Monday, August 19, 2019

Dealing with Hidden Fees (aka Dealer Fees)

Hopefully by now, all but my newest readers know about the infamous “Dealer Fees”. If you don’t know, they’re hidden price increases on the car you purchase disguised to look like a federal, state, or local tax or fee. It’s 100% profit to the dealer. “Dealer Fee” is the most common name for this disguised profit, but they go by many names such as doc fee, dealer prep fee, service fee, administrative fee, electronic filing fee, e-filing fee, tag agency fee, pre-delivery fee, etc. The names are only limited by car dealers’ imaginations. Almost all car dealers in Florida charge a Dealer Fee. The dealer fees range from around $700 to as high as $2,000!

This is the Florida law that is supposed to regulate the Dealer Fee: “The advertised price must include all fees or charges that the customer must pay excluding state and local taxes.” The law also requires that the Dealer Fee must be disclosed to the buyer as follows: “This charge represents costs and profits to the dealer for items such as inspecting, cleaning, and adjusting vehicles and preparing documents related to the sale.”

This law is very weak and almost never enforced. When enforced, it isn’t enforced by the letter of the law; it’s done so as to “accommodate” the car dealers. The law is “weak” because it requires only that the dealer fees be included in the “advertised” price. The word “advertised” is narrowly interpreted to mean a specific car shown in a newspaper, TV, radio, or online ad, but, what about when you get a price on the phone, online, or from the salesman? You don’t find out about the Dealer Fee until you’re in the business office signing a bunch of papers. The dealers get around advertisements very easily by including a “number” in the fine print. This number is their stock number that designates one specific car. When you respond to the ad, this car is no longer available (sales people are usually not paid a commission for selling the “ad car). The advertisement might say “many more identical cars are available.” It’s true that identical cars are available for sale, but they are not available for sale at the sale price because they are not the advertised stock number car. If you buy one of those “exact same cars” you will pay from $700 to $2,000 more.

The reason I’m told that the law is rarely enforced is that the Florida Attorney General’s office is understaffed and too busy enforcing other Florida laws. I’m also told that Florida car buyers don’t file very many complaints against car dealers for violating the Dealer Fee law. I don’t believe that there can be too many other infractions of the law that take more money annually from consumers than dealer fees take from car buyers. Just one car dealer selling 1,000 cars a year and charging a $1,000 dealer fee is taking a $1 million annually from car buyers. Most car dealers in South Florida sell a lot more than 1,000 cars annually and many charge more than $1,000 dealer fee. I believe that the reason more complaints aren’t filed on the dealer fee is because most car buyers don’t know that they are being duped. They either don’t notice the fee or assume it’s an official federal or state fee. Dealer often tell their customers that all dealers charge it and that it’s required by law…not true.

The Attorney General also “accommodates” the dealers by not interpreting the law the way it was intended. For example, the law says that the dealer fee must be included in the advertised price. The Florida Senate has ruled that the law requires that the fee be “included” rather than “specifically delineated.” But the Attorney General allows car dealers to advertise car prices without including their dealer fees in the price if they mention their dealer fees in the fine print. They also allow car dealers to simply state in the fine print that they have a Dealer Fee but not even mention the amount. To me they are simply allowing the car dealers to break the law.

Lastly, the required disclosure of the Dealer Fee on the vehicle buyer’s order or invoice is confusing, misleading, and incorrect: “This charge represents costs and profits to the dealer for items such as inspecting, cleaning, and adjusting vehicles and preparing documents related to the sale.” It should not say “costs” because any cost that you pass along to the customer in the price of a product is pure profit. A dealer can pass along his utility bills, sales commissions and advertising if he wants to and call it a “dealer fee”. It should not say “inspecting, cleaning, and adjusting vehicles” because all car dealers are reimbursed by the manufacturer for “inspecting, cleaning, and adjusting vehicles”.

So, what should you do when you are confronted by a car dealer with the “Dealer Fee”? Besides “LEAVE”, here are some suggestions that may help you:

(1) Make it clear from the very beginning that all prices you discuss must be “out-the-door” prices. This way you don’t care if the dealer fee added up front because you will shop and compare their bottom-line price with at least 3 competing car dealers. Ideally you should require that they include tax and tag in that price. If you don’t, they might try to slip in something they call the “electronic filing fee” or “e filing fee” and trick you into believing it’s part of the license tag and registration.

(2) The dealer will often tell you that all car dealers charge Dealer Fees and that they are required by law to add the dealer fee on every car they sell. Simply tell them that you know this is not true and you can cite me and other car dealers like OffLeaseOnly.com who do not charge dealer fees. Print out a copy of this article, show it to them, and tell them that you know that there is no law that says he must charge you a dealer fee.

(3) As long as you and the dealer understand that the out-the-door price is the price you will shop and compare with his competition, you don’t need to be concerned whether there is a dealer fee showing on the vehicle buyer’s order. To be competitive, the dealer can simply reduce the price by the amount of his Dealer Fee and the bottom line is what you are comparing. You can download a legal form,www.OutTheDoorPriceAffidavit.com, that you ask the car dealer to sign before you sign the vehicle buyer’s order. The dealer legally commits that the price he quoted or advertised is an honest out-the-door price. If he won’t sign this affidavit, than you won’t sign the buyer’s order.

(4) Be aware that dealers usually do not pay their sales people a commission on the amount of their dealer fee. In fact, dealers often misinform their sales people just like they do their customers. The salesman who tells you that the all dealers charge Dealer Fees and that the law requires everyone pay a dealer fee may believe it. Sale people who understand that the Dealer Fee is simply profit to the dealer will be resentful of not being paid their 25% commission on it. A $1,000 dealer fee costs the salesman $250 in commission.

(5) When you respond to an advertisement at a specific price for a specific model car, object when the dealer adds the dealer fee. Unfortunately, the law allows him the loophole of claiming that the ad car is a different stock number, but you might be able to shame him into taking off the dealer fee. If you raise a “big enough stink”, the dealer would be smart to take off the dealer fee than claim that technicality, especially if you were to advise the local TV station or newspaper.

I hope that these suggestions help you and I hope that you will file a complaint with the Florida Attorney General, Ashley Moody. If enough consumers (who are also voters) let our elected officials know how they feel about Dealer Fees, it will bring positive results.

Monday, August 12, 2019

Why Your Car Dealership Won’t Tell You the Price

I’m sure that you noticed that the last time you went car shopping you were unable to get a firm price on the car…unless you were willing to sign on the dotted line and put down a deposit. It’s impossible to get a firm price on a car over the telephone, in person, and very difficult to get one online. If the salesman agrees to give you a price, it excludes hidden fees and dealer installed accessories. If on the off chance you’ve never bought a car, or haven’t bought one in a long time, try this. Call any car dealership and ask for a price on a specific year, make, and model. I can almost guarantee that you won’t be able to get an honest, firm price.

Have you ever wondered why you can get a firm price on just about any other product except an automobile? You can call a jewelry store and get a price on a diamond ring that costs as much or more than a car. You can go on Amazon.com, get a firm price, and buy virtually anything. Walk in or call any department store and they give you a firm, out-the-door price.

Car dealers don’t want to give you a firm price because they want to deprive you of a fundamental right of our American free-market economy, which is to be able to shop and compare prices so that you can choose the lowest one. There are some countries where the prices are dictated by the government or giant cartels. We have anti-trust laws in America that prohibit price fixing, monopolies, or collusion between companies which keep prices artificially high.

In fact, there’s even a federal law that says auto manufacturers must put a sticker on all vehicles that discloses the Manufacturer’s Suggested Retail Price, MSRP. This law was written by Senator Mike Monroney back in 1958. Senator Monroney felt there was a need for this law because, before then, car dealers could ask any price they wanted for car. They could put their own price sticker on their cars and mark their cost up any amount they chose. A car-buyer, pre-1958, had absolutely no basis for comparing prices between competing car dealers. The MSRP gave every car shopper a common basis for comparing discounts from MSRP. All dealers pay their manufacturers the same price for a car and all MSRP’s for a specific year-make-model have the same percentage markup. The Monroney label was a great idea and it worked well for a while, but it wasn’t too long before the car dealers figured out ways around this “handicap” to their profit margins.

The easiest way around an MSRP is simply to refuse to give the customer a firm discount unless they agree to buy the car, and therefore you can’t get a price from a car dealer until then. Another way is to give you a firm discount but add hidden charges like dealer fees, doc fees, electronic filing fees, or dealer installed accessories after you agree on the discount from MSRP. “Bait and switch” is a popular tactic which simply brings you in to buy a specific car only to find out that its “just been sold” …but here’s another one almost like it”. Another popular tactic is to advertise discounts from “list price”, “dealer list price”, or “sticker price”. Dealers even have counterfeit Monroney labels printed that they display alongside of the real Monroney label. These counterfeit price stickers I’ve named “Phony Monroney’s”. I’ve seen advertisements from a South Florida car dealer, advertising “$10,500 Discounts on Every Vehicle in Stock”. The discounts aren’t from the MSRP but from “dealer list” which is clearly thousands of dollars above MSRP.

The best defense against all of this is to insist on an out-the-door price. The definition of an out-the-door price is “the full amount paid to the dealer plus government fees (tax and tag) only. Explain the following to the sales manager at the car dealership. “If you give me an honest out-the-door price, I will compare it with the two prices I already have from two other car dealerships. I will buy from the dealer with the lowest price. If you agree to give me your best price, you have a 33% chance of selling me a car. If you refuse to give me a price right now, you have 0% chance of selling me a car, because I will walk out that front door and you will never see me or hear from me again.” You can accomplish the same thing over the telephone or via email. You can download a form for the dealership to sign to guarantee this price at www.OutTheDoorPriceAffidavit.com. If the dealership refuses to sign this, they aren’t being honest about giving you their lowest price. Buy your car elsewhere.

I also recommend that you try www.TrueCar.com in addition to the tactic I just described. By way of full disclosure, I’m a TrueCar dealer, I own stock in TrueCar, and was member of the TrueCar national dealer council for three years. Another good third-party buying source is www.CostcoAuto.com. Costco requires an annual membership fee of $65 which is well worth the investment.

Monday, August 05, 2019

Minimizing the Pain of Having Your Car Serviced

The pain of buying a used or new car may be greater than the pain of having it serviced, but you need to have it serviced far more often than you must buy a car. Below, I’m listing nine suggestions to make your visit to your car dealer’s or independent service department as pleasant as possible.

(1) If you decide to have your vehicle serviced by a dealership rather than an independent, choose the dealer with the best service department, not necessarily the dealer you purchased your vehicle from. You don’t have to have the same dealership service your car that sold you your car. You probably bought your car from the dealer who gave you the best price. You should have your car serviced at the dealer who can best maintain and repair your car. Your manufacturer doesn’t require that you have recommended maintenance done by their dealers, but you should keep receipts from the independent you choose to prove you had it done in the event of a warranty claim. You must have warranty repairs done by the dealer. The price of service is important, but secondary to the quality of the service and repairs. Do a little research. Ask friends and neighbors who drive your make of car. Check with the BBB and the County Office of Consumer Affairs. Ask the service manager at the dealership to show you his factory score on CSI (customer satisfaction index). Every manufacturer surveys dealers’ service customers and ranks that dealer by how well he treats his customers. Many auto manufacturers are measuring service satisfaction by the percentage of customers that return to their dealer for service, Service Retention. This is the most accurate measure of how well your dealer will service and repair your car.


(2) Establish a personal relationship with your service advisor. The person in the service drive who writes up your repair order is very important. Be sure you get a good one. He should be knowledgeable, attentive to your needs, promptly return phone calls, and recommend only necessary services. You might not find this person on your first visit, but if you aren’t comfortable with the person you are dealing with, ask for one with whom you are. When you make an appointment to have your car serviced, always ask for that service advisor.

(3) Don’t pay the “gotcha”, miscellaneous supplies fee. Almost all car dealers and independents tack on a phony fee when you pay your bill which is simply more profit to the dealer but is disguised by various labels. It’s sometimes called “environmental impact fee”, “sundry shop supplies” and many others. The service cashier just adds a percentage ranging from 5% to 10% to your bill. This is no different than the “hidden dealer fee” that the sales department tacked on to the price they quoted you on the price of the car. Most dealers will waive this fee if you complain about it, especially if you threaten to call the BBB, their manufacturer, or the Florida Attorney General’s office.

(4) Always road test your car, preferably with the technician. If you brought your car in for a drivability problem such as a noise, vibration, or pulling to the right or left, don’t accept the car back until you ride in the car with the technician or service advisor and confirm that the problem has been remedied. I also recommend that you drive the car with the service advisor to demonstrate the problem when you bring it in. His experiencing what you experience always communicates your problem more accurately than listening to your description of the problem. If your problem is a troublesome “noise” which the technician or service advisor cannot hear, but your do, insist on someone else driving with you who has better hearing.

(5) Ask for a written estimate of the total cost of repairs and maintenance. Florida law requires that the dealer give you a written estimate. By law, they may not exceed this by more than 10%.

(6) Make an appointment ahead of time. You should insist on making an appointment and you should try to make that appointment at a time when the dealer’s service department will be least busy…typically the middle of the afternoon on weekdays or Saturday and Sunday. Avoid the 7:30-8:00 morning rush. When your service advisor has written up your repair order, ask him how long it will take. After he tells you, ask him to let you know ahead of time if, for any unforeseen reason, your car will not be ready in the promised time. Often times when you call a service department they will tell you to “bring the car in anytime” or “come right over”. Service advisors will tell you this because they are either too busy or too lazy to take the time to make a proper appointment. When they tell you this, tell them that your time is very valuable and that you insist on an appointment at a time when they can get you in and out quickly. Always write down the name of the person that gave you the appointment.

(7) Shop and compare high cost repair prices. Most service departments are competitive on maintenance items like oil changes, wheel alignments, and tire rotations. However, the costs of major repairs can vary considerably. If you are looking at an air-conditioner, transmission, or engine repair that can cost several thousands of dollars, get bids from more than one service department. Often just suggesting that you will do this will keep the cost down from the dealership you prefer.

(8) Introduce yourself to the service manager. This falls along the same philosophy as developing a good personal relationship with your service advisor. It can’t hurt to know the “boss”. If you are on first name basis with the service manager, it just might earn you a slightly higher level of treatment from those that work for him.

(9) DO NOT BUY ANY SERVICE THAT IS NOT RECOMMENDED BY THE MANUFACTURER. Modern cars require far less maintenance than cars built ten years ago. Car dealers and independents are suffering from the small amount of factory recommended maintenance. To supplement this, they are inventing unneeded maintenance under the guise of dealer recommended maintenance. Be sure that you carefully review your car’s owner’s manual each time you bring your car in for routine service. Be especially careful not to buy “FLUSHES” of the radiator, transmission, fuel system, power steering, engine oil and brake fluid. These are inventions of the dealer and independent service departments to make money and are not recommended by your car’s manufacturer.

Monday, July 29, 2019

Car Dealers Make More Money Financing Your Car than Selling it


OK, you’ve just bought that new or used car and the pressure is off…right? WRONG! The next step for the car dealer is to get you into the “box”. You won’t hear this word mentioned. It’s inside car dealer slang for the F&I office or the business office. This is the place that you sign all those papers making the sale legal and final. But in addition to that, it’s also a very important profit center for car dealers. In most car dealerships it’s the most profitable department. It’s not uncommon for car dealers to make over $1,500 in “the box” on each car they sell. AutoNation, the world’s largest auto retailer makes over $2,000.

The auto manufacturers put a lot of pressure on their dealers to sell more new cars. Dealers have minimum quotas that they must meet or exceed. If they don’t, they can be penalized by losing large cash bonus rewards. To ensure that they don’t lose these bonuses, dealers are being forced to price new cars so low that many dealers are losing money in their new car departments. This puts even more pressure on car dealers to make up for the lost new car profits by increasing their finance department’s profits.

Here’s how that profit is generated. First, and usually foremost, is making money on the interest they charge you. Essentially, they make money on “the spread” just like banks make money when they loan it. For example, a car dealer will borrow money from Bank of America for 3% and loan it to you for 5% or whatever interest rate they can convince you to accept. The second way they earn that big profit in “the box” is by selling you “products” which are added to the price of the car you just bought. There are many products and some of the most common are extended service warranties, maintenance plans, road hazard insurance, GAP insurance, window etch, and LoJack. 


The way you should protect yourself on the interest rate is to have already shopped your own bank or credit union and two other banks for the best interest rate you can qualify for. Never go into “the box” without knowing what the best rate other banks or credit unions will allow you. The best way to protect yourself against the products they will try to sell you is to completely understand each product. Do you want or need an extended warranty on your new car? If this product costs $1,900 for example, how long are you going to keep the car and how long are you likely to be driving it when it’s out of the manufacturer’s warranty? Ask the same questions of each product they try to sell you. If you’re unclear on the merits of a product, don’t commit. You can always go home and think about and seek advice from friends and advisors. If the finance manager tells you that you must decide immediately, just leave. He’s not being honest.

Another important tactic is to never go into “the box” alone. If it’s just you and the F&I manager [often called business manager], and there is a dispute over what was said, it’s just your word against his. Also, having a friend or advisor present will usually be a deterrent to any attempted deception. 


These are some of the kinds of deception you should be on the lookout for. Tying the sale of a product, like an extended service contract, to the interest rate or the bank’s willingness to approve your financing is illegal. But this practice happens all too often behind the closed doors of the “the box.” The F&I manger may tell you that the bank “requires” you to buy the extended warranty, GAP insurance another product to protect the bank’s collateral. This is simply a lie. Another common form of deception is to not disclose the products or interest rate, and have you sign the contract without reading it. There are many documents to be signed after you buy a car. Buyers are often in a state of euphoria now that they have bought their dream car and are in too much of a hurry to sign everything and drive their new car home. The car dealer is required by law to give you a signed copy of the installment sales contract. Be sure you carefully read it, and be sure have a copy. If you don’t get a copy, you may find that you signed a different contract than the one you read. 


Extended service warranties, GAP insurance, and other insurance products are regulated in Florida unlike many other states. This affords you some degree of protection like being able to cancel an insurance product if you did not use it. You can do this in 60 days for a 100% cancellation. You don’t get the cash back and your monthly payment won’t go down, but the amount is taken off the principal amount you are financing through the bank. You can cancel insurance products after 60 days, but the cancellation is not pro rata and you pay a large penalty. 


If you remember nothing else from this article, please remember this one thing. Don’t hurry the process of financing your car and signing the papers. Don’t let the car dealer encourage you to sign anything you don’t understand. Time is on your side because it will allow you to think and to consult with others who can help you make your final decision. I get a lot of calls from victims of “the box” and the one thing they all have in common is that they let themselves be rushed into signing the documents so that they could drive their dream car home that same day.



Monday, July 22, 2019

Top Ten Car 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 4 year 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 own the same make car that you are buying. There’s a similar rebate for lease customers. There’s even a “Farm Bureau” rebate which qualifies you for $500 if you’re a farmer. Dealers are 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 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 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. Very few car dealers will give a signed copy of the vehicle buyers’ order to a customer unless they drive the car home or make a substantial, nonrefundable deposit.

(5) Only one car available at ad price. When you are reading or listening to an advertisement, 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 hidden dealer fees 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 notthe 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 must 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 car’s 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 if 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 must 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 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 Fees”. The average “dealer fee” in South Florida is over $1,000. At least half 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 multiple, hidden dealer fee and they all exclude those 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 about $1,000 in hidden dealer fees.

Monday, July 15, 2019

Deaths from Dangerous Recalls Are the fault of our Legislators

Clearly auto manufacturers are partly to blame for the millions of vehicles on our highways with unfixed, dangerous recalls, like Takata airbags that explode in the driver’s face like a hand grenade. But the auto makers didn’t build cars with dangerous problems on purpose; it was a mistake.

Our lawmakers could get virtually all these cars repaired very quickly just by passing a law to make it ILLEGAL TO SELL A VEHICLE WITH A DANGEROUS RECALL. Their lack of action on this issue is not a mistake; it’s premeditated to enhance their chances of reelection.

You may be thinking that the auto makers are doing all they can because they issue recall notices to drivers and will fix their cars free when the owner brings it to one of their dealers. One wonders how many recalls would be issued if they weren’t required to do so by the National Highway Traffic Safety Association, NHTSA.

The reason that recalls don’t solve the problem is that only 1 out of 4 recalled cars is ever fixed. That’s because most drivers of recalled vehicles are unaware that their vehicles have been recalled and many procrastinate or just don’t care enough to have it fixed. Also, there are hundreds of thousands of recalled cars for which there’s no fix available.

Older recalled cars are often the most dangerous, especially those recalled for defective Takata airbags that become more dangerous over time. A driver of a 2010 used Honda could easily be the second, third or even fourth owner. The chances of that owner receiving a recall notice in the mail are slim. When the car was purchased new, there was no recall. When the car was subsequently sold by used car dealers, there was almost certainly no disclosure made to the buyer. Most states don’t require the disclosure. When and if a disclosure is made, it’s usually buried in the fine print. Yes, this information is available to buyers online via CarFax, NHTSA, and the manufacturers, but the reality is that very, very few used car buyers avail themselves of this.

I’ve mystery shopped dozens and dozens of car dealerships in South Florida over the last three years and virtually everyone is selling cars with dangerous recalls and no disclosure. Many car salesmen lie about the recall, saying there is no recall, or the recall was fixed. Many tell the buyer that all she must do is take it the new car dealer and have it fixed when he knows there is no fix available. You can read these mystery shopping reports at http://www.mysteryshoppingreports.com/.

The auto manufacturers and car dealers are fully aware of all the above, but if they voluntarily refused to sell a recalled car to a customer it would have a significant negative economic impact. The auto manufacturers and many of the car dealerships (AutoNation, CarMax, Penske, Sonic) are publicly owned companies. A public company has a fiduciary responsibility to their stockholders to make a profit by every legal means. Mike Jackson, then CEO of AutoNation, made the right and moral decision not to retail used cars with defective recalls to its customers. After a year of declining used car profits and outcries from stockholders, he reluctantly began retailing these dangerous cars.

The only way to get these dangerous vehicles off the road, fixed and safely back on the road is for our federal and state legislators to make it illegal to sell a vehicle with a defective recall. This is almost laughably simple and obvious. It’s also sadly simple and obvious that the only reason they don’t is because they will lose the financial support for reelection from the auto makers and auto dealers.

Monday, July 08, 2019

Should I Pay Cash for My Next Car or Finance It?

Most people don’t have any choice except to finance their cars. However, if you are reading this column, the chances are you’re in that fortunate higher demographic income group and can afford to pay cash for your next car. People who read newspaper columns and blogs tend to be more intelligent and affluent. But, just because you can, is it the right move?

Many people think they can get a better deal on a car if they pay cash. This was true 50 years ago before dealers discovered the new profit center referred to as the Finance and Insurance Department aka “Business Office”. Today this is not true. In fact, paying cash may even make the actual vehicle cost you more! The reason for this is that car dealers make money when they handle the financing with the bank or with the manufacturer’s lenders like Honda Finance, Chrysler Credit or normal banks like Wells Fargo or Capitol One. A dealer typically averages about $4,000 on every car he handles the financing on. Therefore, if the dealer’s minimum acceptable profit on the car’s markup was $1,000, he may sell it to someone who he could make $4,000 finance profit on for less than someone who he knew was a cash buyer. Dealers will sometimes sell a car for zero profit or even lose money on the car because they can make a good profit on the financing.

If you plan on paying cash for your next car, my recommendation is DO NOT TELL THE CAR DEALER THIS. Tell the car dealer that that you are considering financing with him. This will help you get a lower price because the dealer still has hope that he can make money when he finances our car. The average profit a car dealer makes financing cars is much larger than he makes marking up the selling price. AutoNation, the world’s largest retailer of new vehicles, made the decision about one year ago to increase their new vehicle prices because they were losing money in their new car departments. They were always very profitable in their finance and insurance departments…averaging over $2,000 per vehicle on every car sold. In fact, they’ve focused more on increasing profits in the finance department even more with “branded products” …AutoNation GAP insurance, Auto Nation Maintenance Plan, AutoNation Extended Warranty, etc.

My second recommendation is check interest rates and terms with your own bank or credit union before you talk to the car dealer’s finance people. The finance manager (aka business manager) is on commission and paid a generous percentage of the profit he makes by marking up the bank’s interest rates and selling you extra “products” like extended warranties, GAP insurance, and car maintenance.

One argument in favor of financing a car is being able to keep your money invested, and earning a greater return than your interest cost of financing. There has never been a never time in our history that this is true. The bad news is that interest rates are not only at historical lows for borrowing but also for CD’s and interest income. With very good credit, you can finance a new car today for between 3% and 4%, but you can’t find a short federally insured CD for that amount. However, you can find secure equity and bond investments that will earn considerably more than your cost of interest on financing a car.

There is one very important intangible reason why some people should pay cash for their car. That intangible is called “peace of mind”. My older brother, Doug, grew up during the Great Depression. When he built his new house, he paid cash for it. I couldn’t believe this and was severely critical of him. It was entirely illogical for him to pay cash when he could get a very low interest rate and home mortgage interest is tax deductible. His investments earned him far more than the interest rate on his mortgage would cost. After a while I finally realized why Doug was right and I was wrong. He paid cash for his home because it made him feel better. Growing up in the thirties, like many of my customers did, made an indelible impression on his emotions. Owning his home with no debt made him feel happy and secure and what could be more important than that?

Monday, July 01, 2019

Should You Exercise Your Option to Buy Your Leased Car?

One of the advantages of leasing is your option to buy the car at the end of your lease at the “residual” price. The residual is what the leasing company “guessed” your car would be worth at the end of your lease. They guessed because nobody has a crystal ball that tells them exactly what a used car will be worth 3 or 4 years in the future. If they guessed low, you have an opportunity. If they guessed high, you have no obligation; it’s the leasing company’s problem and they must sell the car and take a loss.

The best thing about making this decision is that you’re holding the best hand in the card game between you, the leasing company, and the dealer. That’s because you know your car better than they do. You’ve probably been driving it for close to three years, you know how well you’ve maintained it, how worn the tires are, whether it’s been wrecked and repaired, and how many dings, dents, or upholstery stains there are. You know if it was garaged, how carefully you drove it and the exact mileage. You also know, better than anybody, how well it runs. All these things determine the value of your car.

Unless you buy a new car, you can’t have as much confidence in any other used car that you buy as your own used leased car. The only assurance that you have when you buy somebody else’s used car is their word, or the dealer’s word, about how it was driven and maintained. A CarFax report offers good information, but it’s not 100% reliable. That means if you did take very good care of your leased car, drove it carefully, kept it in a garage, waxed and washed it faithfully, maintained it carefully and didn’t put too many miles on it, it’s worth more to you than anybody else. That’s because you’re the only one who knows that. And you can never be sure about that for any other used car you might buy.

Given that you like your leased car and want to keep it, the next step is determining the current wholesale market value for your car. Car dealers call this the “ACV”, for actual cash value. Check the Internet for information on the value of your car. The best check on the wholesale value is to drive your car to 3 or 4 car dealerships that are franchised for your make. If you drive a Ford, visit as many Ford dealerships as you can and tell them you want to sell your car. You aren’t misleading them because it’s a lease car. You could exercise your option to buy it from the leasing company and then resell it to the dealer, if the dealer’s offer was higher. If you live near a CarMax store, the largest retailer of used cars anywhere, they buy a lot of used cars “over the curb” and their prices are often competitive. Be sure you get a quote from them. Two other sources for an accurate wholesale market value of your car are www.Carvana.com and www.WeBuyAnyCar.com. You can get an online estimate from each of these companies and they will also give you a firm cash offer when they see your car.

Now that you’re armed with the actual market value for your car, you can compare it with the residual value in your lease contract, the price you have an option to buy it for. You might get lucky and be able to sell your car to a dealer, www.WeBuyAnyCar.com, CarMax, or www.Carvana.com for more than your option price. If so, you can flip the car for a fast profit. It’s not unheard of to make $1,000 or more by doing this. If you want to keep your leased car, you should be sure that your option price is less than, or very close to the true wholesale market value. If not, you’re better off to give the leased car back to the leasing company and buy similar used car at a lower price. Car dealers, of course, mark up the wholesale value of their used cars by anywhere from $1,000 to $4,000+, so even if your option price is $1,000 or so above actual wholesale, it can still be good buy. Remember, you know that used car better than anybody and if you buy another used car, you don’t.

Monday, June 24, 2019

Don’t be TRAPPED into Leasing For the Rest of Your Life

I’ve written several articles on which is the better choice, leasing or buying your next car. As a rule of thumb, I recommend buying because it’s less complicated and offers fewer opportunities for car dealers to deceive you. I also issue a special warning to seniors who, because of health issues, may not be able to drive at some point during their lease contract. They, or their *estates, are still obligated to make the remainder of the payments.

However, there is another negative on leasing which I was remiss in not mentioning in prior articles, and this applies to all age groups. When you buy a car, you’re building equity ownership in the car you’re driving; leasing is just like renting and you build zero equity. If you buy a new vehicle and finance it for 36 months, you can build equity from 50% of the original cost to has much as 70%. The average new vehicle today costs about $40,000, leaving you with an asset worth from $20,000 to $28,000!

Why is this important? According to USA Today, 40% of U.S. adults don’t have enough savings to cover a mere $400 emergency! The median amount of the average American’s savings account is only $4,830. When you buy a home or a car, you’re forced to save. More and more Americans are renting their apartment or homes and leasing their vehicles.

The auto manufacturers and auto dealers are focusing almost exclusively on leasing rather than selling today, for good reasons. Car dealers make substantially more money when they leaseinstead of sell, over $1,000. The likelihood of you repeating with the car dealer and the manufacturer is much higher when you lease vs. buy. Why? You must return the lease car to the car dealer, and the dealer begins soliciting your next lease about 6 months before your current lease expires. If you don’t repeat with that dealer/manufacturer, there’s a penalty called the “lease disposition fee”, about $350. There’s also the likelihood that you will be charged more for “above normal wear and tear” if you buy or lease a different brand. It’s easy for manufacturers and dealers to lure you into leasing, because almost everybody thinks in terms of monthly payments, not the purchase price. If you feel like you can fit the car into your monthly budget, you don’t care what the purchase price is.

That’s why so many people are now caught in the “lease trap”; not just the lease trap but forced to repeat with the same make of car they leased previously. They have no equity for a down payment on a purchase and are penalized if they switch to a different make of vehicle.

When you’re caught in the “lease trap”, you’re also precluded from buying a used car. Leasing companies and banks won’t lease used cars. A good, late model used car is a better value than a new one. It retains its value much more than a new care. Many people with limited savings and income should be buying used cars instead of new ones, but cannot if they were lured into the lease trap because of a low monthly payment.

If you’re fortunate enough to have a substantial savings or investment account that allows you to make the necessary down payment when you purchase a vehicle, that’s great and this article doesn’t apply to you. Unfortunately, it does apply to many people that are being lured into the LEASING TRAP.



*Legal pre-arrangements can be made to protect the lessee’s spouse from liability

Monday, June 17, 2019

Why Even “Honest” Car Dealers Lie to You

If you owned a business that employed a lot of people, including family and friends, that all depended on their earnings from that business to support themselves and their families, how important would the SURVIVAL of that business be to you? Of course, you and your family also depend entirely on the earnings from that business to provide housing, food, medical care, and education for you and your family. Arguably the strongest instinct in all living creatures, including humans, is SURVIVAL. Would you break the law, act unethically, or deceive someone if it was necessary to provide food, shelter, or medical care for you and your loved ones?

All retail businesses must advertise their products to sell them. Arguably, the most important factor in the consumer’s decision to buy is the LOWEST PRICE. Granted, quality and reliability of the product are important too, but once a buyer has decided on the best product, she begins looking for the lowest price. Most car dealerships each sell one brand of cars and a few sell several. Once the consumer chooses the brand, they begin shopping for the lowest price. A Ford, Honda, Jeep, or Toyota at one dealership is the same as those at all other dealerships. Furthermore, the car dealers all pay the manufacturers the same price for their cars. Despite what car dealers may tell you, large volume dealers don’t pay less for their cars than small volume dealers.

Consumers learn the lowest prices from car dealers advertising…online-digital, TV, radio, newspapers, email and snail mail. This is where the problem arises. If you’re in the market to buy a New 2019 Jeep Wrangler Unlimited Sahara 4X4 with an MSRP of $53,940, you’re going to check prices at all the Jeep dealerships in your market first. Usually there are at least 3 dealers for each brand in a market, but when you add shopping online a buyer can shop prices at DOZENS of dealerships. You’ll buy your Jeep from the dealer that gives you the biggest discount from MSRP, the lowest price.

All car dealers, of course, know that you will visit the dealer with the lowest price, so they must be sure their advertised price will be either lowest or close to it. They can only ensure that you won’t find a lower price by pricing their Jeep lower than they can afford to sell it, often below their true cost. This is how HIDDEN FEES, aka DEALER FEES came to exist. These hidden charges aren’t fees at all…at least not legitimate government fees; Hidden dealer fees are PROFIT TO THE DEALER which are not revealed to you in the advertising or the prices quoted to you online, by phone, or in person. A car dealer with $1,000 in hidden fees (average in South Florida) can advertise a car for $1,000 lower than he can afford to sell it for and still make a profit after he adds his hidden fees.

HAVE YOU EVER BOUGHT A CAR FOR THE ACTUAL ADVERTISED PRICE? Most people will say “no” and those that say “yes” probably were tricked into believing the hidden fees that were added were legitimate government fees like sales tax and license plate. Dealers can “name” a hidden fee anything they like. They typically choose names that sound “official” like tag agency fee, electronic filing fee, doc fee, notary fee, doc stamps, administrative fee, dealer handling fee, and dealer prep fee. Often, buyers never see the fees because they aren’t added until you’ve signed the dealer “worksheet” which you thought was a purchase agreement. It’s not a legal document and this disclaimer is in the fine print. Dealer do this, so they don’t have to disclose all of their hidden fees. These are printed out on the real buyer’s order in the Finance Office, along with reams of other paper and fine print that nobody has the time to read.

Who’s to blame for this sad state of affairs? The answer is our legislators and regulators, both federal and state. The political contributions by auto manufacturers, car dealers, and their associations dwarf that of the gun manufactures and NRA and rival those of Big Insurance. If the auto manufacturers and dealers don’t want a politician elected, he just must find another line of work.

About the only thing you can do to get the best price on a car is to outsmart the car dealer, and I have tool that you can download that will help you. It was invented by Nancy Stewart, my wife and co-host of my consumer advocacy radio show, “Earl on Cars”. Download this form at www.OutTheDoorPriceAffidavit.com. It is a legal affidavit that you insist your car dealer sign before you sign to buy any new or used vehicle. The car dealer is swearing that the price he advertised or quoted is the true out-the-door price plus government fees only. If the car dealer won’t sign it, buy your car from the dealer that will.

Monday, June 10, 2019

Seniors… Think Twice Before Leasing

Leasing a new vehicle is very different from renting. When you sign a 36-month or 48-month lease, you obligate yourself for 36 or 48 monthly payments, even if you can no longer drive. You’re also responsible for maintaining insurance on the leased vehicle, even if it’s not being driven. You may become incapacitated or your driver’s license can be revoked. If you die, your estate is obligated for the remaining payments.

It’s possible to have your lease assigned to another person, but this must be approved by the leasing company. There are companies that, for a fee, specialize in finding people to assume lease payments, but these people must have the approval of the leasing company.

You may have noticed that most new car advertising is for leasing, not buying. This is becausecar dealers average a much higher profit from a leased car than a purchased car. Also, the car dealer has a much better chance of keeping you as a customer if you lease. You must return the car to the dealer at the end of the lease. The car dealer and leasing company (usually the manufacturer) have monthly contact with you, because your making lease payments. Leasing companies penalize you with a “lease disposition fee” if you opt not to buy or lease another car of that make.

For all the above reasons, the car dealers and manufacturers will encourage you to lease rather than buy. Be forewarned that unscrupulous salesmen will give you bad advice to persuade you to change your mind about buying and leasing instead. They earn much higher commissions on leases, and they’re more likely to lease or sell you another car. The expression used by car salesmen when they attempt to do this is called the “Lease Flip”. The sales manager will instruct his salesman who is having difficulty making a big profit on a car purchase to “Flip her to a lease”. The salesman will try to focus your attention on the lower monthly payment of a lease and not mention the fact that you are building no equity when you lease like you do when you purchase. He won’t mention the higher cost of insurance, excess mileage charge, lease inception fee, lease disposition fee, or the charge at the end of the lease for excessive wear and tear. Some sales people will imply, or say, that you can return a lease early without any penalty. Too often your trade-in is undervalued or not valued at all on the lease contract. Lease contracts are very complicated compared to purchase contracts. There’s lots of fine print and variables that affect the total cost. The main numbers you have be aware of are the lease factor (interest rate), residual value (estimated value at the end of the lease) and the capitalized cost. The capitalized cost should reflect the fair credit for your trade-in and should represent the discounted price if you were buying the car.

With all that said, a lease can be just as good a value as a purchase, but leases are far more complicated. This gives the car dealer, manufacturer, and car salesman more of an upper hand. There’s an old joke that goes like this…” If you sit down at a poker table, look at all the other players, and can’t figure out who the sucker is…it’s probably you. Always be extra careful when you’re playing somebody else’s game.

Saturday, June 01, 2019

$100,000 DEALER FEE CHALLENGE

Debate the Resolution to Make Dealer Fees Illegal


WHAT? DEBATE RESOLVING THAT DEALER FEES SHOULD BE MADE ILLEGAL
WHEN? ANY SATURDAY MORNING 8AM TO 10 AM
WHERE? TRUE OLDIES RADIO STATION, 8895 N MILITARY TRAIL, PBG, FL


The first car dealer to accept my challenge will debate me for about one hour on my regularly scheduled Saturday morning 8-10 AM radio show (WSVU, TrueOldies 95.9 FM & 106.9 FM; Stream www.EarlOnCars.com) The audience will judge the debate, hearing both sides of the dealer fee issue and vote for the winner. The loser pays the winner $100,000. If I win, I pledge to contribute the $100,000 to Big Dog Ranch Rescue (www.BDRR.org).

DEBATE RULES: 

1. Earl Stewart and the Car Dealer will jointly agree upon, and choose a neutral, unbiased moderator; if no agreement can be reached, a flip of the coin will allow the winner to pick the moderator.
2. The Car Dealer must be a legally appointed dealer, named in the franchise agreement between him or her and the manufacturer of the vehicles he or she sells. 

3. Earl Stewart will open the debate, explaining to the audience why the dealer fee should be made illegal. The length of time will be 5-10 minutes.

4. The car dealer challenging this proposition will take 5-10 minutes explaining why dealer fees should remain legal. 

5. Earl Stewart rebuts the car dealer challenger for 5-10 minutes.
6. The Car Dealer rebuts Earl Stewart for 5-10 minutes.
7. Earl Stewart has a second 5-10-minute rebuttal.

8. Car Dealer has a second 5-10-minute rebuttal. 

9. There can be no interruptions of either speaker.
10. The listening audience will cast their votes for the winner by texting their votes or posting their votes to Facebook, Twitter, YouTube, or Periscope. All votes must be accompanied by a name and phone number for verification. Any employee of a car dealership, car dealer association and family members of either are ineligible to vote. 

I invite all challengers to contact me directly on my cell phone, 561 358-1474 or email me at Earl@EarlOnCars.com. If I receive more than one challenge, the participating challenger will be “drawn from a hat”. The $100,000 prize will be deposited in the escrow account of an attorney mutually agreed upon by both parties at least one week before the debate. If they cannot agree on an attorney, he or she will be decided by the toss of a coin. 

For those unfamiliar with my position on dealer fees and/or unclear on exactly what the dealer fee is, I refer you to my numerous blogs and newspaper articles on this subject, http://oncars.blogspot.com/search?q=dealer+fee

Monday, May 20, 2019

Good People Make Good Car Dealerships

In my columns over the years I’ve always advocated carefully choosing the car dealership that you buy your vehicle from or allow to service it. I still believe this is important. In fact, I publish a list of dealers that I recommend you buy your car from and a list that I recommend you avoid,www.GoodDealerBadDealerList.com. We’ve all visited a restaurant or retail store and had a terrible experience with a waitress, sales person, or other employee and never returned. Yet, we’ll hear friends recommending the same store that we swore never to patronize. We condemned an entire company because of one person.

I also wrote a column a couple of years ago in which I suggested that you carefully choose the individual who advises you and sells you service on your car. These individuals are really commissioned sales people who sell you service just like car sales people sell you cars. Unfortunately, most dealerships call them something else like “assistant service manager” or service advisor. In my dealership we used to call them Assistant Service Managers because that’s the term that Toyota uses. We now call them “service advisors” because too many people thought they were dealing with the service manager. In all candor, I’d feel more comfortable naming them what they are, “service sales people” and I may make that change.
It occurred to me that the same recommendation applies to all companies, not just car dealerships and it applies to all departments in a company. Whichever car dealership you choose, take the time to pick and choose those individuals you deal with. Car dealerships, just like other organizations, are nothing more than the sum of their parts…their people. You should get to know the person who sells you service and, if you don’t like him, ask for another person to handle your service requirements. You should also meet and cultivate a manager in the service department.

The same holds for the sales department. When you buy a car, don’t settle for the first salesman who approaches you. For example, if you’re a woman you may feel more comfortable dealing with another woman. Or, if your first language is Spanish or Cajun, you may feel more comfortable with one who can converse with you in your native tongue. Don’t be shy about asking, and don’t feel bad about hurting the feelings of the first sales person. An automobile is the 2nd largest purchase most people make and it’s very important that you feel comfortable with the person selling it to you. Furthermore, if after dealing with your sales person for a while, you think you made a bad choice, ask to speak to the sales manager or general manager. Believe me, car buyers hold all the cards (until they get your money), and no sane sales manager is going to lose a sale because a prospective customer doesn’t like or trust the sales person she’s dealing with. He will handle your sale personally or choose another sales person you do feel good about.

Car dealerships have other departments including parts, finance and insurance, accounting, and some have body shops. My same recommendation applies to all departments. A word of caution, when you ask to speak to a manager, be sure you’re really are truly speaking to one. Car dealerships are notorious for calling rank and file employees managers to trick the customer.

My purpose in writing this column is in realization of the fact that there are no perfect companies, especially car dealerships and that includes mine. I employ about 160 individuals and I would be less than candid if I didn’t say I have a few rotten apples in my barrel. Unfortunately, I don’t know who they are and finding them is a continuous work in progress. The same thing applies to all companies including car dealerships. In my list of recommended dealers, there are some employees of those dealerships who would take advantage of you, but most would not. In those dealerships that I recommend you don’t buy your car from, there may be a few honest, courteous employees. Then there are all the dealerships that I don’t put in either category. Your odds of finding the right individual are much better if you patronize a good company or car dealership, but never let your guard down.

Just stay away from the ones that I recommend you don’t deal with. In every organization there’s a tipping point. A great company reaches a critical mass of good employees and as their reputation grows, more good employees from other companies seek to be employed there. Honest, hardworking, courteous people enjoy working in an environment where others are like them. The same holds true for evil dealerships and bad companies (those on my “don’t buy” list). A good person with a conscience has a very difficult time functioning in an environment where, from top management all the way down, the design is to trick and take advantage of customers. These few good people don’t last long in evil dealerships and flee to a place where they can treat their customers in a manner that lets them sleep at night.

Monday, May 13, 2019

Buying a Car When You Have a Credit Problem

There are fewer things more sensitive or embarrassing than having to share your personal credit problems with a stranger. Having credit problems can also put many buyers in a weakened and defensive position when buying a car. Many people with bad, or too little, credit feel like the car dealer is somehow “doing them a favor” by selling them a car and getting them financed. Make no mistake about it. A car dealer is probably making more money selling a person with bad credit a car than one with good credit. If you have a credit problem, go about buying a car with the same care and due diligence as if you had the very best credit. Shop and compare your financing, your interest rate, and your trade-in allowance. Get at least three quotes on each of these.

Lenders who specialize in lending to those with bad credit are known as “special finance” lenders. Many of these lenders charge the dealer a large upfront fee, as much as $2,500. Legally, the dealer is not supposed to add this fee to the price of the car you buy but, in the real world, the price of the car is usually higher as the result of this fee. In addition to an upfront fee, the interest rates are very high from special finance lenders. Because they anticipate a much higher amount of repossession losses, they must make more on each transaction. Don’t automatically accept a dealer’s opinion that you must finance through such a lender. There are many conventional banks these days that loan to people with bad credit. Their interest rates are lower, and they don’t charge large upfront fees.

There is much fraud in special finance lending. Credit applications are falsified to show more time on the job, higher incomes, etc. W-2 forms and check stubs are counterfeited. Buyer’s orders show accessories and equipment that do not really exist on the car. Hold checks, or promissory notes are misrepresented as cash down payment. Co-signers’ signatures are forged. Confederates pose as employers, answering false phone numbers to verify employment. These falsifications are performed by finance managers, salesmen, brokers for special finance lenders (who are paid on commission) and the customers themselves. If you sign a credit application, be sure that you know all the information on that application is accurate. Be sure that you understand and agree to all parts of the transaction including down payments, accessories on the car, etc. Never be a party to falsifying information to a lender to obtain a loan. This is a criminal offense.

Advertisements aimed at people with bad credit usually exaggerate with claims like, “We finance everyone”, “Wanted, good people with bad credit”, “No credit, no problem”, and, my favorite, “No credit application refused” (it doesn’t say your loan won’t be refused, just your application). My advice is to ignore these kinds of ads and these kinds of dealers. Their strategy is to take advantage of people with bad credit who they believe will buy any car, pay any amount of interest, and any profit to the dealers if the dealer can get them a loan.

It is common practice in Florida to encourage the car buyer to drive the car home immediately upon signing all of the papers. In some states like New York this is not permitted until all the car has been registered with the state in the new owner’s name. The reason for this immediate delivery (commonly referred to as the “spot delivery”) is to discourage and possibly even prevent the buyer from changing his mind. Taking possession of the car is a legal consideration making the purchase more binding. I recommend that you not rush the purchase or the delivery. For one thing you want to be sure that the car is exactly the way you want it…clean inside and out, all the accessories properly installed, no dings, dents or scratches, and that you have a complete understanding of how to operate all of the features of the vehicle.

I mention the risk of the “spot delivery” in this column on buying a car with bad credit because it can be especially harmful to someone whose credit is denied after the car has been delivered. You will most likely be required to sign a “Rescission Agreement” before you drive the car home. This is a legal document which requires you to return the car if your credit is denied. You will probably be told that your credit will be approved, but sometimes the dealer is wrong. The rescission agreement will have a charge for time and mileage that you have put on the car you are driving. Usually this is a very high charge from 25 cents per mile plus $50 per day and higher. It can take weeks for a special finance lender to rule on a credit application. If your credit is denied you could owe the dealer thousands of dollars which the down payment you made might not even cover.

As frightening as all the above may sound, the one single thing you can do to prevent bad things from happening when you purchase a car is to choose your car dealer very carefully. How long has he been in business? What is his track record with the Better Business Bureau, the County Office for Consumer Affairs, and the Florida Attorney General’s Office? Check his Google rating. Ask friends, neighbors, or relatives who have dealt with this car dealer what their experiences have been like. Choosing a good dealer with integrity will resolve 95% of all your concerns.

Monday, May 06, 2019

THE LOWEST PRICED CAR CAN END UP BEING THE MOST EXPENSIVE


Too often car buyers focus on buying the car that fulfills their preferences of styling, size, and accessories that they can buy for the lowest price. There are other important cost considerations you should look at before buying the cheapest alternative.

Resale value is the number one consideration that is most often overlooked by car buyers. All cars depreciate in value, but some hold their value a lot better than others. You might save a thousand dollars by choosing to buy one used or new car over another more expensive make and model. But if the make and model that cost $1,000 more, held its value by $2,000 more over the 3 years you owned the car before trading it back in, the “lowest priced car” was really $1,000 more expensive.

There are several ways you can check on how much cars will depreciate. A good one is to check the resale value of that same make of car that is 3 or 4 years old. You can also find this information on the Internet. Kelly Blue Book, for example is www.KBB.com, www.Edmunds.com, and www.ALG.com are good sources. If you are thinking about buying a new 2019 car of a particular model and make, find out what a 2016 model sells for today. Compare other makes and models.

Maintenance and repair cost are the second biggest factors in measuring the true cost of a car. When a car has a relatively higher depreciation, one of the biggest reasons is probably because it is more prone to break down. CheckConsumer Reports or Google the year make and model to find the projected repair histories of the cars you are comparing. Saving $1,000 on a make and model is not very significant when you are facing the cost of a blown transmission or engine. Does the manufacturer provide complimentary maintenance? This should be a factor to consider as well.

Big cash rebates and big discounts are not necessarily a good thing. First you must ask yourself, why is it necessary for this manufacturer to giving me such a big cash rebate (I have seen them advertised as high as $11,000) to sell his car? You will generally find that the manufacturers of higher quality, higher demand cars offer fewer rebates and discounts. These are also the manufacturers of cars that depreciate less and cost less in terms of repairs. Big rebates and discounts also negatively affect a cars resale value. It’s what you could call “vicious cycle”. A car is hard to sell because of its high repair costs and high depreciation so the manufacturer pays a big cash rebate to sell it. The rebate lowers the value of the used car of that make and model because the price of a used car directly tied to the cost of that same new car.

You will be surprised how much the color of the car you buy can affect the resale value. Think about it. The color was very important to you when you bought your last car. It is just as important to the person who will be buying the car you trade in. The most popular colors are white, silver, beige, and black. If you have a “thing” for green, blue, orange, or another unusual color, it can negatively affect the resale value of that car by over $2,000. I’m not suggesting that you always buy a white car, but if you like white, silver, beige, and black you are going to get more money for that trade-in than if you like blue and green. Bright colors can be good for certain models. Red is a popular convertible color for example.

Be sure to check your cost of insurance before you make a final decision. Cars with the most safety features, highly rated in collision and rollover tests, relatively low cost of repair especially for bumpers, and non high-performance cars have much lower insurance rates.

Cars are no different than any product that you buy when it comes to the principal of “the cheapest product is usually not the best value”. You buy a quality pair of shoes, paying more than you would for a cheap, poorly made pair because they will look good and wear many times longer. Shopping for the lowest price is a very good idea, but only after you have chosen a car that has low depreciation, operating costs, and cost of repair.

Monday, April 29, 2019

Car Salesmen Don’t Look or Talk Like Car Salesmen Anymore


 - by Earl Stewart 

Many of my readers know that I send mystery shoppers weekly to car dealerships around South Florida so that I can learn how they are selling, leasing and servicing cars. I do this for two reasons. The first is that this is a common practice for all businesses to learn how their competition operates and to have the competitive edge you really need to know how your competitors do business. The second reason is that I feature a mystery shopping report on my weekly radio show, Earl Stewart on Cars that airs between 9 and 10 every Saturday morning. I've done hundreds of these mystery shops and I've noticed an interesting trend over the years.

Back in the day, car salesmen looked and sounded like what many people consider the stereotype for a car salesman. You know what I mean, gold chains, diamond pinkie ring, sunglasses, loud shirt, and white shoes. As car buyers became more educated, sophisticated, and demanding, it didn't take car dealers long to realize that they had to dress their car salesmen in a nicer fashion, “lipstick on a pig”, But even though they looked nicer, they sounded and acted pretty much the same.

With the advent of the Internet, Google, today’s consumer has made a quantum leap in knowledge, education and sophistication. Today’s buyer of virtually everything is far more demanding and far less tolerant of deceptive advertising and sales tactics.

The most recent shift I've seen in car dealers’ efforts to make their salesmen seem less threatening is in who they hire and how they train their salesmen to behave. More and more car dealers are hiring younger sales people, and fewer older, experienced salesmen. These dealers want their sales people to treat their customers with courtesy and respect and gain their confidence. We've all heard the terms con man and con-artist. We also know the verb, “to con”. To con somebody means to steal from them as in Bernie Madoff. Did you know that “con” is short for confidence? A successful con man is good at gaining the confidence of his victim. The con man’s appearance and how he sounds play a critical role in this. I often hear people who were taken advantage of and stolen from say, “He looked and sounded like such a nice person”. Think about that for a minute. How successful could a crook be who looked and sounded like one?

The important thing to remember is that it’s usually not the car salesman who is responsible for the deception. Certainly, he cannot be held accountable for the deceptive and often illegal advertising. In fact, many car sales people hate the advertising that brings prospective customers into the car dealership by false and misleading promises. Especially in today’s economy, many people work in car dealerships because they can’t find a job anywhere else. Imagine how embarrassing it must be to a salesman, new to the car business, when he must try to explain away a bait and switch advertisement. How can you tell a prospective customer that the “sale car” on the showroom floor costs several thousands of dollars more than the one advertised on TV? In my mystery shops, it’s becoming more and more common for the salesman to “nicely” tell my shopper when she asks to see the advertised car that they can’t really buy the car for that price and to apologize for the deceptive ad! These sales people will say right up front that the ad is just to get you to come in so that they can try to sell you a car at higher price.

Also, the salesman is often an innocent victim when it comes to the deceptive sales practices. Many car dealers use attractive, friendly sounding sales people to lure the fly into the web. It’s been proven in studies that customers put more stock in the individual they deal with at a store than the store itself. If that salesman can capture your trust and especially if he can make you like him, the car dealership is 90% closer to closing the sale.

Today’s sales people are more “greeters” than sales people. Many car sales people today are not privy to the cost or even the selling price of the cars they “sell”. The true cost of the car is known only by the sales managers who are also known as closers and team leaders. These managers are also the only ones authorized to quote a price. They also appraise your trade-in. The interest rates you pay and the warranties, maintenance plans, GAP insurance, etc. that you buy are all handled by mangers.

The bottom line is that it’s not the rude, aggressive car salesman you need to be afraid of. There are very few of those around anymore. The car dealers have wised up and you will be dealing with young, attractive, non-threatening, and polite sales people today. In many cases, they know very little about the unfair and deceptive sales and advertising. What little they do know makes them feel bad, but they need the job and want to put food on the table for their family. As much as you like this salesman or saleswoman, don’t give him or her your trust when it comes getting a fair price, trade-in allowance, lease payment, or interest rate. That nice, smiling sales person is the dealer’s pawn and is “just following orders”. Verify all the numbers your new friend gives you by competitively shopping and comparing at least two other car dealers.

Monday, April 22, 2019

The Lemon Law: Your Nuclear Option

By Earl Stewart
Lemon laws are state laws which give rights to purchasers of new vehicles if they find that they have bought a car with a defect that cannot be fixed in a timely fashion by the dealer or the manufacturer. Every states lemon law is somewhat different, but they all have a lot in common and are aimed at the same result. Most car buyers have misconceptions of the lemon law. These are some the most common ones: The car owners think they are going against their car dealer when they are really going against their car’s manufacturer. If you prevail it costs the car dealer nothing. The manufacturer pays. The law applies only to cars purchased as new, not used. If you win a lemon law dispute, the manufacturer or dealer does not simply replace your car with a brand new on. The amount of credit you win toward a replacement vehicle is arrived at by deducting a charge for the usage of your lemon car based on time and mileage.

The complete lemon law process is a difficult and time-consuming task for all concerned… you, the car dealer, and the manufacturer. It’s difficult for you because the law requires specific and extensive documentation. You must have allowed your dealer to try to fix the problem at least three times and you must have detailed written documentation of this. You must be sure that your complaint is clearly spelled out by the dealer on your repair order and that his failure to fix it is also a matter of written record. After three times, you must notify the manufacturer by certified letter that you are invoking the lemon law. Now the manufacturer has one last chance to fix your car. At this time, the manufacturer may take your car to another dealer who he feels is more competent in repairing your car. If the fourth attempt to fix your car fails, your case is assigned to a board of arbitrators. Their ruling is final. This entire process usually takes a very long time. Several months is not uncommon. Meanwhile, you’re saddled with a car that has a problem nobody can fix.

When you formally invoke the lemon law with your certified letter, you sever all communications with the manufacturer other than formal, legal communications as dictated by the law. The manufacturer considers you a legal adversary and their attorneys consider anything they say to you as something that can be used against them in the arbitration. At this point they are legally barred from fixing your car or talking to you about fixing your car.

All the above is why I advise that you use the lemon law only as a last resort…the nuclear option. Put emotion aside and focus on what your purpose should be, which is to have a car that you can drive without the problem that has been driving your crazy since you bought it. Your priority should not be to punish the dealer because, as I already said, he suffers nothing from your winning a lemon law decision. You are punishing the manufacturer to some extent, but this is “business as usual” to all manufacturers who fight (and usually win) thousands of lemon laws annually. What I’m suggesting is that you might want to consider giving the dealer and manufacturer a little more time to fix your car after the first three attempts. If they look like they are sincere and trying hard, it could save you a lot of time driving your broken car (not to mention the mental anguish) compared to waiting months for the lemon law process to work itself out.

I’m not saying that you shouldn’t tell the dealer and manufacturer that you will invoke the lemon law if you have no other choice. You should do that. You should let both the dealer and the manufacturer know in no uncertain terms that you have meticulous documentation of their failed efforts to fix your car, you have familiarized yourself completely with the specifics of your state’s lemon law, and you will not hesitate to invoke it if you are left no other choice. This will instill a sense of urgency to fix your car ASAP if it’s within their abilities. The reason is the dealer and the manufacturer want to keep you as a customer. In fact, the dealer may stretch to give you a better deal on a new car to replace yours than you would ever otherwise have gotten. He can’t do that once the lemon law has been invoked because he would be trading in a “lemon”. A “legal lemon” has the same stigma as a flood car or totaled car that has been rebuilt. The manufacturer not only wants to keep you as a customer but wants to avoid the cost of arbitration (the manufacturer is responsible for all the costs… the cost of disposing of a lemon, and the cost of the damage to their reputation by chalking up another lemon laws loss in the record books. For more information about the lemon law, Florida residents can call the lemon law hotline, 800 321-5366 or you can click this link: http://www.myfloridalegal.com/lemonlaw.

Monday, April 15, 2019

FLORIDA CAR BUYERS BEWARE

By Earl Stewart

This front-page headline appeared in last week in USA Today. I’ll summarize the story for you: Car dealers and their associations are lobbying legislation into state laws to preserve their legal right to sell you a used car with a dangerous recall, like a defective Takata airbag. The law they’re advocating “sounds” like a good law until you think about it. The law is to require car dealers to “disclose” to the buyer that the car they’re buying has a dangerous recall. The word “disclose” when applied to car dealers becomes an oxymoron. Car dealers bury their “disclosures” in ultra-fine print, flashed on the TV screen, webpage, or PC monitor in a fraction of the time you can read it…that is, if you could even see it. Car dealers believe that, but getting these laws passed, they’ll dissuade federal and

state government from doing what they should have done years ago…MAKE IT ILLEGAL TO SELL A VEHICLE WITH A DANGEROUS SAFETY RECALL. By the way, there’s still no law in Florida requiring car dealers to disclose dangerous recalls.

Can anyone explain to me why it’s legal to sell you a vehicle with a dangerous recall? In fact, it’s even legal to sell you a vehicle with a dangerous recall that CANNOT BE REPAIRED. Thousands of used vehicles are sold every day with defective Takata airbags that cannot be fixed because the parts to fix them are unavailable.

I’ll answer my own question of why this is legal. Auto manufacturers and car dealers are afraid of the huge economic impact upon them if such a law were passed. The Florida Auto Dealers Association, FADA (and all other state dealers’ associations) the National Auto Dealers Association NADA, and Big Auto (VW, Toyota, GM, Ford, Honda, etc), combined, have ENORMOUS POLITICAL CLOUT. The auto manufacturer-auto dealer syndicate makes the NRA look “politically weak by comparison”.

So, what are Florida used car buyers to do? Contact Governor Ron DeSantis, Attorney General Ashley Moody, and your state senators and representatives. I tried for two years with Rick Scott and Pam Bondi to no avail. The more likely successful course of action is to check every used car you buy at www.SaferCar.gov, the website for the National Highway Traffic Safety Association. DO NOT BUY A USED CAR UNTIL YOU CHECK YOUR VIN AND VERIFIED IT HAS NO OUTSTANDING SAFETY RECALLS.

Monday, April 08, 2019

FOR IMMEDIATE RELEASE: Florida Attorney General’s Seniors vs Crime presents free program April 25 on How Not to Get Ripped Off when Buying, Leasing or Maintaining a Vehicle


Earl and Nancy Stewart to be Featured Speakers

Thanks to our new Florida Attorney General, Ashley Moody and her Seniors vs. Crime members, Tony Zappone, Sheila Butler and Frank Starnella for inviting Nancy Stewart and me to speak to the seniors of South Florida this April 25th.

Attorney General Ashley Moody has clearly prioritized doing more to protect Florida’s large and growing elderly population from fraud and abuse. She recently announced the formation of Florida’s Senior Protection Team that will work closely with Seniors vs. Crime and the Florida Department of Law Enforcement.

The details of our public seminar on how to avoid being taken advantage of when buying, leasing, maintaining or repairing a vehicle are shown below. If you are a senior, or know seniors that can benefit from our seminar, please book this time and location in your calendar or ask them to: April 25, Thursday, 2 PM at 900 Brandywine Road is located just west of the I-95, Exit # 53, Palm Beach Lakes Blvd. interchange, located on the United Methodist Church campus. Google Maps link is https://goo.gl/maps/7qSXbXU4yV72.

PRESS RELEASE:
Seniors vs Crime, a special project of the Florida Attorney General’s Office, is presenting a free public seminar to educate senior citizens on how they can prevent being victimized when buying, leasing or maintaining their vehicle. The program will be on Thursday, April 25 at 2 p.m. at 900 Brandywine Road in West Palm Beach, at the Gathering Place on the United Methodist Church of the Palm Beaches Campus. Earl and Nancy Stewart will be the featured speakers. The first 500 attendees will receive a free copy of Earl Stewart’s book “Confessions of a Recovering Car Dealer.” He is the owner of Earl Stewart Toyota in North Palm Beach. Light refreshments will be served following the program.

Topics to be covered include how to avoid tricks and scams when buying or leasing a vehicle, how to determine if buying or leasing is the best option, what to look for in a qualified mechanic or body shop, what vehicle safety options are helpful for senior drivers, how to get the most money for a trade in, are extended warranties a smart buy, how to shop for the best financing, and more. Attendees can submit questions ahead of time to earl@EarlOnCars.com with Seniors vs Crime in the subject line or text questions to 772-497-6530.


Reserve a seat by calling 561-844-3461 
or by emailing sandrav@estoyota.com
Reservations are encouraged but not required. 


“We’re pleased to offer local seniors the opportunity to learn how to avoid being ripped off when buying or maintaining their vehicle,” said Tony Zappone, a member of the Palm Beach County Seniors vs Crime organization. “Crime prevention is our key mission, and to help seniors avoid these costly mistakes is important because investing in a vehicle and maintaining it are among the biggest expenses of our age group, and an area where many are most at risk.”

“Being a senior myself, and in the car business for more than 50 years, I have too often seen older people taken advantage of and it is very upsetting,” Earl Stewart said. “Cheating anyone is wrong, but taking advantage of someone on a fixed or limited income is especially bad. We are happy to be able to pull the veil back and reveal some of the ‘tricks of the trade’ to educate people so they can avoid becoming victims.” Nancy Stewart will address some of the issues that older women face when buying or maintaining their vehicles. “Knowledge is power and we want them to go into the process of buying or maintaining their vehicle with as much information as possible,” she said.
The program site at 900 Brandywine Road is located just west of the I-95 – Palm Beach Lakes Blvd. interchange. Google Maps link is https://goo.gl/maps/7qSXbXU4yV72. Plenty of free parking is available immediately adjacent to the meeting site and the building is fully accessible.

The Seniors Vs Crime Project is sponsored by the Attorney General to reinforce the message of crime prevention and to provide methods by which Florida’s senior population can be alerted to consumer fraud, con games, and other criminal acts. The purpose of the Seniors Vs Crime Project is twofold: to offer crime prevention seminars to Florida's elderly and to provide comprehensive training for law enforcement officers and other criminal justice practitioners in understanding how the aging population impacts upon the role of police and other criminal justice professionals.

The program has more than 2,000 volunteers staffing 44 local offices throughout Florida. For more information about Seniors vs Crime visit www.seniorsvscrime.com or call 1-800-203-3099.



-->