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Monday, August 29, 2011

That Brand New Car May Need a Wheel Alignment

I wrote another article on wheel alignments a short time ago. If you’re not conversant with wheel alignments, this is a good article to read and you can find it here. Also, this is a great video on YouTube, http://www.tirekiller.com/.

Most everyone thinks of a wheel alignment as a maintenance item which is the owner’s responsibility that you don’t need to worry about when you first buy the car…at least not until you drive into a pothole, notice a pull to the left or right, or uneven tire wear. Unfortunately most car manufacturers and dealers also look at alignments the same way.

A few months ago, I invested in a new state-of-the-art wheel alignment machine. Older wheel alignment machines require a lot of time and labor to measure the wheels for proper alignment. In fact, it actually takes almost as long to determine if your car’s wheels are out of alignment as it does to also actually correct the alignment. Because of this, most service departments (independents and dealers) will charge you the same just to “check” your alignment as to actually correct it. The cost of 4-wheel alignments averages between $70 and $100. Beware of very low priced alignments. These may be just for the front end of your car and/or by older or obsolete alignment machines. I invested in my new state-of-the-art alignment machine because it allows me to check an alignment in less than 10 minutes which permits me to check a customer’s alignment at no charge.

Now, I check the wheel alignments on every car that comes into my service drive. I also check all of my company cars including my parts delivery trucks my service courtesy vans, my new car demonstrators and my used cars. I do this for the same reason that you should check the wheel alignment on your car, even if it’s brand new. As I explained in my earlier article, a car’s wheel out of alignment is like high blood pressure…often times there are no symptoms. And, just like high blood pressure can be fatal to you, misaligned wheels can be fatal to your tires.

The reason that I’m writing this article so closely on the heels of my last wheel alignment article is because of the astounding data I’ve been able to collect since I began checking every car coming through my service drive (about a hundred each day) for alignment. About one car out of every four that I checked is out of alignment which didn’t surprise me that much. Industry data supports this. But what did surprise me is the fact that about one out of four new cars is also out of alignment! I’m defining a new car as one under one year old or 20,000 miles. My thoughts on this are that some cars may actually be misaligned before they leave the manufacturer and some may have their wheels knocked out of alignment loading and unloading them on ships, trains, and trucks between the manufacturer and the dealer. Of course new cars are also driven by the dealer on road tests, demonstration rides and traded back and forth between dealers. As you can see there are lots of reasons a “new car” can need a wheel alignment.

Because a new car has so few miles on it, it’s impossible for you to notice the misalignment from uneven tire wear. As I explained in my earlier article, the only other tangible symptom for misalignment is pulling to the left or right. But all it takes is two adjustments on two different wheels to be out in opposite directions to cancel each other out in which case there is no revealing pull to left or right.

Now here’s the shocking facts I discovered when I began checking the wheel alignment on all new cars that come through my service drive. Before I purchased my new state-of-the-art Hunter alignment machine, I checked and aligned a new car only when the customer complained of a pull or uneven tire wear. The average number of alignments I checked and fixed each month was only “seven”. Now that I’m checking the measurements on all new cars, I’m aligning an average of forty-six, an increase of 650%! This means that for every wheel alignment I corrected, there were six more that were not detected and fixed. Many of my customers ended up paying for an alignment that should have been covered by their warranty and many may have had to replace their tires sooner than they should have.

It pains me to admit that I haven’t been checking my customers’ new car for alignments before a few months ago, but I really had no choice for two reasons. I couldn’t afford to pay a technician the lengthy labor time required with my old alignment machine and the manufacturer would not pay for an alignment check or alignment on a new car unless the customer complained of a pull or uneven tire wear. This is common practice with most, if not all, manufacturers and I believe it’s a huge mistake. You would think that the manufacturer of the car would understand the technical fact that a car’s wheels can be out of alignment without showing tire wear or pulling. Selling a customer a new car with wheels that are misaligned and not allowing that car to be aligned under warranty is simply not right. The consequences of this can not only be very expensive for the customer, but a potential safety issue as well.

My advice to you is to demand that the dealer and manufacturer who sold you your car prove to you that your wheels are aligned properly as soon as possible after you buy the car. Make this a written condition of the purchase. Ideally all new cars should have their alignments checked just before they are delivered to the customer. Many dealers might encounter a problem with reimbursement by the manufacturer for doing this and that’s why it’s not already being done.

Monday, August 22, 2011

Don’t Be “Flipped” to a Lease

One of the most popular weapons in car dealers’ arsenals is the infamous “lease flip”. This is car dealer jargon for switching a customer who originally intended to buy a car to leasing the car.

Of course the motivation to do this is more profit for the dealer and a bigger commission to the salesman. That’s not to say that leasing a car is always more costly than buying one, but it can be if you’re not careful. And not being careful is exactly what happens when a purchase intender becomes a lessee.

Here’s how it happens. You come into the dealership to buy a car. You may have seen the dealer’s advertisement in the newspaper or TV for a particular model. More than likely you are prepared to make a down payment and/or trade in your old vehicle. You have a monthly payment in mind because almost everybody has a budget and we usually translate most purchases into whether or not we can fit them into our monthly budgets. You negotiate the best price you can to buy the car, or maybe the sale price is good enough.

Now the salesman or more often the F&I manager/business manager tells you what your monthly payment will be. Let’s say that you have a trade-in worth $15,000 and aren’t going to put any cash down. The F&I [Finance and Insurance] manager tells you your monthly payment will be $427 per month. But that’s way more than you can afford and you tell him you can’t buy the car because you can’t afford that big a payment. He asks you how much you can afford and you tell him it must be under $350 per month. Now he has you set up perfectly for the “lease flip”.

“Mrs. Smith, I think I have just the right thing for you. What would you say if I told you that you can drive that new car home today for just $349 per month?” You say, “With glee, you say we have a deal!” Guess what? You’ve just been flipped. If you had bought the car at the advertised price or negotiated a very good price, the dealer probably would have made about $1,000 profit. and the salesman would have made about a $200 commission. Not that you’ve let yourself be flipped to lease, the dealer could be making $15,000 and the salesman could be making a $3,000 commission!

I’m not exaggerating. I get calls weekly from victims of lease flips. Many of the callers are elderly and many of them are widows who never bought a car before, but had relied on their husbands. There’s no law that limits the profit that a dealer can make when he sells or leases a car. $10,000, $15,000, and even $20,000 profits are made and usually on leases. The dealers can do this by using the trade-in as a capital cost reduction on the lease but allowing less for the trade than it is actually worth. In the example above, your trade-in may be worth $15,000 but you were allowed only $5,000 to reduce the capitalized costs of the lease. Also, the dealer could have raised the price of the car you negotiated or the sale price to MSRP or even 110% of MSRP which is allowable by the leasing companies.

By manipulating the number of months of the lease and the down payment [capitalized cost reduction], a dealer can give you as low a payment as you ask for and still make an exorbitant profit. Most buyers are so focused on monthly payments that they don’t carefully analyze what they are agreeing to and signing. The shorter the number of months of a lease, the greater impact the down payment has on the monthly payment. A $5,000 down payment reduces the monthly payment on a 36 month lease by $139 per month, $208 on a 24 month lease, and $417 on 12 month lease.

Incredibly many victims of the lease flip, never thought about the fact that after the 12, 24, or 36 month term of the lease, they own nothing. After 36 months, a car with a good resale value should be worth about half of what you paid for it. Many people who have never leased before think they can bring their lease car back early if they want. Leasing is not renting and you can bring your car back early only if you make all of the remaining lease payments. If you had bought the car for $30,000 and financed it for 36 months, you would have about $15,000 in equity at the end of 36 months and no monthly payments. You were building equity with every monthly payment in the purchase but you were building zero equity with your 36 lease payments.

As I said before, don’t let this frighten you from ever leasing a car. Leasing can be a good choice and sometimes the best choice. You can find six articles I’ve written for Hometown News and for my blog at www.EarlStewartOnCars.com. “Lease a New Car before You Buy It”, “Car Leasing Booby Traps”, “Be Very Careful When Leasing a Car”, “The Lease Acquisition Fee…the Bank’s Gotcha”, “Buy or Lease Your Car at the Right Time of Year”, and “Should I Buy or Lease My Next Car?”

Monday, August 15, 2011

THE TEN COMMANDMENTS

HOW THOU SHALL TREAT THY CUSTOMER

I composed these ten “commandments” for my car dealership. They didn’t come to me in a vision or on a mountain top, but evolved over forty-three years as a car dealer. Most of them evolved over the past decade which is why I refer to myself often as a “recovering car dealer”. But just like the biblical Ten Commandments, they don’t do any good unless people know, understand, and apply them. In my dealership, all of my managers and other employees know that we must “walk the talk”.

(1) Do whatever our customer asks if she believes she’s right. It’s not important whether our customer is right or wrong, only if she honestly believes she’s right.

(2) Do what is right for the customer even if you don’t have to. Just because we’re not required by law or contract to do the right thing is no excuse.

(3) If your supervisor is not available, then you do what is the right thing for our customer. All Earl Stewart Employees are empowered to spend or do whatever is necessary to do the right thing by a customer. If in 20-20 hindsight you should err, you will not be held to blame because you acted in good faith to make our customer happy.

(4) Always answer all phone calls, emails, texts, and messages of any kind from our customers ASAP. Nothing angers a customer (or me) more than a delayed or no response from us.

(5) All Customers must be treated with courtesy and respect at all times. Just because you judge a customer to be unreasonable is no excuse not to treat that custo9mer with courtesy and respect. If you are incapable of dealing with a particular customer, involve your supervisor or me.

(6) You will always tell our customers the truth, the whole truth, and nothing but the truth. I believe in giving every Earl Stewart employee a second chance except when it comes to dishonesty.

(7) Your first loyalty is to our customer, not to Toyota. In the rare case where a dispute arises between our customer and Toyota over warranty coverage, for example, we advocate for our customer. We argue and present the facts on behalf of our customer but abide by Toyota’s decision.

(8) You must personally take ownership of our customer’s problem. This means that if you are the first person to learn of a customer’s complaint or problem, you have the responsibility to stay on top of its resolution until you personally verify that the issue has been resolved. Don’t just refer or delegate the problem to someone else even it’s outside your department.

(9) Promise our customer less than you will deliver. Always be conservative when making promises to your customers. Over estimate the time of a service or the date of arrival of the new car they ordered. Under-promise and over-deliver.

(10) Trust your customer as much as you hope he will trust you. We’ve all been burned by trusting someone who disappointed us but that’s a very small percentage. The fastest way to earn trust is to trust the person you want to trust you. Somebody has to go first. Let it be us.

Monday, August 08, 2011

EIGHT STEPS TO ENSURE THAT YOU ARE BUYING THE BEST CAR FOR THE BEST PRICE

(1) Consumer Reports Subscribe to Consumer Reports, go to the library and read past issues, or check out Consumer Reports online. There are other objective sources of information on cars, but this is the best. They accept no advertising from anybody and their sole goal is rigorously and objectively testing merchandise that consumers buy. You can very quickly find the best make car for the model and style you want to buy. Consumer Reports rates cars by performance, cost of operation, safety, and frequency of repair.

(2) Test Drive the car you have chosen This step requires that you visit a car dealership. Remember that this doesn’t have to be the dealership you buy it from. You obviously must see, touch, feel, and drive the car that you think you want to buy. A new car is a very personal thing and just because Consumer Reports loved it doesn’t mean that you will. Be sure that you test drive the car at all speeds in all road types that you normally drive. Drive it in the city but also on the expressway.

(3) Carefully choose the accessories you want There are some accessories that enhance the value of your car and some that don’t or may even lower it. Generally speaking you should accessorize a car comparably to its class. If you are buying a lower priced economy car, you should not load it up with leather seats and an expensive sound system. If you do, you won’t recoup much of what you spent on these accessories in its resale value. On the other hand, if you are buying a luxury car, don’t skimp on items people look for in luxury cars like a navigation system or a moon roof.

(4) Carefully choose your car’s color Color is more important in determining a car’s resale value than accessories. If you want to maximize the trade-in value of this car, choose a popular color. White, silver, black, and beige are the 4 most popular colors. Sports cars and convertibles are exceptions and red is often the most popular color. The difference in trade-in value between the right color and the wrong color can be several thousands of dollars.

(5) Arrange your financing Now that you know exactly what kind of a car you are going to buy, you can check with local banks and credit unions to find the best interest rate. Don’t commit until you have chosen the dealer you will buy from. Manufacturers sometimes offer very low special rates and dealers can sometimes offer a lower rate than your bank or credit union.

(6) Shop your trade-in If you are trading in a car, take it to 3 dealerships for the same make and ask them how much they will pay you for your car. A Chevy dealer will pay more for a used Chevy and a Toyota dealer will pay more for a used Toyota. If you live near a CarMax store, get a price from them too. They have a reputation of paying more money for trade-ins than most dealers. Don’t commit to the highest bid, but give the dealer you buy from a chance to beat that price.

(7) Shop for the best price on the Internet Go to the manufacturer’s Web site. The addresses are all very intuitive. Toyota is www.toyota.com and Chevrolet is www.Chevrolet.com. You can type in your zip code and get the Web sites of all of your local dealers. Depending on how far you are willing to drive to pick up your new car, request price quotes from as many dealers as you like, but be sure you get at least 3 quotes. When you have chosen the lowest price, verify that this price is “out-the-door” with only tax and tag added.

(8) Offer your favorite, or nearest, dealer the right to meet this price. If you have been dealing with one dealership for a long time and have had good experiences with their service department, you should give them a chance to meet your lowest Internet price. Of course, you can take your new car to them for service even if you don’t buy it from them.

You will notice that there were no steps listed above which suggested that you look in your local newspaper’s auto classified section, watch car dealer’s TV ads, or believe their direct mail “too good to be true” offers. When you fall for this, the dealer is in control. When you follow my eight steps, you are in total control.

Monday, August 01, 2011

Car Dealers Exploiting the Elderly

I wrote this column over four years ago, but it’s more important and timely today. Not a week passes without at least two or three elderly people contacting me about being victimized by a South Florida car dealership. These are usually pre Baby Boomers in their seventies, eighties and nineties. I’m happy to say that I have a high rate of success if I’m contacted soon after the purchase, within a few days. The first thing I do is contact the dealership’s owner. With publically owned dealerships like AutoNation (Maroone), Penske Automotive, and Sonic, and Group One I have to contact the real General Manager. I emphasize “real” because sales managers will often try to foist themselves off as the General Manager, but they are only in charge of the car sales departments and are really “general sales managers”. In the rare occasions I strike out, I have no alternative but to contact the Florida Department of Motor Vehicle, DMV which is the best governmental agency to keep a car dealer on the straight and narrow.

I use the term “car dealer” often in my columns and I want to make it clear that I am not trying to get personal. I could use the terms “car salesman” or “car sales manager”, but the dealer is the boss and I firmly believe the placard Harry Truman had on his desk, “The buck stops here”. The guy that owns the place is responsible for the actions of his employees. Just because he doesn’t know that there are some salesmen or managers taking advantage of his customers, is no excuse.

When I became a senior citizen I truly began to see the world in a different light. I have been a car dealer for over 40 years, but I have seen my own business through the eyes of a senior citizen for only the last few. One thing that has helped this awareness has been my relative new public persona, brought on by my TV commercials. Seeing me on TV (and also reading this column) precipitates a lot of phone calls, emails, and letters from seniors in Palm Beach, Martin, and St. Lucie counties. Some of these are very complimentary. Many of them are also calls for help or advice from those who were taken advantage of when they bought their car.

I get more calls from widows than any other single category. In my dealership last Friday, I was introduced to a widow in her seventies who had come in to buy a car with her nephew. She had never bought a car before. Her husband had always handled this responsibility. He passed away 2 years ago. She was very wise to bring along her nephew to assist her in her first car purchase.

I am learning as I approach 70 that I’m not quite as sharp in some areas as I once was. My memory is not as good and I am not as fast as I used to be. This is not to say that I am not as smart as I was when I was younger. In fact, I’m a lot smarter. There was a great article in the February 16 Wall Street Journal entitled “The Upside of Aging”. It explained how recent scientific studies have proven that even though certain mental abilities like memory and reaction times regress as we age, other more important mental abilities like judgment, empathy, vocabulary, and semantic memory more than offset the negatives. Semantic memory is the recollection of facts and figures from your field of endeavor or hobby and is most robust in seniors. If you would like to read this article just click on The Upside of Aging or send me your email address or fax number and I will send it to you.

Buying the right car at the right price is no easy task. There are a lot of variables like trade-in allowances, monthly payments, discounts, interest rates, lease or buy, finance or pay cash, and all that I just mentioned has to do only with the cost of the car. What about which is the best make and model for you? This process should take lots of time in the study and preparation but too often purchases are made in just a few hours with little or no preparation.

The reasons why the elderly are so often targeted and exploited by car dealers (and other businesses) are many and complex. For one thing, there are just a lot of elderly people living in Palm Beach, Martin, and St. Lucie Counties. When a reporter asked John Dillinger why he robbed banks, Dillinger replied, “Because that’s where the money is”. Even though most senior citizens are smarter than ever, I believe that we are perceived by many as not being so smart. We are looked upon as easy prey. Also, I think that we pre-baby boomers grew up in a more trusting, family oriented time and we sometimes trust others more than we should.

In summary, if you are a pre-baby boomer like me, take extra precautions before you enter a car dealership. Do your homework carefully. Never, never make a rush decision. Do not buy that car on the same day you come into the dealership. Go home, discuss it with friends and family, and sleep on it. And if you call me, please call me before you buy the car, not after it’s too late.