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Monday, January 19, 2015

Open Letter to Florida Car Dealers Part II


 SUBJECT: STOP BAIT & SWITCH ADVERTISING




Dear fellow car dealer, in case you missed my last letter to you on “dealer fees”, you can find it on my blog just by clicking here Open Letter to Florida Car Dealers

The subject of this letter is the ads most car dealers run which are designed to motivate prospective car buyers to come into their dealerships believing that they can buy or lease a vehicle for less than they really can. These ads appear in newspapers, direct-mail, TV, radio, and the Internet. If you are one of the few car dealers who do not do this, I know you will enjoy reading this column and agree with me.

One of the most common lures is advertising the new vehicle below your cost. You spend thousands of dollars advertising monthly and consider losing a little money on one or two cars as part of your advertising budget. The problem is that you deliberately limit the number of cars you will sell at this price and you do this in a deceptive manner.

One way this is done is to show a stock number next to the price of the car. This translates into there being only one car available at that price. Another technique is to use the phrase “other cars available at similar savings”. First of all, how do you define “similar”? Secondly, Florida law requires that you include “dealer fees” in all advertised prices, but not in cars that are sold for “similar savings”. Adding back that dealer fee can turn a “loss leader” back into a profit.

Another trick is to show huge discounts from “list” when list is defined in the fine print as including “dealer installed” options. By simply marking up whatever options you choose to install on an advertised car, you can generate as much markup as you like.

Bait and switch is also aimed at monthly payments. By disclosing in the fine print that a very, very high credit score is required to qualify for an advertised low payment, lease or purchase, you limit the possible buyers that can qualify to a very small percentage of the population. The vast majority that cannot qualify ends up with a much higher payment and higher profit to you.

A favorite deception is to advertise very large “minimum trade-in allowances”. I have seen trade-in “minimums” as high as $15,000. These ads are clearly aimed at prospects from the lower economic strata that are currently driving older cars and may be less sophisticated and informed buyers. A smart buyer knows that you cannot possibly allow someone $15,000 on a trade-in worth $250 unless you make back that deficit in additional markup on the car you are selling.

Another deception aimed at the lower economic, less educated portion of our society is the “no credit, no problem” ad. Having bad credit or no credit most definitely is a problem. It might not be a problem for you but it is for the person with the bad credit and it is for the bank that will refuse to finance that person. Another version of this trick is “no credit application refused”. A sophisticated buyer knows that all you are saying is that you will allow anyone to fill out a credit application and you might even agree to submit it to a lender. But you are not telling him that her credit application will be refused if her credit is too bad or not sufficient.

There are other examples that I could cite and there will be new ways that many dealers will come up with to lure buyers into their dealerships. As I said in my last letter, I am asking you to voluntarily stop this form of advertising before the regulators make you stop. I am not suggesting what you are doing is illegal, but I am saying that it is not right. I am also saying that it is bad business. If I can’t get your attention by asking you to treat your customers with respect and consideration, how about if I tell you that you can sell more cars and make more money if you do?

You are successful in luring lots and lots of people into your dealership, but you sell only a small portion of these people cars. Those you don’t sell are probably angry at you when they learn they cannot buy the car for the price they believed. Even the ones you do sell may be angry because they had to pay you more money than they wanted. Unhappy customers don’t come back and they tell their friends. You have to spend more and more on advertising because your repeat and referral business is so bad. This is not good for your bottom line and your manufacturer is probably “on your back” because your customer satisfaction rating is so low.

If you would like to discuss this with me, please call or email me. My numbers and addresses are below.

Sincerely,

Earl Stewart

Cc: Pam Bondi
Warren Buffet
Ted Smith
Adam Putnam
Jeff Atwater
Rick Scott
Andy Gardiner
Steve Crisafulli

2 comments:

  1. Anthony CantatoreJanuary 24, 2015 12:58 PM

    Cc: Pam Bondi
    Warren Buffet
    Ted Smith
    Adam Putnam
    Jeff Atwater
    Rick Scott
    Andy Gardiner
    Steve Crisafulli

    I do hope all of the above have read your letter? A+ So true to the fact. I fell "victom" to a horrible sale from the day I arrived at this undisclosed dealership, right up to this very day. Started in June 2014. The 28th is the end! This dealership failed on so many levels. They were caught. Caught becasue THE SYSTEM WORKS! Lemon Law. With the right guidence you can prevail by unfloding the truth. Not punish, not sue, maybe some media attention? Or just the BBB. Go viral with respect.( I have a disability that some dealers will take advantage of. It's not a physical disability, and probably irrelevant) But it happens. Sad but true.
    Since my case has not finished, although we've come to agreement, nothing is signed or in my hands? So I wait.
    Earl Stewart has been my educator all the way.I went with the old remedy "you get more with honey than you do with vingar." Oh, and LOT'S AND LOT'S PATIANCE.
    Anthony .... (please pardon spelling-grammer-puntuation) Cell phone is quite small.

    ReplyDelete
  2. Anthony, congratulations on your courage and perseverance. You stood up to that car dealer and made him realize you would not back down. I'm confident you will prevail on January 28; and you know I'm always available if you need assistance.

    ReplyDelete

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