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Saturday, May 31, 2008

SOMETIMES NICE GUYS DO WIN BALLGAMES

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 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

STOP COMPLAINING ABOUT GAS PRICES

“God, grant me the serenity to accept the things I cannot change, courage to change the things I can, and the wisdom to know the difference.” Whether you think our gas prices are soaring because of a conspiracy by the giant oil companies, speculators on Wall Street, OPEC, or plain old supply and demand, there’s not much you or I can do about it, other than vote for the candidates of our choice and pray. I thought it may be useful to suggest some things you can do about lowering your total cost of fuel even if you can’t lower gas and oil prices.

(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.

CAR LEASING BOOBY TRAPS

This is the third article I’ve written on leasing, but I felt it was time because car dealers are resorting more than ever before to leasing advertising. This is simply because it’s easier to offer a low monthly payment with a lease ad than with a purchase ad.

(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.