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Monday, February 25, 2013

Pitfalls to Avoid When Having Your Car Serviced


Before I get into the pitfalls, it is important for you to understand how important it is to have your car serviced according to the manufacturer’s recommendations. The pitfalls and consequences of not doing so can be equal to or greater than those you might experience at the hands of an incompetent or unethical service department.

I strongly recommend that you have your car serviced and repaired by a franchised dealer of the make of your vehicle. I know that this statement, coming from a franchised car dealer, may be met with some skepticism. Listen to my reasons before passing judgment. Modern vehicles are highly complex computerized machines requiring very sophisticated diagnostic equipment and highly trained technicians. The evolution of new, expensive diagnostic equipment requires constant updating. The evolution of car technology requires continuing education of dealers’ factory trained technicians who attend many weeks of schools every year. Forty years ago, it was possible for a really good mechanic to fix anybody’s car. Those days are gone and your car needs a highly trained specialist with the very latest diagnostic equipment. It is impossible for an independent service company to be competent in servicing and repairing all makes of automobiles.

Carefully choose the dealership that will service your car. You do not have to take your car to the dealership that sold you the car for warranty repairs, as many believe. Every dealership of your make car will welcome your warranty and non warranty work.  Do your homework on which dealer has the best service department. Every dealer is graded in customer satisfaction by the manufacturer. Ask to see a copy of his CSI (customer satisfaction index) scores. Check with the BBB and the County Office of Consumer Affairs.

When you take your car in for maintenance or repairs, always ask for an estimate. State law requires that a service department not exceed a written estimate by more than 10%. When paying your bill, scrutinize the detail to be sure that you know exactly what each charge means. Most service departments add a fee on top of everything else with various labels like “miscellaneous supplies”, “sundry supplies”, “environmental handling”, etc. This fee is simply a 5% or 10% charge tacked onto the total bill. If you object to this fee, which you certainly should, dealers will often waive it.

You will find that prices for maintenance like oil changes, alignments, tire rotation and balancing, etc. are usually priced competitively. Where you have to be careful is in the pricing of major repair items like transmission, engines, and air-conditioners. When quoted a price on a big repair, don’t be afraid to negotiate. If you let it be known that you are willing to take your car elsewhere (even if you’re bluffing), you can often negotiate the price down significantly.

You should always make an appointment before bringing your car in. Appointments should be scheduled at relative slow times and days. Avoid bringing your car in early on a Monday morning and other very busy times. You want the service advisor to spend as much time with you as is necessary. This will allow you to drive the car with the service advisor if necessary to identify a specific problem like a squeak, rattle or vibration. Pick your car up at a time when the service advisor or technician has time to road test the car with you again to be sure that the problem was fixed.

Don’t be shy about asking for a loaner car when you have to take your car back a 2nd or 3rd time for a repair that was not done properly. It’s the dealership’s fault and you should not be inconvenienced. On a comeback, always talk with the service manager directly. Also ask that they assign their best technician to the job.

As I have said in earlier columns, there is nothing more important than choosing the right dealership to do business with. No service department is perfect and never makes a mistake. What you want to find is that service department that, in addition to being competent, will fess up to their occasional mistakes, sincerely apologize and make them right. 

Monday, February 18, 2013

BUYERS ARE LIARS! (part 2)


I wrote this column about four years ago and this morning I received another comment on my blog. Here it is:

Hi Earl, good article. As a car sales professional, I have heard this saying and whilst I always approach every prospect with the right attitude: The number of lies I have been told I have lost count. Things like: a/ Customers telling you another dealer will give them an extra $4000 for their trade in: when you know the dealer deals with the same wholesaler b/ Customer tells me that another dealer will throw in a polished alloy bullbar: Two problems: that product was not available for that vehicle yet: yet they still insisted (and the store it was going to come from: TJM: didn’t even make tow bars for that model: and lo and behold: the other dealer hadn’t even met this guy. c/ Customer comes to me, we build a great rapport, then goes shopping elsewhere and buys: phones me to ask if i will match a deal that is so far below cost it couldn’t be anything other than a figment of their imagination: and after calling the dealer, finds out it is just that: and the real buyer was not the person who came to me. This other clown comes and parades the car and restates what deal they got: yet can't produce the invoice. That said, I love the car business and these people are part and parcel of it. I quickly work them out and eliminate them now ;)


This comment is just another example of why car salesmen develop this negative attitude toward their customers.  It’s reminiscent of what soldiers do when they go to war…they demonize the enemy to justify in their minds that their job which is to wound, kill or capture them. During WWII, the Japanese were the “Yellow Peril” and we called them Japs. The Japanese referred to us as Yankee Devils. The same held true with the Germans, Koreans, and today with the Muslims. Just like soldiers, car salesmen are often only “following orders” and they demonize their customers when they’re ordered to do things that their conscience wouldn’t permit them to do to a “good person”.

I don’t claim to be a psychologist (and I don’t even play one on TV), but I have read articles explaining how humans will stereotype other people in a fashion that falsely justifies their negative behavior toward those same people. We also see this with racism. If you make yourself believe that car buyers are out to take advantage of you, “buyers are liars”, you can’t feel guilty about tricking them into paying a dealer fee. If you trick a “roach” or a “slug” into coming in to buy a car on credit when they probably can’t, why should you feel guilty? After all, roaches and slugs don’t have feelings.

I’m always amazed by the way car dealers who use deceptive advertising and unethical sales tactics rationalize their behavior by actually blaming you, their customer. The following is a direct quote from an anonymous car dealer’s email I received this morning in response to one of my recent columns in this newspaper:  “I don't think you would make any of these comments if you sold fords in a non-metro market. How do you expect dealers to change when consumers think they should pay less than dealer cost for a car and then walk into any other form of retail store and pay what they are asking?? Your ideas are noble but there are other dealers who have tried 'your' methods who are no longer in business.” This dealer is saying that his customers are so ruthless and cunning that they won’t buy a car unless they can buy it below his cost and his only solution is to trick them into thinking that they are buying it below his cost, like tacking on a “dealer fee” to the price they quoted the customer.  He also goes on to say that my “ideas are noble” but I can’t possibly be successful and I will go broke trying. I truly appreciate his concern and I want to assure him, if he is reading this article that my business is doing very nicely.

This attitude is actually a prevailing part of the culture in many car dealerships. Many dealers, dealer managers, and sales people don’t trust their customers (how paradoxical!). They don’t even like their customers. A very common expression among car dealers and their sales staff is “Buyers are liars”. This means that a prospective customer will not tell you the truth about the condition of his trade-in, he will lie to you about the price he got from your competitor, and he is likely to remove those new tires that were on his trade-in when the dealer appraised it when he comes in to pick up his new car.

There are also a lot of dealerships where used car buyers and people with bad credit are held in especially low esteem. They have nicknames for people with bad credit like “slugs” and “roaches”. Apparently dehumanizing these unfortunate members of our society with derogatory labels makes it easier to treat them so shabbily. People with bad credit are targeted with direct mail and newspaper ads making absurd promises that convince prospective customers that they can finance a car no matter how bad their credit. In some dealerships applicants are coached on how to falsify credit application and pay records. In some cases the applicant may not even know he is signing a false credit application which is federal offence.  In most cases the credit is refused and the applicants are not even given the courtesy of a return phone call to tell them this.


What these kinds of dealerships don’t understand is that you must trust a person first before you can expect her to trust you. You have to treat a person with respect before you can expect that person to respect you. Somebody has got to go first. My experience over the past 40+ years as a car dealer is that 99.9% of my customers are good people who I can believe and trust. Those are pretty good odds and I just assume that every customer I am dealing with is part of that 99.9%.  Once in a great while I get burned, but the loss from that one in a thousand that takes advantage is far out-weighted by the other 999 who respond positively to my trusting them and treating them with respect.


Monday, February 11, 2013

Buying, Leasing, and Servicing your Car Is Governed by “Survival of the Fittest”


Buying, leasing, or servicing a car is in an “evolutionary time warp” compared with most other retail transactions. Buying an iPhone from an Apple store, a TV set from Target, or a dress from Macy’s is actually a pleasant experience. People shop in modern stores as a form of pleasurable recreation without any intention of buying anything. My wife, Nancy, and I go to Costco often on Saturdays, not because we have a lot to buy, but because it’s a pleasurable way to spend an hour or two. Contrast this with buying a car which many compare to having a root canal or a colonoscopy.

Flash back about 75 years in the retail evolutionary tree, and you have the “21st century” car buying experience. Everybody you deal with is paid a commission on whatever you buy…a car, service for your car, parts for your car, or financing or insurance for your car. This commission is directly proportional to how high a price they can coerce you into paying for the car, part, service, finance or insurance. Furthermore, everybody pays a different price for everything they buy. You might buy a new 2013 Jeep Wrangler Sahara today for one price and find out that your next door neighbor paid $2,000 less the following day from the same Jeep dealer you bought yours from! In fact, it’s almost certain that she paid a different price than what you paid. The price each of you paid depended on the buying and negotiating skills of you and your neighbor. The difference in price is also affected by the skill, ethics, and integrity of the car salesman and manager you dealt with.

Car salesmen, on the average, earn about 25% of the profit they make when they sell or lease you a car. The average profit on a new car is about $2,000 but this average is made up of wild variations from “zero profit” to $20,000 and even higher. You ask, “Why would a car salesman sell a car for zero profit if he’s paid on commission?” There are two reasons. First, some cars are “real dogs”, very hard to sell and may have sat on the dealers lot for months or even years. Salesmen are paid what is called a “flat commission” to sell these “dogs”, anywhere from $100 to $1,000. The second reason is that manufacturers often pay big bonus money to dealers for hitting a monthly objective. Toward the end of the month, dealers will also pay flat commission to salesmen so that they can hit their volume objective.

You may also ask, “How could a dealer possibly make a $20,000 profit on a car?” The most common way it by leasing a car and tricking the customer into thinking he is buying the car. A large down payment or trade in added to the normal profit on a lease can be gigantic and the monthly payment is reduced so much by the down payment that the unsuspecting lessor is not suspicious.  Sometimes people are talked into leasing by the salesman promising them that they can return the car at any time, just as if it was a daily rental. Remember that a salesman will earn a $5,000 commission on a least with a $20,000 profit.  Another way people are tricked into paying exorbitant profits when buying, is by dealers marking up the manufacturer’s sticker price with an addendum label. The dealer advertises that price as the “list price” or “sticker” price but what he doesn’t tell you is that it’s his sticker/list price, thousands higher than the manufacturer’s MSRP.

The same wild variation in price for the same products or services applies also to what you pay for service, parts, and finance and insurance. Your neighbor who was smart enough to finance his car with his credit union, can easily save $3,000 over what you paid in the dealer’s F&I department if you weren’t careful. If you allowed the “assistant service manager” or “service advisor who is really a commissioned service salesman to sell you unneeded services, you also paid more than your more careful, prepared neighbor.

As most regular readers of my blog, newspaper column, and listeners to my radio show know, my mission is to educate you so that you will be the winner in the contest between the car salesman, service salesman, and finance and insurance salesman. My frustration is that you’re probably already “survivors”. The mere fact that you read my blog and column and listen to my radio show proves that you’re trying to improve your skills and you are not overly trusting of car dealers who may be out to deceive you.  In other words, I’m “preaching to the choir” in a sense.

Last week I received a call from an 82 year old man who thought he had bought a new 2013 Hyundai Santa Fe but found out when he drove it home he had signed a lease, not a purchase contract. The dealer made at least a $15,000 profit and the salesman made about a $3,750 commission. When he realized what they had done to him he brought the car back and offered the dealer $1,000 to take back the Hyundai Santa Fe and return his trade-in, a 2010 Santa Fe. They refused, saying “You signed the paper and you’ve leased a car”. I’m working with the elderly man now to try and help any way I can. I’ve spoken to the General Manager of the Hyundai store and am trying to get him to do the right thing. At this point, things don’t look too promising.

The problem is that there’s a group in our society that is, unfortunately, natural victims. They’re too trusting, not well enough educated, very young (first car purchase), mental faculties failing (maybe the last car purchase), and language impaired (immigrants). Unscrupulous car dealers and salesmen lay in wait for these victims just like a lion lays in wait on the Serengeti plains for a young or injured antelope. That’s why I used “survival of the fittest” in my title. 

You can easily recognize the advertisements that are aimed at the victims. You’ll see or hear phrases like “We’ll match your down payment”, “We’ll allow you $8,000 over book for your trade-in, “We guarantee the lowest price”, “Bad credit or no credit is no problem”, or “$7,000 discounts on all new cars”. The victims flock into dealerships that run these ads like sheep to the slaughter.

Because I don’t advertise this way, I rarely see “victims” in my Toyota dealership. My customers are mostly well informed consumers and lucky for me, there are a lot of them and they are growing in numbers. I’ve grown to become the largest volume car dealership in Palm Beach, Martin, St. Lucie, and Indian River Counties. However, I must say that as a businessman and a humanitarian, I’m very sorry that I cannot sell cars to those who suffer the most, the victims of our society. But, I’m the proverbial optimist and believe that through better education and smarter, more compassionate regulation we will see the victims of our society minimized over the next few years.

Monday, February 04, 2013

TOP TEN CAR AUTO AD SCAMS


I could write a “Top 50 Auto Ad Scams” because the ingenuity for deception in “getting car buyers in the door” is virtually limitless. However, I chose to concentrate on the ten most popular with South Florida dealers. Just beware that there are many more schemes than these I list. 

(1)   Discount from Dealer List. Anytime you read or see a car advertised with a large discount, determine whether that discount is from the MSRP [manufacturer’s suggested retail price] or the dealer’s retail price. An all too common practice is for a dealer to mark up his cars thousands of dollars over the MSRP and call it “dealer list” so that he can show huge discounts that aren’t real.
(2)   Prices exclude “impossible” rebates. Manufacturers often offer cash rebates to customers who qualify for special reasons. Some of these are being on active duty in the U.S. military. This rebate can be as much as $1,500. If you graduated from an accredited university within the past 6 months you can qualify for $500 to $1000 from some manufacturers. There is a customer “loyalty” rebate which affords you $1,000 or more if you are own the same make car that you are buying. There’s a similar for lease customers. There’s even a “Farm Bureau” rebate which qualifies you for $500 if you are a farmer. Dealers are actually combining all of these rebates and deducting them from advertised prices of their cars. Of course, what are the odds that any customer would simultaneously qualify for all of these rebates? The average reader of these ads qualifies for none of the rebates.
(3)   Lease payments based on large down payments. Virtually every lease payment advertisement requires a large down payment which is concealed in the fine print. Most people lease because they want to lay out as little cash as possible. If they had $4,000 cash to spend, they would probably opt for a purchase. Those that fall for this trick often end up leasing the car at the full retail. Leasing companies will allow dealers to lease cars for “only” up to 110% of capitalized cost. When you make a down payment, this reduces the net capitalized cost which allows the dealer to sell your contract to the leasing company.
(4)   Lowest Price Guarantee. This guarantee is absolutely worthless. If you read the fine print, you will note that it says that “the dealer reserves the right to buy the car from the other car dealer [his competitor] at the same price his competitor quoted you”. No car dealer is going to accommodate his competition so that they can steal away his customer. Of course the other fact that makes this guarantee worthless is that it requires that you prove the lower price by presenting a buyers’ order from the other dealer signed by a manager. I know of no car dealer [besides me] who will give a signed copy of the vehicle buyers’ order to a customer unless they drive the car home or make a substantial, non refundable deposit.
(5)   Only one car available at ad price. When you are reading a newspaper ad, you will often see a strange number next to the advertised car. If you are watching the ad on TV or listening on radio, the number will be unreadable or undecipherable as is the fine print. An example is STK #T91832. This is the stock number of the car and means it is the only car of that model and accessories you can buy at the advertised price. They don’t say “only one car available at this price” because you would realize that the chances of that car being there [or sold to you if it is there] are very slim. Don’t be misled if the ad also says “many more identical models available at this price”. Florida law requires that dealers include the dealer fee in their advertised price. But if that specific stock number car is unavailable, they can add their dealer fee to the price of an identical car. This scam is why I continue to lobby Tallahassee to require that all profits to the dealers be included in all prices whether advertised, verbal, or on the Internet.
(6)   Advertised price is “plus dealer installed accessories”. All this means is that the price you see is not the price you get. Dealers love to add their accessories to their cars because they can set any price they want and drastically increase their profit margins. A dealer charging you $299 for pin stripes and floor mats would have a real cost of about $100, allowing him a 300% margin.
(7)   Lease payment based on unrealistically low mileage allowance. All leasing companies limit the number of miles you can put on their car without paying a penalty. This is because the higher the mileage, the lower the resale value and the leasing company has to sell their car at the end of the lease. The average American drives her car 15,000 miles per year. It’s very common to see mileage limits of 10,000 and even 7,500 miles per year with penalties of 25 cents per mile. For an average driver in a four year lease that would be a penalty of $7500! The dealers don’t get this money, the leasing company does, but the dealers do this so that they can advertise an unrealistically low lease payment.
(8)   Lifetime Warranty. A lot of dealers are advertising these “lifetime warranties” on every car they sell. This is a very limited warranty which applies only to the cars powertrain. The term powertrain has different definitions as to which parts of the car it consists of. It typically means only those parts of the engine, transmission, drive shaft, and rear axle that are lubricated. These parts virtually never fail as long as you change your oil as prescribed by the manufacturer or by the issuer of the warranty policy. If you fail to change your oil as prescribed, the warranty is null and void. It’s a win-win for the car dealer. You have to come in to have your car serviced regularly so that he can make more profit and, if you do comply with this, there will never be a claim. Dealers do pay outside warranty companies for these warranties, but the cost to the dealer is minuscule, around $25. The low price the dealer pays the warranty issuer is further proof that the warranty is worthless.
(9)   Purchase payments include “balloon payment”. How would you like to buy a new BMW 2009 328i for just $339 per month only to discover that your last payment was $12,983! Oh, and you also had to make an upfront down payment of $2,500. ALWAYS READ THE FINE PRINT!
(10)                       Internet Quotes Exclude “Dealer Fee”. The average “dealer fee” in South Florida is about $850. About 25% of car buyers are using the Internet to buy cars today. Almost 90% used the Internet for information about buying their car before going to the dealership. Virtually every car dealer in Florida charges a dealer fee and they all exclude that from the price you are quoted on the Internet. I spoke to a woman just the other day who drove all the way from Lakeland to West Palm Beach to pick up the new Infinity that she had purchased on the Internet. When she got to the dealer, he added an additional $695 for his dealer fee.