Saturday, December 27, 2008

The Recession of Trust

There are dozens of theories about why the world finds itself in such a severe economic decline. I don’t say that lack of trust is what started the ball rolling but I firmly believe it’s what's keeping the ball rolling.

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.

14 comments:

  1. Unlike the newspapers I've purchased lately you have produced an excellent article Earl.
    I can say with certainty that if the MiamiHerald published articles based in truth rather than mindless agenda their financial situation would change quickly.
    The MiamiHeralds success is strictly rooted in peoples ability to "TRUST" what the MiamiHerald prints. The Herald has failed with a product that requires less financial commitment than a cup of coffee! It does however require a huuuuge ammount of "TRUST" that the interest they inspire with their articles is based in TRUTH! Nobody likes to find out after a purchase (no matter how much time passes) that they were duped. .

    Earl Stewart , you have put into words the cause of this recession very clearly.

    The basis of your article on the honorable use of "TRUST" based in TRUTH has the potential for Global inspiration.

    The biggest release of potential positive energy in the world would be the abandonment of an ideal held by most American politicians; that lying (creating mistrust) is a political necessity.

    I hope the rest of the world reads your article and understands.

    Thank you Earl Stewart!!!!

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  2. Dear Fred,

    Thank you for your supportive words.

    When I wrote this article, I worried that I was just espousing the obvious.

    It's a sad statement on the current state of our culture when the obvious becomes a revelation.

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  3. Hi Earl,

    You know, I really believed in your commercials. You came out as a good guy in an industry full of thugs. My wife and I thought "lets try him, seems like a good guy maybe his dealership is different". Well, we did give you a try, UNFORTUNATELY, you write good articles while your staff swindles potential customers.

    You were the last hope for South Florida Toyota dealers, but last week you lost that with my immediate and extended family. Your band of robbers conveniently left out a figure in the contract to try and upsell me after a week of driving. This after 'buying' my trade at a throw away price and listing online at almost double the figure the paid for it.

    I don't think you can spell T-R-U-S-T, lest talk about it.

    Thanks for the Chrismas con.

    Michael

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  4. Dear jenkush02/Michael,

    If you are telling me the truth, I will reumburse you in full for what my "band of robbers" stole from you. Please call me on my cell phone at 561 358-1474.

    But I don't think you are telling the truth and I don't think I'll ever get a call from you. If you were sincere, you would have called me before and you would have given me your full name in your blog posting.

    You are most most likely employed by one of those "South Florida Toyota Dealers" you refer to.

    Prove me wrong and call me on my cell phone [561 358-1474] or at the dealership, 561 844-3461. I don't have a secretary and nobody screens my calls.

    If you don't call me I will make another posting to this blog and confirm to our readers that you are a phony, most likely employed by my competitors. You probably are blaming your dealership's poor sales on the recession, but your shoddy sales practices are equally responsible. My dealership's sales are down, but our market share has grown enormously. I was the smallest Toyota dealership in Palm Beach County 5 years ago and today we're #1 out of 4. We are also the largest volume car dealership in Palm Beach County of any make.

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  5. Well...for the record. I did give you a call.I hope to see you in person this weekend.

    However, if you have a public blog (keyword = "Public"), you shouldn't threaten people with lawsuits because they don't agree with your business practices. I would think you would accept a healthy difference in opinion on your blog, both good and bad comments.

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  6. Dear Michael/ jenkush02,

    Yes, to your credit, you did call me and we will be meeting in person to discuss your false accusations on this public blog. You are not an employee of another car dealer as I suspected and for accusing you of this I sincerely apologize.

    You say I should not threaten people with law suits. What should I do when I'm slandered in a public forum? You said my employees were "a band of robbers" who attempted to steal from you". In our phone conversation you denied calling my employees robbers because they only "attempted" to steal from you. I explained that "attempted" robbery is also a crime. When I prove to you that you are wrong, I'll insist on a public apology on this blog.


    "Your band of robbers" conveniently left out a figure in the contract to try and upsell me after a week of driving. This after 'buying' my trade at a throw away price and listing online at almost double the figure the paid for it.

    You also accused me of taking your trade at a "throw-a-way" price and trying to sell it on Ebay at nearly twice the price. You also thought in our phone conversation that we were trying to sell your vehicle before we consumated the deal. I explained that we would not have accepted the auction bid on Ebay until the the sale was consummated. As far as the price being twice what we allowed you, Ebay is an "auction" and the "asking" price is just that...not the price you get.

    In the future, may I suggest that you choose your words more carefully and get your facts straight before you slander somebody again who will not give you chance to apologize.

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  7. I apologize for expressing my opinion that your employees were a "band of Robbers". Maybe I shouldn't have, for that I sincerely apologize.

    It doesn't change my experience at your place of business and yourself during the phone conversation. I was particularly taken back when you asked me " what is your country of origin? you don't seem to understand English". After pondering your above mentioned comment, I figured that we are probably not going to come to any meaningful conclusions on Saturday.

    Nice talking to you and Best of luck.

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  8. Dear jenkush02/Michael-Kinyanjui,

    I accept your apology for calling my son, salesman, and finance manager robbers.

    My son explained what happened and said that we had made an honest mistake by inadertantly omitting the $3,800 you owed the bank on your trade-in from the finance contract. We sold you the car for exactly what we said we would, but when the data from the buyer's order was input into the finance computer, the $3,800 was accidentally left off. This was clearly a mistake on our part and I apologize again [my son, Josh, did so already].

    You clearly knew there was a payoff on your trade-in and you too must have made a mistake when you didn't notice that the total amount financed was almost $4,000less than it should have been. It looks like we both made a mistake. I certainly am not going to accuse you of deliberately taking delivery knowing we had forgotten to include the payoff on your car in the total amount of the finance in the hopes that we wouldn't notice or that you could hold us to the contract.

    I think the reason you don't want to meet with me personally is because you already knew all of the above. My son not only explained it to you and apologized but offered to discount the car to our cost in way of apology.

    As far as my asking your country of orign, it is because I noticed you spoke with an accent and I was concerned that you might not be understanding me. You did not seem to understand that you HAD accused my son and my salesman of a crime. You said that you had not becuase it would only have been a crime if we had "gotten away with it". I responded that in America, an attempted robbery is still a crime.

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  9. For other readers' sake, I speak English very clearly. Your son and sales team had no problems with my 'accent', and I never had to repeat anything I said. Regardless of being from Africa, I have a clear British accent.

    I like that you decided to post some numbers. I have some of my own, the other half of the story (no one bothered to tell you about)

    I admitted to my mistake of overlooking the fine print of your lien payoff agreement. I missed the empty space on the agreement, placing my trust that your employee got it right.

    Now the latter was not the problem. The problem was NOT the fact that both your employee and I missed the missed the lien payoff number. Mistakes happen, and I understand that.

    The problem was the fact that your salesman and I agreed to a combined total (including Lien payoff) of $5100 for a 2004 Honda Civic with 61K miles (and in near pristine shape). By all means a loss for me, that I was willing to swallow. But to come back and ask me to payoff my vehicle's balance $3800, would mean that you were buying my trade-in (2004 Honda Civic 61K miles) for $1300 was the problem.

    On top of the "crazy" figure above, your salesman insisted that we did not include the lien payoff in the original conversation (making me a liar).


    Finally, Josh only acknowledged your Finance Departments' mistake after quickly pointing out that I missed the line in the paperwork. Offering to buy my car for $2300 was an added insult. The reason I will not meet with you is because I don't think it'll accomplish anything. If my employee made the kind of mistake yours did, I would swallow my pride and stick to the contract.

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  10. Dear jenkush02/Michael-Kinyanjui,

    You are confused about the transaction, Mr. Kinyanjui,

    Perhaps cars are sold differently in the country you come from. My son Josh has given this very clear explanation in response to your misstatements and misunderstandings. I strongly suggest that the next time you attempt to buy a car you bring along an advisor who is more familiar with the process than you.

    The notion that we were giving you only $1300 for the vehicle is incorrect. The trade in value was $5100 (a fair appraisal for a 2004 Honda Civic Coupe VP with a manual transmission.) That number never changed during the course of your deal.



    You agreed to an “out the door” price on the Highlander which clearly included your $5100 trade-in allowance and the $3800 payoff. Our error occurred after the negotiations were complete. The payoff was mistakenly left off the final paperwork.



    The only figures we have any control during a car deal are the sale price and the trade-in allowance. The payoff is an external factor over which we have no control.



    The $5100 trade-in value did not change simply because we corrected our mistake and factored back in your lien pay off amount. If you’d like we will still give you $5100 for your Honda right now. The sale price of our vehicle remained constant as well.



    The trade-in allowance (in your case $5100) and the payoff figure are always kept separate. One of many reasons this is done is for sales tax purposes. The trade-in allowance lowers your tax base, while you are not taxed again on the payoff amount. I apologize for the paperwork error, but I can assure you we never communicated that the $5100 trade in allowance was your net equity. Trade-in negotiations are not done that way.




    Joshua Stewart | EARL STEWART TOYOTA
    1215 US 1 | Lake Park, FL 33403
    V: 561.301.6890 | F: 561.844.0274
    joshs@earlstewarttoyota.com | earlstewarttoyota.com

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  11. "Perhaps cars are sold differently in the country you come from"

    Real classy

    I've bought 3 cars in THIS country before. You act like I just came off the boat yesterday.

    I think it's pretty clear why I'm not going to waste anymore time on this matter. Your customer service speaks for itself on your own blog.

    I'll go figure out what side of the road to drive on now. Thanks

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  12. Dear jenkush02/Michael-Kinyanjui,

    Did I offend you because I suggested that different countries have different cultures, customs, and ways of doing business?

    You are being overly sensitive. I didn't know that you'd bought 3 cars in this country. It does surprise me that, given that fact, you didn't know the pay-off to your trade-in must be added to the price of the car you are buying in the finance contract.

    Just remember that when you do buy a car, you have to pay an extra $3,800 to pay off the balance owed on your trade-in.

    Best of luck,

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  13. Are you seriously this childish Earl? To stoop to such forum/blog bickering? This should be kept within the confines of your dealership. And to display the person's name? Tisk Tisk. I'm quite disappointed in this "professional" behavior. Always thought you were above that Earl. I think you need to pay more attention to your service department, between the EXTREMELY POOR attitudes and behavior of your horrible technicians; and the downright uneducated idiots you have turning wrenches. Is it true one of your oil changers blew an eighteen thousand dollar motor simply because he let the vehicle leave without oil? Are your "grease monkeys" really this ignorant? Is it true that your foreman dispatches work with extreme bias? And treats the other techs based on how they act towards him? Theres so much more you should be looking into. You preach Customer's for life, why not Employees for life?

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  14. This is finally the true Earl Stewart. One point, One opinion. Only yours. This blog shows the intellegent consumer that you are just another car dealer hiding behind the lies you tell.

    Thanks for enlightning us.

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