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Monday, July 29, 2013

TOP 10 WAYS TO GET SHAFTED BY A CAR DEALER

(1)   Believe the newspaper and TV ads. It never ceases to amaze me how outrageous and unbelievable the car dealers’ claims are. Just when I think that they can’t get any worse, I see one that tops them all. Last month, one dealer was advertising in the newspaper and TV that if you bought one vehicle from him you got a second for nothing. The “facts and fine print” would reveal that the first vehicle was a very expensive one with a huge markup of over $6,000 and the second vehicle was only the “use” of one for two years... a lease. My father always said, “If it sounds too good to be true, it probably isn’t”. Astoundingly, the general manager of this dealership had the gall to say on TV, “This is not a gimmick”!

(2)   Buy a car on impulse on the first day you start shopping. Can you believe that this is the way most people buy cars? It truly is. There is something about a new car that excites people and appeals to them on an emotional level. People let their feelings short circuit their logical thought processes. Overcome that emotion that tells you that you must drive home that shiny new car right now. Go home and think about it. Talk it over with your spouse and friends. Research the model of car you looked at and the price on the Internet. Always drive the car you chose before you sign any papers. You should take at least a week or two in the decision making process before you buy a car.

(3)   Trade your old car in to the dealer you buy from without shopping its value. Most people have no idea what their trade-in is worth when they come in to buy a new car. They rely entirely on the appraisal by the selling dealer. The dealer can make it appear that he is giving you a lot of money for your trade by taking some of the high markup on the new car and showing it as part of the appraisal value. Check Kelly Blue Book (kbb.com) andEdumnds.com on the Internet. Get at least 3 bids from other dealers of the same make for your trade. Make the purchase of the new car and the sale of your trade two separate transactions. Remember that you do get a sales tax break by trading in your car to the dealer you buy from.

(4)   Use the dealer’s financing without checking with your bank or credit union. Shop for the best price on your financing just like you shop for the best price on your trade-in and the best price on new your car.

(5)   Believe this, “This low price is good today only”. This is one of the favorite ruses used by car sales people and dealers. In 99% of the cases, you can buy that car for the same or an even lower price later. The only time that you can’t is when factory incentives expire on a certain date, typically at the end of the month. If that is the claim, demand to see the written factory incentive by the manufacturer.

(6)   Fall for this, “Make me a written offer with a deposit and I will submit it to my manager”. This is S.O.P at most car dealerships. This is to get you psychologically engaged in the buying process. Once you have signed a buyer’s order and written out a check, you will remain in the dealership for a while and are more likely to buy. The salesman knows that. Insist on getting their best price on the car you have selected. You should never make the first offer. Once you have their price, compare it with at least 3 other prices from other dealers on the same make and model.

(7)   Follow this advice, “Take this new car home and see how you like it.” This is the famous “puppy dog” technique so named because once you take a puppy dog home overnight, who has the heart to return it the next day? You, your neighbors, and friends will see that shiny new car parked in your driveway. It sure looks good! How can you explain to anybody that you didn’t buy it?

(8)   Agree to this, “I’ll buy the car if you can get my monthly payments below $___.__”Most of us tend to think in terms of our monthly budgets. We might feel that we can afford a new car as long as it costs us less than $350 per month, but there is a big difference between $350 per month for 36 months and $350 per month for 72 months. I recommend that you finance a car for no more than 42 months, preferably 36.

(9)   Believe the salesman when he says, “You have my word on that.” Be absolutely sure that every promise or commitment made to you by your sales person is in writing and signed by a manager. That salesman may not work there when you have occasion to ask for that “free loaner car” that he promised you anytime you bring your car in for service.

(10)                       Fall for this, “All dealers charge a dealer fee and we can’t remove it from the invoice.” In fact, all dealers do not charge a dealer fee. I don’t. But unfortunately most do charge this “gotcha” ranging from $495 to $1,000. It is true that Florida law (which should prohibit dealer fees entirely) requires that the dealer fee appear on all invoices. If you charge just one customer a dealer fee, you must charge everybody. The state legislators, in their infinite wisdom, decided if a car dealer is going to take advantage of even one buyer, he must take advantage of all of the buyers….never discriminate. But the loophole in this stupid law is for you to demand that the dealer reduce the price of the car by the amount of the dealer fee, making it a wash.

Monday, July 22, 2013

Holdback or Holdup?

Back in 1968 when I first went into the retail car business with my father, I can remember asking him, “What is holdback?” I was learning the business and had been studying the invoices on new Pontiacs that General Motors sent us when they shipped a new car that we had ordered. We had to pay the invoice immediately when it was issued, sometimes even before the car arrived at our dealership. Actually, in most cases, it was our bank or GMAC who paid GM and we borrowed the money from them to pay for the car.  

My father’s answer to my question about holdback was that it was an increase in the amount of the invoice that we paid General Motors which was not really part of the price of the car. It was just an extra amount added to the real price of the car and included in the invoice. At that time it was 2% of the MSRP [suggested retail], so if a new Pontiac Bonneville had an MSRP of $10,000 and a true cost of $9,000, the factory invoice would be $9,200. I asked my father, “When do we get the $200 back?” He said, “At the end of the year”. I asked him if they paid us interest on our money and I can remember him laughing loudly and saying no.

Of course my next question was why they do that. He told me that the reason they gave him was to be help dealers sell their cars for more money so that they didn’t go broke. He said that because they didn’t get their holdback money for such a long period of time, they began to think of their invoice as being the actual cost of the car. General Motors felt that many dealers were such poor businessmen that they might sell their cars so cheaply that they would go out of business. Now, because GM was kind enough to hold back hundreds of thousands of dollars of the dealers’ money [and pay them no interest on it] but return the money to them once a year, they could help the dealers make a bigger profit and maintain adequate working capital.

At that time I thought this was the biggest bunch of boloney I had ever heard and I was sure that this was a scheme by the manufacturers to keep a free float of millions of dollars of their dealers’ money under the guise of helping the dealers. I asked my father why the dealers didn’t strongly object to this and he said that most dealers actually “liked” the idea of holdback. When I heard that, I thought that maybe GM and the manufacturers were right about the dealers not being smart enough to sell their cars for a reasonable profit.

It took me a few more years in the business before I understood what was really going on with holdback. It was a “no brainer” as to why the manufacturers liked it but at last I understood its attraction to us dealers. Because we had to pay an extra amount over the true price of the car and not see that money for up to a year, we began to think of the invoice as the true price, even though it was actually inflated by hundreds of dollars. Because all manufacturers added holdback to all dealers invoices, the net effect was to raise the price of all cars to all buyers by the amount of this holdback. I know this is a dirty word, but it is price fixing on the grandest of scales. This might have been something that Henry Ford, Alfred Sloan, and Walter Chrysler concocted while playing golf at Bloomfield Hills Country Club outside of Detroit.

Another neat thing about holdback for us dealers is being able to tell our customers that we are only charging them “X dollars” over invoice. Or, we can tell them that we will sell them this car at invoice with no profit to us at all! [There’s a sucker born every minute] Dealers often have “invoice sales” with copies of the invoice pasted on the car windows. Who doesn’t believe that an invoice is the cost of the car? The truth is in the semantic skullduggery …”Mr. Customer, I solemnly swear to you that this the exact price that I paid the factory for this car. In fact, here’s a copy of the invoice.” That’s what the dealer “paid” the factory all right, but it’s not what the he paid the factory after he got his holdback check in the mail.

You might be thinking, so we’re talking about $200 more or less on a $10,000 car. Who cares? Don’t forget, that was over 40 years ago. Holdbacks have expanded considerably and now instead of several hundred dollars we’re talking several thousand.  Also, dealers no longer have to wait a year to get their hold back money back. Now they get it back monthly. Manufacturers even changed the names of these monies they hold back. These are innocuous names so that, if you see them on the invoice, you will have no suspicion…names like floorplan assistance, advertising, PDI, Administrative or DAP. Of course there are also cash rebates to dealers that don’t even show on the invoice. I estimate the average car invoice today includes $3,000 to $4,000 in hidden holdbacks to the dealer. Holdbacks are also applied to factory or distributor accessories like “protection packages” [wax, undercoat, window etch, roadside assistance], floor mats, window tint, etc.

The bottom line is that you don’t rely on the dealer’s factory invoice to determine the price you are willing to pay for a car. And be especially suspicions when the dealer quotes you a price of “X dollars over invoice” or actually shows you the invoice. You’ve heard the old joke, “How can you tell when a politician is lying?” Answer: When his lips are moving. “How can you tell when a car dealer is lying?” Answer: When he shows you the invoice.



Monday, July 15, 2013

Cadillac Service and Repairs at Chevy Prices


This article is directed at luxury car owners. If you drive an Acura, Cadillac, Lexus, Lincoln, or Infiniti and you’re taking your car to the dealer of that same make you drive, you’re paying as much as twice as much as you have to for maintenance and repairs.

Most people know that General Motors manufacturers Cadillac as well as Buick, Chevrolet, and GMC trucks. Most of the models of each of these makes share in the engineering and design. This also holds true for Acura and Honda, Lexus and Toyota, Lincoln and Ford, and Infiniti and Nissan. Some models are almost totally identical “under the skin”. The manufacturers make their luxury version look fancier and add luxury options and accessories, but the underneath it all, they are mostly the same vehicles.

The reason that many people don’t know that their Infiniti is built by Nissan and Lexus is built by Toyota is “marketing”. The manufacturers don’t want you to know that that the Lexus ES you’re driving is really a Toyota Camry, “all dolled up” or that the Acura ILX is really a fancy Honda Civic. Volkswagen, Mazda and Hyundai all made big marketing mistakes when they introduced their luxury models, Phaeton, Amati, and Equus. The VW Phaeton which cost over $100,000 bombed badly and is no longer sold in the USA. The Mazda Amati was announced in the early 90’s but Mazda canceled their plans when they suddenly “saw the light”.  The Hyundai Equus, over $60,000, is not selling well either and I predict it won’t be able to compete in the USA luxury car market either.  

The reason these three models failed is that Volkswagen, Mazda and Hyundai made the fatal marketing mistake in expecting a luxury car buyer to spend $100,000+ for a car sold in a Volkswagen dealership or $60,000+ for one sold in a Hyundai dealership. To compete with established luxury brands like Mercedes and BMW, manufacturers must offer buyers a car that they feel confident is not only a luxury car, but perceived by their friends, neighbors, relatives, and business associates to be a luxury car. When a luxury owner is leaving a fancy restaurant or his country club and gives his ticket to the valet, he doesn’t want to be asking for a Volkswagen or Hyundai, albeit the most expensive one. When he brings his car in for service, he wants to mingle with other luxury car owners with all of the luxury amenities offered…it’s like first class vs. coach. I know Lexus dealers who offer massages and manicures to their service customers. JM Lexus, the world’s largest Lexus dealer, has a putting green on their roof for their waiting service customers.

Luxury owners expect to pay more for service and luxury car dealers are happy to accommodate them. If you’re willing to pay twice as much for an oil change because you can play golf while you wait or have a manicure, that’s up to you. But you can save a whole lot of money and have technicians that are totally qualified to maintain your luxury car by bringing it to the same manufacturer’s dealer for the lower price make…Acura to Honda, Cadillac to Chevrolet, Lexus to Toyota, Lincoln to Ford, and Infiniti to Nissan. 

There is one caveat and that is the manufacturers require that you have your factory warranty repairs done by the luxury car dealer. You may also experience some problem with parts availability. Although most parts are the same, there are some parts like a cabin air filter which the dealer may have to buy from the luxury car dealer. My suggestion would be to make an appointment for your service in advance and tell the Honda dealer what you would like done. He then can be sure to already have all the necessary parts on hand when you arrive. You will be shocked at how much money you can save and, measured over the total time you own your car, this can amount to thousands of dollars.


I know that a lot of luxury car owners will read this and continue to bring their luxury car to the luxury car dealer just like there are diamond jewelry buyers who will pay Tiffany’s twice as much for the exact same caret, color, and clarity diamond as Costco sells, when the only tangible difference is the “little blue box”. Brand image is a powerful marketing tool. 

Tuesday, July 09, 2013

Always Get It in Writing

Many readers of this column call me for advice and to tell me horror stories about their dealing with unethical car dealers. Of course it would be much better had these readers called me before they bought the car.

I have written hundreds of columns for Hometown News and given advice on a variety of subjects which should make your car buying, or servicing, experience safer and more pleasant. There is one piece of advice which, if strictly followed, would eliminate over 90% of the problems car buyers have with car dealers. That advice is “always insist that all promises and commitments made by the car sales person or sales manager are put in writing”. The written commitments should be signed by the sales person/manager and you and you should retain a copy.

These are just some examples of promises made by sales people and sales managers that  were not kept: (1) Sign the contract, drive the car home, and if you change your mind within three days you can bring the car back and we will refund all of your money. [When the customer brought the car back, the salesman claimed he never said any such thing] (2) After signing a 36 month lease, the salesman assured this customer that, if she got tired of this car in less than 36 months, she could just bring it back anytime. [Of course the leasing company didn’t agree with the salesman on this]. A customer was promised that she would be able to get free loaner cars anytime she brought her car in for service. [The service department didn’t know anything about this. They don’t offer free loaners]. The business manager, also known as the F&I manager, told the customer that the warranty/extended service contract he was selling her covered 100% of anything that went wrong with her car. [When she came in for a brake job, the service manager showed her the fine print in the warranty contract that said maintenance items were not covered]. The salesman told the customer not to trade his car in on the new car because he owed way more on the car than it was worth. He told him to just let the bank take her old car back and because she was making her payments on time on her new car it wouldn’t harm her credit rating. [I don’t think this requires any explanation]. Customers are promised that they can bring their car back after they buy it and have CD players, leather, running boards, and floor mats, and other accessories installed as part of the deal. When they come back, none of the managers knows about this and the salesman can’t be found or doesn’t “remember”. I could list dozens more of these anecdotes.

You have very little chance when it’s your word against the salesman’s or sales manager’s. You have even less of a chance if it’s two against one. Do not be timid about asking that everything you are promised is put into writing. If the salesman objects to this or hesitates, you have to ask yourself why? Another reason for having all promises committed to writing is that the salesman or sales manager may not work at that dealership anymore when you come back to collect on his promise. He may have actually been sincere, but now he’s gone. Will his replacement believe you?

It’s a good idea to carry a note pad with you when you are negotiating to buy a car. I wrote a previous column entitled “Never Go Car Shopping Alone”. When you have an ally with you, she can take notes while you are negotiating. Also, if you do forget to commit a promise to writing, your credibility is enhanced when it’s two against one instead of “he said/she said”. When you are signing the final documents, you have your complete set of notes detailing promises, assurances, and commitments by the salesman. Then, all you have to do is have these signed by both parties and be sure that you get a copy.

Saturday, July 06, 2013

Earl Stewart on Cars: A Look at a Deceptive Dealer TV Ad: Napelton Kia

In this segment of the Earl Stewart on Cars radio program, Earl discusses dissects a deceptive television ad from Napelton Kia, and talks about what happened when his mystery shopper attempted to purchase the sale priced vehicle.

Listen to Earl Stewart on Cars every Saturday, from 9am to 10am Eastern, on Seaview Radio, (seaviewradio.com), AM 960 and FM 95.9 & 106.9. You can phone in your car question during the show using the listener line at 1-877-960-9960.

Pick up a copy of Earl's new book, "Confessions of a Recovering Car Dealer". Go to earlsbook.com or on Amazon http://www.amazon.com/Confessions-Recovering-Dealer-Earl-Stewart/dp/0985729511/ref=sr_sp-atf_title_1_1?ie=UTF8&qid=1373116154&sr=8-1&keywords=confessions+of+a+recovering+car+dealer All proceeds will go to charity.

You can also learn more at earlstewartoncars.com and twiiter.com/earloncars.
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Monday, July 01, 2013

Should I Buy a Car or Have a Colonoscopy?

I wrote this column 6 years ago, but my doctor just told me I’m scheduled for another colonoscopy at the end of this year and it reminded me that, if I were you, I would probably rather do this than buy a car from a typical car dealer. J 

If you are over 55, you should have had a colonoscopy.  If you haven’t, call your doctor because this could save your life. It did mine, but that’s another story. I had another colonoscopy yesterday and I have to tell you that it’s a very unpleasant experience, mainly from the mental anguish anticipation and the discomfort of the preparation the previous day. I had a lot of time to think about my procedure and I started thinking about how this experience parallels that of buying a car. It’s something you must do and has a very good benefit, but you dread the process.  

This column, my 39th for Hometown News, has consisted mainly of suggestions and inside information that can make your new or used car buying experience less of a fearful occasion. Some of the titles/subjects are “Always Get an Out the Door Price”, “Bait and Switch Advertising”, “Beware of Deceptive Internet Car Pricing”, “Beware of Direct Mail Car Advertising”, “Buying a Car When You Have a Credit Problem”, “Eight Steps to Ensure You Are Buying the Best Car for the Best Price”, “List Price and MSRP Might Not Be the Same”, “Negotiating to Buy a Car”, “Open Letter to Florida Car Dealers” (I, II, III, and IV), “Shop Your Financing and Trade”, “Should I Buy My Car at the End of the Lease?”, “Should I Lease or Buy my Next Car?”, “Should I Pay Cash or Finance My Next Car?”, “Should I Trade in My Old Car or Sell it Myself”, “Tell Your Car Dealer to be Nice”, “The Right Used Car is a Better Buy than a New Car”, “Translating Misleading Car Ads”, “What is the True Cost of that New Car?”, “What to do if You Are Treated Badly by a Car Dealer”, “When is a Car Sale Not a Car Sale?”, and “The Internet Price is the Lowest Price for a New Car”.  

Almost every one of these articles originated from my customers’ and others’ experiences when buying cars from other car dealers. I get a lot of calls from people who have never bought a car from me. They call to tell me of their bad experience with another dealer and, when I get several calls on the same subject, I write a column on it. People often call me asking for advice or assistance after they have already bought, which is “closing the barn door after the horse is gone.” On more than one occasion I have called car dealers asking them to consider undoing a wrong they have caused one of their customers. I have to confess that I am “batting zero” on this effort. I won’t give up, however. I just made another call this afternoon on behalf of a customer whose installment sales contract, signed by her and the dealership had a higher interest rate than a second contract that the dealer sent to the lender. The customer told me she signed only one contract, the one she took home a copy of.  

One thing that amazes me about these weekly columns that I have been writing for almost a year is that no car dealer has ever called me to complain or for any other reason. I have not been sued either. I think that says something about the truth of my articles. I’m not a lawyer, but I do know that you can’t successfully sue somebody for libel or slander if they write or say the truth. I know of one car dealer who threatened to cancel her advertising in the PB Post because she thought it owned the Hometown News. I am puzzled why not one single dealer would call me just out of curiosity. I don’t have a secretary and I don’t screen any of my calls…nor do any of my employees. They do know how successful my dealership is and how fast my sales are growing. They know that I am selling a lot of their former customers. Many of these new customers tell me how they told the other dealers why they chose to take their business elsewhere. I believe that before too much longer we will see some changes in the way other car dealers do business even if they refuse to call me, as I have repeatedly invited them to do. Sooner or later they will understand that treating your customers with courtesy and integrity is just plain good business. 

Earl Stewart on Cars: Defeating the "Highball" and "Lowball"


In this segment of the Earl Stewart on Cars radio program, Earl explains "highball" and "lowball" sales tactics and how to defeat them using smart consumer practices.

Listen to Earl Stewart on Cars every Saturday, from 9am to 10am Eastern, on Seaview Radio, (seaviewradio.com), AM 960 and FM 95.9 & 106.9. You can phone in your car question during the show using the listener line at 1-877-960-9960.

Pick up a copy of Earl's new book, "Confessions of a Recovering Car Dealer". Go to earlsbook.com. All proceeds will go to charity.

You can also learn more at earlstewartoncars.com and facebook.com/EarlStewartToyota