A Sea Change in the Way Cars Are Sold?

The dictionary defines a sea change as “a striking change, as in appearance, often for the better.” A lot of economists and other experts have speculated that we are experiencing a sea change in America, or even globally, as a result of this worst recession since the Great Depression. The experts are saying that Americans will never again spend as much or save as little as they have. Because so many of us have lost our jobs, had our homes foreclosed on and cars repossessed and have seen our 401K’s cut in half we will never be the same.

Nobody disputes the fact that the Great Depression caused a sea change, at least in that generation who lived in it. Those of you who were old enough to remember the thirties will vouch for that. I was born in 1940 but my father was born in 1892. He was a young man during the thirties and those years changed him for the rest of his life. Even though he was a relatively wealthy and successful Pontiac dealer, he saved and spent his money as if he might be looking for a job tomorrow. As a child, I can remember my mother admonishing him for wearing his shirts and his pants for too many days. He didn’t want to spend the money to send them to the cleaners. A lot of my Dad rubbed off on me and I still can’t stand to throw anything away. My wife, Nancy, has to cajole me to donate shoes or clothes that don’t fit me anymore to Goodwill or other charities.

Last Friday, I was honored to be invited to an interview at the Palm Beach Post. Charles Passy, one of their oldest and best reporters, invited several local business owners and I was the one representing car dealers. It was Charles’ interview that gave me the idea for this column. The purpose of this interview was to learn what local businesses had experienced with their customers and employees that might suggest a sea change in saving and purchasing habits. You can read what everybody had to say in this Sunday’s, September 6, PB Post.

I agree that we are experiencing a sea change but one that is quite different from the one of the Great Depression. This time in addition to Americans being traumatized by the loss of their jobs, homes and retirement, they are traumatized by their loss of trust. Just a short while ago, insurance companies and banks were considered among the most trustworthy of institutions, but no longer. Wall Street and their government regulators are among the least trusted also. Trust in the media and politicians are at an all time low. Americans don’t know where to turn to invest or save their money. Just recently, Americans were so afraid of putting their money in a bank or any place else except the U.S. Government that they actually paid the government interest on treasury notes to keep their money safe.

The recent government incentive program, “cash for clunkers” is evidence of the lack of trust that car-buyers have for car dealers. Read car ads or watch them on TV and every day you will see offers of savings that exceed the savings of “cash for clunkers”. But when car buyers heard it from a trusted source, the United States government, they came in and bought cars in record numbers. August is the best auto sales month since January 2007 and it has occurred in the middle of the biggest recession since the Great Depression. In my Toyota dealership in North Palm Beach, I shattered my old record of 404 new Toyotas. I’m writing this column on Monday, August 31, and it looks like we will sell about 500 new Toyotas in August.

As many of you know, I practically never advertise prices. This is simply because most other dealers advertise prices less than what they are actually willing to sell the car for…often times below their actually cost. If I advertise a car for an honest price, mine will appear higher in comparison.

More evidence of this sea change of Americans gravitating to invest, save, and spend their money only with those whom they can trust is my rapidly expanding market share. I outsell my two nearest Toyota dealer competitors to the south of me combined. I outsell the three nearest Toyota dealers to the north of me combined. I outsell Ed Morse Delray Toyota by a large margin even though he is in a population area three times the size of Lake Park/North Palm Beach. I outsell all the Toyota dealers in the Orlando, Tampa, and Atlanta markets. I also outsell most of the Toyota dealerships in the Ft. Lauderdale-Miami markets. I am the 5th or 6th largest seller of Toyotas in the Southeast USA. I use only Toyota for comparison, because Toyota is the number one retailer and I obviously outsell all of the other makes.

I’ll probably take a lot of flak for bragging about how many cars I sell. I’d be lying if I didn’t admit it feels good to be #1. However, I believe my unparalleled success is good news for car buyers, even those who don’t buy Toyotas. Auto retailers everywhere are watching Earl Stewart Toyota and trying to figure out how we do it. If they figure it out, they too can match or exceed my success. And if they do, you, the car buyers of America will benefit as well.

CASH FOR CLUNKERS LEGISLATION IS A WASTE OF TAXPAYERS’ MONEY (With New Preface)

*Now that the cash for clunkers program has ended, I thought it would be good to rerun my original column on this subject. My belief about the program being ill thought out remains, but I’m hopeful about there being some economic benefit. This will be decided in the next few months based on whether the demand for new vehicles “falls off a cliff’ because clunker deals were not fresh business. There is a fear that we merely borrowed sales from the future from those who would have bought a new car in the next few months anyway.

The cash for clunkers program was not only wasteful of taxpayers’ money but it was administered just about as sloppily and inefficiently as is possible. Ray LaHood, the head of NHTSA did not have a clue as to how car dealerships operate, what paperwork is pertinent to a sale, or how a dealership’s cash-flow would virtually dried up by not paying dealers promptly. You will be reading about dealerships that were literally put out of business by this program because they did not receive the money from their sales from NHTSA. As I write this preface, less than 10% of the $3 Billion dollars has reached dealers. My own dealership is owed well over $1 million. Because dealers make far less than $4,500 or $3,500 on a sale, every clunker transaction drove them further into a negative-cash position….some to the point of bankruptcy and thousands were forced to quit the program early.


Once again our Congress and Senate have proven that they are out of touch with reality or, perhaps more likely, simply inclined to pass any legislation that will get them reelected.

The “Cash for Clunkers” bill passed the House and the Senate and awaits President Obama’s signature. It is supposed to be help energy conservation because it will take higher gas mileage vehicles off the road. It’s also supposed to help our floundering economy because it will incentivize owners of “clunkers” to buy new cars. When the driver of a clunker, defined to be a vehicle with relatively poor gas mileage and worth up to $4,500, trades it in he gets a voucher for either $3,500 or $4,500. Then the dealer must scrap that vehicle.

Here’s why our politicians are out of touch with reality. Our country is in the worst economic condition since the Great Depression. The most severely affected are those at the lower end of the economic spectrum. Arguably even more important than housing to this class of people is transportation [you can sleep in your car]. It’s not possible for many to get to work without a car. It’s not even possible for many to look for work without car. How about taking your children to school or getting to a doctor or hospital? These are the people who buy “clunkers” because they don’t have the credit to buy anything more expensive. Or, maybe they can’t get any credit at all and can afford only cars cheap enough to afford to buy for cash.

If this legislation works the way the politicians say they want it to, it will remove most clunkers from the road and drive up the prices of those few remaining to make them unaffordable to those that have no other transportation option. Of course, a lot of the economically challenged are already driving clunkers. The new law doesn’t permit them to use the $3,500 or $4,500 voucher to buy a nicer, more reliable used car. They may only buy a much more expensive new car. Unfortunately, most people with bad or no credit who are forced to drive a clunker, won’t be able to get financed on a new car even with the $3,500-$4,500 down payment.

Logic dictates that no one would have his vehicle scrapped for a $4,500 voucher if was worth more than $4,500. But, who is to say what a clunker is really worth? I can tell you from my 40+ years in the retail auto business that you can show a used car to five different used car managers and get five different opinions as to what it’s worth. I advise consumers to shop their trade-in to at least three different car dealers before they accept a trade-in allowance from the dealer they buy from. Typically you will see a $2,000 to $5,000 difference between the 3 professional opinions. I see nothing in the legislation to control this variable. I can guarantee you that there will be thousands of vehicles scrapped that are worth more than the voucher amount. How will you feel knowing that you paid $4,500 of your tax dollars to scrap a car that had a market value of $6,000?

To the extent that lower gas mileage vehicles are taken off the roads, this is good. But energy conservation is not our country’s top priority right now. We need to think about cutting our 10%+ unemployment in half. Scrapping the only cars that many of our unemployed can afford to buy and driving up the prices of those that remain is not the right way to go about this.

The car dealers love this because of the general lack of understanding of this new law will likely drive potential buyers into their showrooms. You can argue that this is good because it will stimulate new car buying. But, is it good to stimulate the economy through deception? I’m already getting solicitations from marketing companies with all sorts of cute ideas about how to exploit this legislation. You can expect to see an advertising media blitz on “Cash for Clunkers”.

I will end this column on a positive note. One Congressman who voted against this legislation is Tom Rooney from my district, the 16th. There are always a few who vote their conscience and not what will get them reelected. Unless we recognize and vote for guys like Tom Rooney, this endangered species will vanish.

Cash for Clunkers to End Monday August 24th

The story below was just forwarded to us from TMS. The bottom line is as follows:

-The CARS program will end Monday August 24, at 8 PM EDT.
-All deals must be submitted by that time -Dealers are still able to resubmit rejected applications after the deadline

The Achilles’ heel of Car Dealerships [and even good businesses like Costco]

I’m often asked why my Toyota dealership in North Palm Beach is so successful. My dealership is actually located in the tiny little town of Lake Park [population 8,721 as of the last census]. I’m on the city border of North Palm Beach, so I advertise my location there so people can find me. I mention this because Earl Stewart Toyota sells more cars than any other car dealership in Palm Beach County. We are the 7th largest seller of Toyotas in the Southeast USA. People can’t understand how we can sell so many cars in such a small population area.

Furthermore, people are mystified by our high customer satisfaction ranking. Last year, for example, we were honored to be selected by Toyota as one of just 12 dealers [out of 1,277] in the USA for the President’s Cabinet Award. The award is based on sales volume and customer satisfaction.

I know that I sound like I’m bragging and I guess I am. A lot of people have been quoted as originating, “It ain’t bragging if you can back it up”. I first heard it when Mohammed Ali said it, but he probably wasn’t the first. In this column, I’m going to reveal the secret to my success. All car dealers and all businesses can use my secret to become at least as successful as I.

First, let me relate an incident that happened to me just recently at the Costco Wholesale Club on Northlake Boulevard in Palm Beach Gardens. Costco is my favorite retail store and my wife, Nancy, and I shop there almost every Saturday. In fact, I’m also a stockholder and, for readers of this column, I recommend you buy some Costco stock.

In the past several months we noticed that the shopping carts at Costco were littered with trash…used napkins, used tissues, paper and plastic bags, and unidentifiable “stuff”. This is partly caused by the free food samples that are passed out in paper cups or plates and with napkins and toothpicks sometimes. Customers eat their samples and throw what they don’t eat into their carts. When Nancy and I come into Costco on Saturday mornings and pick up our cart, we have to take the trash out of the cart with our bare hands and find a trash receptacle. This would be a nasty enough a task even without the Swine Flu pandemic in the news every day. Because I’ve been a regular member of Costco for 25 years or more, I know many of the store’s employees and regard many of them as my friends. I mentioned this to several of them and they promised to bring it up with upper management.

When nothing changed and the carts were still filthy, I spoke to a Costco employee who I knew very well and who I especially admired for his special concern for his customers. He suggested that I fill out a written suggestion and put it in the suggestion box in the front of the store. He said that all of these suggestions were sent to Costco headquarters in Issaquah, Washington. I did that, but two months later there was nothing done. At this point I took it upon myself to speak to the “weekend manager” because I shop at Costco only on Saturdays. He listened but didn’t seem very concerned. He told me that the reason the carts were littered with trash is because Costco customers left their trash in the carts. I told him that I understood the reason, but I thought the carts should be cleaned for the next customers. I asked him why the employees who picked the carts up from the parking lots and brought them back to the front of the store couldn’t clean the carts out first. He didn’t have an answer for that but he said he would “take it under consideration”.

About a month has passed since my last conversation. Last Saturday, the carts were still filthy. In fact, I cleaned out two carts for ladies waiting for carts plus my own cart. For those of you familiar with Costco, you know that you have to show your membership card when you enter the store. When I did this, I asked “the shopping carts are still littered with trash. Why can’t Costco clean them out?” The Costco employee replied, “It’s the customers’ fault that the carts are dirty”. I have to admit that I briefly lost my cool. I turned to him and said incredulously, “Are you blaming me because your shopping carts are dirty?” He looked at me angrily and said again, “It’s not our fault; It’s the customers’ fault.” Immediately after this, I went to men’s room so that I could wash my hands.

By now, you may have guessed what my secret to success is. You can sense my frustration with Costco which is still my favorite retail store, by the way. That frustration is that I, their customer, cannot communicate with higher management. When I advised the local lower level Costco employees, it went no higher than the weekend manger. When I send a written complaint to their headquarters, who knows what happens to it? When I spoke personally to the weekend manager, it stopped right there. Most of the employees in Costco are great employees who care very much about their customers. These employees agree with me that the shopping carts should be cleaned before they are returned to the customers. In fact, one employee said that they should emulate Publix which, not only cleans their carts meticulously, but provides sanitary wipes in a dispenser so customers can clean the cart’s handle.

When a customer has any kind of a problem in my company, I hear about it 99% of the time. As most of you know, nobody in my company, including me, screens their calls. All calls to me and all of my employees are put immediately through. If I’m not in the dealership, the calls are put through to my cell phone. You probably know that I have 4 red phones strategically located through my dealership. A red phone is always within a few steps of every customer. The sign on the phone says, “If we have not exceeded your expectations, please pick up this red phone; The buck stops here”. There is no dialing required and when the customer picks up that red phone it automatically dials my cell phone. If all of that isn’t enough, I give every customer my home telephone number which is printed on my business cards.

So there you have it, CEO’s of companies all over the world. This is the secret to success. LISTEN TO YOUR CUSTOMERS. You all say that but you don’t walk the talk. You have layer after layer of insulation between you and your customers…secretaries, assistants, middle managers, executive managers. All of them are telling you what they think you want to hear but not what’s going on “in the trenches”. It’s not easy, but who said success was supposed to be easy. How bad do you want it and how much are you willing to sacrifice to get it? Am I worried that my competition will read this and be able to compete more successfully against me? What do you think? LOL!

WSJ - Clunker Plan Needs a Tune Up

http://online.wsj.com/article/SB125019621566330159.html

Earl talks to the wall Street Journal about Cash for Clunkers

Don’t let the Dealer Clunk You With Your Clunker

Since the U.S. Senate voted an extra $2Billion of our taxpayer’s money toward Cash for Clunkers, the insane rate of frenzied new car sales has not slowed. In over 40 years as a car dealer, I’ve never seen an incentive that has so energized the retail auto industry. The CARS program has so exceeded the expectations of our government, the auto manufacturers, and car dealers that auto inventories are evaporating at a rate so fast that dealers will be virtually out of cars in the next few weeks. Auto manufacturers will not be able to gear up production fast enough to keep cars on dealers’ lots.

Anytime you see buyers panicked into buying based on a program that’s almost too good to be true, you see buyers being taken advantage of. I’ve listed some of the main dangers you may encounter if you decide to trade in your clunker before Labor Day, September 7, which is when the program is scheduled to end. I believe it will end sooner because the extra $2 Billion will be gone before that.

(1) Confirm for yourself that your old car qualifies. You can get this information by clicking on www.Cars.gov or calling the toll free number 866 CAR-7891. The basic qualifying rules are that your car must be less than 25 years old, get no better than 18 miles per gallon, and be continuously owned and registered by you for at least one year. It also must be continuously insured for one year, but not necessarily by you. You may have given your old car to your child or grandchild. Knowing that your car does qualify and for how much, gives you an edge in the price negotiation.

(2) Do not tell the dealer you are negotiating a price with that you own a clunker. Tell him that you have no trade-in. When dealers know that you have a clunker worth $4,500 or $3,500, they see “dollar signs” and extra profit in their pockets. Surveys show the average profit dealers are making on sales with clunker trades is 20% higher.

(3) Get at least 3 competitive price bids. If you are Internet savvy, you can get a dozen or more price quotes in less than the time it takes you to drive to 3 dealerships. Your Internet price is usually the lowest price a dealer will sell a car for.

(4) Do not sign a form making you responsible for the government not paying the dealer the clunker money. Many dealers are requiring that customer sign a form accepting the responsibility to reimburse the dealer if the CARS program does not pay the dealer all the money that he expected. In many cases customers are signing these forms along with the myriad of others, not even being aware. If the dealer won’t budge on this, buy your car from another dealer.

(5) Demand to see the actual price the dealer is getting for the salvage on your vehicle. The government does not require that the dealer take this amount off the price of the new vehicle, but it does require that the dealer inform you of the “estimated” salvage value of your vehicle. This is so that you will have this information in negotiating the best price of the new vehicle. However, this is a big oversight in the government program and does not accomplish its intent. The estimated price means nothing and can be far from the actual price he sells your car to the salvage company for. The average price so far given as estimates to clunker owners is $75. In my dealership, with about 130 clunkers traded for so far, we are averaging about $450 per clunker. We allow the full salvage value less $50 [specified by the government]. Insist that the dealer take the full salvage price he got for you car [less $50] off the price of the new one.

(6) If you are buying a used car, be sure it’s not a clunker trade-in. It’s illegal to sell a clunker trade-in to anyone except an authorized salvage yard. But, with all the confusion going on and the desperation of many dealers, it’s likely that clunker trade-ins have been and will be sold. I’m seeing an unusually large number of old cars advertised for sale. If you see a used car advertised for under $10,000 be very, very careful. Check first to see if it would qualify as a clunker and, if so, do a CarFax title search and contact the previous owner. You may be able to get this information from the government, but their computers are so overwhelmed, it’s doubtful. Even if the old car you’re considering is not a clunker trade-in, be very wary of paying $6-$10 thousand for an old car that is worth a few hundred dollars for salvage.

(7) New vehicle inventories are approaching their lowest levels ever. You will be pressured by many dealers to buy a car you don’t want because the one you do is not available. They will tell you that, if they have to order the car, the cash for clunker program will have expired. This may be true but do you really want to spend $26,000 or for a new car that you really don’t wan to drive?

(8) 60 months is the minimum lease under the CARS program. This is another big mistake by the government. You should not lease a car for 60 months or more, but you have no choice with CARS. When you sign any lease contract, you are obligated to make a lease payment for every month the lease is for. If the car turns out to have big mechanical problems, you still have to make 60 lease payments. If you die, your estate must make the rest of the lease payments. If you become disabled, you’re still obligated. If you buy or lease another car before the 60 months is up, the unpaid lease payments are added to the price of that new car.

SHOP YOUR FINANCING AND TRADE-IN WHEN BUYING A CAR

If you have read my earlier columns you know how important it is to get several competitive prices from different car dealers on the car you are buying. Equally important is to get at least 3 prices/bids on your financing and the true value of your trade-in.

The absolute worst thing you can do is to tell the dealer “all I care about is keeping my payments under “$X per month” and not know what the interest rate, terms, or products are included in the payments. Part of the profit a dealer makes on his cars is called “F&I income” and averages from $500 to as much as $2,000 per car sold. You can do your homework and buy your car at a very good price, but by not shopping your financing you can pay the dealer thousands of dollars in finance profits.

Credit unions are often the best source of funds for buying a car. Because they get special tax breaks from the government not available to banks, they usually have the lowest finance rates. Even if you don’t belong to a credit union, there are several you can join for a nominal fee. You should also get a financing quote from the bank you do business with. Also, give the dealer that you are buying from an opportunity to beat the rates you were quoted. Sometimes he can.

When you are taking delivery of your car, you will be asked to consider buying products like extended warranties, maintenance plans, road hazard insurance, GAP insurance, roadside assistance, credit life insurance, etc. My suggestion is that you do not make a snap decision on these products at the last minute. You should get complete information on each product and determine if it has value for you. You may already have coverage for some insurance products in policies you already own. With extended warranties and maintenance be sure you understand what is covered and what is not covered and what the deductibles are.

You should get at least 3 bids on the value of your trade-in. You can get some pretty good guidance from Kelly Bluebook, www.kbb.com and www.edmunds.com. Make an appointment to drive your trade-in to show the used car manager at a dealer who is franchised to sell the make you own. A Chevrolet dealer will likely pay you more for a Chevrolet trade-in than a Ford dealer would. That’s because people generally will shop for a used Chevy from a Chevrolet dealer. Get one or two more bids from other dealers in the same make. If you are near a CarMax store, you should take your car there too. They regularly buy cars like this for their inventory. The price you will be quoted is referred to as the ACV which stands for “actual cash value”. This is the wholesale value of your trade in.

Don’t confuse the ACV with the trade-in allowance that the dealer you are buying from gives you. The trade-in allowance includes part of the markup on the vehicle you are purchasing. You have probably read ads saying “MIMIMUM $4,000 ALLOWANCE ON ALL TRADES”. It’s not hard to offer thousands more on a trade-in than its ACV (true wholesale value) when you mark up the new car several thousand dollars more. Be sure that you explain that want to compare the ACV of your trade-in. Tell them you want the markup on the price of the car you are buying discounted, not added on to the ACV of your trade. Remember, however, that if you sell your trade-in to another party, you lose the advantage of deducing the trade-in from the price your sales tax in calculated on. At 6%, you would pay an extra $600 in sales tax for a trade-in with a $10,000 ACV.

With competitive bids on the car you are buying, the interest rate on your financing, and your trade-in ACV you are sure to minimize the total cost of that new or used car.

Your Clunker’s Salvage Value Should Reduce the New Car Price

The CARS government program which pays you up $4,500 for your old gas-guzzler, clunker is up and running. In fact, it’s exceeding my expectations for effectiveness. My first thought when I heard about this program was that most owners of older, cheap cars would not have the credit to buy new one, even with a $3,500 or $4,500 gift from Uncle Sam. I was wrong. A lot of people with good credit are trading in these old cars and this will result in a real short term boost for car sales nationwide. It’s entirely possible that the program could run out of money before the November 1 deadline. The funding for the program is $1 billion. This sounds like a lot, but will fund only about 250,000 new car sales which is an average week’s sales.

For all of the information on the program, you can click on http://www.cars.gov/. Unfortunately, as is the case with most government programs there is “too much” information. The rules comprise 136 pages and are quite confusing and ambiguous.

The purpose of this column is to point out one of the least understood but most important elements of the program. That is what is the true “salvage value” of your clunker trade-in. You are at the mercy of the dealer to learn about this unless you want to shop your clunker to the list of government approved salvage companies. The dealer is permitted to keep $50 of the salvage value of the trade and the rest is to be given to the consumer. With a typical salvage value of $200, the dealer retains $50 and $150 is added to the $3,500 or $4,500 you qualify for.

However that small amount assumes that the car will be crushed and sold only for scrap metal value. A lot of clunkers have valuable parts and accessories that can be disassembled and sold individually. These can total thousands of dollars...a CD player, tires, camper top, air-conditioning compressor or condenser, an alternator, etc. The only way to truly maximize the true value of your clunker is to competitively shop it with several approved salvage dealers. The dealer you buy your new car from should do this for you. In my dealership, we get bids from 5 different government approved salvage dealers and, of course, take the highest bid.

The dealer you are buying from is required by law to disclose the amount of money he is receiving from the salvage dealer. You should sign a form with this information on it and receive a copy signed by the dealer. This is your money and should be taken off the price of the new car you are buying.

This salvage value could make a big difference in the final price you pay for your new car. When you are shopping for your new car, you need to compare not only the price of the new car, but the salvage amount each dealer is allowing you. If he discloses that he is allowing you only $150, that means that you are receiving only the scrap metal value of your car. If you tires are in good shape, these alone should be worth more than $150. You should ask the dealer to identify the salvage company he is selling your clunker to. You should also ask to see what the other bids were from other salvage dealers. If a dealer is getting only one bid from one salvage dealer I would be very suspicious.

One of the reasons that it took the government so long to get all of the rules of the CARS program out was the realization that there is a huge opportunity for fraud in the sale of the clunker. In my opinion, this opportunity still exists. What’s to prevent a car dealer from disclosing a lower amount than the scrap dealer actually pays him? The scrap dealer can pay the dealer one amount by check and the other in cash “under the table”. Using multiple scrap dealers with multiple bids would go a long way to reduce this threat, but, unfortunately, this is not a requirement of the CARS program.

Cash for Clunkers: BUYERS BEWARE

If all goes according to plan, the CARS government stimulus program, “Car Allowance Rebate System”, aka “Cash for Clunkers” will goes into effect this Friday, July 24th. I’m predicting that this government program will be exploited by car dealers and that car buyers will be taken advantage of on a scale rarely seen.

These are the basic requirements to determine if your car qualifies:
Your trade-in vehicle must:

§ have been manufactured less than 25 years before the date you trade it in
§ have a "new" combined city/highway fuel economy of 18 miles per gallon or less
§ be in drivable condition
§ be continuously insured and registered to the same owner for the full year preceding the trade-in
§ The trade-in vehicle must have been manufactured not earlier than 25 years before the date of trade in and, in the case of a category 3 vehicle, must also have been manufactured not later than model year 2001

Note that work trucks (i.e., very large pickup trucks and cargo vans) have different requirements.

Here are some tips to avoid being one of the victims:

(1) Do not pay any attention to car dealers’ advertising on this program. Most of it is entirely misleading and deceptive. Go to the official government Web site, www.CARS.gov and read the real story. Beware of fake Web sites which purport to be the official government Web site.

(2) If you own a car that qualifies for the rebate, be sure that it’s not worth more than the government voucher. Before you consider excepting a check for $3,500 or $4,500 for your old car, be sure that it’s not worth even more. An older, cheaper car that will run is in higher demand today than ever before. In today’s terrible economic times, many people cannot get credit to buy a new car or nicer used car. Therefore they have to buy older, cheaper ones for cash. This high demand and low supply has raised the prices for “clunkers”. Get at least three bids for your old car from the used car managers at the dealerships that sell your make of car. If you live near a CarMax, they also pay top dollar for used cars. Although this is more trouble and time consuming, you may want to consider selling your old car to a friend, neighbor or listing it on Ebay.

(3) Be sure that the dealership you are trading in your clunker to, is registered with the Government. Registered letters were sent out last Friday, July 17, to tell dealers how to register. These dealers will be listed on www.CARS.gov. You can check this Web site to see if your car qualifies for getting bad enough gas mileage www.fueleconomy.gov/feg/sbs.htm.

(4) Verify that the $3,500 or $4,500 credit you are getting for your clunker is coming from the government and not from the dealer. A dealer could find that your car is worth more than the amount he can get from the government program. Or, the dealer may not really be registered for the program. Demand official verification that the government voucher for the VIN number for your car has been issued to this dealer.

(5) Buy the new car before you tell them you have an eligible clunker. You probably have heard the consumer tip, “don’t tell the dealer that you have a trade-in until you have negotiated the best price for the new car”. That tactic is even more important with the CARS program. The dealer sees your clunker as $3,500 or $4,500 in extra profit for him. Don’t let him see that extra profit but make it your extra savings on the best new car price you can negotiate. Remember to get at least three competitive bids on that new car. When you have selected the dealer with the best price, “spring” your clunker worth $3,500 or $4,500 on him and take that right off low price you already have locked in.

(6) Remember that this program does not apply to buying a used car. Although I believe it should, the car you are buying must never have been titled. If the dealer tells you otherwise, he is not using the CARS program and is tying to trick you into thinking you are participating.

(7) Why your clunker could be worth a lot more than $3,500 or $4,500. If sold separately, the parts in a car costing $3,000 can be worth more than $10,000 and more. Cars that are totaled are sold at auction to junk dealers who dismantle the car and sell the useable parts one at a time. Cars that can’t be sold in this country because of emissions or safety considerations can be exported to South or Central America where they have much looser regulations. It’s common in South Florida for cars with very high mileage to be exported because in other countries they have no rules against rolling back odometers or they aren’t enforced. Our government can’t track the VIN of a car sold out of the county. I predict that some dealers participating in the CARS program will be taking cash kick-backs from exporters and junk dealers; or setting up companies in different names to handle these kinds of transactions.

LEASE A NEW CAR BEFORE YOU BUY IT

I wrote another column that was entitled, “Buy a New Car before You Lease It”. The main message in that column was to establish the lowest “capitalized cost” which is critical in determining your lowest lease payment. Almost every lease ad I read establishes the capitalized cost at MSRP. My column explains that you should shop and compare prices as if you are going to buy the car. Once you’ve determined the lowest price, you can then ensure the dealer you are leasing from uses that lowest for your capitalized cost on the lease and not full sticker or MSRP.

The reciprocal of this rule is also true. The purchase price of your new car is only one component in the total cost of ownership. Depreciation is the largest single cost of owning. Two different make/model cars can have almost identical prices, but one can easily depreciate thousands of dollars more than the other. For example, in the current Automotive Leasing Guide, the residual value for a Honda Accord sedan on a 36 months lease is 52% and the residual value for a Chrysler Sebring sedan is 25%. The MSRP of these two cars is $22,400 for the Honda Accord and $21,900 for the Chrysler Sebring. The Sebring depreciates $16,245 in 3 years! The Accord depreciates only $10,752. Even if you were able to buy the Sebring for a much larger discount than the Accord, the discount would not offset the extra depreciation.

The Automotive Lease Guide, ALG, is the “bible” that virtually all leasing companies use to establish the used car value of the car they lease you at the end of the lease. All car dealerships, leasing companies, and banks that lease cars will have a copy of this book. You can get information from ALG’s Web site, www.ALG.com and you can also get information on residuals and depreciation from www.KLB.com and www.Edmunds.com.

ALG has been doing this for more than 40 years and they look at many factors before they establish a residual number for a particular year, make, and model vehicle. For example, the residuals for Chrysler and GM products plummeted when these companies entered bankruptcy. The residuals for these makes came back, although not all the way, after they emerged from bankruptcy. Higher priced cars typically have higher markups and as a general rule, depreciate faster [have lower residuals] than low priced cars. Cars with high sticker prices can have a markup of 25% and a low sticker priced car can have a markup of 8% or 9%. Vehicles that you typically see large discounts and cash rebates on, most recently Chrysler and GM, are usually the ones that depreciate the fastest.

The biggest single factor that translates into a higher residual [low depreciation] is high quality. Historically, Asian vehicles have typically ranked highest in quality surveys. My favorite judge of vehicle quality is Consumer Reports and in their tests for reliability there was only one American nameplate in the top 10, the Chevrolet Corvette ZO6 manual.

Another important factor in establishing depreciation rates is the price of gasoline. The residual values of trucks, vans, and SUV’s plummeted over a year ago when the price of gas hit $4 a gallon. As you might expect, the residual values of fuel efficient cars, especially hybrids, soared. With gas prices being volatile, you may want to consider leasing if you want to “lock in” the depreciation. You can hedge the price of gasoline and let the leasing company bear the risk or reward. At the end of the lease on a big truck if gas prices go back to $4.00 or higher, the resale value will plummet but you can simply walk away from the lease vehicle and let the leasing company absorb the loss. On the other hand, it the price of gas drops precipitously, the resale/residual will rise. You can then exercise your purchase option and “flip it” to the dealer who will pay you the higher wholesale value.

The bottom line is that, if you are going to buy your next car, don’t make a final decision until you know what the ALG residual value for that specific year, make, and model is. The higher the value, the less is the cost of depreciation which translates into a higher trade-in allowance when you go to buy your next vehicle. Or, it translates into being able to sell it outright for more money.

Always get an “Out the Door” Price

Many states have laws prohibiting car dealers from adding “fees” onto the prices they quote you. Unfortunately, Florida is not one of these states. The state law in Florida requires only that the dealers disclose on the buyers’ order that this additional charge is not a local, state, or federal fee, but is actually just profit to the dealer.

Almost every car dealership in Florida has this extra profit printed on their buyer’s order, under an assortment of labels like “Dealer Fee”, “Doc Fee”, and Dealer Prep”. You will not see it on the car’s price sticker you will probably not hear any verbal disclosure by the sales person or manager, unless you ask. If you ask, you will be told that “all other dealers charge this” and this is “almost” true.

Florida law also requires that when a dealer has this additional profit printed on his buyer’s order, he must not delete it for some customers and charge it to others. The only way he can effectively eliminate this extra profit is by reducing the quoted selling price of the car by this amount, but keep the dealer fee amount that is printed on the buyer’s order. This is rarely done because dealers do not pay their salesmen or managers a commission on the dealer fee. If you demand the price be reduced to compensate for the dealer fee, it cuts the salesman’s commission. Dealer fees range from $500 to $900 and a typical salesman’s commission is 25%, costing the salesman $125 to $225.

Florida law requires that a dealer include the dealer fee in the price of an advertised car. This is often ignored by dealers advertising on the Internet and in direct mail because it is below the “radar screen” of the Attorney General’s office. In newspaper, TV, and radio ads one car is advertised at a low price with a seemingly innocuous designation like “#1234B” (the stock # of the car) all there is to tell the buyer that only one car is available at this price. Another common tactic is a fine print disclosure at the bottom of the ad reading “price good on date of publication only”. The odds of being able to buy one of these cars at the advertised price are not good. Not only is there only one car with the price good for just one day, but the salesman receives no commission or a much smaller commission if he sells you this car.

My advice is not to pay much attention to advertised car prices. Do your shopping on the Internet or by telephone. Insist on an “out the door” price including everything except sales tax and license tag. If buying a new car, get several “out the door” prices quoted on the exact same year, make, model, and accessorized car. Two very good free Web sites to get information on dealer costs and fair retail prices are www.kbb.com and www.edmunds.com. Consumer Reports is also an excellent source of product information and pricing information, but there is a fee for their Web site.

The Internet Price is the Lowest Price for a New Car

Ten years from now, I believe that at least 75% of all new cars will be purchased over the Internet. Right now it is less than 20%. The reason is simply that that Internet price is usually your lowest price and more and more car buyers are figuring that out every day. Dealers must give their best price to a prospect inquiring over the Internet because that dealer probably will have only that one chance to sell the car. If they try “the old negotiating game” the Internet prospect will simply choose the lowest price from several other quotes he gets. When my friends ask me to advise them on how to get the best price on a new car, I always tell them to use the Internet. If they ask me for the best price on my product, Toyota, I give them my Internet price.

I am not suggesting that you don’t visit your local dealer to see, touch, smell, and drive the new vehicles you are considering. This is very important. You can’t make a valid, final decision on which new vehicle is best for you by solely reading data and looking at pictures on the Internet, Consumer Reports, or any other source. Research of that nature is important, but you should finalize your decision with visits to the dealers to actually experience the vehicle.

Once you have made your final decision on the year, make, model, color, and accessories, you are ready to sit down at your PC and choose the dealer from whom you will buy this specific vehicle. If you are not handy with a PC, ask a friend or relative who is. First, go to the manufacturer’s Web site like www.ford.com, www.toyota.com, www.chevrolet.com, etc. You will be able to type in your zip code to find all of the dealers of that make within a given radius, usually about 40 miles, giving you 3 or 4 dealers. To expand the radius, choose another zip code further from yours. The dealers within your radius will show their Web site addresses. Click on their Web site and ask for a quote on the specific car you have selected. Most Web sites have a page for what is called a “quick quote”. You type in the year, make, model, color, and accessories. It will also ask you for your name, telephone number, address, if you have a trade (check “no”), whether you are ready to buy now (yes), and other questions. All you really need to fill out is year, make, model, and accessories and your email address. If you prefer not to be contacted by phone, don’t fill in the phone number. If they require it before you can submit your request, type in any 10 digits so that the Web page will allow you to. If you can’t find a “quick quote” page, just email your request to their Internet sales department.

Depending on your PC and typing skills this whole process should take less than half an hour. Think of all the time, gasoline, shoe leather, and especially aggravation you are saving compared to visiting as many dealerships in person. The time it will take to get back quotes varies from dealership to dealership. You may get some back within a few minutes, some will take a few hours, and some may take a day or two. Believe it or not, some might not respond at all. There are even a few dealers who will not quote a price on the Internet, but try to lure you into their store with false promises. Ignore them. I recommend that you get a minimum of 3 valid price quotes on your specific vehicle. It’s so easy to get quotes, why not get a half dozen or so? You are not necessarily even limited by driving distances. If the best price is from a dealer who is too far away, show that quote to a dealer nearer you and ask him if he will match it.

There are some things that you must be careful about. Be sure that that the price you get is an “out the door” price. That is a price which excludes only federal, state, and local fees and taxes which are usually just for tax and tag. Most dealers in Florida tack on a fee or fees of their own which are variously referred to as “dealer fee”, “delivery fee”, “documentary fee”, etc. This is illegal in many states, but not in Florida. These fees vary from around $500 to $900. Be sure that this fee which is just profit to the dealer is included in your “out the door” price. Also be absolutely certain that you are comparing “apples and apples”. When you select your low bid, double check that this dealer is quoting you on the same year, make, model, and accessories as the other dealers. A good double-check is to compare the MSRP. The MSRP, manufacturer’s suggested retail price, will be identical on identically equipped cars of the same model and year. Also, be sure that the car you have the price on will be there when you come in. Give them deposit on your credit card to hold the car for you.

Internet car buyers are the wave of the future. The retail car business is going through rapid changes and the old fashioned, price-haggling way of buying cars is slowly but surely becoming obsolete. If you haven’t already, now is the time to join the ranks of the smart, sophisticated car buyers.

CASH FOR CLUNKERS LEGISLATION IS A WASTE OF TAXPAYERS' MONEY

Once again our Congress and Senate have proven that they are out of touch with reality or, perhaps more likely, simply inclined to pass any legislation that will get them reelected.

The “Cash for Clunkers” bill passed the House and the Senate and awaits President Obama’s signature. It is supposed to be help energy conservation because it will take higher gas mileage vehicles off the road. It’s also supposed to help our floundering economy because it will incentivize owners of “clunkers” to buy new cars. When the driver of a clunker, defined to be a vehicle with relatively poor gas mileage and worth up to $4,500, trades it in he gets a voucher for either $3,500 or $4,500. Then the dealer must scrap that vehicle.

Here’s why our politicians are out of touch with reality. Our country is in the worst economic condition since the Great Depression. The most severely affected are those at the lower end of the economic spectrum. Arguably even more important than housing to this class of people is transportation [you can sleep in your car]. It’s not possible for many to get to work without a car. It’s not even possible for many to look for work without car. How about taking your children to school or getting to a doctor or hospital? These are the people who buy “clunkers” because they don’t have the credit to buy anything more expensive. Or, maybe they can’t get any credit at all and can afford only cars cheap enough to afford to buy for cash.

If this legislation works the way the politicians say they want it to, it will remove most clunkers from the road and drive up the prices of those few remaining to make them unaffordable to those that have no other transportation option. Of course, a lot of the economically challenged are already driving clunkers. The new law doesn’t permit them to use the $3,500 or $4,500 voucher to buy a nicer, more reliable used car. They may only buy a much more expensive new car. Unfortunately, most people with bad or no credit who are forced to drive a clunker, won’t be able to get financed on a new car even with the $3,500-$4,500 down payment.

Logic dictates that no one would have his vehicle scrapped for a $4,500 voucher if was worth more than $4,500. But, who is to say what a clunker is really worth? I can tell you from my 40+ years in the retail auto business that you can show a used car to five different used car managers and get five different opinions as to what it’s worth. I advise consumers to shop their trade-in to at least three different car dealers before they accept a trade-in allowance from the dealer they buy from. Typically you will see a $2,000 to $5,000 difference between the 3 professional opinions. I see nothing in the legislation to control this variable. I can guarantee you that there will be thousands of vehicles scrapped that are worth more than the voucher amount. How will you feel knowing that you paid $4,500 of your tax dollars to scrap a car that had a market value of $6,000?

To the extent that lower gas mileage vehicles are taken off the roads, this is good. But energy conservation is not our country’s top priority right now. We need to think about cutting our 10%+ unemployment in half. Scrapping the only cars that many of our unemployed can afford to buy and driving up the prices of those that remain is not the right way to go about this.

The car dealers love this because of the general lack of understanding of this new law will likely drive potential buyers into their showrooms. You can argue that this is good because it will stimulate new car buying. But, is it good to stimulate the economy through deception? I’m already getting solicitations from marketing companies with all sorts of cute ideas about how to exploit this legislation. You can expect to see an advertising media blitz on “Cash for Clunkers”.

I will end this column on a positive note. One Congressman who voted against this legislation is Tom Rooney from my district, the 16th. There are always a few who vote their conscience and not what will get them reelected. Unless we recognize and vote for guys like Tom Rooney, this endangered species will vanish.

A Victory for Florida Car Buyers In The War Against the Dealer Fee!

A watershed event for South Florida car buyers occurred June 1, 2009. Two large car dealerships, Palm Beach Toyota and Royal Palm Toyota, eliminated their dealer fees. For those who may not know what a “dealer fee” is, it’s an extra charge which is added to the price of the car in addition to the price you are originally quoted. In the case of these two dealerships, it was $899. You can learn all you ever wanted to know about the dealer fee by reading my articles on http://www.earlstewartoncars.com/ or just Google “Earl Stewart” and “Dealer Fee”.

This is a victory for the car buyers of South Florida because they spoke with their pocket books and wallets and two car dealerships listened. When I eliminated my dealer fee about six years ago, I was one of the smaller car dealerships in Palm Beach County and the smallest seller of Toyotas. Today I’ve grown to be, not just the #1 seller of Toyotas but also the largest seller of any make car in Palm Beach County. This growth could not have occurred just in my immediate market area. Earl Stewart Toyota is located in Lake Park on the border of North Palm Beach, a much smaller population area than the three other Toyota dealerships south of me. The growth came from customers in the central and southern county who travelled many miles to buy from me.

As many of you know, I’ve fought against the dealer fee for several years. My column in Hometown News, http://www.earlstewartoncars.com/, my Saturday morning talk show on Seaview AM 960, my TV advertisements, public speaking engagements all over Palm Beach County, and my lobbying efforts in Tallahassee have all been focused on eliminating the dealer fee in Florida. Isn’t it interesting that where my political efforts to change the law have so far failed, the free marketplace efforts are winning, albeit slowly? By educating you, the car buyer, to what the dealer fee is and why it’s bad, you’ve spoken out with your checkbooks and done something that the politicians were afraid to do.

I congratulate Palm Beach Toyota and Royal Palm Toyota for their decision to eliminate their dealer fee. It took a lot of courage, especially during these severe economic times, to eliminate an extra $899 profit per car sold which was going right to the bottom line. But now, by including all profits in the prices you’re quoting your customers you’re not only doing the right thing but you’re giving your prospective customers the ability to shop and compare your price with your competition. You may make less per car but you will sell more cars.

I expect this trend to continue. There are two more dealerships in Palm Beach County that do not charge dealer fees. Mullinax Ford opened just last year on Northlake Blvd. [only about a mile from my dealership] and North Palm Beach Mercedes opened just this year [about 2 miles from my dealership]. General GMC Truck in West Palm Beach also doesn’t charge a dealer fee. Mullinax has three more Ford dealerships in central Florida and does not charge dealer fees at these locations either. North Palm Beach Mercedes also owns Palm Beach Mercedes [In West Palm Beach] which does charge a dealer fee…go figure!

I encourage the Penske Auto Group, a public company traded on the NYSE, to consider eliminating their dealer fee for all of their franchises. Penske Automotive Group still adds a dealer fee to the Mazdas and Nissans that they sell from their Royal Palm location that also sells Toyotas. This move would give you a “leg up” on your competition that charges a dealer fee. You can be the first to do the right thing for Mazda and Nissan buyers in Palm Beach County. I do not believe that the Penske Auto Group has eliminated the dealer fee on their Toyota dealership in Orlando either, Central Florida Toyota. This would be a smart move to capture sales from the other Toyota dealers in that market that do.

Readers of the Hometown News and http://www.earlstewartoncars.com/, please call my NO DEALER FEE HOTLINE, 1 800 909-9879 and voice your opinion on eliminating the dealer fee in Florida. I collect these voice mail messages which are transferred to computer audio files and forwarded to our Florida legislators. Messages relating personal and specific experiences with the dealer fee are especially valuable.

CAR DEALERS CAN’T INTIMIDATE ME

As many of my readers know, I’ll never win a popularity contest among Florida car dealers, much less ever get elected as an officer of the FADA [Florida Automobile Dealers Association]. Some of you may have read how certain car dealers attempted to band together in such a fashion as to exert economic harm on my business. This failed and so will the latest attempt at making me go away, a series of business and personal lawsuits by Ed Morse.

For those who aren’t regular readers of my blog and this column, Ed Morse Honda ran a radio commercial last year accusing me of deceiving my customers. In the lawsuit he said that I “hid my dealer fee” in the car prices that I quoted to my customers. There are few things in my life more precious to me than my reputation. This attack on my integrity left me no choice but to sue Ed Morse Honda for slander and violation of the Unfair and Deceptive Trade Practices Act. My opinion is that Ed Morse got it exactly backwards as to who is deceiving their customers. I include all of my profits and costs in the prices that I give my customers. Ed Morse Honda, on the other hand, does not. Like most other car dealerships on Florida, if you ask the salesman for the price of the car in person, on the phone, or over the Internet you will get a price excluding a “dealer fee”, “doc fee, “dealer prep” or an extra charge by some other creative name.

The radio commercial he ran obviously didn’t make me back off on what I believe to be right. His countersuit against my company didn’t work either. Now, he has filed two personal lawsuits against me for defaming Ed Morse Honda and his lawyers in my blog. You can access my blog by clicking on www.EarlStewartToyota.com. The specific articles that I have been sued about are “Ed, You Went Too Far This Time”, “Why My Lawsuit Against Ed Morse Honda Is Important To You”, and “Ed Morse Sues Earl Stewart for Defamation”. I would like to hear back from you if you think that I wrote something that was not true.

Interestingly, I wrote another column for my blog and the Hometown News recently about my conversations during a lunch I attended in Washington D.C. with Bob Woodward, the Pulitzer prize journalists for the Washington Post. You can read this by clicking on http://oncars.blogspot.com/2009/04/conversation-with-bob-woodward-about.html. The main point I wanted to make when I wrote this was that Bob Woodward told me and the 8 other Toyota dealers at this luncheon that he believed the biggest threat to the USA and the World was that “he fears that the media is failing to fulfill its vital role to report all of the news and their opinions fearlessly, completely, honestly, and ethically.”

Think about the courage it took for Bob Woodward and Carl Bernstein to break the Watergate exposé of corruption in the Nixon administration. It was not only the courage of these two young reporters but the courage of the Washington Post editor, Ben Bradley, and the owner, Katherine Graham. There are few rights more precious than our first amendment rights which expressly prohibits the United States Congress from making laws "respecting an establishment of religion or that prohibit the free exercise of religion, infringe the freedom of speech, infringe the freedom of the press, limit the right to peaceably assemble, or limit the right to petition the government for a redress of grievances.

In the past 15 years the Internet has become a very powerful means of freedom of thought and opinion, gradually replacing newspapers. Newspapers have come under great pressure, initially from the electronic media, then the Internet, and finally this severest of all recessions. Today, it’s a lot more difficult for a newspaper editor or publisher to stand up like Ben Bradley and Katherine Graham did and go head to head with the executive branch of the United States Government. Threats of lawsuits and threats of advertisers are far more fearful when you are struggling to keep your newspaper afloat.

Even though I don’t get paid for it, I consider myself a journalist as well as a car dealer. I have written my blog, a weekly column in the Hometown News, and hosted a weekly talk-show on Seaview AM 960 [9-10 am every Saturday; stream it online at www.SeaviewAM960.com] for several years. I frequently speak to groups at public libraries, schools, civic clubs, and condo associations. I’m even looking for a publisher for my book which would be based on the hundreds of blog articles and Hometown News articles I’ve written over the years. Because I derive my income from my dealership and don’t accept pay for my writing, public speaking, or radio shows, I feel I have even more credibility and freedom from economic influences.

No lawsuits will ever stop me from freely expressing my opinion, especially when it comes to doing right by Florida car-buyers. I speak the truth, not only as I see it, but as the vast majority of car buyers see it. They have listened to and put their faith in me. Anytime I’m out in public, shopping, eating at a restaurant, pumping gas, or just walking down the street, people come up to me and thank me for spreading my message. They have also responded by entrusting me with their car purchases, making me the largest volume car dealership in Palm Beach County. I was honored by Toyota to be one of just 12 dealerships in the USA ranked by volume and customer satisfaction.

However, I do have a way that Ed Morse [and any other car dealer who charges a dealer fee] can stop me. I want an honest, acceptable answer to this simple question. “Why don’t you include your dealer fee in the price you quote your customers?” I won’t be the judge of whether your answer is honest and acceptable; your customers will. A third-party, independently selected research firm will survey a randomly selected, statistically significant number of your customers. They will judge whether your answer to my question is honest and acceptable. If a majority of your customers vote for you, I will withdraw my lawsuit, publically apologize to you, and donate $100,000 to your favorite charity. If your customers don’t agree that your reply was honest and acceptable, I will continue my lawsuit and you must consent to allow me to publically reveal the results of the survey.

ADVICE TO DRIVERS OF CHRYSLER & GM VEHICLES

There’s a lot of media coverage and concern about the fate of General Motors and Chrysler and about the UAW workers and their families. There’s even concern about car dealers and their employees and families. But what about you, if you are driving a Jeep, a Pontiac, a Dodge truck, a Hummer, a Saturn or any other GM or Chrysler product?

You have to face the fact that your vehicle has plunged in value. This is because the demand for products of these two manufacturers has plunged, especially for those makes that have been discontinued like Saturn or Pontiac. The value has also plunged because tens of thousands of Chrysler and GM vehicles will be dumped on the market by the thousands of dealerships closing and the banks that have seized the inventories of failed and canceled dealerships. It’s also because lenders are afraid to finance GM and Chrysler products. They have drastically raised their credit standards and down payment requirements. This makes it very difficult for most people to buy a GM or Chrysler product, even if they wanted to.

I’ll give you the good news first. If you are lucky enough to be leasing your GM or Chrysler vehicle, you are in the best shape of anybody. This is because you have no liability for the likely plunge in resale value of your vehicle. The resale value of your vehicle is the problem of the leasing company or bank who owns your vehicle. The GM or Chrysler model you are now leasing will be worth many thousands of dollars less than the leasing company thought when you leased it [Unless you leased it very recently which is unlikely because GM and Chrysler virtually eliminated leases when the economic crisis hit]. Actually, you are enjoying the benefits of their mistake one, two, or three years ago. That was when they grossly overestimated the “residual value”, or the estimated value, of your lease vehicle at the end of the lease. But I must warn you that the leasing company will be trying very hard to trick you into buying the car for the inflated value or to have you extend your lease. They do not want to have you turn that vehicle back in because they may lose $10,000 or more when they are forced to sell it the auto auction. Another warning is to be especially careful when you turn your car in to the dealer. Demand a thorough inspection report, detailing the condition of your vehicle’s interior, exterior, and mileage. Be sure you and a representative of the dealership sign off on this report and you keep a copy. Ideally, you should also take photos of the interior and exterior. Leasing companies are charging for “above normal wear and tear” as never before. They are overcharging on virtually all lease turn-ins unless you protest with documentation.

What do you do if you own your GM or Chrysler vehicle? The best solution for you is to keep it for as long as you can. The longer you own any automobile, the lower the average annual depreciation. The largest amount of depreciation for a new automobile is in the first year of ownership. Each year, the amount of deprecation gets less and eventually it almost stops. If you take really good care of your car, getting all factory recommended maintenances and washing and waxing it regularly, you will get good value out of your purchase and will enjoy reliable transportation, even if you won’t sporting the latest model on the block.

But, if you decide you must buy another vehicle, be prepared to get far less for your GM or Chrysler vehicle as a trade-in or selling it yourself. If you do trade it in, be very careful of those dealers who promise high trade-ins or “minimum” trade-ins. These are simply illusions made possible by artificially inflating the price of the new vehicle they are selling to show you an artificial “over allowance” for your trade-in. You’re better off just to “bite the bullet” and sell your trade in for what it’s worth. Just be sure not to sell it or trade it for less than it’s worth. You can do this by getting at least 3 bids on your vehicle. Call three used car managers at 3 dealerships that sell your make. Tell them you want to sell your car [do not mention that you are going to buy another]. Drive to each of these three dealerships and get their bid for your car. Now you’re prepared to buy the car of your choice. If the seller doesn’t match your highest bid, sell it to the highest bidder [Take into account the fact that you lose your sales tax deduction by not having a trade-in if you sell your car outright].

When you decide which make car to buy, you should consider makes with established higher resale values. You can get this information from Consumer Reports or online at www.kbb.com and www.edmunds.com. You don’t want to put yourself right back into the same position you started. Too many people fall for buying a vehicle because the selling price is the lowest or the rebates are the highest. The initial price you pay for car is only one component of the true total cost. In fact, highly discounted cars and cars with big rebates depreciate much faster.

I’ll finish with some more good news. You don’t have to worry about your warranty coverage, servicing for your vehicle, or spare parts availability. The government and existing laws will see to this. You may experience less convenience if your dealer is one of those who will be closing his doors. It would be a good idea to find out which GM and Chrysler dealers will be around in the future. Things are pretty chaotic now, but this news should be made public before much longer. Right now, GM is not revealing the names of the dealerships they have canceled. If you own a make that has been canceled like Pontiac or Saturn, other GM dealers will be able to service and perform warranty work for you.

ANSWERS TO TOP 10 DEVIOUS STATEMENTS MADE BY CAR SALESMEN

(1) “I’ll give you the price only if you’ll commit to buy today.”

Your answer: I’ll ask you once more for your best price. There are 3 car dealerships that sell this same make within a half-hour drive of here. If I don’t get your best price right now, I’ll walk out of your showroom and you’ll never see me again.

(2) “I’m sorry, but we just sold that car we advertised, but we have others just like it”.

Your answer: I know that Florida law now allows you to add your $899 dealer fee to the advertised price, because, technically, I’m not buying the advertised car. I also know that you can now legally add “dealer installed options” to the low ad price. However, if you do not sell me the car I came in to buy for the advertised price, I will walk out that door and you will never see me again.

(3) “This price is good for today only”.

Your answer: I don’t believe you and I won’t make my decision to buy today. I want to shop and compare your price with your competition and, if yours is the best price, I will call you to see if I can buy it for that price. If you tell me that I can’t, I’ll buy it from your competitor.

(4) “This price is so low that I’m willing to guarantee it or pay you $1,000 [or some other amount] if you can find a better one”.

Your answer: First of all, no retailer can always have the lowest prices. If they did, they could not make a profit and remain in business. I’ll bet you can’t give me the name of just one customer that you paid your $1,000 guarantee to. I also know that you ‘reserve the right to buy the exact car from the dealer that I say has the lower price.’ What makes you think that I would believe your competitor would sell you that car so that you could steal his customer?” You must think I’m really stupid and I don’t want to buy a car from somebody who thinks his customers are stupid.

(5) “I can give you this price only if you take a car from my present inventory. If I have to order a car or dealer-trade a car, the price will be higher.”

Your answer: My car is very important to me. I want the exact color and accessories that will satisfy me and not a compromise. I will buy the car from you only if you agree to get me the exact car I want at the price you just quoted me. If not, I’ll bet that your competitor will.

(6) “I can’t give you this price in writing unless you will give me a deposit”.

Your answer: I know that Florida law allows you to keep my deposit if I change my mind about buying. I also know that you do not want to commit to a price in writing because I might show your price to your competitor who may beat it. That’s the risk you have to take if you want my business. If you do, you have a chance at my buying a car from you. If you don’t, you have no chance because you will never see me again.

(7) “What will you pay for this car today? Or, make me an offer on this car and I’ll take it to my manager for approval”.

Your answer: This is not a game that we’re playing. I’m about to make the 2nd largest purchase of my life. If I was shopping for a TV set and the salesman said that to me, I would walk out without another word and buy from his competitor. And that’s exactly what I’m about to do to you unless you give me your best price in writing.

(8) “We cannot quote you a price over the phone”.

Your answer: It makes no sense to me that I should have to drive 10 miles and back to your dealership just so that you can tell me the price of the car I want to buy. I can get prices on the Internet so why can’t I get them on the telephone? I think the reason you want me to drive to your dealership is so that you can pressure me into buying today without competitive shopping. If you won’t give me your best price right this minute, you will never hear from me again because I will buy from your competitor.

(9) “I’m sorry but the owner isn’t available right now and we are not allowed to give out his cell phone number”.

Your answer: If the owner of this dealership is too busy to speak to his customers than I’m too busy to buy my next car from him.

(10) “The reason that this $749 item labeled dealer fee [or doc fee, dealer prep, handling fee, admin fee, pre-delivery fee, etc] was not included in the price that I quoted you is because it is ‘to cover our costs of inspecting, cleaning, and adjusting vehicles and preparing documents for sale’.”

Your answer: The price quoted to a customer for any product should include all of the costs of the seller. Furthermore, I know that the manufacturers of all cars reimburse their dealers for “inspecting, cleaning, and adjusting vehicles”. I also know that now you’re going to tell me that you must charge me your dealer fee because you charge all customers this same fee. But, I also know that you can deduct the amount of your fee from the price you quoted me and leave the dealer fee on the buyers’ order which will have the same net effect of removing it. If you do not agree, I will walk out of your dealership and never return.

A Conversation with Bob Woodward about Integrity in the Media

Seven other Toyota dealers and I spent several hours with the renowned Washington Post reporter, Bob Woodward, on Sunday, April 18th. We met at the Newseum in Washington D.C. and then had lunch together at the Capital Grille next door. This once in a lifetime experience was my reward for being one the top Toyota dealers in the USA, measured by both sales and customer satisfaction. In addition to this experience, we spent 4 ½ days in Washington D.C. seeing the sights, luxuriating at the Four Season’s Hotel, and eating at other great restaurants.

Just in case you’re too young to remember Watergate, Bob Woodward and another young reporter at the Washington Post, Carl Bernstein, were the reporters that broke the most important political story of the 20th century which led to the resignation of President Richard Nixon. Bob Woodward has written several books, won the Pulitzer prize, and is generally regarded as the #1 investigative reporter and political author in the world.

Now what on Earth can my conversations with Bob Woodward have to do with car dealerships? I’m glad you asked! As you know, I have been on a crusade for many years to make the dealer fee illegal in Florida. In addition to the dealer fee issue, I write this column, a blog [www.EarlStewartOnCars.com], and host a weekly radio show [Seaview AM 960] campaigning for truth, ethics, and legality in advertising and selling cars. The main reason my message is so slow to reach the public is the refusal or reluctance of the great majority of the media to report the story.

Why won’t many newspapers and radio and TV stations report rampant unfair and deceptive trade practices by many car dealers in Florida? It’s the economy, stupid! Car dealers are responsible for about 20% of total retail sales. As a group, they are often the largest single buyer of advertising in the media. When the media runs a negative news or editorial piece about car dealers, they risk losing that advertising revenue. Newspapers are going out of business daily. Many of our largest newspapers, the NY Times for example, are teetering on bankruptcy and local newspapers are even more severely affected.

During my lunch with Bob Woodward, he asked each of us what we considered the single most important threat to the United States and the world. My answer was “radicals inciting terrorism and the threat of a new world order”. Another Toyota dealer was afraid of “hyperinflation brought on by this Administration’s out of control spending”. After hearing all of our greatest fears, Bob Woodward told us his greatest fear affecting the USA and the world. He fears that the media is failing to fulfill its vital role to report all of the news fearlessly, completely, honestly, and ethically. We Americans take a lot of things for granted and I’m afraid that a free, open, and honest media keeping our government and corporations honest is one of them. Most of the world doesn’t have a free press and it’s no coincidence that those parts of the world without it also don’t have freedom.

Newspapers like the Hometown News and radio stations like Seaview AM 960 should be admired and respected for having the journalistic ethics and courage to allow me to express my opinions about unfair and deceptive trade practices in the retail car business. My local newspaper, the Palm Beach Post, is not so inclined. For fear of losing the advertising business of local car dealers, they refuse to run any news or op ed article with my name in it. This is not just my “opinion”. PB Post reporters have said “off the record” that they cannot get permission from their editors to do stories about my company or me. I know one former PB Post reporter who quit his job for this very reason. When I finally realized that the PB Post had put a “black out” on any news about me or my company, I met personally with the former publisher, Doug Franklin, and he confirmed that he could not risk losing car dealer advertisers by reporting my views or even running positive news articles about me. I do have to give him credit for being candid about this. He equates the financial survival of the PB Post with maintaining sufficient advertising revenue. Survival is our strongest instinct. It’s a very rare person or company that will put ethics ahead of survival. Would you?
So there you have it. What do you think is the greatest threat to the USA and the rest of the world? I’m inclined to agree with Bob Woodward. Who is going to keep our politicians, Wall Street, corporations [including car dealers] honest and ethical if they know that nobody will ever learn about their shenanigans in the media?

*Ed Morse Sues Earl Stewart for Defamation!

Those of you who read either my blog [www.EarlStewart.com], my column in Hometown News, or listen to my radio show [Stream it Saturdays, 9-10 am at www.SeaviewAM960.com] know that I’m rarely at a loss for words! But when I got the letter from Ed Morse’s lawyers a few days ago, telling me that Ed Morse is suing me personally for defamation, I was temporarily speechless. However, words and phrases soon begin to float through my mind… like” unmitigated gall”, “chutzpah”, “You can’t make this stuff up”, “stranger than fiction” and “Fools Rush in”.

As I write this column I haven’t been served with the lawsuit but the letter from Ed’s lawyer said that the lawsuit will be based on two of my articles that appear in this blog. One is “Ed you went to far this time” and the second is “What my lawsuit against Ed Morse Honda means to you”. If you haven’t already read these, please do. It will give you a better understanding and appreciation of this article.

For those new readers, let me briefly recap the events that brought us to this point. Around mid 2008, Ed Morse Honda ran a radio commercial accusing me of deceiving my customers because I “concealed a dealer fee” in the price of my car. Now, if you don’t already know, I do not charge a dealer fee. In fact, I’m one of the very few dealers in Florida that doesn’t. Ed Morse Honda does charge a dealer fee and the amount is $699. A dealer fee is just profit to the dealer that is not included in the price quoted to their customer. Ed Morse Honda’s radio commercial raised a lot of concern among my customers, prospective customers, not to mention my friends and family. This is not to say that those who know me, feared that I was doing anything wrong, but when you’re publically accused on the radio of deceiving your customers it’s a matter of concern.

There are few things more important in life to me than my reputation. My business and I, personally, are known for our reputation of integrity and we’re both held to a higher standard in our community than other car dealers and dealerships because of this. I had no choice but to defend this attack by Ed Morse’s radio commercial and my defense was a lawsuit against Ed Morse Honda for slander.

Now, let’s get back to this most recent development of Ed Morse suing me for defamation. The reason that I was at a temporary at a loss for words when I received the notice, is because I could not believe it. At first, I thought it might be a joke! After I realized that it wasn’t a joke, I was still speechless because I had no understanding of why Ed Morse would do this. Gradually I began to formulate some theories on motives for this seemingly irrational act.

Theory number one is that Ed Morse doesn’t really believe that I’m serious about my lawsuit against him for slander and that my having to spend some more money to also defend against his lawsuit will “make me go away”.

Ed, read my lips: I’m not going away!

It isn’t about money; it’s about my reputation. I’ve stated publically that 100% of the proceeds that I receive from my lawsuit will be donated to charity. Ed’s flimsy attempt to frighten me off has had the opposite effect. Now, Ed Morse has impugned my reputation again.

Theory number two is that Ed Morse’s law firm is **“running amok”. Most lawyers make their money by billable hours and some lawyers feel that the more animosity they can stir up between their clients, the more money they can make. Ed Morse owns about a dozen car dealerships and, especially in today’s economy, has his hands full. I don’t need to tell you that most car dealerships are in crisis mode these days and owners are very busy doing damage control most of the time. Maybe Ed simply hasn’t looked at our dispute closely enough. Ed, if that’s the case I strongly advise you to learn all of the facts about my lawsuit against you and your new lawsuit against me. You’re obviously a smart businessman. You haven’t grown to be one of the largest dealership groups in the USA by accident. Frankly, I don’t know how you can efficiently manage 12 dealerships all over Florida at the same time. My hat’s off to you! I have my hands full just staying on top of my one dealership in North Palm Beach.

My final theory is that Ed Morse is reacting out of anger, ego, and not logic. Now, Ed, himself, may not be guilty of this, but maybe one of his senior managers is. Too large an ego has gotten lots of powerful men in big trouble. “Pride goeth before the fall”.

Lawyers will tell you that “the truth is an ironclad defense against defamation, libel, or slander.” When these two lawsuits go to trial, a jury of our peers will look at the evidence. It’s likely that most of those jurors will have driven to the courthouse in cars they bought in Florida. It’s also highly likely that all or most of the jurors paid a dealer fee when they bought their car. Some or all of them may not have even realized that the extra amount they had to pay for their car was just additional profit to the dealer. Because of this and the arguments presented by Ed’s and my lawyers, the jury will form an opinion on whether or not the dealer fee is deceptive to car buyers. That belief will dictate whether or not they believe that I am telling the truth or that Ed is telling the truth. “May the “honest” man win.”

*As lawyers would say, “in an abundance of caution” I ran this column by my lawyers and there are some clarifications that they felt were necessary. I refer to Ed Morse, Ed, and “he” in this column, but Ed, personally, isn’t suing me [Although, I am personally being sued]. My lawyer was very nervous about my using the term “running amok”. The word was in use in India during the British Empire, originally to describe an elephant gone mad, separated from its herd, running wild and causing devastation. I want to make it abundantly clear for the record that I in no way intend to compare Ed’s lawyers with “mad elephants”. I believe that journalists are allowed literary leeway for humor, exaggeration and satire. I also do not know that Ed’s lawyers are stirring things up between Ed and me for monetary gain, but not knowing his lawyers, I can’t rule out the possibility.

JOB LOSS, CAR PAYMENT PROTECTION SCAM

Desperate economic times make for desperate sales and advertising tactics and that’s what we are seeing today with the promise that you “don’t have to worry about losing your job” if you buy a new car.

First you heard about this from Hyundai. About three months ago they began advertising that if you buy a new Hyundai and then you lose your job and can’t make the payments…NO PROBLEM! Guess what? It worked! Hyundai sales rose 20% while all other car manufacturers’ sales are plummeting. Seeing this, AutoNation, the largest publicly owned car dealer group in the USA, jumped on the bandwagon [In Florida, AutoNation chose to name most of their dealerships “Maroone”. I guess there’s a certain stigma associated with public companies vs. locally owned]. Not to be outdone, GM and Ford joined the party recently. If Hyundai can fool that many people, maybe we can too!

I contacted the Texas company that was underwriting the payment protection plan for Hyundai. I found out that this was nothing new, the company had been peddling this “get ‘em in the door” scam to car dealers for years. What they have been selling and what they sold Hyundai is like an insurance policy. But, it’s not an insurance policy. It’s kind of like those “credit default swaps” you’ve been reading about so much lately. They should be regulated but they are not. Hyundai, AutoNation, GM, and Chrysler are paying a “premium” for the highly unlikely event that one of their car buyers loses her job. This cost is included in the price of every car they sell, even for those buyers who have no concern about losing their job. Maybe they’re retired! Maybe they paid cash for the car! That’s just one more thing that stinks about this ruse. Every by buyer, whether they need or want payment protection, is subsidizing, by the higher price they pay for the car, those who think they need job loss protection.

There’s a lot more wrong with this deceptive promise of guarding you against job loss. Even though it does not qualify as an insurance product, it is underwritten just like it was. As you hear repeated so often these days…”The devil is in the details”. I went to the General Motors Web site which was advertising their payment protection plan and finally got to the “devil and his details”…SEVEN pages of fine print! It was worse than reading a health or life insurance policy. This column doesn’t have space for me to list and explain all of the exclusions, qualifications, and other loopholes. I can best explain it this way. You have heard the insurance term “pre-existing condition”. That means that if you have a particular illness, your health insurance or life insurance policy does not cover you. Well, if you are in danger of losing your job, your chances of having Hyundai, GM, or Ford take care of your car payments if you do lose it are slim and none.

This advertisement is very similar to the ads you have seen and heard that tell you that you can buy a car even though you have bad or no credit. These ads exploit car buyers’ fears. Often times prospective car buyers have exaggerated negative feelings about their credit status. Even in today’s economy, a few people with low Beacon scores can qualify a large down payment and are willing to pay a very high interest rate. Or, the dealers will sell the person a cheap used car for cash down payment she saved. The problem is that for every person with bad credit that can buy a car, the ads bring in at least 25 more that are disappointed and embarrassed when they can’t qualify. A lot of car dealers won’t even show you a car until they run a credit check on you. They don’t want to “waste their time”. This kind of advertising is like casting a net to catch fish. You catch lots of fish with every cast, but only a small percentage of “keepers”. In my opinion, this kind of advertising is unconscionable.

Slim Chance for Outlawing Dealer Fee or Bestiality in Florida

Just about one year ago I wrote a column entitled, “The Dealer Fee, Bestiality, and Tallahassee Politics.” You can read that column by clicking on my blog, www.EarlStewartOnCars.com. The timing had to do with the 2008 Florida legislature being in session. The 2009 legislative session is in process and it’s time for another progress report on capping the dealer fee or making it completely illegal in Florida.

Last Saturday’s PB Post carried a column by Frank Cerabino, “Put teeth into ending abuse of animals”. In my opinion, Frank Cerabino is one of the funniest writers on the Planet and if you want some belly laughs, you can read his column online by clicking on www.PBPost.com. The theme of his article is how ridiculous our Florida lawmakers are to not be able to pass a “no-brainer” law like making it illegal for humans to have sex with animals. Florida is one of 16 states in the Union without such a law!

Although, Frank Cerabino raises the possibility that there are some Florida lawmakers who may be blocking such a law from passing, this is only Frank’s acerbic sense of humor talking. The real reason this law does not get passed is from lack of lobbyist support. Unlike Insurance Companies, Trial Lawyers, and the Florida Automobile Dealers Association, The SPCA, Society for the Prevention to Cruelty to Animals, is very poorly funded. They cannot afford to support Florida politicians’ elections, making large campaign contributions to gain access and influence. There can be no other possible serious explanation for such a bill not passing our legislature last year and apparently not going to pass again this year.

Legislators will tell you that each Senator and House Representative is allowed only a very few bills [about 5] to sponsor. This number is a small fraction of the total number of issues and causes that are requested by citizens to be considered as new laws or changes in existing ones. The bottom line is that time constraints on the number of actual bills that get drafted, then get sponsors by both the Senate and the House, then pass successfully through committees, and finally get to the governor’s desk are a tiny fraction of the number that are needed and requested.

So, which bills never even get drafted, or never get a sponsor by both the House and Senate, or get knocked down or delayed by committees, and or lastly don’t get signed by the Governor? The answer is those bills that don’t have the financial support of strong lobbying groups. The sad fact is that very good causes can fall by the wayside year after year because of the cold hard reality of Florida politics.

But there is a big difference between those of us who intensely believe that that the dealer fee should be made illegal and those who intensely believe that bestiality should be made illegal. Of course, the obvious reason is that animals cannot make their voices heard in Tallahassee [Although, Frank Cerabino did suggest that we round up the sheep for a march on the capital]. The car buyers can make themselves heard. In the short run, the powerful lobbying organization, the Florida Automobile Dealers Association, can cause delays as they did this year and last. Write your local newspapers, radio stations, and TV stations. Call your legislators. Call my “No Dealer Fee Hotline”, 800 909-9879. I will email your recorded voice mail to Tallahassee. The voice of the people cannot be ignored over the long run and we must never give up. In the long run we will prevail.

TOP TEN CAR AUTO 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 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 are own the same make car that you are buying. There’s a similar for lease customers. There’s even a “Farm Bureau” rebate which qualifies you for $500 if you are a farmer. Dealers are actually 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 of 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 absolutely 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. I know of no car dealer [besides me] who will give a signed copy of the vehicle buyers’ order to a customer unless they drive the car home or make a substantial, non refundable deposit.

(5) Only one car available at ad price. When you are reading a newspaper ad, 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 dealer fee 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 not the 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 has to 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 cars 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 as long as 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 have to 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 2009 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 Fee”. The average “dealer fee” in South Florida is about $850. About 25% 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 a dealer fee and they all exclude that 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 $695 for his dealer fee.