Monday, January 30, 2017

Should I Trade In My Old Car or Sell it Myself?

When you trade your old car in on your next car, the dealer will try to retail your car or sell it at auction for more than he allowed you in trade. If he successfully retails your car, he will make about $2,000. If he wholesales it at the auction, the profit will be less. You should know that this is what the dealer wants to do. Sometimes it doesn’t work out that way and he will actually lose money on your car at the auction. Or, he may be unable to retail your car and then most certainly lose money when he is forced to wholesale it.

Obviously it is more difficulty for an individual to make a profit by selling her own trade-in than it is for the dealer. That is one of the main consideration you must consider before deciding to sell your old car yourself. Most people run an ad online to advertise their trade using a site like AutoTrader.com. If you do this, you need to know what to ask for your car and I recommend studying the listings on Autotrader or consulting Kelley Blue Book at www.kbb.com. This site will tell you about what your car is worth wholesale and retail. Another way to determine this is to ask dealers for your make of your car what they will buy it for. This will establish the wholesale value. CarMax is a good company to consult if there is one near you. Once you establish the wholesale, you should consider a markup of less than what car dealers are asking. When deciding how much profit you want to make, remember that you are losing the sales tax reduction that you earn when you trade your car in. On a $20,000 trade, that amounts to $1,200. If you can make a $2,100 above wholesale, you are ahead of the game by $1,000. This takes a lot of work and you will be dealing with a lot of “tire-kickers” and people who cannot afford to buy your car. I very strongly advise you not to extend credit. Require full payment in cash. Set a time limit on how long you will try to sell your car. Remember that your used car is depreciating every week and your cost of advertising will climb. I wouldn’t suggest you hang on to your old car for more than a month.

Ebay can be a good option for advertising your car. A lot of car dealers use Ebay to retail used cars and it is very effective. There are schools on how to retail merchandise on Ebay and Ebay has tutorials. There are also a lot of books at any bookstore on this subject. There are companies who will do all of the work for you and you only pay them a fee if they are successful in selling your car. If the dealer you are buying your new car from sells cars on Ebay (most do), you can ask him if he will post yours Ebay along with his cars for a fee.

If you fail in your attempt to retail your old car, remember to be careful to maximize the amount you get from your dealer as trade-in. Often times dealers will attempt to trade a car in for below wholesale. Be sure you have a firm handle on the true wholesale value of your trade. You can get bids from other dealerships to purchase your car for cash and you can check with www.kbb.com. If you are buying a car from a dealer franchised to sell a different make than your trade-in, be wary. This dealer will likely be unable to offer you as much as a dealer who is franchised to sell the make of your trade. People looking to buy a used Toyota are more likely to visit a Toyota dealership than a Chevrolet dealership. That is why it’s important to get bids from other dealerships before accepting the trade-in offered by the dealer you’re buying your new car from.

Monday, January 23, 2017

Why the First Set of Tires on Your New Car Wear Out Fast

The tires that came with your last new car were not designed by Michelin, Goodyear, Bridgestone or any other tire manufacturer. They were designed by the manufacturer of your car. If your new car came with a set of Michelins, Michelin made the tire but they made it to the specifications set by your car manufacturer. These tires are referred to as OEM (original equipment manufacturer).

Furthermore, your manufacturer does not warranty the tires on your new car even though he tells you that you have a “bumper to bumper” warranty. The last time I checked, my tires were between my front and rear bumpers. Even though GM designed the tires on your Chevrolet, they have no responsibility if they are defective. The tire manufacturer bears that responsibility.

The OEM tires that came with your car can’t be replaced (which is a good thing) after they’ve worn out. And they will wear out much sooner than they should. This is because virtually all auto manufacturers specify very soft rubber which means they wear out too fast. Why would the manufacturer do that? They want that new car to have the smoothest ride possible, even at your expense of having to buy a new set of tires at half the mileage you should have to. When you test drive that brand new car and it rides very, very smoothly you’re more likely to buy it. You’ll find out how fast the tires wear out much later, and when you do you’ll blame it on the tire maker.

By the way, another way the car makers delude you into thinking your ride is very smooth is by recommending low tire inflation. The number you see on your door jamb or in your car’s owner’s manual is the car manufacturer’s recommended air pressure. The number on your tire is the tire maker’s recommendation. The number on the door jamb is the minimum and the number on the tire is the maximum. There’s typically a 10-pound difference.  I recommend you try the maximum and, if the ride’s too rough, split the difference. You’ll not only get longer tire wear but better gas mileage.

I can’t prove it, but I suspect another reason auto manufacturers design their own tires is to cut costs. By cutting a few corners in the design and specifications, they can increase their profit and/or cut the overall car price. If their purpose was to design a better tire, why wouldn’t they make these OEM tires available for the car owner to buy after the first set wears out? Many car owners “think” they’re replacing their Firestones or Michelins that were on their new car with the same tire, but they’re not. The tire might be the same size and look the same, but it’s a different model number.

One thing you should look for on your first set of replacement tires is the “tread wear index” which is molded into the side of your tires. This number will be 200 to 800. Your OEM tires will have a lower number because their made of softer rubber. If the tires that came on your car had a 200 tread wear index and you replaced them with 400, you should get twice the mileage on your second set of tires. The car might not ride as smoothly, but most people can’t even notice. And to my way of thinking, cutting you tires cost in half is pretty good compensation for a slightly rougher ride.

When replacing your tires, don’t get enamored by a sexy brand name. Brands aren’t always built on quality but also on advertising. Also, a famous brand tire makes all different kinds of tires to many different designs and specifications. Just because it’s a “Michelin” doesn’t necessarily mean it’s a good tire. If Michelin made that tire for an auto manufacturer who designed the tire with only two things in mind…low cost and soft ride, you didn’t get a very good tire. My recommendation is to check Consumer Reports for the best tire replacements. You’ll find tire brands recommended that you may never have heard about. The Japanese and Chinese make some very good tires but they have funny sounding names and you don’t see them advertised heavily on TV. 

Monday, January 16, 2017

Comments to the Federal Trade Commission

Regarding CarMax Selling Killer Cars



Below are my comments to pending litigation against CarMax, the largest seller of used cars in the USA. The litigation is being spearheaded by Rosemary Shahan, the president of CARS, Consumers for Auto Reliability and Safety. They are the largest car consumer advocate organization in the USA. CARS is the reason we have a “lemon law” in Florida and all 50 states. Shockingly, the Federal Trade Commission has ruled that CarMax and all used car retailers can advertise their cars as “Certified” and claim that they have passed a rigorous safety check, even though that car has a dangerous, potentially lethal recall. CARS and other consumer advocate organizations are suing the FTC to force them to change this terribly wrong ruling.


Attention: Federal Trade Commission

Subject: In the Matter of CarMax, Inc., File No. 142 3202 – Consent Agreement


I've been a car dealer since 1968 and am currently the CEO of Earl Stewart Toyota of North Palm Beach.

Virtually all of the other car dealers in my market (SE Florida between Orlando and Ft. Lauderdale) are actively selling used cars with dangerous recalls. Most of these are Takata airbag recalls. These cars are being aggressively advertised and sold, many of which have NO FIX AVAILABLE (the Takata airbag inflator is unavailable). I have taken the position of not retailing these cars because of my concern for the safety of my customers. When I trade-in one of these affected cars, I don't retail it unless I can replace the airbag inflator. If no airbag inflator is available, I store the car and wait for the time when it can be repaired and made safe.

This puts me at a severe competitive disadvantage to the other car dealers in my market. I must accept these used cars in trade on new or used cars because, if I don't, it will cost me a sale. I am unable to retail the used cars with defective airbags which makes it impossible for me to retail many high demand used cars (Honda is one of the most affected brands). Furthermore, I'm incurring the large depreciation expense of the stored, affected used cars that I cannot retail. I am wholesaling cars with only the passenger side airbag defective.

I have filed a lawsuit against one car dealer in my market under the Florida Deceptive and Unfair Trade Practices Act and will be filing similar lawsuits against more dealers.

I have mystery shopped over 100 car dealers in my market and learned that virtually all of them are selling these cars. Many of them do not even disclose the existence of the recall. Some even overtly deny the existence of the recall. Some tell the customers that there is a recall, but they can take it the dealer to have it fixed, when there is no fix available. The very few dealers that will not sell these cars (less than 5% of the dealers) advertise the cars for sale and use them as a bait and switch to sell the customer another car without the recall. I have shopped CarMax 3 times and they do not disclose the airbag recall unless asked. They advertise their cars as being safe because they have gone through their "rigorous" inspection process.

Very few used car buyers are aware of the severity of the Takata airbag problem. The media has downplayed this issue because of the importance of dealer advertising. The manufacturers are not speaking out because they fear the economic impact from litigation if it is made illegal to retail these cars. The NADA has taken the same position of negative economic impact on their dealers. I find it outrageous that "economic impact" can take precedent over human life.

I see this lack of awareness with my used car customers. They rarely ask about recalls when them buy used cars from me and I sell about 180 used cars monthly. Because of this lack of awareness, the other car dealers in my market are finding very easy to retail these cars. They are not only allowed to freely retail these cars but are under no obligation to disclose the recalls.

The car manufacturers, the dealers, the dealer associations, the legislators, and the regulators are all grossly negligent in not taking responsibility and action against this terribly dangerous threat to used car buyers. The danger is even greater than the current situation suggests. We know statistically that most recalled cars are NEVER REPAIRED...the older the car, the less likelihood of its being repaired. With the Takata airbag inflator, the older the car gets the greater the danger of a failure. Also, who knows how many deaths from the shrapnel of Takata airbags have actually


Until we can get a law passed making it illegal to sell killer cars with dangerous recalls, it’s BUYER BEWARE. Before you buy any used car, check the VIN with NHTSA and the car’s manufacturer, www.IsMyCarRecalled.com. You can also help make this illegal by signing my petition, www.AirbagRecallPetition.com.