Sign the Petition!

Monday, January 31, 2011

CAR OWNERS AGAINST DECEPTIVE DEALERS

Regular readers of this column/blog know that I’ve been “fighting the good fight” against car dealers’ deceptive sales practices and advertising many years. Besides this column, I also warn and advise my radio listeners every Saturday morning and every weekday how not to be “ripped off” by car dealers’ deception. Many of you have seen my TV advertisements calling for making the dealer fee illegal. I even took the fight to our Florida legislature when I testified against the dealer fee in front of the Senate Commerce commission.

I’ve made some progress but it’s been an uphill battle. The auto dealers have powerful lobbying groups that make it almost impossible to get any car consumer protection legislation passed. Our state regulators are sadly deficient in regulating our current laws and responding to consumer complaints. I see illegal advertisement running consistently on TV and radio and in our newspapers. The media is reluctant to expose the illegal and unethical advertising and sales practices because car dealers are among their largest advertisers.

I believe the only way to get the attention of our politicians, regulators and the media is by organizing the car owners of Florida and having their voices heard. Therefore I recently announced on my radio show that I would like to form an organization tentatively named C.O.A.D.D., Car Owners Against Deceptive Dealers. The response from my radio audience has been very positive and many listeners have already volunteered to become a part of COADD. Below, I’ll describe my vision of this car owner activist consumer group. If you have an interest of being a member or even on our board of directors, please contact me.

COADD would include members from Palm Beach County north through the Treasure Coast, including Martin and St. Lucie Counties. Eventually I envision growing south through Broward and Counties and eventually becoming statewide. COADD will be a nonprofit corporation controlled and operated by Florida car owners. No car dealers could be members and certainly not on the board of directors, but honest, ethical car dealers would be allowed in an honorary capacity as consultants. I would be the first of these dealers to serve.

I’ve been approached by one of Palm Beach County’s most prestigious law firms that is seriously considering helping COADD get formed as a nonprofit. A member of this firm would also sit on our board of directors. Once we are formed and have a bank account, I will contribute $10,000 to help us begin operations.

The first task of COADD should be to develop a car dealer code of ethics regarding their advertising and sales practices. All car dealers in Palm Beach, Martin, and St. Lucie Counties would be asked to sign a covenant stating that they would abide by these ethical rules. Those dealers who agree would become honorary members of COADD and could use this in their advertising. Of course, their advertising and sales practices would be regularly monitored to ensure compliance.

The next task of COADD would be enforce the code of ethics with all car dealers in our area, including those who refuse to sign the covenant. I suspect that there will be many car dealers that, at first, will refuse to sign, but I also suspect that growing pressure will force most to join. Those dealers that violate the code will be sent a certified warning for the first offense and given a reasonable time to comply. If they don’t comply, COADD will advise our regulatory agencies, of the violation(s). Which agencies will be notified will depend on the seriousness of the violation and can include the County Office of Consumer Affairs, Department of Motor Vehicles, and the Attorney General’s Office. Honorary dealer members that violate the code will be suspended and banned if they refuse to comply.

Raising funds is always a challenge for nonprofits. Once we begin to make an impact and are able to recruit more car dealers as associate/honorary members, COADD will charge them an annual fee for membership. This should be a significant source of revenue. Another task of COADD will be to help car owners who have been taken advantage of in buying or servicing their cars. This could also be a source of revenue because many victims would be willing to make a contribution if COADD successfully resolve their problems and saved them money. Nonprofit fund raising is not my field of expertise but there must be other sources of local, state, and federal funds for nonprofits that provide a valuable service to their communities. For membership in COAD, there would be a reasonable annual fee. Members would be give educational materials on how buy a car and service a car without getting ripped off and would be able to identify themselves to dealers with their membership card or even a pin. If a dealer attempted to take advantage of a member, she would have the full force of COADD’s support to defend her.

Equally important to funding is getting started with a good, strong, involved board of directors. Among South Florida’s greatest resources are highly qualified retires...Men and women who formerly owned or operated large and small companies, occupied high government and military posts, college presidents, and well known celebrities. High energy, high intelligent people like this love to lend their expertise to worthwhile nonprofit organizations and most of them have several horror stories to share about being mistreated by car dealers.

After I help fund and organize COADD I see my continuing role an advisor and publicist. I will use my radio show, blog, newspaper column, and local “celebrity status” to continually endorse and promote our organization. What I ask from you is to join our group as a member or, if qualified and willing to donate your time, as a board member. If you know somebody who would make a good board member, please let me know. I cannot overemphasize how important having the right mix of people on the organizing board of directors is.

Monday, January 24, 2011

Driving Your Car Using a Cell Phone

There’s nothing new about the controversy over using your cell phone while driving your car. It all began with a movement to require you to use a hands-free device so that you didn’t have to hold your phone to your ear while you conversed. Next it evolved to the fact that, hands-free device or not, simply talking on your cell phone is unsafe. Now the big drive is against texting, which is obviously something that requires your hands and eyes.

Now, I fear this thing is about to go “over the top”. It has just been reported (I read it in Automotive News and New York Times) that one of the cellular carriers, T-Mobile, has developed a technology that makes it impossible for you to use your cell phone while driving your car! In fact, they’re selling that app to users for $4.99 per month. Concurrently with this technological breakthrough, Ray LaHood, the chairman of NHTSA (National Highway Transportation Safety Association) is strongly advocating Federal regulation of the use of cell phones in cars. This means that our government, either thorough regulators or the legislature, could require all wireless carriers to make it impossible for you or me to use our cell phones while driving.

Now, I don’t want to turn this blog/column into a political commentary…we have too much of that already. I mentioned this subject on my weekly radio show last Saturday and received some rather strongly worded emails. Here’s an example:

I was listening 1-22-11 to Seaview radio and heard you posing a hypothetical question about the government shutting down cell phones in moving cars. Your wife then asked for comments and gave out the 877 # twice. Being a carefull [sic] driver, I pulled into a parking lot and called immediately but was told there was only a minute left and there was no way I would be able to express my opinion on air! So, you pose a STUPID, PARANOIA-induced question, ask for comments but cut the show off??? Wow! Well. Here's my answer anyhow: STOP trying to scare people about the government possibly doing something unlikely somewhere in the future!!! WHAT is wrong with you? Still upset McCain did not win? Get over it. The government is NOT the evil entity you put forward, sir. The government is We, the People.

Have we reached a point where we can’t be publically critical of our government? I hope not because there are a lot of countries in the world where that is exactly the case and I wouldn’t want to live in Iran or even China.

I’m 70 years old and lived about half of my life without a cell phone. I can tell you that the quality and productivity of my life has increased exponentially as a result of the cell phone, not to mention the smart phone and PC. I accomplish a large amount of work and personal related tasks everyday using my cell phone including the time I spend in my car. I’m a very safe driver, although my wife and my sons will tell you I drive too fast. Ever since the “safe driver” addendum to licenses came out, I’ve had that stamp on my license and I’ve never been involved in a traffic accident.

But forget about my personal experience, the percentage of traffic accidents, injuries and deaths has declined steadily for at least the past 50 years which includes the period of time we’ve had cell phones in our cars. Now I’m not going to argue that we couldn’t reduce accidents even more if we didn’t use our cell phones, but the same principal applies to lot of things we Americans like to do. Between 1919 and 1933 our government made it illegal to make, buy or sell alcohol in the USA. You know how that turned out. The only people who benefited from that moronic experience were guys like Al Capone and Bugsy Siegel. In fact, guys like them are probably already designing something that will override the device that T-Mobile invented to neuter our cell phone while driving.

I would love to hear what readers of this column and blog have to say about their freedom to use their cell phones while driving their cars. And I will close with this personal message to Ray LaHood….”I’ll give you my cell phone when you take it from my cold, dead hands” (For those nut-jobs who may be reading this, I’m just kidding!).

Monday, January 17, 2011

Auto Manufacturers Partly to Blame for Dealers’ Deceptive Car Pricing

For many years manufacturers have employed a device called “stair-step incentives” to motivate their dealers to sell more cars. A stair-step incentive is bonus money paid directly to the dealer to reward him for selling a certain quota of cars within a certain period of time, typically one month. The number of cars in the quota is decided upon by the manufacturer and is a higher number than the dealer would normally sell.

For example, a dealer who would normally sell 150 cars in one month might be given a quota of 200. If he hits his quota, he earns $250 retroactively on all 200 (or more) cars he sells that month, or $50,000+. If he sells only 199 or less, he earns nothing! It’s easy to understand why this would strongly motivate any car dealer to “do whatever it takes” to try to sell his quota.

Unfortunately “whatever it takes” sometimes translates into “irrational and crazy pricing” and those are the words of Mike Jackson, the CEO of AutoNation (the largest retail chain of car dealers in the USA}. He spoke before the World Automobile Congress recently and announced that he will make it his mission to end stair-step incentives by auto manufacturers.

At first, one might ask what’s wrong with incentivizing a car dealer to sell lots of cars by paying him a large bonus. The answer is that there’s nothing wrong with the concept, just with how the concept is applied. In my example above, the dealer gets $250 per car. If he got $250 every time he sold a car in that month, he would be inclined to discount each car by up to $250. But, the dealer only earns that $250 per car if he sells at least 200 cars and that’s more than he would normally sell. You can understand how the very first customer of the month might get a different price from the last customer, especially if the last customer was buying the 200th car! How can a car dealer tell a customer at the first of the month that this is the best price and give him his best price when even the dealer doesn’t know what he can afford to sell the car for? On the last day of the month, it’s perfectly feasible for a dealer to sell a car thousands of dollars below his cost if that’s the sale (200th car) that will allow him to hit his $50,000 bonus.

It might seem at first that this can be a great opportunity for the car buyer…just come in at the end of the month and buy the last car a dealer must sell to hit his quota. This does happen but the car buyer cannot plan for it any better than the car dealer can. The dealer may not hit his quota at all or he may have hit it earlier in the month. These stair-step incentives are secret incentives and aren’t advertised by the dealer or the manufacturer. In fact, usually the salesmen don’t even know about them. But the managers who control the price that is given to the customer do.
This kind of incentive makes it even more mandatory to do comparison price shopping. If you want to buy a new car or truck, you should shop and compare prices with no less than three other dealers of the same make. But, you have no way of knowing which dealers will make their stair-step bonus that month. The dealers that know they have no chance to sell their quota will maintain their normal pricing. Those that are committed to reaching their quota number (and believe they will) can discount their cars substantially more than the other dealer(s). The dealer that believes he can’t hit his quota can give you his lowest price but it won’t be as low as the dealer who will hit his quota.

The stair-step incentives favor larger volume dealers because they can earn larger bonuses. Imagine two dealers selling the same make of car the first of whom is a small dealer with a quota of 50 cars and the larger dealer has a quota of 500 cars. The first dealer earns $12,500 when he hits his quota but the larger dealer earns $125,000! Assume both dealers are “stretching” to hit their quotas in the last week of the month. Which dealer will likely offer you the best price? It’s pretty obvious that the larger dealer can literally give away one or more cars in order to earn his $125,000 bonus. This sort of thing is why the president of AutoNation referred to stair-step incentives as “irrational and crazy pricing”. And I wholeheartedly agree.

Monday, January 10, 2011

Caveat Emptor and Car Dealers

You Can Fool Some People All the Time

Almost everyone has read Abraham Lincoln’s popular saying, “You can fool some of the people all of the time, and all of the people some of the time, but you can’t fool all of the people all of the time.” I think Abe meant this to be a positive assertion that government may get away with deceiving us for a while, but in the long run, truth justice and the American way will prevail…and I think he was right.

However, it doesn’t work that way with unethical car dealers and car buyers. It always has been “caveat emptor”, or “buyer beware when it comes to buying or servicing a car. Unfortunately for a buyer to “beware” he must be “aware”…that is to say educated, mature, sophisticated and experienced. This excludes a very large segment of our population including the very young, the very old, the uneducated, those with low I.Q.’s and those not proficient in the English language. Is this one reason why our regulators and elected politicians don’t seem to care or take action with respect to the rampant unfair and deceptive sales practices of a large number of Florida car dealers? Most elected officials and regulators are lawyers and are highly educated and sophisticated. They don’t have a problem buying or servicing a car. In fact, the car dealer that tries to take advantage of a lawyer, regulator, or politician is asking for trouble.

I’ve been writing this column/blog and broadcasting my radio show, Earl Stewart on Cars, for about four years. I sometimes feel that I’m “preaching to the choir” when it comes to advising people how to avoid getting ripped off by a car dealer. You, my readers and listeners, largely fall into the category of the educated and sophisticated, “aware” buyer. Most of you aren’t taken advantage of when you buy or service your car because you won’t allow it. Unfortunately, there are enough uneducated, naive, and otherwise vulnerable consumers to feed those unethical car dealers who prey on the defenseless among us. All you have to do is read some of the car ads in the Saturday (the biggest selling day for most car dealers) auto classifieds. To the educated, sophisticated buyer, these ads are actually funny if you can forget the fact that so many fall prey to them and are taken advantage of by the dealers. For example, it’s hard for you or me to believe that anybody would respond to an advertisement without reading the fine print. Many dealers today are advertising prices that, when you read the fine print, are understated by many thousands of dollars. When you or I see a dealer stating that the car price is plus “freight”, we are educated enough to understand that the law requires that the freight cost be already included in the price. A shrewd buyer knows that “dealer list” is not the same thing as MSRP and that a large discount from “dealer list” means absolutely nothing. We know that the “lowest price guarantee’ is worthless if the dealer reserves the right to buy the car from the other dealer that offers a lower price.

There are those who argue that all buyers have the responsibility to guard against unethical sellers, to take care of themselves. In fact, that’s the literal translation of the Latin legal term “caveat emptor”…let the buyer beware. That’s sounds good, but what about the elderly widow whose husband recently died and who never had to make a the decision on a major purchase in her entire life? What about the young person just out of school with no experience in the real world? How about the immigrant who struggles with English? Should we be concerned about our underprivileged classes who often drop out of school because they have to go to work to support themselves or their family? You and I know lots of good people who, for one reason or another, simply can’t cope with a slick car or service salesman.

My bottom line is this, since we can’t rely on our regulators and politicians to protect those who “can be fooled all the time”, maybe we owe it to society to protect these folks. If you know someone who is thinking about buying a car or has a service problem with her car and you feel she may not have the ability to fend for herself with the car dealer, offer your support. If you’re one of the people who needs support, ask someone who can go “toe to toe” with a car dealer to come with you when you are car shopping. By the way, nobody, sophisticated or not, should car shop alone. Two heads are always better than one and it’s always a good idea to have a witness to what was said during a negotiation. And, of course, if you don’t have the time to help a person or you’re that person, you can always call me…I’m always here for you.