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Thursday, February 18, 2010

The Dealer Fee... “Whatever?”

My column this week is a reaction to an article that appeared in this week’s edition of The Automotive News. For those of you “not in the business”, The Automotive News is the premier trade publication for the automobile industry. It is read by manufacturers, distributors, dealers, and everyone else associated with the car business.

The headline of the article, “Document Fee Began with a Lie, ‘Inventor’ Says,” grabbed my attention (to say the least). However, the neutral stance toward the nefarious “doc fee” that the publication seemed to take is what prompted my reply.

Below is the text of my email to the author, Edward Lapham, followed by the original article printed in the Automotive News.

Good morning, Ed. J

I was very surprised to read your commentary in this morning’s Automotive News, but I enjoyed it very much.

You may have heard of me. I’m the dealer in Florida who is championing making the doc fee (aka dealer fee, prep fee, etc.) illegal. I’m one of the few dealers who don’t charge such a fee which has grown enormously since Mr. Fashjian “invented” this concept in 1967. There’s a Mazda dealer in Delray, FL and a Nissan dealer in Ft. Pierce who charge $1,549 for dealer fees. The average fee in my market is over $750.

You can check me out on my website,
www.earlstewarttoyota.com or my blog www.EarlStewartOnCars.com.

In your article, you say:

“We know that consumer advocates, assistant attorneys general and investigative reporters from TV networks consider the "doc fee" to be a consummate evil that some dealers use to gouge a little more profit out of poor, defenseless, unsuspecting customers. Dealers, who have had their gross margins eroded by factory pricing and Internet-savvy consumers, consider the doc fee to be manna from heaven that lets them squeeze a little more profit out of every deal. Whatever. “
I guess “whatever” means that Automotive News takes no editorial position on this. I can certainly understand why since most car dealers, the vast majority of your subscribers and advertisers, engage in this “questionable” practice.

I’m guessing that you consider this a “whatever” because there’s a split on opinion between consumer advocates, assistant attorneys general and investigative reporters from TV networks and car dealers. Have you wondered how car buyers feel about it? Why doesn’t Automotive News engage a pollster to measure the sentiments of car owners and prospective car buyers about doc fees/dealer fees?

Since you consider the current status this a draw (whatever), maybe the customer can be the tie breaker.

Sincerely,

Earl Stewart



EDWARD LAPHAM
Document fee began with a lie, 'inventor' says
Edward Lapham Automotive News -- February 15, 2010 - 12:01 am ET
COMMENTARY

Edward Lapham is executive editor of Automotive News.

I had an intriguing conversation with John Fashjian last week. He told me that three years ago, he sold his Framingham Chrysler dealership in Framingham, Mass., and moved to Florida.

More significantly, Fashjian matter-of-factly said he's the guy who invented the document fee.Of course, there is a difference of opinion about the add-on charge.We know that consumer advocates, assistant attorneys general and investigative reporters from TV networks consider the "doc fee" to be a consummate evil that some dealers use to gouge a little more profit out of poor, defenseless, unsuspecting customers.

Dealers, who have had their gross margins eroded by factory pricing and Internet-savvy consumers, consider the doc fee to be manna from heaven that lets them squeeze a little more profit out of every deal.

Whatever.

Here's how Fashjian said it started. In 1967 he was sales manager at Bancroft Motors in Worcester, Mass., selling Datsuns for next to no profit. For example, he remembers that the Datsun B1200 stickered at $1,962.50, and customers tried to get him down to $1,900. The way Fashjian told it, he decided that bumping the price up to a rounder number would help with negotiations and -- since he wasn't a math major -- would make figuring the 3 percent Massachusetts sales tax easier because there were no personal computers or pocket calculators back then. So he arbitrarily added $12.50 to every sticker, which bumped the price to $1,975. Then Fashjian told customers that since Datsuns are imported, the fee was to cover the cost of going to the port and taking care of the documentation.

And they bought it!

That $12.50 seems anemic by today's doc fees, which Fashjian said net some dealers up to $1,000 or more. It's a great tale. And, you know, I thought about running Fashjian's picture with this column. But the next thing you know, somebody might put it up in the post office. Or the Automotive Hall of Fame.

Wednesday, February 17, 2010

Sleazy Tactics

In a free market, competition is the name of the game. When you stumble, your competitors are always ready to jump in and take advantage. That's the way it is.

Toyota has stumbled, and it is the right - the responsibility - of the other car manufacturers and dealers to do their best to gain from the situation.

However, this week we have witnessed a new low when one of my competitors crossed the line and boldly lied to the consumers in our community. Napleton Nissan in Riviera Beach sent out a mass mailing of phony "Toyota Recall Notices" to thousands of people in our area.

This sales solicitation came in an official looking envelope, complete with the red Toyota logo and typeset. The return address said it was from "Notification Headquarters."

Inside the envelope there is more false information about the recall and Toyota vehicles that were not even affected are listed.

It goes on with even more deceptive offers. They say they will buy back your Toyota for "Original Base MSRP." They neglect to mention that "Original Base MSRP" does not include the price of any options added, manufacturer's delivery fee ($775), or the dealer fee added by most dealers. They go on to explain that this value will be further lowered by the mileage of the vehicle and incentives you received when you bought it. In other words, it's business as usual.

The letter is signed by Napleton Nissan's general sales manager, Bret Macy.

Napleton Nissan should be ashamed of themselves for sending out such a deceptive and misleading solicitation. I cannot say I'm surprised; their newspaper ads typically assume the same style, but, as I said, they have reached a new low.

You can view the actual mail piece by clicking here.

Monday, February 08, 2010

“Piling on” Toyota?

Regular readers of this column, my blog (EarlStewartOnCars.com), and my Saturday morning radio talk show know that, even though I’m a Toyota dealer, I’m not “in the tank for Toyota. I tell it like it is and when I think Toyota is doing something wrong, I’m not afraid or timid about speaking out.

So, first I’ll say that Toyota brought a lot of this on itself. Last October 2nd, Akio Toyoda, the current CEO and grandson of Toyota’s founder, said “We have to listen to our customers and make better cars”. Mr. Toyoda also said that that his company has gone through 4 of the 5 stages leading to failure, of “hubris born of success, undisciplined pursuit of more, and denial of risk and peril,” Toyoda was citing Jim Collins, the author of How the Mighty Fail. He said that leaves his company in the 4th stage which is “grasping for salvation”. Looking back on the past few weeks, this seems almost prophetic. After hearing Akio Toyoda’s remarks, I immediately read How the Mighty Fail. I did so out of respect for Akio Toyota’s courage to “tell it like it is” and was heartened about Toyota’s future because the first step to improvement [the Japanese word for continuous improvement is “kaizen”] is recognizing and admitting your mistakes. I also read the book because I wanted to be sure my company would never experience similar problems.

Now, let’s talk about “piling on” Toyota. Akio Toyoda has been strongly criticized in recent weeks by virtually all of the media, especially the Wall Street Journal and Automotive News for going into hiding and refusing to address the recall issues. I have to ask myself “why?” given the astonishingly candid remarks he made to the world on October 2nd. Have you ever heard a CEO of GM, Chrysler, Ford, or Honda make such a statement? His comments that Toyota needed to “listen to its customers and make better cars” and that his company was “grasping for salvation” are unprecedented by any CEO of any company, auto or other, that I can recall. They were made in response to the sudden acceleration problem which, at that time was being addressed as a floor mat issue. What is it exactly that the media wanted the man to do... fall on his Samurai sword?

Toyota is the biggest and best auto manufacturer on the Planet. They build the highest quality cars on the Planet. Consumer Reports, in my opinion the most accurate, objective judge of consumer products anywhere, recommends more models made by Toyota than any other manufacturer. They have temporarily taken the eight Toyota models recalled off their recommended lists, but are putting them back on as soon as the pedals are fixed. As of February 8 all of these new models have the new accelerator pedal and are recommended. Dealers are in the process of fixing all of the ones that have already been sold.

A problem with the brakes of the 2010 Prius was announced and may result in a recall by the time you read this. Consumer Reports has gone on record as saying that the 2010 Prius’ brakes are safe and the vehicle is perfectly safe to drive. They also rank the Prius as the most reliable car on the Planet, including not only other hybrids but all gasoline powered cars too.
Guess what? Now the Washington Post is attacking Consumer Reports for saying good things about Toyota! The Washington Post also attacked NHTSA, the National Highway and Traffic Administration, NHTSA, for not being tough enough on Toyota. I wonder if they thought they were being tough enough when Ray LaHood, the U.S Secretary of Transportation, said that people driving recalled Toyotas should stop driving them immediately and take them to their dealers [how can you take them to your dealer if you can’t drive them?). Of course, somebody higher up in the Obama administration (Maybe our President himself] made him retract that statement immediately but “the bell had already rung” and more panic was created.

Why do you suppose this phenomenon occurs? I think it has something to do with the American psyche of “loving the underdog” and conversely “loving to kick the top dog”. Most people wanted the New Orleans Saints to win the Super Bowl even though the Indianapolis Colts was the better team. No other golfer except Tiger Woods would have suffered such a fire storm of criticism for infidelity.

Another factor might be “politics”. Our government has invested billions in GM and Chrysler against the argument from many that they should have been allowed to fail. You and I (the taxpayers) are now the majority stockholders of GM and Chrysler. We taxpayers are also the voters who will decide the next election. If our stock in GM and Chrysler rises we may be more inclined to reelect those who invested billions of dollars of our money in these two auto companies. One way to help GM and Chrysler sell more cars is to crush their competition. Speaking of pandering to those who have a powerful influence on elections, how about the UAW? They never liked Toyota because most of Toyotas plants are non union. If Toyota gets squashed and GM and Chrysler get larger, that creates lots more jobs for the UAW.

A final reason for this unfair piling on might be over zealous patriotism. Even though 95% of Toyotas are manufactured in America by Americans, lots of people still think of Toyota as a “foreign” car. If they gave this a little more thought, they would understand that Chrysler is a foreign car. Previously Chrysler was owned by Daimler Benz, a German company and now it will be controlled by Fiat, an Italian company. You would be amazed at some of the vile, racist email and voicemail I receive from bigots who think of themselves as patriots.

In closing I want to thank my customers and friends for the fantastic support they’ve given me and my family during these difficult times. When my home, cell, and red phones ring, most all of the calls are those of support like “hang in there, Earl. We will always continue to be you customer”. I’m writing this column on Sunday morning, February 6. A woman just called me on the red phone from my dealership. She had driven up from Boca Raton so that we could fix the accelerator pedal on her Camry. She told me that another dealer had told her it would be several weeks before they could get to her. Furthermore, not only are people still buying Toyotas from my dealership, but we are gaining market share like never before. In January we soared from the #31 volume Toyota seller in the USA to #16! We began February as the #1 seller of Toyotas in the Southeast USA.

Monday, February 01, 2010

SHOULD I BUY MY CAR AT THE END OF THE LEASE?

The best thing about making this decision is that you are holding the best hand in the card game between you, the leasing company, and the dealer. That is because you know your car better then they do. You probably have been driving it for close to three years, you know how well you have maintained it, how worn the tires are, whether or not its been wrecked and repaired, and how many dings, dents, or upholstery blemishes there are. You know if it was garaged and how you carefully you drove it. You also know, better than anybody, how well it runs. All of these things determine the value of your car.

Unless you buy a new car, you can not have as much confidence in any other used car that you may buy than your own used lease car. The only assurance that you have when you buy somebody else’s used car is their word or the dealer’s word about how it was driven and maintained. That mean that if you did take very good care of your lease car, drove it carefully, kept it in a garage, waxed and washed faithfully, and maintained it carefully it is worth more to you than anybody else because you are the only one who knows that. And you can never be sure about that for any other used car you might buy.

Given that you like your lease car and want to keep it, the next step is determine its wholesale market value. The leasing company usually is not in the business of selling cars, just leasing them. Getting rid of off-lease cars is expensive and time consuming for them. You have an advantage here too and you should be able to negotiate a good price. Remember, you know your car much better than they do. They will usually give you a price you can buy the car for without even looking at it. Oftentimes they will call you first about buying your lease car before the lease is up. Be careful when this happens because this can mean that they are facing a loss if they have to wholesale your car at the auction. They are calling you to sell you your car for more money than they can get for it at the auction.

That is why you need to establish the current wholesale market value for your car. Car dealers call this ACV, for actual cash value. Check the Internet for information on the value of your car. www.kbb.com, the Web site for Kelly Blue Book is one of the best sources. Consumer Reports can also give you this information. The best check on the wholesale value is to actually drive your car to 3 or 4 car dealerships that are franchised for your make. If you drive a Ford, visit as many Ford dealerships as you can and tell them you want to sell your car. You aren’t misleading them because it’s a lease car. You could exercise your option to buy it from the leasing company and them resell it to the dealer, if the dealer’s offer was higher. If you live near a CarMax store, the largest retailer of used cars anywhere, they buy a lot of used cars over the curb and their prices are usually very competitive.

Now that you are armed with the true market value for your car, you can negotiate the best price with the leasing company. Even if they won’t sell you the car for the ACV, wholesale value, paying as much as $2,000 over wholesale for a car you have absolute confidence in is a good deal. If you can buy it for wholesale or below, you should celebrate!

Another thing to be on the lookout for with the leasing company is when they offer to extend your lease for the same monthly payment you are currently making. That is not a good deal. They are doing this because they will lose money if they sell this car at the auction at the present time. They want you to keep making payments on the car so that their depreciation rate catches up with the residual value. The residual value is the price they guessed your car would be worth in 3 years. If you had leased the car for longer at the onset of your lease, the payments would be lower than they are now. Why should you pay the leasing company the same as they charged you for a shorter lease?