Monday, August 27, 2018

Common Deceptions by Car Dealers... Check out the Gallup Annual Poll; Honesty & Ethics in Professions






I get a lot of heat from the Florida Auto Dealers Associations (FADA), auto manufacturers, and most car dealers because I say “bad things” about the way they do business. In my own defense, I’m just one voice among most Americans that feel that the majority of car dealers are unethical and dishonest. The Gallup poll on “Honesty and Ethics in Professions” has been conducted every year since 1977 (40+ years) and car dealers have never ranked above 4th from the bottom. Last year they were next to last, just below Congressman and above Lobbyists. All other retailers except car dealers have “gotten smart’ to match the intelligence and high demands of the 21st Century American consumer, but car dealers are still selling cars the way they did in 1950.

The “Big Sale Event”. If you look online or on TV, you’ll find that most car dealers in your area are having a sale of some kind. It may be because of a current holiday, “too large an inventory” of cars, to “reduce their taxes”, “the manager is out of town”, or some other nefarious lure. Advertising 101 says that you should give the prospective buyer a “motive to act”. Unfortunately, it doesn’t matter whether the motive is real or not. The fact is that most car dealers do not sell their cars for less during “sales events” than they do at any other time. I point this out so that you don’t rush your buying decision. If you don’t buy a car during the tight time constraints of a phony sales event, you can negotiate just as good a price the next day. The exceptions to this are legitimate rebates offered by the manufacturer. These often expire at the end of the month which is one reason why the “last day of the month” really can be the best time to buy a car”.

“The Price I’m giving you is good only today”. If a salesman or sales manager tells you that, it is probably only a tactic to push you into buying the car. The only exception would be the expiration of a factory incentive. Once again, this is simply a tactic to push you into buying before you have a chance to do your comparative price shopping.

“I can’t give you my best price, but if you bring me another dealer’s price, I guarantee I’ll beat it”. Car dealers are afraid to give you their best price because they fear other dealers will beat if by a few dollars and they’ll lose the business. Guess what! That’s called “the free market place” and that’s the way all other businesses are conducted. The only retailer that won’t give you a final, out-the-door price is the car dealer. They’re still selling cars like they were sold in the middle of the 20th century. Can you imagine walking into Target or Macy’s and asking for the price of dress or a TV set and the sales person tells you can’t have it unless you buy it right now?

“Take the car home tonight and see how you like it”. Driving the car, you’re considering buying, home can be a good thing. It will give you a lot better idea about how the car performs, etc. However, there are two reasons the car salesman offers this. One is that you must leave the vehicle you might be trading in with the car dealer. This means that you cannot shop prices with other dealers. The second reason is the psychological impact of parking that new car in your driveway where your family and neighbors can see it. The slang expression for this is “the puppy dog”. If you were to take home a little puppy from the pet store, you and your children would fall in love with her and could not return her the next day. This same tactic is used when a customer has questionable credit. This is referred to as the “spot delivery” and the dealer will have you sign a form known as a “Rescission Agreement”. You might not even realize that you’ve signed it. It says that you must return the car immediately if the bank rejects your credit application. If you don’t comply, there are huge financial penalties.

I’ll hold the car for you, but you must give me a cash deposit. Deposits in Florida are nonrefundable only if that is stated in writing on the receipt for the deposit. Always get a written receipt and not just handwritten on the salesman’s business card. Read the receipt and be sure that it does not say in the fine print that refunds are nonrefundable. It’s a good idea to give them your credit card for the receipt instead of cash or even a check. You can always protest the charge with your credit card company if the car dealers tries to unfairly keep your deposit.


“Make me an offer and I will take it to my manager for approval”. This is a very common tactic which you have probably already encountered. It’s not unethical. It’s simply part of negotiating. I point this out so that you are fully aware that this is part of the negotiating game. Be aware, that no matter what price you offer, the manager will ask you for more money. Even if you offered a high price that would be a very large profit for the dealer, the manager would ask you for more money. The psychology behind this is that if you suddenly accepted the offer, you may frighten the customer by thinking he had offered too much (which he would have). When you negotiate, you must be well versed on what is a good price for that car. Start out below the best price you think you can buy it for You can obtain fair prices for all cars online with Kelly Blue Book (KBB.com), Consumer Reports, TrueCar.com, and Edmunds.com.

The “really big” discount”. Recently, a friend showed me direct mail advertising piece from a new car dealer with a coupon good for $3,000 discount on any car in his inventory. This is very common for online, direct mail, and TV ads too. Federal law requires new cars to have a price sticker on the window named the Monroney label. A discount from this suggested retail price gives you a fair basis for comparison. Unfortunately, most car dealers today, increase the suggested retail price substantially with the use of an addendum to the Monroney sticker often referred to as a “Market Adjustment Addendum”. This “adjustment” can be several thousands of dollars. Be sure you know what the asking price is for the car when you have been offered a “big discount”.

I’ll sell you the car for $100 over my cost. The salesman will show you the invoice of the car and add $100. The invoice price of a car is NOT THE TRUE COST. The dealer invoice contains thousands of dollars in hidden rebates, holdbacks, advertising kick-backs. The manufacturers are colluding with the dealers in this deception to raise the advertised and actual selling price of cars. Any car dealer would be delighted if he could sell every car at the factory invoice amount…he’d make a fortune.

The best protection from all the above is to find a car dealer that you can trust. Ask your friends about their experiences with dealers and call the Better Business Bureau and the County Office of Consumer Affairs. Unfortunately, this is a very difficult thing to do. I recommend two third-party buying services, www.TrueCar.com and www.CostcoAuto.com. You must pay a fee to become a Costco member, but there’s no charge for TrueCar. You can also buy through Consumer Reports; they use TrueCar as dealer and pricing source. If you buy directly from a dealer, you better off to negotiate the price completely online. Remain anonymous so that you won’t be harangued by car salesmen. Use a different email address and don’t give them your real phone number.

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