took approximately 30 days and our testing began in February 2008. Our current plans are to complete our testing by the end of January 2009.
“I will insure that you get a copy of the test data when the test is done and our results are written up. Thanks for your continuing interest in this project.”
I responded by asking Mr. Cohen the following four questions:
• When you “publicly announced” that testing would begin in September 2007 and would be completed within a year, why didn't you also publicly announce that testing was being delayed for six months?
• I e-mailed you in March asking you about the testing results while still under the impression, as was the public that the tests were in process. I e-mailed you two weeks ago, asking the same question and a third e-mail one week ago. Why did you not respond to my e-mails until last Friday?
• When will your tests that commenced last February be completed?
• Will you advise the public and me if you delay the testing again?
Remember that this test is being conducted at an approximately $65,000 taxpayer expense and it is being conducted months after the “Consumer Reports” study was already published.
There was another article in “The New York Times” within the last year that came to the same conclusion about nitrogen in tires being worthless. The author, Tim Moran, has asked me to keep him posted on the developments with Palm Tran.
In an e-mail from Tim this morning, he suggested that, in addition to profit, one of the reasons so many car dealers are selling nitrogen is that they believe it does customers’ tires no harm.
I e-mailed him back and said, “What these folks don’t understand is that there is a detrimental effect when you make people believe in a product that doesn’t work. Item No. 1 in your list is that ‘it does no harm.’”
Drivers should really check their air pressure at least monthly, but with the “magic nitrogen” in their tires, they probably won’t feel it’s necessary.
Shark cartilage is “harmless too,” unless you don’t see your doctor regularly for checkups because you believe you can’t catch cancer.
I checked with four different car dealers to see what they are charging for putting nitrogen in tires.
John Pierson Toyota of Stuart charges $50. They used to have an addendum label on all of their cars with a charge of $199 for nitrogen. I guess that was a little more than people were willing to pay.
Schumacher Infiniti and Royal Palm Toyota both charge $39.95 and Maroone Toyota in Fort Lauderdale charges $37.95.
Tire Kingdom is also pushing nitrogen and it appears as if most car dealers in South Florida are selling it, too.
One of the reasons I’m pressing Chuck Cohen, Palm Tran and Palm Beach County government officials for justification of using nitrogen in bus tires is the fact that their using nitrogen adds legitimacy to all of these service departments that are peddling a worthless product to you, the consumer and tax payer.
If Palm Beach County government officials give their tacit endorsement of nitrogen by continuing to use it in their bus tires, you can bet that every seller of nitrogen in Florida will tout this as absolute proof that nitrogen in tires gives better gas mileage and longer tire wear.
Saturday, August 30, 2008
In fact, if it wasn’t a secret it would be totally useless to the dealers. This is why, when the FADA with their lobbyists and politicians approach me to discuss a compromise law that will give “complete disclosure” to the car buyer of the dealer fee, I know they can’t be sincere. Think about it. (1) Car dealers admit that the dealer fee is pure profit [they also refer to it as recapture of costs but that is synonymous with profit]. (2) All the rest of the dealers’ profit is included in the price he quotes you on the car. (3) Common sense and “Accounting 101” says that businesses should include all of their costs/profits in the price of their product or service. (4) What reason can there be for a car dealer electing to remove a portion of his profit from the price he quotes you on a car, renaming it “dealer fee” [or one of at least 22 other nebulous names according to the Florida Senate Investigation of the Dealer Fee] and then adding that profit back in when you sign your paperwork upon the delivery of your car? I submit that there can be only one answer to that question. That answer is that the car dealer wants you to think that the price he quoted you includes all of his profit and is the complete out-the-door price of the car. When I debate the dealer fee with car dealers I often say that if they can satisfactorily answer that one question, I will drop my opposition to the dealer fee. So far, I’ve found no one who can satisfactorily answer that question without admitting that the dealer fee is an unfair and deceptive trade practice.
Since the dealer fee could not exist if it were not a “dirty little secret”, you have to wonder why it has not been exposed before now. Why haven’t our legislators jumped to the defense of the consumer? What about the newspapers, TV, and radio…the media? You would think that the dealer fee would make a great campaign issue for a politician, wouldn’t you? I don’t know what percent of Florida registered voters have bought cars in Florida and paid a dealer fee but I’m sure it would be over 99%. You would think that a politician seeking reelection would jump on the “dealer fee bandwagon”. Making it illegal to quote a price on a car without including all of your profit in that price would save consumers of Florida hundreds of millions of dollars! You would also think that a newspaper or TV station would jump all over this! What a story!
We have over 1,000 car dealerships in Florida. These are relatively large businesses employing tens of thousands of Floridians and paying millions of dollars in taxes. The average price of a new car now is over $25,000. The Florida sales tax on one average car is $1,500! Car dealers are one of the largest advertisers in the state, spending hundreds of millions annually with newspapers, TV, and radio. Car dealers are very well organized. Virtually every larger dealership and most smaller ones are members of the Florida Automobile Dealers Association, FADA, headquartered in Tallahassee. You might wonder why the FADA would locate their headquarters in Tallahassee and not Orlando which is centrally located. That’s because FADA’s main function is to lobby Florida’s legislature. The FADA is a political lobbying group who gives strong financial support to all senators and legislators who “play ball” with FADA.
Are you beginning to get the picture? I’ve been told “off the record by politicians that they will not go against the FADA because their support is too important to their reelection and because without their support you cannot get a bill passed into law. I’ve been told by reporters who tried to run stories about the “dirty little secret” of the dealer fee that their editors “killed the story”.
You have heard or read the homily, “Money is the Mother’s Milk of Politics” and this is true. Well, advertising revenue is the Mother’s Milk of the media. Newspapers are suffering especially, losing ad revenue to the Internet and other media. They cannot afford to offend car dealers in their editorial or news departments because car dealers are either the largest or the second largest advertiser in most newspapers.
Just as I won’t paint all car dealers with the same brush, I won’t paint all of the media. Hometown News has run my weekly column for over two years. I know that it has cost them some advertising from car dealers but their publisher, Steve Erlanger, has the courage of his convictions. He is a journalist with the highest ethical standards for both his editorial and news departments. Radio station Seaview AM 960 airs my weekly talk show every Saturday morning between 9 and 10. This is a live call-in talk show where I expose unethical and illegal activities of some car dealers. For a long time no car dealer would advertise on Seaview AM 960, but there station has gained such good ratings recently that a lot of car dealers are now advertising with them in spite of my talk show. I congratulate Chet Tart, Seaview AM 960 General Manager, for his integrity and high journalistic standards, just as I do Steve Erlanger.
My lawsuit against Ed Morse Honda is not for publicity as car dealers have accused. The court is the only alternative I have when politicians have been silenced by FADA and the media has been silenced by car dealers’ threats of advertising boycotts. The court won’t remain silent when the jury returns their verdict. Every juror who has bought a car in Florida and paid a dealer fee [most, if not all, of the jury] will positively render a verdict for me after they discover the “dirty little secret”.
Saturday, August 23, 2008
Some say that my lawsuit against Ed Morse Honda for slander and violation of the Florida Deceptive and Unfair Trade Practice Act is just a squabble between two car dealers who will be airing their “dirty laundry” in public.
This couldn’t be further from the truth. I will prevail in court, and I have no doubt of this. How else can a jury possibly decide when they have all of the facts and understand how deceptive the dealer fee truly is? Most likely every juror has bought cars in Florida. Those who paid a dealer fee and didn’t know it until now will be furious. Those that saw the fee but thought it was like a state, federal, or local “official fee” will be angry when they learn the truth. Those few who understood what the dealer fee was and were forced to pay it anyway, will be very happy to see that they can do something to end dealer fees.
There are two parts to my suit…slander and violation of the Florida Deceptive and Unfair Trade Practices Act. The damages awarded me by the jury for slander will be donated to charity. When the dealer fee is found to be in violation of the Deceptive and Unfair Trade Practices Act, it will be the end of the dealer fee in Florida. This is why my lawsuit is very important to you and every other Florida car buyer. This verdict will be worth tens of millions of dollars to Florida car buyers.
Below are my comments at the press conference on Wednesday, August 21, the date I filed the suit. And below that is my press release which got less coverage than it could have due to tropical storm Fay.
I'm announcing today the filing of a lawsuit against Ed Morse Honda for slander and deceptive trade practices. I will donate any damages that I am awarded to local charities.
The lawsuit stems from a radio ad this dealership has been airing alleging that I am hiding dealer fees in my prices
I know he's targeting my dealership in the ad because I'm the only dealer in Palm Beach County, and nearly all of the state of Florida, who advertises on TV that I don't charge a dealer fee.
A dealer fee is pure profit, ranging from a couple of hundreds of dollars to sometimes $1,000, added on to the price of a car after the price is negotiated.
Most people don't know that it's not a tax -- they think it's a government mandated fee -- because it's on the sales agreement at the end by the taxes.
It is impossible to comparison shop for cars when a dealer fee is charged, because my price will look higher than my competitors because they add the fee on at the end after the price has been negotiated and the customer doesn't know it's there until they're signing the papers for the final sale.
I am suing for slander because the Ed Morse ad is false and attacks my reputation as an honest car dealer.
I have gone to great lengths to earn a reputation for honest dealing:
My dealership is built on the philosophy of Customers for Life. All of my employees must read this book and practice its concepts in dealing with our customers.
Any customer with a complaint or a compliment can pick up one of four red phones connected directly to my cell phone.
I have mounted a statewide campaign to outlaw the dealer fee because I feel it's unfair to consumers. I testified before the Florida Senate Commerce Committee and have addressed this issue with the Florida Automobile Dealers' Association
I write a weekly newspaper column on how to buy and care for a car and answer consumer's questions every morning on SeaView Radio and on my hour long call in radio show every Saturday morning from 9- 10 a.m. on Seaview 960
I traveled throughout the county addressing groups on ”How to Buy a Car without getting Ripped Off," exposing all of the tricks of the trade practiced in most car dealerships.
The suit also claims that Ed Morse Honda is violating the Florida Deceptive and Unfair Trade Practices Act because he does not disclose his $699 dealer fee as required by law.
If the court agrees with me that the charging of dealer fees is a violation of this law, it will be great news for car buyers throughout Florida.
They will be able to comparison shop accurately and will pay less to the car dealer without the dealer fee. These savings could amount to tens of millions of dollars.
Earl Stewart Toyota of North Palm Beach
Sues Ed Morse Honda for slander and deceptive trade practices
Suit stems from radio ad alleging hiding of dealer fee
Stewart pledges to donate anticipated damages to local charity
A lawsuit has been filed by attorneys representing Earl Stewart Toyota of North Palm Beach seeking an immediate injunction against the airing of a radio ad by Ed Morse Honda claiming that the car dealer hides a dealer fee in the sales price of his cars. The lawsuit also seeks damages against Ed Morse Honda for slander against Earl Stewart Toyota of North Palm Beach and for damages resulting from Ed Morse Honda’s alleged violations of the Florida Deceptive and Unfair Trade Practices Act.
Earl Stewart will donate to charity all of the jury’s award for his damages by Ed Morse Honda for slander. Stewart is also bringing the suit on behalf of Florida car buyers. A declaration finding the use of the dealer fee to be a deceptive trade practice could amount to tens of millions of dollars in savings to consumers buying cars in the state.
The lawsuit was filed Thursday, August 21 in Palm Beach County’s 15th Judicial Court by Michael Weeks of the Ward, Damon and Posner law firm on behalf of Earl Stewart Toyota of North Palm Beach.
The lawsuit alleges that Earl Stewart Toyota of North Palm Beach has suffered damages due to lost car sales resulting from an Ed Morse Honda radio ad which claims to expose a local car dealer who claims he doesn’t charge a dealer fee but actually “packs the equivalent of a dealer fee …in your price…where you can’t see it.” Since Earl Stewart Toyota of North Palm Beach is the only car dealer with television advertising in Palm Beach County stating that he does not charge a dealer fee, the ad specifically targeted the dealership and is slanderous, the suit states. Damages are sought because Earl Stewart has, according to the suit, “built its reputation and focuses much of its advertising upon the strength of Earl Stewart Toyota’s honesty with its customers and integrity in the automobile industry.”
The lawsuit alleges that Ed Morse Honda is in violation of the Florida Deceptive and Unfair Trade Practices Act because the dealership charges a $699 dealer fee on all of its car sales, but does not disclose it in price negotiations, in violation of the act. The act allows for “anyone aggrieved by violation of the Act to obtain a declaratory judgment” against the party committing the violation.
The suit claims that not disclosing the dealer fee in advertisements or price stickers “results in a deceptive environment for consumers and hurts dealers who disclose all of their profit in the prices they quote.” The result is that consumers cannot fairly comparison shop for cars from dealer to dealer if one price includes all of the dealer’s profit while another does not and has the extra profit added on as a dealer fee after the price is quoted. The suit claims that this practice is “an obvious evasion of Florida Law” and “flies in the face of the purpose of the Florida Deceptive Trade Practices Act.”
Earl Stewart is known as an outspoken advocate for eliminating the dealer fee in Florida and this year testified for its elimination before the Florida Senate Commerce Committee. This spring he initiated a state-wide internet campaign to urge consumers to contact their state legislators to pass legislation outlawing the dealer fee.
Earl Stewart Toyota of North Palm Beach is a four-time recipient of The President’s Award, the highest award Toyota gives for customer satisfaction. The dealership is the only Toyota dealership from Vero Beach to Ft. Lauderdale to win the award this year. Stewart also is a featured speaker at numerous civic groups, clubs and public libraries on the topic of “How to buy a car without getting ripped off.” He also answers consumers’ questions on a live hour-long radio show broadcast each Saturday at 9 a.m. on Seaview 960 AM and writes a weekly consumer article for Hometown News. These articles are part of his blog site offering advice to consumers on buying and servicing cars, found at http://www.earlstewartoncars.com/. Stewart said he plans to donate any damages received from the lawsuit to a local non-profit organization.
Earl Stewart Toyota of North Palm Beach sells more hybrid vehicles than any other car dealership in America, outside of California where strict emission laws boost hybrid sales. He is the number one volume Toyota dealer in Palm Beach County.
You can read the entire lawsuit, by clicking on http://www.earlstewart.com/.
Monday, August 04, 2008
[Disclaimer: 24 month lease with approved credit, 3-9-9-5 down plus tax, tag and title]
“Hi…this is Lia again…from Ed Morse Honda…with a little exxpossee..
Last night I’m watchin’ TV in my jammies…and see a car ad that’s full of …well…
Bull_ _ [Sound effect: cow moo].
This car dealer says…he doesn’t add a dealer fee…on top of your price. He doesn’t tell you…he packs the equivalent of a dealer fee – or more – in your price. Where you can’t see it. Insulting right?
Well, Ed Morse Honda has an honest deal for you.
This year is our once-a-year Clearance Event.
Every one of our gas sipping Hondas is reduced.
Accords with 31 miles per gallon are now just $159 a month…and 36 mile per gallon Civics are reduced to $16,203.
Plus, Ed Morse has clearance financing…below 1%.
And…we also have a basket of free bull_ _ [SFX: cow moo] horns…
And when you see one of those no dealer fee TV ads…give it a toot!
And get a real deal at Ed Morse Honda
On I-95 and Blue Heron Blvd.
You will notice that the commercial does not name me or my dealership. However, since I’m the only car dealer “in the World” advertising on TV to make the dealer fee illegal, it’s pretty obvious that this slander was directed at Earl Stewart and Earl Stewart Toyota. Now, I’m not one who likes to sue anybody. In fact, I don’t remember ever filing a lawsuit, but this commercial directed against my company and me is just going too far. How dare Ed Morse say that I “pack the equivalent of a dealer fee or more in the price where you can’t see it”! Ed Morse and all of the other dealers who charge a dealer fee are the ones trying to hide something from their customers. Ed Morse’s dealer fee is $749. When you are quoted a price on car by one of his salesmen, that dealer fee is not included. When my sales people quote you a price on a car or you look at the sticker or other price on the car, it’s an out-the-door price plus tax and tag. Which of us is hiding something from our customers?
When you get a price from my dealership, you get no “surprises” when you sign the paperwork. That’s when customers who pay dealer fees usually discover that the price of the car is higher than they were told. In many cases, they never realize that the dealer fee was added or they think it’s some like of “official” local, state, or federal fee.
The commercial above says, “Well, Ed Morse Honda has an honest deal for you”. Is it honest to put a disclaimer, out of context, at the beginning of the commercial which is difficult to understand because the disclaimer is “mumbled”, very rapidly at reduced volume? This is not to mention that the disclaimer is about a lease payment that isn’t mentioned in the commercial until near the end. The misleadingly low $159 per month payment is spoken loudly and clearly. The disclaimer that you can’t understand says you have to make a down payment of almost $4,000, but it makes this unclear when it says “3-9-9-5 down”…just one more subterfuge to make sure you don’t understand you have a large down payment on a short, 24 month lease, to arrive at the $159 payment. A $3,995 down payment on a 24 month lease is the equivalent of $166.45 per month. In other words, the advertised monthly payment is really less than half of the real lease payment. How “honest” is this?
You have to ask yourself, what would possess a car dealer to attack me for lack of integrity because I don’t charge a dealer fee. It doesn’t seem rational does it?…except maybe in Bizarro World. Furthermore, to make that attack in a radio commercial which is itself deceptive is even more irrational. What drives these dealers to irrationality? I believe it is emotions”…predominantly fear and/or anger. As you know I’m virtually the only car dealer in Florida that does not charge a dealer fee. I lobbied the legislature in Tallahassee last year to make this “dealer license to steal” illegal in Florida. I am lobbying again this year and the prospects for my success in the 2008 legislative session are quite good. I’ve been approached by and met with legislators and lobbyists who want to talk compromise. They wouldn’t do this if they were confident. They are terrified that the dealer fee may become illegal. Dealers are afraid to lose this “profit” which they can now disguise as the reimbursement of a “fee”. This attack by Ed Morse Honda to impugn my reputation and integrity is not the first attack launched against me by Florida car dealers. A few months ago a group banded together to conduct an illegal boycott of my dealership. They aborted this effort upon receipt of a letter from my anti-trust attorney who informed them that such an action would subject them to reimbursing me for treble damages in civil court and criminal prosecution by the Justice department.
Monday, July 28, 2008
A woman wrote me a letter this week in response to one of my columns. Her husband had recently passed away and this was the first car she had bought on her own. The dealer did not have the model car with the accessories she wanted and was unable to locate one at another dealership. She did not want to make a decision without seeing the actual car she wanted to buy but the salesman and manger talked her into signing a buyer’s order, assuring her that she was under no obligation to buy. They also included two accessories that she did not want because “the manufacturer required it”. I’ve heard of distributors ordering cars with certain accessories from the manufacturer which essentially makes them “standard”, but never “$250 floor mats” which was one of the accessories she mentioned. I get a lot of emails, phone calls, and letters from people who made a bad deal in their car purchase and want to know how they can get out of it. This is actually one of the less egregious, but I chose it because it was a simpler and shorter example.
There is strength in numbers when shopping and negotiating to buy a car. In fact, this applies to any serious decision in life. You might be the sharpest, shrewdest negotiator on the block, but your odds of striking a better deal and not get taken advantage of are enhanced when you have others on your side. Personally, I make a habit of always having at least one partner when I am engaged in a serious, adversarial decision making process. When meeting with those on the other side, I make it a point to arrive with at least as many people as they have present. One reason is the psychological factor. When you are in an office by yourself with 2 or 3 others, it can be intimidating. Another reason is that you always have people on your side to corroborate what was said. If a salesman or a sales manager makes a verbal promise that can be corroborated by a friend or two, it is far less likely to be broken. It will also hold up in court, if it has to come to that. Of course, the better solution is to see that all promises are committed to writing.
Buying a car, especially a new car is more often than not, an emotional decision. Having a friend or two with you can help you make more of an analytical, logical decision. Another point of view is always useful when making an important decision. Also, having one or two friends with you slows down the process to a level more easily absorbed and understood by you. A friend will often think of a question you should have asked but forgot.
Ideally you should bring someone with you who is skilled in negotiation and experienced in buying cars. However, if you don’t know someone like that, somebody is better than nobody.
By the way, most car dealers are unhappy when prospective customers bring in advisors and friends. Naturally they feel that way because they recognize their chances of making a fast, very profitable sale are diminished.
Saturday, July 19, 2008
But, there are still a huge number of these gas guzzlers on the roads, in dealers’ inventories, and parked in driveways and garages. What will become of these behemoths? You can be sure of one thing, they won’t just disappear overnight. Eventually they will be sold and, of course, that means somebody will buy them. Because of the rapidity with which gas prices rose recently, the demand for gas guzzlers evaporated virtually overnight. CarMax, the largest seller of used cars in the world, said that the value of SUV’s, pickups, and vans dropped more in the last 3 months than they would normally drop in a year.
In my opinion, the values have plummeted even more that this. CarMax judges wholesale values of vehicles based on those that are bought and sold at wholesale auctions. There are hundreds of thousands of gas guzzlers sitting on car dealers’ lots which, under normal conditions, would be going to the auctions for sale, but are not. Why? Because car dealers are in a state of denial. Imagine being a used car manager whose total compensation is a percentage of the profit he produces on his retail and wholesale profits every month. Three months ago his inventory of 100 vehicles was worth two million dollars. Suddenly it’s worth 1.6 million dollars…a loss of $400,000. But right now that’s only a “paper loss” and that used car manager, general manager, and dealer only realize the loss if they take these vehicles to the auction and sell them to the highest bidder. If they keep them on the used car lot they can “pretend they’re worth more” or “hope” that the value of gas guzzlers will rise. By not taking the true loss, their paychecks and the company’s financial statement aren’t affected.
What does all this mean for you? If you are one who actually needs an SUV, pickup, or van, [for your business, tow your boat, accomodate a large family] it’s not a good time to buy a used one from a dealer. The dealers’ cost on gas guzzlers on his lot is vastly inflated because of the dealers’ refusal to accept reality. The dealers’ retail prices of gas guzzlers are based on a markup from an inflated cost which leads to an inflated retail price. This is similar to what has happened in Florida, California, and Arizona with housing prices. Sellers are in denial about how far the value of their homes have dropped and are just sitting on unrealistically high prices, praying for a miracle. This means that home sales have virtually stopped in these states. Gas guzzlers will begin to sell at a normal pace when their prices finally come down to the market value. That is the time to buy a gas guzzler if you need one. When this time will arrive is hard to predict, but it will happen a lot faster than it’s happening with housing. I’m sure that you will have some great buying opportunities for used gas guzzlers by the end of this year. Unfortunately some of those opportunities will be the result of banks being forced to liquidate bankrupt dealers’ used car inventories.
Be very dubious of offers on the radio, TV, or the newspaper for gas guzzlers that seem “too good to be true”. There are a huge number of cheap gas offers tied to the sale of gas guzzlers. Chrysler Corp. is offering $2.99 gas for three years, but read the fine print. The mileage is limited as are the models it applies to, and the actual dollar value of the offer is less than the rebates that Chrysler is also offering. You must choose only one…the rebates or the gas card. People are better off to take the rebates and pass on the $2.99 gas card. Chrysler knows this and is using the gas card just to “get you in the door”. Dealers are advertising even greater “free or cheap gas scams”. One local dealer is offering $500 worth of free gas just for a demonstration ride. The fine print says, “while supplies last” and only one $500 in gas will be given away every 90 days”. Another local dealer is advertising gas for 99 cents per gallon. The fine print says this is just for 6 months and to accept this offer you waive all discounts and rebates. Just remember there is no such thing as a free lunch.
Another trick that dealers are using to lure you in to trade in your gas guzzler on a new vehicle is a high fake trade-in allowance for gas guzzlers. They accomplish this by marking up their new vehicles thousands of dollars over MSRP, so that they can show you a bogus high trade-in allowance for your gas guzzler. In the fine print you will find that the discount is from “Dealer List Price”, not the manufacturer’s. You may have also seen the advertised very high “minimum trade-in allowance”…$3,500 or even $5,000. If you have to sell your gas guzzler now, you are better off to seek a private buyer or sell it on Ebay.
If you must have a gas guzzler from a dealer today, it’s safer to buy a new one than a used. The reason for this is that the manufacturers have been more realistic in dropping the prices of new gas guzzlers than dealers have dropping the prices of used. Furthermore, I highly recommend that you lease a gas guzzler rather than buy one. This is because the banks and leasing companies have been slow to adjust the residual values in their leases down. This means a lower lease payment for you. Also, who knows how much further gas guzzlers will decline in value. Suppose, God forbid, we see $8.00 a gallon gas? I you own a gas guzzler, you are stuck with the lower value. If you lease it, you can walk away from it and leave the bank to take the loss.
Monday, July 07, 2008
All car dealers pay the manufacturers the same prices for their new cars. Dealers will lead you to believe that volume dealers pay less, but this is not true. So, when a car dealer advertises a price for a new car in the newspaper, he has no price advantage over his competition.
Virtually all of the prices for new cars you see advertised in the newspaper are so low that it would be impossible for a dealer to remain in business if he sold more than a very few cars at that price. The reason for this is that, if a dealer advertised realistic prices with a reasonable profit built in, another dealer would advertise a lower price. The dealer who advertised a realistic price is actually helping his competitor sell a car.
Most of the new car prices advertised in the newspaper are below the dealers actual cost. He protects himself by selling very few at this price and counting this loss as a cost of advertising. Next to an advertised car you will see some letters and numbers like, #5632A. That is the “stock number” of the car being advertised. This is all that the dealer does to tell you he has just one at this price. The chances are that if you are not the first person in the dealership on the morning of the ad, this car will be gone.
Look for these two fine print disclosures at the bottom of the ad: (1) Price good on date of publication only. (2) Price good with copy of this ad only. These are just two more ways the dealer can avoid selling you the car at the advertised price.
If you read my last column, you understand about “dealer fees”. These fees are additional dealer profits ranging from $500 to almost $1,000 that are added to the agreed upon price of the car by most dealers in Florida. Florida law requires that this dealer fee be included in the advertised price. When the salesman tells you the advertised car has been sold but he has another one “exactly like it”, he can legally add back on that dealer fee.
As you can guess, the salesman’s commission on an advertised car is either zero or very small. Having a very small incentive to sell an advertised car, he will most likely encourage you to buy any other car.
My recommendation to you is to ignore advertised new car prices. If you must respond to an ad car, call the dealership first and ask if the car is still available. If the answer is no, you have saved yourself a lot of time and aggravation. If the answer is yes, ask if they will hold the car for you. If you have to, offer to give them your credit card for a deposit to hold the car. If they won’t hold the car, save yourself the wasted trip.
The only way to get the best price on a new car is by getting competitive bids from at least 3 car dealers for the exact same year, make, model, and accessorized car with the identical MSRP. You can do this on the Internet, by phone, or in person. Use Consumer Reports magazine, the Internet (www.edmunds.com and www.kbb.com are two excellent free sources of information), or even your local library.
Saturday, June 28, 2008
From: Stu Stewart Sent: Tuesday, June 24, 2008 7:52 PMTo: Earl Stewart; Jason StewartCc: Josh StewartSubject: RE: Response to blog
I called and left a voicemail for Mr. K.
The sales manager made a mistake and worked the lease with a bank that does not residualize aftermarket leather. Honoring the original quote means he’d dip $150 into holdback, which he should have done (he was keeping the deal at just $250 over invoice). The RAV is here and the leather is installed. This type of mistake shouldn't have been brought to the customer's attention - we should have absorbed the loss and moved on.
I’m going to apologize, honor the quote at $388, and tell him exactly what happened.
Stu Stewart EARL STEWART TOYOTA1215 US 1 Lake Park, FL 33403V: 561.635.1349 F: 561.863.7536 firstname.lastname@example.org earlstewarttoyota.com
From: Earl Stewart Sent: Tuesday, June 24, 2008 6:19 PMTo: Jason Stewart; Stu StewartCc: Josh Stewart; David SilversteinSubject: FW: Response to blog
Please investigate this and call Mr. K with an explanation.
From: XXXXX Sent: Tuesday, June 24, 2008 6:10 PMTo: Earl StewartSubject: Response to blog
I am sorry to respond via email, but I am still very angry about my situation. I just spoke with my mother concerning the call I received today about the increase in the lease price that your salesman quoted us. She wasn’t too pleased either.
I leased a RAV4 from you in February and my mother really likes it. She currently leases a car which the term is up soon. I approached Mr. D on June 12th with the RAV4 model and options that my mother wanted. My mother is on a fixed income, so, there is a limit to what she can pay per month on a lease. After several emails concerning price and options we were able to get the lease price to where it fit her finances. My mother reduced the mileage allowance and gave up the auto sensing mirror in order to get the numbers to work. We received a quote from Mr. D that was $388 per month. My mother agreed to this deal and a deposit of $585 has been paid for the RAV4.
Today I get a call from Mr. D that an error was made on the lease deal and that the best available option is now $399 per month. My mother can’t pay the new amount.
What is curious about the $399 amount? It was the first quote Mr. D gave us and it was with a 15,000/year mileage allowance and the mirror. What is frustrating about this is we spent the two weeks negotiating this and now I have to start over with another dealer and/or vehicle that she likes. She also made an appointment this week to return her current car that she will have to cancel.
Your company sells or leases hundreds of cars a month…so, how can this happen?
Below is a copy of the email where I received the quote or $388.
Reacting quickly to a mistake like this is crucial. My sales manager made a poor judgement call and made a decision to ask the customer to bear the brunt of his mistake. It was a small amount of money to the dealership, but it was a very big deal for our customer. This afternoon, Edwin's mother took delivery of her new 2008 RAV4 Limited. We have also implemented a process change that will help us prevent something like this from occurring again.
Saturday, June 21, 2008
I say all this, not to brag (or maybe just a little). It might surprise you that I am not deluged with phone calls. I get quite a few, but considering I sell 400-500 cars a month and service thousands of cars each month, I doubt if I average more that 25 calls per day. Most of them are positive, complimentary calls. I believe one reason for this is that my employees are motivated to work harder to satisfy my customers because they know, if they don’t, I’m going to hear about it very quickly. Another reason is that my customers are remarkably respectful of the fact that they can call me and do not take advantage of it. Frankly, my wife, Nancy, was very nervous about this when I first started passing out my business card with my home telephone number. Would you believe that I don’t get more than 5 or 6 home calls a week? When you extend your trust to people, they almost always respect that and do not take advantage.
Of course, you are not going to find a lot of car dealers who do what I do. But here is how you can improve your communications in other ways that will allow you to get problems solved and promises kept. Always ask for the business card of every person you deal with. If they don’t have a card, be sure to get their name. This improves your service right away because the person is no longer anonymous. Ask the person for his cell phone number. There was a time when it was considered wrong to call someone on his cell phone, but that was before cell phone rates became so cheap and the cell phone became universal. If this is a critical person you are dealing with, ask for his home telephone number too. Here is a little trick that I use when I do this. I always start out by giving them my cell phone and my home phone number. Then I say “and may I have yours?” I can’t remember ever having been refused. If someone you are doing business with refuses to give you his cell or home phone number, maybe you should wonder why.
Also, make it a point to be introduced to this person’s manager. Get the manager’s business card and as many contact numbers as he is willing to share with you. When you do this, you have put the salesman or service advisor on notice that if he doesn’t return your phone calls you will be calling his boss. If you really want to have an edge, ask to meet the general manager and/or owner of the dealership. Get his telephone numbers. Now you will have everybody’s attention when you come into the dealership to transact business.
If you are a “computer person”, collect email addresses from everybody you deal with. Email is not as timely as a telephone, but it has the advantage over the telephone because it is “on the record”. When you make a request of a person by email, he can’t deny it because you have a copy of the message. I know that with Microsoft Outlook email, I get an acknowledgement every time somebody opens an email that I sent them. Furthermore you can copy as many people as you like with an email. You can send copies that the primary recipient knows about or make them blind copies that he can’t tell were sent. Someone is a lot more likely to act on your request when he knows that it is a matter of record and his boss was copied with the email.
If you can force yourself into the habit of getting names, telephone numbers, and email addresses from everybody you deal with and their managers, conducting business with your car dealer (or any other business) will be much smoother and trouble free.
Saturday, May 31, 2008
This column is not a forum to celebrate my accomplishments or for trying to sell you a Toyota, but to share my knowledge with you about how to buy your next car or have your car serviced without being taken advantage of. With that said, I tell you that my Toyota dealership sold more new Toyotas last year than any other Toyota dealership between Orlando and Ft. Lauderdale. We are the currently ranked #50 out of more than 1,600 Toyota dealerships nationwide and we are #10 in the SE USA. Of course I’m proud of that accomplishment, 33 years in the making. After all, my dealership is in Lake Park, which many of you may not have even heard of. I always mention North Palm Beach in mentioning my dealership’s location because we are on the city limit of Lake Park and North Palm Beach. Our population in Lake Park in northern county is much less than that of West Palm Beach and Delray. We just aren’t “supposed to” sell more cars than the dealers from the “big city”.
Was it Will Rogers who said, “It ain’t braggin’ if it’s so”? I’m not sure if I agree with that and I always feel a little funny about tooting my own horn. The reason I’m writing about my dealership’s accomplishment is not because of what we did but how we did it. We were able to accomplish this truly amazing feat by being “nice guys” and we did win in spite of what Leo Durocher may have said. What most other car dealers can’t understand is how we can be so successful without advertising the way they do. By that I mean we virtually never advertise cars, prices, special sale events [Once last year we did advertise a sale on new Priuses because we temporarily had an oversupply]. If you have seen my ads, you know how I advertise. It’s all about my direct personal access via my red phone, my decrying the dealer fee and calling for it being made illegal, and telling you that you will always be treated with integrity, respect, and courtesy in my dealership.
Our sales practices and our service practices are like our advertising. We truly walk the talk. I have four red telephones located in the service drive, customer waiting lounge, show room, and the body shop. Beside the red phone is a sign with my picture saying, “The buck stops here. If we have not exceeded your expectations, pick up this red phone and be directly connected to me, the owner”. These red phones immediately ring my cell phone which I have with me 24/7 [I turn it off when I go to sleep at night]. I invite all of my new customers to a reception every two months, speak to them, and give each one my business card with my home telephone number. We don’t have secretaries in my company and we don’t have voice mails. No employee, including me, has their calls screened. In fact, if the person you are calling is out of the dealership, the call is directly connected to her cell phone. My instruction to all of my employees is “If the customer thinks she is right, take care of the problem”. The important thing about this philosophy is not debating who is right. The important thing is what our customer believes. Our motto is “It’s what you do for your customer when you don’t have to that is the true measure of character…like sticking up for somebody that can’t defend himself”.
There is another reason that I’m “bragging” in this column. Other businesses and especially other car dealers are sitting up and taking notice. Hopefully we will see some of them change their business practices like dropping the dealer fee and changing their bait and switch advertising tactics. If you’re a car dealer reading this column, give me a call and let’s talk. I want to tell you how much better you will do by treating your customers the way your mother probably told you you should. Not only will your business do better but you will sleep a lot better at night.
Saturday, May 24, 2008
(1) Burn the lowest octane fuel you can in your car without causing a ping or a knock. Even if your car’s owner’s manual recommends high test, there’s a good chance you can drop down one or even two grades of octane and your engine will run just fine. There are a lot of factors that affect how your car runs on a particular grade of fuel like ambient temperature and ethanol content. You can even experiment by mixing octanes in your tank. Buying the lowest octane will save you several cents a gallon.
(2) Keep your tires inflated 2 or 3 pounds over the manufacturer’s recommendation and check their pressure at least once a month. You may get a little harder ride but you will improve your gas mileage by about 5%.
(3) Check the Internet for the lowest priced gas station in your neighborhood. My favorite Web site is http://gasprices.mapquest.com/. This site shows prices for all of the gas stations near your zip code from lowest to highest. It also shows a map with the location, name and address of the gas station. I just checked the prices from my zip code, 33403. The lowest price for regular was $3.84/gal for a Circle K on Military Trail and the highest was $4.25/gal for Sunoco in Palm Beach. That’s 41 cents per gallon difference! You can save $8.20 on a 20 gallon fill up!
(4) Drive slower. Do you remember how they lowered the speed limit on the turnpike during our last energy crunch to 55 mph? This was to save gasoline because you burn a lot more fuel at 70 mph than you do at 55.
(5) Learn how to drive your car for maximum fuel efficiency. It’s not uncommon for one of my customers to complain that they are not getting the gas mileage on their particular model Toyota that the EPA sticker on their car when they bought it says they should. We always check the mileage by having one of our technicians drive the car and measure the mileage. Usually the technician gets as good or getter gas mileage than the EPA mileage. This is simply because he is an expert at driving cars for maximum fuel efficiency. One of my technicians, Rick Kearney, tell our customers that the best thing they can do to improve their gas mileage is to “reach down and take the brick out of their shoe”. He suggests that you imagine there is an egg between your foot and the gas pedal. Anticipate stops and curves so that you don’t have to brake, but just take your foot off the gas pedal. For longer stops like waiting for a bridge to go up and down or a train to go by, turn off your engine.
(6) Check your wheel alignment and rotate and balance your tires every 6 months or 5,000 miles, which ever first occurs. The less friction between your tires and the road, the better your gas mileage will be. With all the potholes and road construction we have in South Florida, you can know your front end out of alignment without even realizing it. Just because you can’t notice a pull to one side doesn’t always mean your alignment is right. Misaligned wheels prevent your tires from rotating smoothly over the road surface. Rotating and balancing your tires assures even wear and smooth surface for your tires to roll on.
(7) Riding a bicycle and walking is good for your health. When was the last time you walked anywhere? When was the last time your road a bicycle? Here’s a great way to save gas and improve your health at the same time.
(8) Take the bus or the train. I always get angry when I see a Palm Tran bus on the road because there are usually very few people on board. I think I read that they average about 20% occupancy. That’s a huge waste of taxpayers’ money. South Floridians just prefer the convenience of their own cars, but for the sacrifice of a little convenience think of all the gas dollars you can save. Tri-Rail not only will save you lots of gas money but the aggravation of fighting the traffic on I-95 or the turnpike.
(9) If you decide to purchase a hybrid vehicle (or any fuel efficient model), be very careful not to fall victim to price gouging. Many car dealers take advantage of sky-high gas prices by charging a large premium over the MSRP of hybrids and fuel efficient vehicles. These "market value adjustments" amount to thousands of dollars and unfairly victimize consumers.
(1) You owe the bank or leasing company for damage beyond “normal wear and tear” and excess mileage. The danger here is because many people return their car to the dealership after the lease expires without getting signed, written verification of what damage exists on the car and what mileage is on the odometer. Return lease cars commonly sit on the car dealer’s lot for weeks or even months before the bank or leasing company gets around to picking the car up to send it through the auction. Anybody might be driving that lease car in the interim. It could be an employee of the dealership. A returned lease car with a full tank of gas can be a big temptation. In many dealerships the accounting for returned lease cars is very sloppy. Remember, the car does not below to the dealership, but to the bank or leasing company. The dealer doesn’t even have insurance on this car. The insurance may even still be in your name. A return lease car can easily be stolen and no one would even notice. I have heard many horror stories of customers who received bills from their leasing company weeks after returning their lease car for thousands of dollars in damage and excess mileage that they say they were not responsible for. Your only protection is to be sure that a representative of the dealership fills out, with you, a complete return lease inspection form which notes all damage, the estimated cost of repair and the mileage. As an extra precaution, I recommend taking pictures of your lease return car. Be sure that this is signed by the dealership representative and you get a copy.
(2) A lease ad with a large down payment and short term. Most lease ads you see on TV or read in the newspaper have a large down payment hidden in the fine print. A down payment of $4,000 is typical. Ironically one of the biggest reasons people lease cars is to avoid laying out more cash. Dealers do this because a cash down payment on a lease is “leveraged” compared to a down payment on a purchase. A $4,000 down payment on a lease will reduce the monthly payment much more than on a purchase. Also, watch out for shorter lease terms such as 24 months compared to 36 or 48 which are normal. Remember, when buying a car, your monthly payments are paying for the “whole car”. When leasing, you are only paying for a small part of the car…the time you use it. A 24 month lease requires less of a down payment to lower the monthly payment than a 36 month lease or 48 month lease. You can actually lease a car for “zero dollars per month” if you put up a large enough down payment. The banks call this a “one-pay lease”. All you are doing is making all of your lease payment up front and, to a lesser extent; this is what you’re doing when a dealer sneaks in a large lease down payment in the fine print.
(3) Low mileage allowance. Be sure you know exactly how many miles are allowed in your lease contract. By restricting the number of miles you are allowed, the dealer can quote a lower monthly payment. I’ve seen lease ads with as low as a 7,500 annual mileage allowance and a 25 cent per mile penalty. Most people drive a lot more miles than this. If you missed this in the fine print and are a fairly typical driver who puts 15,000 miles a year on your car, you would get a surprise bill from the leasing company of $5,625 at the end of a 36 month lease!
(4) The Lease Acquisition Fee and the Dealer Fee. If you thought you were going to avoid the infamous “license to steal”, the dealer fee, by leasing your car you are wrong. The dealer will also charge this sneaky fee on a lease [which goes by at least 22 names according to the Florida Senate Investigative Report]. Furthermore, the banks or leasing companies all charge their version of the dealer fee commonly referred to as the “Lease Acquisition Fee” or “Bank Fee”. It’s fairly common for the bank or leasing company to kick back half of this to the dealer. This charge averages about $800 or $900.
(5) The Lease Disposal Fee. It would almost be funny if it weren’t so deceptive. The bank is charging you an extra fee for leasing you the car and then hitting you again for taking the car back. They certainly incur a cost for doing the lease and for taking the lease back, but his is called business overhead expense and should be included in their price which is your lease payment. The motive behind all of this, of course, is the same motive behind the dealer fee…it allows the “illusion” of a lower price than you are actually paying.
(6) Higher Insurance Costs. Typically you are required by the bank or leasing company to carry more insurance on their lease car than you might normally buy if you purchased your car. Furthermore, the cost of the insurance is simply higher on lease cars. That may be because insurance companies know that people are not as careful driving a lease car [belonging to the bank] than they are their own car.
(7) Higher Credit Requirements. Another reason dealers advertise lease payments is that most of those who respond to the ad cannot qualify to lease a car and the dealer then tries to sell them the same car. Of course the payments are much higher, but the dealer accomplished his purpose…”he got you in the door”. If you have a Beacon score below 720, which most people do, you can forget about leasing that car for advertised payment. You may be able to lease it at a higher payment if you have a 680+ Beacon, but many people don’t and cannot lease a car at all.
(8) No Hybrid Tax Incentive. The IRS offered a tax incentive to buy a hybrid car. All hybrids except Toyota have those in effect now. Because Toyota sells so many hybrids, 80% of all hybrids, their tax incentives expired. If you lease a hybrid, the tax incentive does not go to you; it goes to the leasing company because they are the legal owner of the car.
(9) No Tax Advantage to Leasing. This is not really a “booby trap” but a lot of people lease cars thinking they can write of the lease payment faster than they can depreciate a car if they buy it. This is not so. Check with your accountant.
The only real advantage I see to leasing over buying is protecting yourself against, or even taking advantage of, unexpected depreciation of the vehicle. When a bank or leasing company establishes a lease payment for a particular model car, the single biggest variable is what that car is going to be worth at the end of the lease. They can’t know and they have to guess. If they guess high and the car is worth a lot less at the end of the lease, you have no obligation and the bank suffers a big loss when they sell it at the auction. This happens more often than you might think. If you had bought the car, you would be the one to worry about the expectedly low trade-in value when you bought your next car. On the other hand if the bank guesses that the value of your lease car is lower than what the market value really is, you have an option to purchase that car at this low price. Even if you don’t want to keep the car, you can buy the car at this below market option price, sell it to the dealer for the true higher value, and pocket the difference.
Monday, April 28, 2008
I’ve reproduced his posting and my reply below because the comments of this car salesman are very revealing of what goes on inside the heads of many car sales people today.
I often am accused of calling car dealers and car sales people “crooks” or just plain “evil”. I certainly don’t mean to. I don’t believe that most people in the retail auto business are dishonest any more than I believe that about lawyers or politicians. Of course, there are a few that are just plain bad.
“Amoral” is a better way to describe the mindset of those in the retail car business who cause the huge problem we have today with the way car buyers are treated. A person who is amoral is one who is not admitting of moral distinctions or judgments; neither moral nor immoral. When you read the words of “Alex S” below you can see that he does not believe what he does to sell a car is deceptive, immoral or unethical. I’m sure you know others like Alex. If somebody challenges their behavior, it’s never their fault. In Alex’s case, he blames me and he blames and his customers for the negativity surrounding car dealers and car salesmen.
(my comments in caps)
Earl Stewart:THANKS VERY MUCH FOR YOUR POSTING. PLEASE EXCUSE THE "ALL CAPS" BUT THIS WILL DIFFERENTIATE YOUR WORDS FROM MINE. I'VE CHOSEN TO ADDRESS YOUR POSTING PARAGRAPH BY PARAGRAPH. FIRST, LET ME CONGRATULATE YOU FOR HAVING THE COURAGE, NOT ONLY TO RESPOND TO MY BLOG, BUT NOT TO CHOOSE TO BE ANONYMOUS. YOUR POSTING IS VERY INTERESTING BECAUSE IT SPEAKS FOR MOST FLORIDA CAR DEALERS. AS YOU POINT OUT, YOU AND MOST OF THOSE EMPLOYED IN THE RETAIL AUTO BUSINESS ARE NOT "CROOKS". A MINORITY ARE, BUT THE MAJORITY ARE SIMPLY ASSESSING THE DEALER FEE BECAUSE "THAT'S THE WAY ITS ALWAYS BEEN DONE" AND NOT TAKING TIME TO THINK OUT WHY IT'S BAD FOR THE CONSUMER.
Alex S: I work at a dealership in sawgrass(i wont mention the name because i dont have the authority to). Over the past few days I have noticed the quantity of my complaints over dealer fees have gone up, so I investigated and found your site. I respect what you are doing and can completely understand what it is that you are doing. I always disclose the dealer fees to my clients during me negotiations, i don't say plus fees i tell them plus dealer fees of XXX.
Earl Stewart: I'M VERY GLAD TO HEAR THAT MY ANTI-DEALER FEE EFFORTS ARE SPREADING AROUND THE STATE. I'M HAPPY TO HEAR THAT YOU TOTALLY DISCLOSE THE DEALER FEE TO ALL OF YOUR CUSTOMERS. UNFORTUNATELY, MOST SALES PEOPLE DO NOT. VIRTUALLY ALL SALES PEOPLE DO NOT USE THE COMPLETE TERM "DEALER FEE" [OR WHATEVER THEIR PARTICULAR DEALERSHIP CHOOSES TO CALL IT], BUT SIMPLY SAY "FEES". THIS LEADS THE CUSTOMER TO BELIEVE IT IS AN "OFFICAL FEE", FEDERAL, STATE, OR LOCAL.
Alex S: What it boils down to for me is that "profit" is not a dirty word. Dealer fees are an essential part of profit. Car sales are all a game, the customers goal is to spend as little as possible where as my goal is to make as much as possible. If both parties can come to a happy agreement, then it is all for the better. I read your previous article and people feel they are being robbed, that is simply not the point, No salesman has ever held a customer down and made them sign, if you dont like the way we do business then leave.
Earl Stewart: I CAN'T TELL YOU HOW OFTEN I'VE HEARD OTHER DEALERS USE THE SAME PHRASE, "PROFIT IS NOT A DIRTY WORD". THIS PHRASE IS A STRAW DOG JUST LIKE "WE DON'T WANT GOVERNMENT TO TELL US HOW TO PRICE OUR CARS". MY DEALERSHIP IS VERY PROFITABLE AND I DON'T CHARGE DEALER FEES. I'M IN BUSINESS TO MAKE A PROFIT AND I WOULDN'T BE IF I THOUGHT "PROFIT WAS A DIRTY WORD". I'M NOT CRAZY ABOUT YOUR DESCRIPTION OF "ALL CAR SALES BEING A GAME". IT'S THE 2ND BIGGEST PURCHASE A CUSTOMER MAKES IN HIS LIFE. IF IT'S A GAME, IT'S A VERY SERIOUS AND IMPORTANT ONE. USING YOUR ANALOGY, I ONLY WANT BOTH TEAMS TO BE FULLY INFORMED OF THE RULES OF THE GAME...HENCE FULL DISCLOSURE OF THE PRICE OF THE CAR WHICH SHOULD INCLUDE EVERYTHING EXCEPT TAX AND TAG. THIS FULL DISCLOSURE SHOULD NOT COME "AFTER THE FACT" BUT FROM THE FIRST TIME A PRICE IS QUOTED IN ADVERTISING, VERBALLY, ON A WINDSHIELD OR SIGN, OR OVER THE INTERNET. YOU SAY "NO ONE HAS EVER HELD A CUSTOMER DOWN AND MADE HIM SIGN". MAYBE NOT LITERALLY, BUT I KNOW OF LOTS OF CUSTOMERS THAT WERE FIGURATIVELY "HELD DOWN". I'VE TALKED WITH ELDERLY WIDOWS IN THEIR EIGHTIES AND NINTIES WHO WERE KEPT IN A CLOSING OFFICE FOR HOURS WHEN THEY ASKED FOR THEIR CAR KEYS TO GO HOME. I ALSO KNOW OF CUSTOMERS WHO DON'T UNDERSTAND OR READ ENGLISH WELL, YOUNG, UNSOPHISTICATED FIRST-TIME BUYERS, AND BUYERS WHO ARE UNEDUCATED AND/OR JUST NOT VERY SMART WHO HAVE BEEN TAKE GREAT ADVANTAGE OF.
Alex S: People do not walk into an electronics store and fight about the price they pay for a $5000 flat screen tv. They dont walk into the grocery store and argue about the price of a pound of apples. I guess what i am trying to get at is if you are in a comfortable place with a calm attitude the dealer fee should not be a deal breaker for anyone. Talk to the dealer sales associate about it. Believe me when i say this, most sales people dont recieve compensation from the dealer fee, but i still need to collect it.
Earl Stewart: ANOTHER THING THAT DOESN'T HAPPEN WHEN YOU SHOP CIRCUIT CITY, BUY RITE, AND BEST BUY TO GET THE LOWEST PRICE ON A 50 INCH PANASONIC TV IS NOT BEING SURPRISED AT THE CASHIER THAT THE "BEST PRICE" IS NOT REALLY THE BESTS PRICE BECAUSE BEST BUY HAS A $350 "DEALER FEE". YOU DON'T HAVE TO HAGGLE WITH CIRCUIT CITY BECAUSE YOU'VE HAD THE OPPORTUNITY TO FAIRLY COMPARE THEIR PRICE WITH THEIR COMPETITION. THIS OPPORTUNITY IS BEING DENIED CAR BUYERS IN FLORIDA. YOU ARE RIGHT ABOUT CAR SALESMEN NOT BEING PAID ON THE DEALER FEE. THIS MAKES THE SALESMAN VERY RELUCTANT TO DEDUCT THE AMOUNT OF THE DEALER FEE FROM THE PRICE OF THE CAR DURING NEGOTIATION. IF YOUR DEALER FEE IS $999 AND YOU DEDUCT IT FROM THE PRICE, YOU ARE COSTING YOURSELF $250 [ASSUMING A 25% COMMISSION]. THE SALESMAN ALSO TELLS THE CUSTOMER HE CANNOT REMOVE THE DEALER FEE BECAUSE HE IS REQUIRED BY LAW TO CHARGE ALL CUSTOMERS THE SAME DEALER FEE.
Alex S: If you find the need to rush out after the sales associate has informed you of a dealer fee, you didnt want to be there in the first place. Buying a car should be a pleasent experience.
Earl Stewart: WOULDN'T YOU "RUSH OUT" OF BEST BUY IF THE CASHIER ADDED A $350 DEALER FEE TO THE $3,995 ADVERTISED PRICE OF YOUR PANASONIC PLASMA TV? AS FAR AS CAR BUYING BEING A PLEASANT EXPERIENCE, TRY THIS EXPERIMENT...WITHOUT REVEALING YOU ARE A CAR SALESMAN, ASK THE NEXT 10 PEOPLE YOU SEE OUTSIDE YOUR DEALERSHIP IF THEY CONSIDER BUYING A CAR A "PLEASANT EXPERIENCE". I WROTE A POSTING FOR THIS BLOG ENTITLED "WOULD YOU RATHER BUY A CAR OR HAVE A COLONOSCOPY"? CAR DEALERS ARE ONE OF THE FEW RETAILERS THAT HAVEN'T ENTERED THE 21ST CENTURY. THEY ARE GOING TO HAVE TO IF THEY ARE GOING TO SURVIVE AND COMPETE. ALex, IN THE 21ST CENTURY, "THE CUSTOMER IS KING"...WAKE UP AND SMELL THE COFFEE.
Alex S: As a last note, if you walk into a dealship expecting to be ripped off, no matter how good of deal you actually get, it will never be good enough. If you walk in expecting to be treated right, you will probably leave happy everytime.
Earl Stewart: ARE YOU SUGGESTING THAT CAR BUYERS SHOULD SHOULD NOT BE WARY OF OVER-PAYING WHEN BUYING A CAR? IN THE SECOND PARAGRAPH OF YOUR POSTING YOU ADMITTED THAT "YOUR GOAL WAS TO MAKE AS MUCH PROFT OFF THAT CUSTOMER AS POSSIBLE". YOU ARE SUGGESTING THAT IF THE CUSTOMERS WEAR ROSE TINTED GLASSES, TRUST YOU TO GIVE THEM A GOOD PRICE, THEY WILL LEAVE HAPPY. ALEX, THE ONLY CUSTOMERS THAT "LEAVES HAPPY EVERY TIME" AFTER OVER PAYING FOR A CAR ARE THE THOSE WHO WERE DECEIVED.