Monday, January 28, 2008

BEWARE OF DECEPTIVE INTERNET CAR PRICING

BULLETIN: Senator Jeff Atwater will call into my radio show this Saturday, February 9 at 9:05 AM. You can listen in at Seaview AM 960, WSVU. You can stream the show on the Internet by clicking on www.seaviewam960.com.


Last September, I wrote a column for this newspaper entitled “The Internet Price is the Lowest Price for a New Car”. If you missed that, you can read all of my columns at www.EarlStewartOnCars.com. Although, I still believe you can find your best price on the Internet, I thought that I should write another column to stress how careful you must be in determining whether or not you have a real, bottom line, out-the-door price.

The reason that a dealer always tries to post his lowest new car price on the Internet is simple. If he doesn’t the Internet shopper will simply ignore the price quote and buy from another dealer who has a lower price. A car dealer gets “just one chance” to sell you a car when he puts his price out on the Internet. The Internet is theoretically the purest and best form of a competitive marketplace, favoring the buyer. Think about it…if you wanted to take the time you could get a price quote from every Honda, Toyota, or Ford dealer in the USA! There are about 1,300 Toyota dealers in the USA. It might take you a while (about 8 days if you worked 8 hours a day and spent 3 minutes per email), but you sure would know who was selling your selected model Toyota for the lowest price.

Whether you are reading newspaper ads, watching TV ads, reading direct mail advertising, or surfing car a dealer’s Web site you have to be careful of deception. Internet advertising on car dealer’s Web sites and their Internet price quotes can be more deceptive than other media. This is because the Internet is the “new frontier”. Legislation has not caught up with the Internet like it has newspaper, TV, and radio advertising. A dealer can get away with a lot more on his Web site and price quotes than he can in a newspaper ad. Electronic media and newspaper advertising are also a lot more visible to the regulators than the Internet.

I’ll give you an example of the type of violation you must be wary of. There’s a car dealer in West Palm Beach who quotes prices to his customers over the Internet excluding $699.95 for a “dealer fee” plus $199.95 for a “doc fee”. This totals $899.90 in a surprise price increase when you come into the dealership to pick up your car. The written warning you have is an asterisk denoting some fine print at the bottom of the Internet quote that says *plus tax, tag, and fees. The “fees” mean $899 in additional price and profit to the dealer on top of the price you were quoted. As if this practice isn’t bad enough, many people come in, sign the papers, and drive their new car home without even realizing that they paid an extra $899.90 because it is hidden in the voluminous paperwork that you sign rapidly in the dealer’s finance office.

Your defense against this sort of thing is to call those dealers who have given you the lowest price quotes on the vehicle you want to buy. Start with the lowest price and simply ask, “Is there anything else added to my price other than Florida sales tax and a state fee for a license tag or tag transfer?” If they do add something, find out specifically what they do add so that you know you have an “out-the-door”, bottom line price when you come in to take delivery. If they won’t give you a clear answer or are ambiguous, hang up and call the next dealer.

Dealers who advertise deceptively have the philosophy that all that counts with their advertising is to “get them in the door”. Another slang dealers use for this is “driving floor traffic”. They calculate that if they can trick enough people to come through the door, they will be able to fool a certain percentage of them. It’s like Abraham Lincoln said, “You may fool all the people some of the time, you can even fool some of the people all of the time, but you cannot fool all of the people all of the time.” Well these dealers don’t have to fool all of the people to make lots of money. All they have to do is fool some of the people all of the time and that’s exactly what their advertising is designed to do. Don’t be one of those who are fooled.

Sunday, January 13, 2008

SHOULD YOU BUY A CAR THROUGH A BROKER?

If you aren’t familiar with car brokers, they are third parties [mostly individuals but some companies] who act as an intermediary between you and the car dealer, supposedly to get you a better price than you would be able to obtain by yourself.

Most dealerships, including mine, deal with brokers. Virtually all brokers are paid a fee by the dealer and some also charge the customer…a “double dip” you might say. The fee the brokers charge range all over the map. I don’t remember paying a broker less than $500 and have paid up to $5,000. The charges to the customers range from $250 to $750. If the broker is charging you a fee, you can be almost certain he is also charging the dealer at least as large a fee.

Another way brokers do business is to actually buy the car and then sell it again to you. To do this they must have a dealer license; otherwise they would have to pay sales tax on the transaction. Buying the car allows them to mark the car up to you as their compensation. They may charge you a fee too.

As you can see, the price of going through a broker raises the price of the car that you buy. The only question is does it raise the price above what you could buy the car directly? The answer to this question depends entirely on your buying skills. If you are of average intelligence and follow the advice that I’ve given in these columns, you should be able to buy most cars at as low a price as a broker can. This means you will save anywhere from $500 to $5,500 in fees that you don’t have to pay. I don’t care what a broker may tell you, a dealer will always sell you the car at just as low a price as he charges a broker…if you are a skilled buyer and do your homework.

Of course there are reasons other than price that car buyers seek out brokers. As I’ve often said, buying a car can be a very unpleasant experience. One of my columns is entitled, “Should I Buy a Car or Have a Colonoscopy?” If you go about buying a car the right way, you minimize the unpleasantness. Don’t ever go into a dealership without doing your homework about the exact year, make, and model you want, accessorized exactly as you wish. Always get at least three competitive prices. If at all possible do your shopping in the comfort of your home on the Internet. If you’re not cyber savvy, ask for help from a friend, son or daughter, or grandchild who is. You will get your best price on the Internet without ever having to leave the comfort of your home. Two excellent Web sites you can consult are www.kbb.com and www.edmunds.com. They have vast amounts of free information on dealer cost, quality ratings, trade in values, etc.

A lot of people rely on their credit unions for advice on which dealer they should buy a car from. It sounds like a good idea because your credit union handles thousands of these transactions and has experience with lots of car dealers. I must warn you that there are employees in credit unions who are paid by the car dealers for referrals…not any different than a broker’s fee. Also many credit unions sell extended warranties on cars that they finance and they may refer you to dealers who agree not to offer to sell you their extended warranty. This is a potential conflict of interest. I advise you to get at least three competitive prices from three dealers, including the one that your credit union referred you too.

If you are accustomed to going through a broker to buy your cars, I suggest that on your next purchase that you also get prices directly from two other dealers. Compare those prices with your broker’s price and be sure you don’t pay him his fee unless you buy the car through him.

Saturday, January 05, 2008

SOMETIMES NICE GUYS DO WIN

Leo Durocher is often quoted as saying “Nice guys don’t win ball games” [He later denied ever saying this]. But this expression is quoted often too justify aggressive, rude, exploitive and unethical business practices. A surprisingly large number of otherwise intelligent business leaders actually believe this saying. This is especially prevalent in the retail car business. I’m a member of an organization called a “20 Group”. This group of car dealers (about 20, hence the name) meets for 3 days 3 times a year to compare business practices and financial results. Our members are from all over the USA. The majority of the members of this group think my way of doing business is not smart. Most Florida dealers I know don’t understand or agree with my business practices.

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 the other Toyota dealerships in Palm Beach County, one in West Palm Beach and one in Delray. 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 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. Nobody, 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.