We have until January 8th, 2024 to submit comments to the FTC about proposed rules to BAN CAR DEALER JUNK FEES. Please visit to be heard!

Monday, December 04, 2023

Buyer Beware Warranties for Sale!

If you own or lease a vehicle, someone has probably tried to sell you a warranty, maybe several people or companies. You may have already bought one, but you probably haven’t had to use it, or maybe you didn’t even realize you were sold one. If you have tried to use a warranty you purchased, it probably didn’t cover the repair your car needed.

Over the past decade, the quality and reliability of most vehicles have improved more than at any time in automotive history. If you did your homework and bought a quality car, you simply don’t need to buy another warranty, aka extended service contract.

I understand that some people buy extended warranties on their vehicles because it gives them “peace of mind.” If you’re one of them, I urge you to carefully study the warranty being offered for what it does and does not cover. The warranty companies, as you would expect, are very well versed in what repairs are more or less likely for every make, model, and year vehicle for which they sell an extended warranty. They write the warranties to cover those items that are least likely to fail and less expensive to repair if they do. They exclude items that fail more frequently and are costly to fix. For example, a powertrain warranty is often offered for free by car dealers but is also often sold.

The powertrain consists of all the parts that are lubricated by oil or grease on a vehicle. The condition in a powertrain warranty (and all warranties) is that your vehicle must have all the manufacturer’s recommended maintenance performed, which means all oil changes (typically once every year or 10,000 miles for most vehicles). Historically, to the best of my knowledge, no vehicle has ever required a repair that had all its oil changes as recommended by the manufacturer.

The huge increase in the reliability of vehicles in the past decade is largely due to the commensurate increase in technology and engineering, particularly in software and computers. Today’s automobile is more a computer on wheels than the mechanical device that evolved from Henry Ford’s Model A. Most extended warranties sold today cover mostly mechanical parts like the engine, transmission, and axles, but cover very little of the computer modules and software. These computer components are extremely expensive. The irony is that the mechanical parts fail very seldom now because of the computerized parts.

The reason extended warranties are pushed on you today is simply because they’re extremely profitable for the sellers. Almost all large car dealers design and sell their own extended warranties. They decide what the warranty covers and does not. They also decide the price. The profit margin on these homemade warranties is HUGE, some approaching 100% or higher. This is partly because tax laws favor insurance companies. Warren Buffett, close to the richest person on Earth, made most of his money owning insurance companies. Insurance companies don’t have to pay income tax on the premiums they collect from you until they “earn out”. If you buy an auto, extended 5-year warranty for $2,000, the company pays no income tax in the first year and just 20% of the tax per year after. This is called “the float” and is why warranty companies make more money than any other. They take all the money that you pay them in untaxed premiums and invest it, which increases their profits by their investment return.

**Earl Stewart**

Monday, November 27, 2023

Amazon to the Recue!

Jeff Bezos Can Make Car Dealers Honest

Last week’s breaking news was that Amazon entered an agreement with Hyundai to sell their cars on The details are sparse, but we can conclude that Amazon will offer Hyundai buyers (and probably Kia and Genesis) a transparent, out-the-door price. Amazon will deliver the new vehicle directly to the buyer, or the buyer can pick it up at the Hyundai dealership. This goes into effect this January, and you can bet that all other auto manufacturers will jump on the bandwagon.

This will afford Hyundai buyers the luxury of avoiding junk fees, dealer-installed accessories, addendum labels, and bait-and-switch advertising. You probably are already a customer of Amazon…63% of Americans are. You know how Amazon works. The price you see is the price you pay. According to last week’s press release, Amazon will also provide financing, which historically has been car dealers’ largest profit center.

You can still buy Hyundais directly from the Hyundai dealers, but now you’ll have Amazon’s out-the-door price to compare. Never in the history of auto retailing has the consumer had access to a true, transparent out-the-door price to shop and compare with the dealers’ competition.

There’s bound to be a huge hue and cry and massive litigation by the car dealers, their organizations, and probably some manufacturers who will be timid about admitting that this is really what they hoped for all along. You’ll see U.S. Senators interrogating Jeff Bezos and/or his CEO and probably the Justice Department going after Amazon, although they’ll risk the ire of car buyers/VOTERS.

All fifty states have enacted franchise laws that make it almost impossible for anyone except a car dealer to retail a new car. The details as to how Amazon and Hyundai were able to find the loophole in these state laws are unclear at this time. Tesla successfully navigated these laws and, if you’ve bought a Tesla, you know what a seamless, transparent, and pleasant experience it is.

I must comment on the irony that the two richest people in the world, Elon Musk and Jeff Bezos, will take credit for changing the retail automobile business from the worst experience to one of the best.

Monday, November 13, 2023

Throwback: Open Letter to Car Dealers 2006

Seventeen years ago, I wrote this open letter to car dealers and published it online and in the south Florida papers. In it I implored car dealers to look to my example and success after eliminating the dealer fee I was charging my customers. 

Flash foward to 2023 and we find ourselves in a world that would be unrecognizable to my 67 year old self. Not only did the dealer fee survive, it grew, evolved, and then metatasized. We call them junk fees now, mainly because dealers came up with so many new names to call dealer fees. During the immediate post-COVID period dealers innovated in the creation of new junk fees and ways to separate customers from their cash.

In this open letter written so many years ago, I truly believed I could inspire other car dealers to pick my chosen path to success. The current state of affairs, particularly in the south Florida car market, remains a stark reminder that these dealers, chose a very different road to go down.


Dear fellow Florida car dealer, I started in the retail auto business in 1968, about 38 years ago, and I have seen a lot of changes in the way we dealers sell cars and the expectations of our customers. My remarks in this column are made sincerely and with a positive intent toward you and your customers. I am not trying to tell you how to run your business; I am suggesting a change that will reward both you and your customers.

Virtually every car dealer in Florida adds a charge to the price of the cars he sells, variously referred to as a “dealer fee”, “documentary fee”, “dealer prep fee”, etc. This extra charge is printed on your buyer’s orders and is programmed into your computers. It has been made illegal in many states including California. You charge this fee to every customer and it ranges from a few hundred dollars to nearly a thousand. Florida law requires that, if you charge a dealer fee to any customer, you must charge all customers. It also requires that you disclose in writing on the buyer’s order that this charge represents profit to the dealer. Florida law also requires that you include this fee in all advertised prices. You don’t always do this and you get around the law by limiting the number of advertised vehicles (as few as one).

The argument that I hear from most car dealers when I raise this issue is that the dealer fee is fully disclosed to the buyer on his buyer’s order. But, most car buyers are totally unaware that they are paying this. Who reads all of the voluminous paperwork associated with buying a car? The few who notice it assume it is an “official” fee like state sales tax or license and registration fee. Those few astute buyers who do question the fee are told that your dealership must charge this fee on very car, which would not be true if you were to make the decision to not charge the dealer fee to anyone. These astute buyers are also told that all other car dealers charge similar fees. This is almost true, but, as you know, my dealership does not.

The reason you charge this fee is simply to increase the cost of the car and your profit in such a manner that it is not noticed by your customer. This is just plain wrong. Dealers will admit this to me in private conversations and some will admit that they have considered eliminating the fee as I have, but are afraid of the drastic effect to their bottom line. By being able to count on an extra $895 in profit that the customer is not aware of or believes is an “official fee”, you can actually quote a price below cost and end up making a profit. Or, if the price you quote the customer does pay you a nice profit, you can increase that by several hundred dollars.

This “extra, unseen” profit is even better for you because you don’t pay your salesmen a commission on it. That’s being unfair to your employees as well as your customers. When the rare, astute buyer objects to the dealer fee, the law permits you to decrease the quoted price of the car by the amount of the dealer fee. This would have the same net effect of removing it. The salesman won’t permit this because he will lose his commission (typically 25%) on the decrease in his commissionable gross profit.

If you don’t know me, I should tell you that I don’t profess to be some “holier than thou” car dealer who was always perfect. Although, I never did anything illegal, when I look at some of my advertising and sales tactics 20+ years ago and more, I am not always proud. But, I have evolved as my customers have evolved. My customers’ expectations, level of education, and sophistication are much higher today. Your customers are no different. As I began treating my customers, and employees, better I discovered that they began treating me better. Yes, I used to charge a dealer fee ($495), and when I stopped charging it a few years ago, it was scary. But I did it because I could no longer, in good conscious, mislead my customers. Just because everybody else was doing the same thing did not make it right.

Now here is the good news. My profit per car did drop by about the amount of the dealer fee when I stopped charging it. But, when my customers realized that I was now giving them a fair shake and quoting the complete out-the-door price with no “surprises” the word spread. My volume began to rise rapidly. Sure, I was making a few hundred dollars less per car, but I was selling a lot more cars! I was, and am, selling a lot of your former customers. My bottom line is far better than it was when I was charging a dealer fee. You can do the same!

Why am I writing this letter? I’m not going to tell you that I think of myself as the new Marshall that has come to “clean up Dodge”. In fact, I am well aware that this letter is to some extent self-serving. Lots of people will read this letter to you and learn why they should buy a car from me, not you. And, I am also aware that most dealers who read this will either get angry and ignore it or not have the courage to follow my lead. But maybe you will be the exception. If you have any interest in following my lead, call me anytime. I don’t have a secretary and I don’t screen any of my phone calls. I would love to chat with you about this.


Earl Stewart

Monday, November 06, 2023

Average Auto Insurance up 18%... Florida Auto Insurance up 88%!

This alarming increase in auto insurance premiums has occurred over the past two years, according to the Federal Bureau of Labor Statistics. The purported reasons are more crashes, increased litigation, and higher repair costs.

In my opinion, there’s another very significant but unobvious reason. That is consumer inflation psychology. When prices go up unexpectedly, buyers complain and may even buy from a different store, switch brands, or go temporarily without. However, when all prices for a given product or service continue to rise, buyers learn to expect it and reluctantly accept the fact. When sellers learn that their buyers are acting as if high prices are the norm but don’t complain or consider switching sellers or choosing a different brand, sellers increase prices even more than their increased costs have justified previously.

This happened in the new and used car markets. The Covid shortages and supply chain interruptions caused production and sales to plummet, but because of the inflation psychology of car buyers, car dealers were able to raise their prices so high that, in spite of their car sales being way down, their profit per car was so high they did and are making far more profits today than they did when they sold far more cars. The same thing happened with the car manufacturers because they raised their prices to the car dealers so high as to offset the decline in production.

Now the auto insurance companies are benefiting from buyer inflation psychology. Don’t let this happen to you, and here are some tips to help you:
  • Shop your insurance premium with several other insurance companies. Remember, insurance companies are a lot like car dealers; they charge each customer as much as they can get away with. Your insurance company has been increasing your premium every year, and now they’re increasing it at a greatly increased amount. Another insurance company will offer you a lower premium with the hope that they can increase your premium in subsequent years because most people stay with the same insurance company for too many years. You can also hire an independent insurance agent who can do the premium shopping for you.
  • Raise your deductible as high as you can and/or drop your collision/comprehensive insurance. The average driver files a claim only once every twenty years. Imagine how much you can bank/invest that saved deductible cost instead of your insurance company doing the same with your extra deductible and collision/comprehensive premium.
  • You may be able to bundle your homeowners with your auto insurance.
  • Take a defensive driving course or allow driving to be monitored, and some insurance companies will discount your premium.
  • Buy a copy of the October Consumer Reports that, frankly, I got a lot of the above information from. You can access it online at

Monday, October 30, 2023

Get it in Writing... Especially When Buying a Car

You'll agree that you've never bought a new or used car where the dealer didn't get all phases of the transaction affecting him in writing. You didn’t read everything you signed because it's too voluminous and includes undecipherable fine print. Most of this vast paperwork is signed after you “thought” you'd bought the car, and your salesperson has already thanked you for “buying” the car and introduced you to the “business” manager. What you've signed so far is probably just a simple worksheet, which you probably did read but has no legal significance. In fact, the fine print on the worksheet says it's not legally binding. You read very little of the vast amount of legally binding documents in the business office. These are the documents that the dealers' lawyer prepared and/or recommended to protect the dealer’s interests, not yours.

The best way to balance the scales and protect your interests is to commit to writing all the commitments and promises made by the salesperson and sales manager. This can be cumbersome and time-consuming in a one-on-one, in-person transaction inside the dealership, although it can be done. My recommendation is that you buy your car online, which requires either email or texts. Minimize the use of the phone call and, when necessary, confirm in writing.

The most important item you need to commit the dealership to in writing is the out-the-door price. The definition of out-the-door is the price you can write on a check, present it to the salesman in exchange for the car you purchased, and drive it home. The second most important thing to get in writing (text/email) is the complete description of the car including VIN, MSRP, mileage, color of exterior and interior, and all the accessories and options. Finally, confirm in writing any promises your salesperson made such as a free loaner car whenever your car is in for service, a free detail, car wash, or tank of gas, etc.

These text/email communiqu├ęs are, technically, not legal signed contracts, but when responded to and accepted in writing by the dealership, they are almost as good as a signed contract. They constitute prima facie evidence to the court. The dealer knows this and knows that if you did sue and took him to court, he'd lose and likely be responsible for, not just making you whole, but your legal fees, as well as his.

If a dealer won’t respond by email or text confirming your written comments to him, you've found out that he was lying to you upfront, without having to waste a lot of time arguing.

Monday, October 23, 2023

Car Buyers Pay $9,600 More Because of Hidden Junk Fees

The average new car sold for $48,006 in March of 2023, according to Kelly Blue Book (KBB). However, car buyers "pay upwards of 20 percent more than they would have, had the actual price been disclosed upfront,” as stated by the Federal Trade Commission (FTC).


Car dealers are fiercely competitive. There are 18,257 new car dealers in the USA. Most metro areas boast large numbers of dealers where consumers can shop and compare prices. My Toyota dealership is in North Palm Beach, FL, and there are sixteen Toyota dealerships in my South Florida market. With the rise of online shopping, the number of dealerships available for price comparisons is nearly limitless. This should be a “consumer's dream market” because new car buyers can choose from a vast number of dealers who control the selling price for identical products.

All new car dealers selling a specific brand pay the manufacturer the same price. The manufacturer also permits their dealers to sell those cars at any price the dealer chooses. The manufacturer’s price sticker (Monroney label) is merely a “suggested” retail price. Naturally, the price dealers select is “AS MUCH AS THEY CAN GET.”

One might start to recognize a significant challenge for car dealers: how can they sell their new cars at a reasonable, or even fair, profit when numerous other dealers nearby sell the exact same car, possibly for less? Like all businesses, car dealers need to sell their products above what they pay the manufacturer, in addition to covering costs like sales commissions, building leases or rents, utilities, advertising, etc.

Since all Toyota dealers in a market sell the exact same car, the primary incentive they can offer a potential Toyota buyer is a reduced price. If a buyer decides she wants a new Toyota Camry, she'll buy it from the Toyota dealer she believes offers the lowest price. Therefore, the only way for a dealer to attract this potential Toyota buyer is to advertise or quote a price lower than competitors. This underscores the car dealers’ challenge: enticing a customer "in the door" (literally or figuratively) to at least attempt selling her a new Toyota.


The dealer's solution to this challenge? Deception. Misleading potential customers in advertisements and price quotations. They might feel compelled to advertise prices lower than all other Toyota dealers in their area. Advertising a higher price would risk not making the sale. If all dealers advertised identical prices, they'd risk accusations of “price fixing”, which can lead to substantial fines and incarceration.

Once a dealer convinces customers he offers a price lower than competitors, the next hurdle is increasing that price discreetly, leading to hidden junk fees.

The Federal Trade Commission notes, “Junk fees make it difficult for consumers to determine actual costs. Many shop based on an advertised price, like a car price in a TV commercial. When dealers add fees at the end of a transaction, or bury them in fine print, it complicates consumers' ability to ascertain the car's total price. Even when junk fees are individually listed, the sheer number of them can obscure the all-in cost of the car.”

Most car dealers recognize that adding junk fees can boost profits. In a market where these fees are common, dealers who strive for fair, transparent pricing appear more expensive than competitors, leading to lost market share. When junk fees are allowed, there's an incentive for dealers to concoct new ones instead of improving quality or reducing car prices.

Auto manufacturers aren't innocent in this junk fee scheme. They intentionally saturate the market with dealerships across the USA. More dealers mean more sales. Since manufacturers receive their asking price for every wholesale car, having more dealers increases sales and revenue. This places dealers in the tough position of meeting the manufacturers' sales quotas while still turning a profit. Both dealers and manufacturers thrive by deceiving the primary retail buyer.

Monday, October 16, 2023

The Higher Up You Complain, the Greater Your Chance of Satisfaction

Many readers of this column may not remember Harry Truman, the 33rd President of the United States, but those of you who do will remember the sign he had on his desk in the Oval Office: "The Buck Stops Here." The sign meant that he accepted responsibility for all acts, policies, and decisions under his command. To be realistic, we know that the chances of you or me making a complaint directly to "POTUS" are zero, but the higher up you complain, the better your chances of being heard and accommodated.

There are two reasons why higher-ups in any business, organization, or government are more inclined to be honest, transparent, and fair with you. (1) The most cynical of those reasons is called "deniability." Some top company executives know that their underlings aren't treating customers fairly but believe that this allows the company (and them) to make more money and likely can go undetected. However, as insurance, in case they get "caught," they can claim that they didn't know these bad practices were happening. (2) They really don't know what's going on at the lower levels, which can often happen in larger companies.

Car dealerships come in all shapes and sizes, but the trend in recent years has been toward larger dealerships and the consolidation of many dealerships under one CEO. Fifty years ago, car dealerships were mostly small, family businesses. The owner was also the dealer, general manager, and the CEO. Today, family dealerships are dying out and being acquired by giant publicly and privately owned companies like AutoNation, Terry Taylor, Sonic, Lithia, Penske, and Larry Morgan. If you have a problem with a car dealership, the likelihood of reaching the very top is slim, but you should endeavor to do so, and the higher up you reach, the better off you are.

Regular readers of this column and listeners to my Saturday morning live radio talk show, Earl on Cars, know that we get a lot of calls to the show from "victims" of car dealers. A few weeks ago, we had a caller named Ellen who spoke to my wife, Nancy, my co-host, about her bad experience when she bought a new 2023 Toyota Camry from "Al Hendrickson Toyota" in Coconut Creek, FL (near Ft. Lauderdale), which is in the top 3 car volume car dealership in the USA. Ellen was very upset because, after signing all the papers and taking delivery, she realized that she'd paid way too much. She returned to talk to the salesman and sales manager (Brandson Angel and Scott Zuckerman), but they were unapologetic and denied overcharging her for the new Camry.

Ellen was under the impression that the dealership was owned by Al Henrickson and didn't know that it had been sold a few months ago to the Moran Auto Group, owned by Larry Morgan. Many car dealerships retain their original owner's name after the sale. The Morgan Group bought the three Arrigo Chrysler-Dodge-Jeep dealerships three years ago, but the Arrigo brothers' name is still on the dealerships, and they still do the TV commercials.

Nancy and I suggested to Ellen that she contact the real owner of Al Hendrickson Toyota, Larry Morgan. She did so, Larry apologized, and asked her to return to Al Hendrickson Toyota and said that he'd instructed them to make her happy. She did return and was given $2,600 back off the price she'd paid for the new Camry.

Ellen was fortunate to have called our radio show and learned who really owned Al Hendrickson Toyota, and she was fortunate to find the contact information to reach Larry Morgan. My advice to you, when you buy your next car, is to do the research first before you buy the car. With Google and AI, like ChatGPT, you can find out almost anything today. Find out who really owns the dealership and what the management structure is inside that dealership. You must insist on getting the contact information (cell phone numbers are mandatory) of all the managers in the sales department and the General Manager or owner. Make this a precondition of buying the car.

The mere act of demanding this information will likely ensure that you get more honest and transparent treatment than if you had not. A car salesman is far less likely to cheat somebody who has his boss's cell phone number. His boss is also less likely not to make things right if you have his boss's cell phone number, etc...