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Monday, March 28, 2011

Emotion Is Your Enemy When Buying a Car

It’s hard to believe, but a high percentage of people will buy a new or used car on the first day they go car shopping. Many buyers never even compare prices with other dealers or research the car for safety, fuel economy, reliability, maintenance costs or resale value. If you’re a reader of this blog/column, you know that the car purchase process should take weeks. You must not only choose the best car to meet your needs, but you must choose the best price by getting at least three competitive quotes. The best price must include your trade-in and your financing interest rate. Since the terrible tragedy befalling Japan, tsunami-earthquake-nuclear reactor damage, panic buying of Japanese cars has been ignited. People are frightened that that new Honda, Nissan, Mazda, or Toyota they’ve been thinking about buying won’t be available if they don’t rush out and buy it today. Nothing could be further from the truth. In the first place, most Japanese brands that are bought in the USA are also built in North America and countries other than Japan. Parts for these cars are also mainly manufactured here. Of course there will be interruptions and slower production of a few models such as the Honda Fit and the Toyota Prius, but these will be only temporary. If there’s a shortage of the specific model you want to buy, wait a few weeks and there will be larger inventories and selections than ever before! Why? Japan’s economy and consumers have suffered a terrible economic blow. When manufacturing is reestablished and parts are full available again, there will be virtually no domestic buyers and Japan can only export what they make. Waiting to buy that Japanese car that is in short supply for a few weeks can save you thousands of dollars. Did you know that emotion can be the car dealer’s enemy sometimes and this can work to your benefit? There are two forces that have the net effect of driving car dealers and their salesmen and managers into an emotional frenzy. One is the “end of the month” and the other is the “stair-step incentive system”. It might sound like an old wives tale or an urban legend to be debunked by Snopes, but car dealers do sell cars for less at the end of a month. This is for a variety of reasons: (1) Dealers and manufacturers concentrate their advertising of sales and specials in the 2nd half of the month. (2) Manufacturers’ and dealers’ rebates and incentives typically expire at the end of the month. (3) Salesmen and sales managers are usually paid bonuses which culminate at the end of the month. Salesmen are paid volume bonuses and just one car sale can mean $1,000 or more on the last day of the month. (4) Manufacturers “live for market share” and sales numbers are widely publicized at the end of each month. Ford wants to outsell GM, Honda wants to outsell Toyota, etc. Stair step incentives are the most popular way that manufacturers motivate their dealers to sell more cars. An example would be a dealer earning $500 for each car he sold in a given month, but not until he sold the number of cars in his objective that was set by the manufacturer…say 250 cars. If the dealer sells 249 cars in the month, he earns zero incentive money. If he sells 250, he earns $125,000! Now, I think you can understand why you, a customer for that 250th car at midnight on the last day of the month might be able to negotiate a pretty good price. In fact, it would actually pay the dealer to “give’ you the car. Of course, it isn’t only the 250th buyer, but all buyers that the dealer believes may help him hit his objective. At the beginning of the month, it’s too soon to know if a particular sale will be the pivotal one. You’re probably reading this article close to the beginning of April. This gives you 3 or 4 weeks before the end of the month to do your homework and choose the right car. You have plenty of time to get three prices on the car you want to buy as well as on your trade-in and financing. Now, the fun part is to wait until the last day of the month and visit the dealer who gave you the lowest price earlier in the month. There’s a very good chance that you can negotiate a better price by hundreds if not thousands of dollars. Your emotion is the enemy when you buy a car, but the dealer’s emotion can be your friend.

Monday, March 14, 2011

The Media and the Tragedy in Japan

There they go again! Déjà vu from the BP oil spill (anybody seen an oil slick lately?) and the Toyota “sudden acceleration” recalls (Did you read that Toyota was exonerated and the cause was driver error?).

The earthquake and subsequent tsunami in Japan last week were, unquestionably, a terrible tragedy. The Japanese Prime Minister said it was the worst crisis to beset Japan since WWII. Certainly, that statement is a fact – not since its near destruction has a greater disaster befallen Japan. I was born in 1940 and I have a vivid recollection of how Japan literally rose, over the years, from the ashes of complete devastation topped off by the Hiroshima and Nagasaki nuclear blasts. There are no more resilient, resourceful or intelligent people on the Planet than the Japanese. They will be back, better than ever, far sooner than anybody expects.

This column/blog is named “Earl Stewart on Cars” and I’m a Toyota dealer. So, forgive me if I focus more on the impact on Japanese auto manufacturing. Other aspects of this tragedy will be addressed by other writers, but I will address the business aspect and the car business aspect in particular. I will not be the first; many newspapers and web sites, including the Wall Street Journal and the New York Times have done so already.

I’ll start the discussion with the model car that Japan exports more of to the USA than any other, the Toyota Prius. There was absolutely no damage to the Prius plant from either the tsunami or the earthquake. Furthermore, thanks to the Japanese “just in time” parts supply manufacturing process; virtually all of the Prius’ suppliers lie safely and closely to the Prius plant.

The Prius plant and most other auto manufacturing plants were closed right after the earthquake and tsunami but most all of them are scheduled to open on March 16. There have been concerns expressed about transporting cars to the ports because of possible damage to the ports, railroads and highways. My view is that a Japanese manufacturer wouldn’t announce that they were commencing production on March 16th unless they knew they could get the cars to the port. Japan auto manufacturers won’t be building cars for domestic consumption for quite a few months due to the blow to their economy and the domestic consumer. They have only one choice which is to export. Prius is the largest selling car in Japan. With domestic consumption at a virtual standstill, the USA and the rest of the world can expect to receive record volume shipments of Priuses.

The media would have you believe that the supply of Japanese produced cars will dry up overnight, but the exact opposite is most likely to occur. That’s not to say that Priuses are going to be in large supply in the next few weeks or months. But this is due to high gas prices and the crisis in Libya, Egypt, and maybe even Saudi Arabia. All hybrids and fuel efficient cars are in short supply now. Ironically, the Japan crisis will work to increase supplies and lower prices as more cars are exported to the USA from Japan.

Lastly, although the Japan-bashers hate to admit it, even if Japan never exported one more car to the USA, it wouldn’t be a big obstacle for most Japanese car makers, especially Toyota. Most Japanese car brands build most of their cars sold in the USA in North America and use domestic parts suppliers. The average Toyota has more parts built in the USA than any other car sold in America including the Ford F-150. The Toyota Camry is the “most American car” you can buy. When you hear these redneck bigots making disparaging remarks about the Japanese and extorting their dimwitted friends to “buy American” made trucks and cars, they are really saying buy a Toyota Tundra not a Ford F-150 or a Toyota Camry not a Chevrolet Malibu.

Monday, March 07, 2011

Florida’s Orwellian Attack on the Elderly

I couldn’t believe the article I read in last Sunday’s Sun Sentinel (March 5, 2011) reporting that Florida took away the driver’s licenses of 7,719 residents based on 9,105 anonymous accusers!
This is the result of a Florida policy allowing anybody to notify the state if they believe a person is mentally or physically incapable of safely driving their vehicle. The informant can obtain a form from the Florida Department of Highway Safety and Motor Vehicles or download the form from the Internet. The informant is anonymous and is not required to have proof that there is anything causing the driver they are turning in to drive unsafely. Not only does the informant remain anonymous, but should the victim of the informant feel or even prove that that the report was made carelessly or maliciously, “no civil or criminal action may be brought against any person who provides the information.”

Once the informant has made his report, investigators who work for the state make contact with the driver and submit their findings to a medical review section in Tallahassee. Investigators may interview family members, neighbors, or the driver’s physician as part of the investigation. The drive may be asked to submit a medical report from their physician or they may be required to report to a driver license office for retesting. How much confidence do you have in state investigators? I know that the ones who investigate children abused in foster homes haven’t been doing too good a job lately.

What this all means is that, if you don’t like the way somebody drives or even if you just don’t like somebody period, you can turn them in to the state and hope that their driver’s license is revoked. Almost 9 times out of 10, driver’s licenses are revoked on the basis of these reports so the odds are pretty good for the informants. But even if the driver’s license isn’t revoked, think of the aggravation, embarrassment and time consumed by these drivers to fight to keep their licenses. Clearly, most of those reports are made against the elderly and the elderly are often more vulnerable and less equipped to do battle with the state or he accuser.

Have you ever been driving and gotten angry because the driver in front of you was going too slowly? Maybe you’re late for something and the drivers in the left and right lanes won’t get out of your way. This can make anybody angry to the point where you might curse, blow your horn or flash your lights. I’m sure that many cases of violent road rage start with this scenario.
It’s very easy to obtain a person’s name and address once you know their license tag number. I wonder how many reports are made to Florida’s Department of Highway Safety and Motor Vehicles as a result of angry drivers in a hurry. You don’t even have to be angry at a person’s driving to report them. You might just have had an argument and decided this is a great, completely safe way to get even without the other person ever finding out.

I completely understand that we have lots of impaired drivers who shouldn’t be on the road. That’s why we require that drivers take driving tests periodically. I would fully support requiring older drivers to take more frequent hearing, vision, and driving tests. But I can’t believe that we have a system allowing anybody to anonymously inform on another with no responsibility or recourse. If a person has reasonable evidence to think another driver is impaired to the point he can’t drive safely, he should report him, but not anonymously. Everybody should have the right to face his accuser. The accused should also have the right to sue or prosecute the accuser if it can be proven the accusation was made carelessly or maliciously.

If you agree with me, contact your local state senator and representative and let them know how you feel about this Orwellian assault on Florida’s elderly drivers.