Saturday, August 30, 2008

The Car Dealers’ Dirty Little Secret

When the Palm Beach Post broke the news of my lawsuit against Ed Morse Honda a little over a week ago [a very small article buried in the “Metro Report”], the reporter who wrote the story used the phrase “dirty little secret” to describe the dealer fee. That reporter’s phrase stuck with me because she hit it right on the head about the dealer fee. The fact that it’s a secret is what makes it so effective for the dealers and dangerous for the car buyers.

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”.

25 comments:

  1. Dear Capt. Don,

    [This posting actually originated in an email from Capt. Don who had read my last column in Hometown News. I asked his permission to post his comments on this blog and he said "fine]

    I have been reading your column for a while now & I have to admit you are adamant/ persistent! A good quality to have going into politics! Especially when you are right!
    I sold cars back in the 70's & 80's. I started out w/ Mazda in 73. It was a hard sell then as we had all the negative publicty about them getting 10-12 mpg. We then had the opurtunity to have the customer fill the tank (him/her self) & take a test drive. Then upon return- refill the car . Then they computed the mpg & found all the crap they were reading was just that. Granted the rotary wasn't a Civic, but got decent mpg (avg-18 combined) on their test drive considering the performance of the car.
    Back then we charged no shipping, prep, etc.. We did charge a "Appearance & Protection Pkg @ $200. It included- "True glazing/ cosmoline removal & wax, sanding- disc brake rotor prep, undercoating (Up North), & "nice" floor mats around. I guess there was some markup in it @ the time.If someone said they didn't want the extra cost- we took it off & did it any way @ a small cost to the dealer I assume? They are outa control here & elsewhere w/ the dealer fee!! I raised hell when I bought my Nissan & was told $495 dealer fee on top of tags etc!! I said- $500 less for the car or I walk. Most people wont do that nor should they have to! I wish you luck on an uphill battle here! The dealers will just find another way to make up the difference. Keep up the good work tho & good luck!! Capt Don

    You’re welcome. J



    I post all of my Hometown News columns to my blog, www.EarlStewartOnCars.com. If you have a few minutes, you might want to check it out. I get lots of “interesting” comments especially from car salesmen and sales managers.

    My email to Capt. Don:

    Would it be all right if I posted your email with my response on my blog? If you would prefer, I could make it “Anonymous” and not use your name.

    Capt. Don's response:

    By all means post it. Use my writing name as Capt Don. Had MANY editorials published thru the years under that name & a lot of people know it & respect my views! I will look @ it on occassion. Thinking back over the car sales years, we never charged a dealer fee (in NJ). One dealer wacked people w/ a $100 reg fee. When they asked "Why so much" were told to say "We have to pay someone to go to MV" . Total BS of course, so I guess it was a dealer fee. The Appearance & Protection Pkg I mentioned earlier- @ least they got something!
    And if they said they didn't want to pay for that- we gave it to them @ a small loss to the dealer I am sure.The work was actually done (brakes etc) & they did get the good floor mats. Keep up the fight!!! Its an up hill battle but it does make people aware of whats up!! I think w/ the economy in the tank rite now- it will work more in your favor! I think the worst practice in the auto sales bus. was to get a hold of the customers license, car keys, credit card etc & "tie it up" till the TO man got done w/ the rubber hose ! That's like unlawful detainment?
    As a buyer 1 time, I said "Give me my license NOW "or I holding their keys said I will go out here & see how fast this car will go in 1st gear? Feel free to mail me anytime. I was in the business since '72 on & off.

    ReplyDelete
  2. Dear Earl,

    I'm sure your online critics may find this interesting:

    http://cyber.law.harvard.edu/stjohns/anon-net.html

    http://blog.mlive.com/annarbornews/2008/08/company_files_defamation_lawsu.html

    http://www.lostremote.com/2008/06/29/newspaper-site-ordered-to-out-anonymous-posters/

    http://yro.slashdot.org/article.pl?sid=08/07/31/185227&from=rss

    ReplyDelete
  3. I-dog,

    You seem to have a lot of time on your hand s for nothing. Go do good in the world instead of looking at blogs all day.

    ReplyDelete
  4. Dear I-Dog,

    Thanks very much for posting those Web links regarding the potential liability that "anonymous" Internet comments can have.

    I am aware of this and have on at least one occasion warned an anonymous poster that today's technology makes it very easy to find the PC from which an email is sent...even when it goes through a blog.

    I prefer not to exercise this option for 99.9% of the postings, even those that are personally insulting, profane, and vulgar. I ask the Blog Master to delete profane and vulgar language, but leave the balance of the posting for all to see. I have faith in the readers of this blog to recognize ignorance, bigotry, dishonesty, and hidden agendas when they see it. In fact, these kinds of posting actually further my points of view by revealing the kind of people who oppose me.

    I do draw the line on threats of violence and I have contacted the Sheriff's Department to notify the Blog Master of this blog to trace the sender of messages threatening me with physical violence. You can understand why I can't comment any further on this legal issue.

    In summary, "freedom of speach" is one of America's most precious rights, except when you infringe on another's rights. You aren't allowed to shout FIRE in a crowded theatre [Unless there's really a fire].

    ReplyDelete
  5. I-Show You…

    You can tell a lot about a man by his shoes. You can tell a lot about a car dealer by his Used Car Prices: When you are talking about somebody that plays the role of customer's advocate, somebody going after other competitors, legislators, Toyota Distributor making the dealer fee the core of his marketing campaign, the least you expect is to get a good price. Does it make sense for far?

    Well, what you would say about a dealer that offers a U S E D 2009 Corolla LE, Stock Number P1913, with 3752 miles at $18,495.00, when the MSRP of a BRAND NEW 2009 COROLLA LE is ONLY $17,525.00? It doesn’t make much sense, does it? What would you say about the integrity of this dealer?

    This is when you can tell a lot about a man by his shoes.

    For the record you can find this UNBELIEVABLE Price of $18,495.00 for a USED 09 Corolla at EARL STEWART TOYOTA, but remember you can buy a Brand New 2009 Corolla LE for much less at any Toyota Dealer!

    This is when you can tell a lot about a man by his shoes.

    ReplyDelete
  6. Earl,

    I have to tell you, looking on your website and seeing how beautiful your wife is. If she isn't busy let me know.

    ReplyDelete
  7. Dear anonymous,

    "Thanks" for your rude, personal comments about me and my wife.

    I encourage you to continue to prove to readers of this blog how crude, vulgar, and uninformed many of my car dealer opponents can be.

    By continuing to prove that you are incapable of intelligent debate, you make my case better than I can.

    Attention: Blog Master

    Please leave this posting up as it reads.

    Thank you

    ReplyDelete
  8. Dear Anonymous,

    What would I say? Well, first I'd say that you ought to get your facts straight before libeling me on my blog. Then I would educate you on the facts.

    I would tell you that the Corolla listed on my web site (P1913) did not have an MSRP of $17,525, it had an MSRP of $18,420.38. It is equipped with alloy wheels, keyless entry, and carpet mats.

    Then I would tell you that the wholesale prices on used, fuel efficient vehicles (like the Corolla) are very high now because of the huge demand. According to Manheim Market Reports, auction prices for a 2009 Corolla LE with mileage under 10,000 (mine has 3750 miles) range between $16,500 and $18,000! Obviously, when wholsale prices rise, retail prices follow. Right now, Kelley Blue Book's (www.kbb.com) suggested retail price for a 2008 (that's right - 2008, not 2009) Corolla LE with no alloy wheels or keyless entry is $19,180!!! Look it up for yourself.

    So, Anonymous, as I said, get your facts straight. I'm selling a well equipped, low-mileage 2009 Corolla LE for $685 less than the price of a lesser equipped model one year older! Now consider that I will not add $900 in dealer fees to the price, I will provide tires and batteries for life, and I offer a seven day unconditional money back guarantee - I would think that some might consider this a pretty good offer. I could go on about the fact that this is a Toyota Certified vehicle with a better warranty than a new car, but I'll spare you the details.

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  9. Earl,

    I hope you realize that not every anonymous user is the same person. If you don't realize this then you are as blind as your customers. When I speak about your wife, it has nothing to do with the car business or being a dealer. Not everyone that reads this little blog is an employee of the car industry. I comment on several things because I don't like you. I have never liked you. You are dishonest and rude. By the way you never did answer me about you wife.

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  10. I-SHOW,

    Dear Earl, thanks for proving my point.

    This is what you are telling us:

    1. Brand New 09 Corolla LE equipped with Alloy Wheels and mats
    Manufacturer Suggest Retail Price: $18,400.00
    2. USED 09 Corolla LE equipped with Alloy Wheels and used mats
    Earl Stewart Price: $18,495.00

    (The Invoice for the 09 Corolla LE equipped with Alloy Wheels and mats
    $17,200.00).

    Let’s see:

    You can buy at EARL STEWART a USED 09 COROLLA LE for $95.00 MORE than the MSRP of a New 09 COROLLA LE, or you can buy a BRAND NEW Toyota COROLLA LE with the same equipment for a little over $17,200.00 (invoice) at ANY TOYOTA DEALER IN SOUTH FLORIDA.

    Although Earl tried to polish his shoes he proved me right when I said that you can tell a lot about a man by his shoes! You can tell a lot about a Car Dealer by its Used Car Prices!

    Earl, Newton’s law is clear: Every action has an equal and opposite reaction.

    You might be thinking now, well I knew my predatory marketing campaign set to place me beyond suspicion had a price tag, like anything else in life.
    I give you that, your campaign might be worth for now, but it’s still very dirty game.

    Here is a sample of EARL STEWART “dirty little secret” exposed.

    ReplyDelete
  11. I-Show,

    Earl is using the old adage that any publicity is good publicity.

    Several years ago Earl found GOD. I am not sure why it took so long but now he has. Since then he is trying to be a modern day Robin Hood. Well the world doesn't need Robin Hood anymore. 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.

    Customers need to realize that the price they ask for they will pay. Any out the door price will include ALL charges.

    Read between the lines ladies and gentleman. Earl charges more to make they needed monies to run his buiness and make a profit. Every business man need to make a profit. If you go to a dealer ask for the price you want.

    ReplyDelete
  12. Dear Anonymous,

    Thank you very much. I am very appreciative that you helped me solidify the point I have been trying to make all along. While we disagree about whether my price for the used Corolla is too high, the fact that I do not sneak in a surprise, illegitimate fee allowed you to make an informed decision. With my prices, what you see is what you get. If you saw this price on another dealer's web site, without knowing the amount of their dealer fee ($495? $695? $995???), you couldn't possibly know what you were paying out the door.

    By the way, I made a minor mistake about the MSRP of that Corolla when it was new - it is $18,669, not $18,420.

    ReplyDelete
  13. In defense of what Earl Stewart is saying, I challenge anyone to call a car dealer on the phone and ask for an out-of-the-door price on any car. GOOD LUCK! You will hear "sorry, I'm not allowed to give prices over the phone" or "I can give you the best price after you caome in and drive the car" or "that model ranges from 20 thousand to 40 thousand". You will go crazy trying to get real information. If they won't eevn give you the price of the damn car your nuts to think they'll tell you how much their dealer fee is or that they even have one! Earl Stewart is right: it is all about giving the customer accurate information...UP FRONT. I keep reading this guy say the only thing that matters is the out of the door price. Give me a break! Go to a car dealer and ask the salesman what the out of the door price is on this car - you'll get the run around so bad your head will SPIN! The other thing about what this guy keeps saying about the dealer fee not mattering is such fantasy. I bought a few cars from dealerships in my time (as recently as this year) and NOBODY ever offered me no out of the door price. Yes I paid the dealer's fee and NO I didn't realize it then! I didn't have a clue until I started reading the Hometown News columns. I may have been stupid or too trusting, but that's what makes taking advantagfe of me that much worse. I guess if your smart enough to look for it and put up a stink you'll get your "out of the door price". If your not - well good luck! And It's just a numbers game, these dealers know a certain percentage of people will never question it and they can get away with it and a certain percent will call them out. I am grateful Mr. Stewart is helping to increase the numbers of us who will now CALL THOSE BASTARDS OUT!!!!!

    ReplyDelete
  14. Dear car salesman,

    I'll use ALL CAPS to differentiate my responses to your comments.


    September 03, 2008 10:59 PM
    Anonymous said...
    I-Show,

    Earl is using the old adage that any publicity is good publicity.

    NO, ACTUALLY I BELIEVE THAT GOOD PUBLICITY IS VALUABLE AND BAD PUBLICITY IS HARMFUL. I'M GETTING ALL THE GOOD PUBLICITY AND YOU'RE GETTING ALL THE BAD.

    Several years ago Earl found GOD. I am not sure why it took so long but now he has.

    I WON'T DISCUSS MY RELIGION WITH YOU, BUT SUFFICE IT TO SAY THAT I HAVE ALWAYS BELIEVED IN GOD AND THERE WAS NO CHANGE "SEVERAL YEARS AGO". I DO LEARN SOMETHING NEW EVERY DAY AND, OVER THE COURSE OF THE PAST SEVERAL YEARS, HAVE BEEN ABLE TO ADAPT TO THE RAPIDLY GROWING EDUCATION, DEMANDS, AND SOPHISTICATION OF THE MODERN CAR BUYER. YOU AND LOTS OF OTHER DEALERS ARE STILL DOING BUSINESS LIKE YOU DID IN THE '60'S, '70'S, AND '80'S.

    Since then he is trying to be a modern day Robin Hood. Well the world doesn't need Robin Hood anymore.

    ROBIN HOOD WAS A THIEF WHO STOLE FROM THE RICH, KEPT SOME FOR HIMSELF, AND GAVE WHAT WAS LEFT TO THE POOR. THE RECORD AND MY REPUTATION FOR INTEGRITY SPEAK FOR THEMSELVES.

    YOU AND YOUR ILK ARE THE "ANTI ROBIN HOODS"...YOU STEAL FROM THE POOR CONSUMERS, KEEP SOME YOURSELVES, AND GIVE THE REST TO THE RICH OWNERS OF YOUR DEALERSHIPS.

    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.

    UNFORTUNATELY, IN THIS LIFE YOU DON'T GET WHAT YOUR "NEED", YOU GET WHAT YOU "EARN" AND OFTEN "DESERVE". I "RUN DOWN" THOSE DEALERS WHO RESORT TO UNFAIR AND DECEPTIVE TRADE PRACTICES TO SELL CARS. I LAUD DEALERS LIKE JERRY AND LARRY MULLINAX WHO TREAT THEIR CUSTOMES WITH INTEGRITY, COURTESY AND RESPECT.

    Customers need to realize that the price they ask for they will pay. Any out the door price will include ALL charges.

    YOU CAN'T POSSIBLE BE STUPID ENOUGH TO THINK ANY READER OF THIS BLOG BELIEVES THAT "CUSTOMERS WILL GET THE PRICE THEY ASK FOR" FROM EVERY CAR DEALER. WHEN THEY ASK, WHAT THEY DO GET IS A "LOW BALL/BAIT AND SWITCH" PRICE [EXCLUDING THE DEALER FEE] TO GET THEM IN THE DOOR.

    Read between the lines ladies and gentleman. Earl charges more to make they needed monies to run his buiness and make a profit. Every business man need to make a profit. If you go to a dealer ask for the price you want.

    OF COURSE I NEED TO MAKE A PROFIT! BUT THE REASON I'M MORE SUCCESSFUL AND PROFITABLE THAN YOU IS THAT CUSTOMERS REWARD MY INTEGRITY AND PRICING BY BUYING LOTS MORE CARS AND SERVICE FROM ME THAN ALL OTHER CAR DEALERS IN PALM BEACH, MARTIN, AND ST. LUCIE COUNTIES.

    ReplyDelete
  15. Wow! Mr. Stewart, your last comments were remarkable. I am very impressed with how well you explain your position. As someone who has followed this exchange while straddling the fence, so-to-speak, I can say now that I believe you and completely understand where you are coming from. Your opponent may "get it" too, but he can't admit it; the only lines to read between are the ones in his posted comments. Why do you think he is a salesman? It sounds like he is a dealership owner!!! Keep up the fight, Mr. Stewart :)

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  16. Earl,

    I will try to explain that I am not a salesperson, an owner, a dealership employee, a business partner or anything else related to the car business. I can't understand why you don't get it. I have told you many, many times. I will tell you that I am know a lot about the car business and a lot about you. When I comment on this blog I am speaking about you and about what I know about you and your dealership.

    I will tell you most of the information I get about you and your dealership comes right from your dealership employees. You are not as popular as you think you are.

    I am sure you will respond that this is a lie or the employees are ex-employees but let me reassure you and your readers. These are not lies and the employees still work for you, most have worked for you for a long time.

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  17. Dear "I swear to God I'm not a car salesman",

    "Me thinks thou dost protest too much".

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  18. Har de har har!

    You outed him, Earl.

    How about "If it walks like duck and talks like a duck..." LOL

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  19. I-Bewildering …

    Earl Stewart Toyota “No Dealer fee Price” is so good that its employee bought a car from another dealer. Is this taking the wind out of your sails?

    “This was so weird that four experts can only sit around and laugh as they outdo each other in trading revelations about amazing findings and discoveries”

    Sometimes, truth is stranger than fiction but is still the truth by the end of the day. Please, do not even try to invade your employee’s privacy, it would be silly.

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  20. Dear "I-Bewildering",

    You chose a very suitable pseudonym for yourself.

    assuming that you are being truthful about one of of my employees buying a car elsewhere [a large assumption], you would have to be "bewildered" to not understand that I could fully understand, condone, and expect this.

    I employ approximately 140 people. Toyota is the #1 seller in the market but this amounts to only 18%...82% buy something else! Why should my employees be any different? I would be astounded if MOST of my employees didn't buy vehicles from other dealers than buy from me.

    If you really want to join your colleagues in some more "bewildered" laughter, here's a real knee-slapper...I, Earl Stewart, bought a car from another dealer. My personal car is a Lexus LS 460L. But, guess what? I didn't pay a dealer fee! LOL

    ReplyDelete
  21. Anonymous Employee of ESTSeptember 11, 2008 5:34 PM

    Dear Nut Job:

    I would love to hear your explanation of why most Southeast Toyota associates who live in S. Fl buy their vehicles from Earl Stewart Toyota, when they can get the same price at any SET dealer?

    I'm waiting.

    ReplyDelete
  22. You are dead wrong. Most SET associates do not buy from Earl Stewart Toyota. Try again.

    ReplyDelete
  23. Anonymous Employee of ESTSeptember 12, 2008 1:10 PM

    Dear Anonymous Nut Job:

    I didn't say most SET associates bought from Earl Stewart (it wouldn't make sense to fly down from North Carolina or Alabama). I said most SET associates who live in south Florida do. This is a fact.

    Nice Try Nutso

    ReplyDelete
  24. Again, you are still wrong. Most of the SET associates buy closer to campus and not Earl. Earl does not have a very good reputation with SET and is not one of the go to guys. So try again.

    ReplyDelete
  25. Anonymous Employee of ESTSeptember 15, 2008 11:38 AM

    Well we could go back and forth on this. You are 100% incorrect, but who's going to believe a nut-job anyway?

    Oh, silly question: since Earl Stewart is selling more new Toyotas in his market (in terms of pure volume and percentage of objective) and SET's primary job is to wholesale new Toyotas, how is it Earl Stewart has a "bad reputation" with them? Earl Stewart is their best customer! Also, why is it that SET and TMS keeps sending teams of analysts to study Earl Stewart's process in an effort to "bottle" what he's doing?

    ReplyDelete

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