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Monday, January 25, 2010

Business Ethics:

Niche Opportunity for Car Dealers

If you tuned in my live radio talk show either of the last two Saturdays, you heard me interviewing Professor Marianne Jennings, an expert on business ethics. She’s written 10 books, the most recent being The Seven Signs of Ethical Collapse; How to Spot Moral Meltdowns in Companies…Before It’s Too Late. She made the comment that with the ethical vacuum in today’s business environment there was a true niche opportunity for those that do run ethical businesses.

I’d be lying if I said “I hate to toot my own horn” because I’m no different from anyone else. I love to brag about the accomplishments of my company’s team. The only reason I don’t do it more is because I know its boring to my customers. My customers care a lot more about being treated with courtesy, efficiency, and integrity than the fact that we sell more cars than anybody else.

But, if my company’s success can send an important and useful message to other car dealers, then touting my company’s success can serve a useful purpose. My company’s stated purpose is to “Make the car buying and servicing experiences pleasurable ones for our customers, and, leading by example, bring integrity and respectability to the image of car dealers everywhere.” Therefore this is my “excuse” to tell you and other car dealers how well Earl Stewart Toyota did in 2009. The message to other car dealers is that you too can prosper if you follow the ethical guidelines that Earl Stewart Toyota has followed.

Earl Stewart Toyota has the highest customer satisfaction scores in sales for 2009 of any other Toyota dealership from Orlando to Key West, coast to coast. We also were in a virtual tie with Maroone Toyota in Ft. Lauderdale for the best in service and parts customer satisfaction. We are the #1 volume Toyota dealership in sales satisfaction in the entire USA based on the November YTD numbers. The December numbers were not out as of today, but we were so far ahead, I’m confident we will remain #1,

We outsold every car dealership Palm Beach and Broward Counties in 2009. In fact, only Kendall Toyota in Dade County and Ft. Myers Toyota in Lee County sold more cars. We finished 2009 as the #4 volume Toyota dealership in the Southeast USA and #31 in the USA. We were #3 in Florida in 2009, but were #2 in Florida and the Southeast USA for the last half of 2009.

All of this is pretty amazing when you consider we’re located in the small town of Lake Park, Fl, population approximately 9,000. It defies conventional wisdom to think that a small town car dealer could outsell all of the dealers in Jacksonville, Orlando, Tampa, Ft. Lauderdale and even Atlanta Ga. It also defies conventional wisdom for a car dealer who rarely ever advertises a price or has a sale to outsell all those who seem to never stop having sales.

So there you have it car dealers of Florida…the secret to my success. Half of me hopes that you will listen and treat your customers better…the human side. The competitive side of me hopes that you never get it and allow me to continue to grow my market share and win over your customers.

Saturday, January 23, 2010

LIST PRICE & MSRP MIGHT NOT BE THE SAME

Just when I thought that I knew all the tricks that some car dealers play, I discovered a new one in Saturday’s Palm Beach Post.The ad screamed “GET UP TO $12,000 OFF”. The new cars featured in the ad showed many discounts over $3,000 and $4,000. Then I found the gimmick. The discount was off of “List” price, not the manufacturer’s suggested retail, or MSRP. Most people, including me, use the terms list price and MSRP interchangeably. However, MSRP is a legal term deriving from a law sponsored by U.S. Senator Monroney, about 40 years ago. The Monroney label is required by law to be displayed on all new vehicles showing the manufacturer’s retail price, MSRP.The purpose of this law was to offer the consumer some basis for comparison of prices between different car dealers. Before this law was passed, a car dealer could post any price he wished on the window of a new car. If he posted a price with a markup of $10,000, he could advertise a $5,000 discount and still make a $5,000 profit.The ad I am referring to in Saturday’s Palm Beach Post shows discounts from “list” price, but defines it in the very fine print at the bottom of the ad as being “MSRP plus installed options”. There it is! The giveaway is “plus installed options”, if your eyes are good enough to read the fine print (I had to use my magnifying glass). By jacking up the MSRP with “installed options”, a car dealer has circumvented the law sponsored by Senator Monroney. This dealer can now advertise huge discounts, limited only by how high a markup he wants to put in his “installed options”. There is no law limiting the markup in an installed option. Dealers commonly install options with very low cost with high perceived value to the too trusting or careless customer. Some examples are undercoating, paint sealant, fabric protector, stripes, theft insurance, and rust proofing.I came across another surprise in The Stuart News. If you have read my past columns, you know about “dealer fees” aka “dealer prep”, doc fees, and a few other misleading names. This charge is simply additional profit to the dealer disguised as a state or federal fee like sales tax or license and registration. The amounts range from $495 to $895. State law requires that this “fee” be included in all advertised prices and my surprise was that there are some dealers ignoring this law. The prices advertised in The Stuart News in the ads I am referring to disclosed in the very fine print “all prices plus tax tag & dealer fee”. This is a violation of state law. Unfortunately, it is impossible for the Attorney General’s office to police all of the car ads in the state every day.Dealer fees, dealer prep, doc fees, etc. are bad enough even when they are included in the advertised price. The tactic employed by dealers to get around the law requiring that the dealer fee be included, it to switch the prospective buyer to another car. This is easily done by these means: (1) Pay the salesman no commission or a minimal commission on the advertised car. (2) Make the color and accessories of the advertised car very unattractive. (3) Have only 1 or 2 cars available at that advertised price. (4) Limit the time a buyer can buy that specific car by fine print saying “price good on date of publication only”. (4) Simply telling you that the car has already been sold. How are you to know? Many states like California make dealer fees illegal. In my opinion they should be made illegal in Florida. Please write your legislator on this issue.Your best defense against this kind of thing is to choose the dealership you buy your car from with great care. Find a dealership that has a good reputation with the Better Business Bureau, Count Office of Consumer Affairs, and the Attorney General’s Office. Preferably choose a dealer who has been in business for a longer time. Ask friends, neighbors or relatives who may be driving a model that you are interested in how their experience was with that dealer.

Monday, January 11, 2010

South Florida Car Dealers: Give Me a Call Saturday

As many of you know, I’ve been doing a live radio talk show, “Earl Stewart on Cars” for over three years. The show is aired on Seaview radio, 95.9 FM and 960 AM every Saturday morning between nine and ten. My wife Nancy is part of the show and we try to give advice to car buyers and car owners about buying and servicing their cars, especially how to avoid being taken advantage of by some car dealers. My weekly intro to the show goes like this:

“Good morning. My name is Earl and I’m a recovering car dealer. I sold my first car in 1968. A little more than ten years ago, I decided I was selling cars the wrong way. This show is just one of the ways I’ve changed my company and my life for the better. I’ll share with you all of the tricks of the trade I’ve learned in almost 40 years of selling cars. I’ll answer all of your questions about buying a car or having it serviced. I’d like to share with you this quote from Jim Press, the former top Toyota executive for all of North America. Jim said, ‘It’s what you do for a customer when you don’t have to. That’s the measure of true character…kind of like sticking up for someone who can’t defend himself’.”

We get a lot of callers almost every Saturday. People call to share their bad experiences, and some good, with their car purchase or service. We get a lot of questions on subjects like is leasing better than buying or should I always take my car back to the dealership for service or use an independent shop. Our Saturday morning show has exceptionally good ratings and our listener base is growing rapidly. The Seaview management is even discussing bringing the show national through syndication.

If I have any regret about my show, it’s that I don’t get any calls from other car dealers or their employees. I have received a few calls from car dealers from other parts of the country. Most of these are retired and have moved to South Florida. These calls are always complimentary. If you’ve listened to my show, you know that I’m very candid in my criticism of many South Florida car dealers. I’ll specifically name a car dealership and a specific ad if it’s illegal or deceptive. I also discuss specific unethical sales practices like quoting prices that are lower than what the dealer will sell the car for. I’m highly critical of the “dealer fee” which is added to the quoted and advertised prices of cars by almost every dealership in South Florida.

Last Saturday, I thought I had a great idea about how to encourage car dealers or their employees to call my show. I offered $100 to the first employee or ex employee [employed within the past year] to call into the show. I even offered $500 to the first such caller from any of the many Napleton dealerships. The Napleton dealerships are the largest auto advertisers in the PB Post and have many franchises and locations in PB County. Napleton advertises prices that are disclosed in the fine print to be plus his $799 dealer fee and “dealer installed accessories”. He also excludes multiple rebates from the advertised prices like college graduate, active military service, and owner loyalty when very few, if any, buyers could qualify. I consider this to be unethical and deceptive advertising.

I was amazed that I did not get one call from a single car dealer or their employee taking me up on my offer. I deliberately included ex-employees as being eligible because I thought that current employees may be intimated to call the show if still working for the dealership. I promised the callers that I would give them as long as they wanted to voice their side of the story regarding their advertising and sales practices. I assured them that they would not be cut off or muted out as many talk show hosts do when they have a caller who is vociferously disagreeing with them.

I’m going to give this another try this coming Saturday, January 16. I might even “up the ante” if I have to. Hearing the car dealers’ side of the story is not only fair, but it makes for much more interesting and exciting radio. If you’re employed by a car dealership in South Florida or were within the past year, please consider calling in. The show will run this Saturday morning between 9 and 10 and the toll free call-in number is 877 960-9960. I promise you that your opinions will be heard and I will not insult, abuse, or embarrass you or cut you off. Do you know someone that works for a South Florida car dealership or did within the last 12 months? Please let them know that they can make a fast $100 [or $500] if they are the first to call into my show.

Monday, January 04, 2010

BAIT & SWITCH ADVERTISING

(READ THE FINE PRINT)

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.