DON’T BUY A NEW CAR Used Cars Are Better Than New Cars!

No, I’m not joking; I’m serious. This didn’t used to be the case. When I started in the auto business in 1968, buying a used car was only for folks who couldn’t afford to buy a new one.

 Back in the 20^th Century, the reliability of new cars was so low (compared to today) that when their owners sold or traded them in, the used car was virtually “worn out”. Banks were reluctant to finance used cars. If a used car had been driven more than 50,000 miles, most conventional lenders wouldn’t consider it.  If they agreed to finance any used car, they limited the term to 12 or 24 months, required large down payments, and charged very high interest rates. The mileage on odometers was routinely rolled back to far less than the actual. There was no CarFax report to tell you the condition of used cars. Some of you will remember the old saying, “When you buy a used car, you’re buying somebody else’s troubles.”

Today, everything has flipflopped. New cars are extremely reliable. Manufacturers’ warranties are much longer. The quality, reliability, maintenance costs, and safety are exponentially better than before. You may have heard Honda’s slogan about their certified pre-owned vehicles, “The Best New Cars Make the Best Used”. A high-quality new car maintained according to the manufacturer’s recommendations can be driven more than 300,000 miles with low maintenance and safety, but most trade them in long before they’ve reached that mileage.  Today, many people buy new cars because of new styling, as status symbols, or because they still believe that used cars are too risky to buy. They trade in or sell their perfectly good used car and buy another new car. This affords you the opportunity to buy their trade-in at a bargain price. The new car they buy depreciates thousands of dollars the minute they drive it off the showroom floor. Used cars depreciate far slower.

If you’re looking for a better value and decide to buy a used car, just follow these basic guidelines.

1. Research the best used cars with Consumer Reports, www.ConsumerReports.org. Their annual auto issue lists, not only the best used cars to buy, but lists the worst ones…the ones you should never buy.
2. Consider buying your used car from CarMax, OffLease Only, or AutoNation. These are honest, transparent used car sellers that put their lowest price on every used car and their hidden fees are smaller than other dealers. The best site to look for that used car is www.AutoTrader.com.
3. No matter where you buy your used car, insist on an out-the-door price. Do this research online and tell the salesman that your definition of an out-the-door price is “the amount you can write a check for, present it to the seller, and drive the car home.” Virtually all car dealers add hidden fees and unwanted accessories to their advertised and quoted prices. Getting an honest, out-the-door price will save you potentially THOUSANDS of dollars.
4. Before you sign on the dotted line, take the vehicle to your independent mechanic for a complete check-over. This can cost $100 to $200 but it’s worth every penny. If the seller won’t allow you to do this…DON’T BUY THE CAR. They’ll often argue that their mechanic has rigorously inspected the car, but clearly this is not as reliable as your mechanic.
5. Study a CarFax or AutoCheck report that should be provided to you by the seller. This prevents you from buying a car with a dangerous recall, one that’s been in a bad accident, or a flood. It also provides the maintenance record if it was service by dealer reporting to CarFax or AutoCheck. 

Maintaining and Repairing Your Car During the COVID-19 Pandemic

Virtually everything is changing during this crisis, including how you take care of required maintenance and repairs on your vehicle. If you own a car that’s still under the manufacturer’s warranty, you’re required to have the recommended maintenance spelled out in your vehicle owner’s manual within certain time/mileage limits.  If not, you risk having your warranty being voided when lack of recommended maintenance is the cause. You also must be concerned about having safety items like tires and brakes inspected.  

Most manufacturers recommend maintenance every six months or 5,000 miles, whichever occurs first. Oil changes are recommended every year or 10,000 miles (synthetic oil now used in all late model cars) whichever occurs first.  

Vehicle sales are surprisingly strong when many other retail sales have fallen off.  This is because we feel safer in our cars. Your car is just about the only place to be safely outside your home, without having to wear your face mask. Most people won’t take a train, bus, Uber/taxi or fly, for fear of being infected. More and more of us are driving our cars to vacation spots. It’s natural that you want to have your car checked out before embarking on a long trip. Who wants to be stuck on the turnpike on Sunday night with a disabled vehicle? 

These are my tips on safely maintaining your vehicle. 

1. Be sure you read your owner’s manual so that you know what your responsibilities are to maintain your car under warranty. If you can’t find your owner’s manual; you can access it online.  

2. If you feel uncomfortable about bringing in your car for service, check to be sure the service department you use has taken all the proper precautions…All employees and customers must wear face masks, social distancing maintained with marks on the floor, hand sanitizer and handwashing basins quickly and easily accessible, plastic “sneeze shields” separating you from those you’re dealing with, and daily deep disinfecting cleansing of all the areas you’ll be in.  

3. Check to be sure your car will be disinfected thoroughly before it’s returned to you. Some service departments offer an antimicrobial treatment which will protect your car from being re-infected for 30 days.  

4. If you still feel uncomfortable about visiting an auto service department, ask if they offer pick up and delivery. A few are offering this at no charge if you’re not too far away, and most are offering this for a charge.  

5. Call the service department and explain that you feel uncomfortable about bringing your car in and ask for an extension of the time stated in your owner’s manual. Be sure you confirm in writing, email, text, or letter. Most car dealerships and manufacturers will be flexible…an extra 3 months for an oil change shouldn’t be a “big deal”.  

6. If you have a problem with your car while under warranty, report the problem to the dealer service manager immediately. Explain why you can’t bring your car in and ask that this complaint be noted in your service record. When you can bring the car in, most dealerships and manufacturers will still fix the problem under warranty at no charge. As always, be sure to confirm this in writing.  

7. Finally, remember that you are not required to have your car maintained at the dealership you bought it from, or even by a franchised car dealer. If you take it to an independent service department, be sure to keep the records proving you had the maintenance recommended in your owner’s manual done at the specified intervals.

Pandemics, Bad Credit, and Car Buying

Since the Covid-19 pandemic enveloped us, millions of Americans are either unemployed, furloughed, or working fewer hours for less pay. Banks and all lenders are raising their credit standards to buy vehicles. Lending institutions, themselves, are financially threatened by customers unable to make their car and home payments.

Almost counterintuitively, new and used car sales are surging back almost to pre-Covid times. Many car dealers have always taken advantage of buyers with bad credit. With millions more car buyers with bad credit, this danger to you is worse than ever before. People with bad credit can be desperate (and therefore careless) when buying a car. They’re more worried about having their financing approved than buying the right car at the best price. This allows car dealers to overcharge them for the car they want to sell. It also allows dealers to sell them the car that the dealer wants to sell, not the one the customer wants to buy.

Following are six rules to follow if you have low income, bad credit, or too little credit, and you need to buy a car:

• Never assume that you have bad credit; you should check your own credit score which you can do free. Even if your credit score isn’t good, you should always check with your credit union and/or bank before you opt for dealer financing.

• Choose the car that you want to buy and negotiate the best price before you let it be known that you have marginal credit. Almost every car dealer will try to get you to fill out a credit application before you even begin discussing the car you want to buy and the price. REFUSE to do this and tell the salesman that you have acceptable credit. By doing this you ensure that the dealer isn’t raising the price and steering you to the wrong car because you have bad credit. 

• Car salesmen and finance managers can falsify your credit application that is sent to the bank. NEVER sign a credit application until it is completely filled out, and you’ve verified its accuracy. Be sure that you have a copy of the credit application before you accept delivery of your car. Falsifying credit is a federal crime, not to mention the fact that you’re probably paying far more for the car than you can afford. 

• Choose the car that’s best for you, not the one the dealer “wants” to sell you. The dealer will choose a car that he “wants to get rid of”, one that he can’t sell to anybody else; and/or he’ll choose one with a higher loan value than the one you really want.

• Verify that the car described to the lender has the same options and accessories as the one you’re buying. Dealers will sometime falsify additional optional equipment on the car that they’re asking the lender to finance. Adding fictitious options like sunroofs, navigation, sound systems, etc. tricks the lender into advancing more money than they should. This allows the dealer to sell you a higher priced car, increasing his profit. 

Lenders that specialize in people with bad credit are called “subprime lenders”. Car dealers even have separate finance people that specialize in subprime buyers. They’re called the “special finance” department. Subprime lenders often charge a fee to the dealer which can be as much as $2,500. This fee is not supposed to be paid by the buyer, because it would effectively increase the interest rate, probably above the usury law limits. Unfortunately, it’s commonly added to the price of the car. This is illegal, but it’s almost impossible to prove. By negotiating the best price on the car you want to buy BEFORE the dealer find out you have credit problems, it becomes obvious if the price is increased.

Car Dealers Have Blocked Your Right to Sue

Did you know that when you bought your last car that you agreed to waive your constitutional right to sue the car dealer who sold you the car and have your complaint heard in a court of law by a jury of your peers?

You probably did not, because an “arbitration clause” was hidden in the fine print of your contract that you signed. Even worse, you also are prohibited from even taking that car dealer to arbitration unless you write a “demand letter” first!

What is “arbitration” anyway?

The average person does not understand what arbitration is, much less know that they agreed to substitute this process for their right to sue when they bought their last car. Arbitration allows individuals that are employed by an arbitration company to decide who is right in a dispute, you or the car dealer. Professional arbiters can be retired judges or anyone that the arbitration company decides is qualified. Because car dealers use the arbitration company often and because car dealers determine the compensation to these companies, there is a good chance that the arbitrators are inclined to side with “the hand that feeds it”.

You can’t even file for arbitration unless you write a “demand letter” to the dealer which must contain specific information as prescribed by Florida statute 501.98. This is a summary of that law:

“Florida Statutes require that, at least 30 days before bringing any claim against a motor vehicle dealer for an unfair or deceptive trade practice, a consumer must provide the dealer with a written demand letter detailing the name, address, and telephone number of the consumer, the name and address of the dealer; a description of the facts that serve as the basis for the claim; the amount of damages; and copies of any documents in the possession of the consumer which relate to the claim. Such notice must be delivered by the United States Postal Service or by a nationally recognized carrier, return receipt requested, to the address where the subject vehicle was purchased or leased or where the subject transaction occurred, or an address at which the dealer regularly conducts business.” If you would like to read the detail of this law, you can access it online at https://www.flsenate.gov/Laws/Statutes/2013/501.98.

If you hire a lawyer because you believe a car dealer has taken advantage of you, you’re not eligible for reimbursement of any legal fees unless you have sent the demand letter exactly as described above. Therefore most lawyers are reluctant to assist you because they know that the fees they would normally be entitled to are at risk…both because of the arbitration requirement and the demand letter.


What I’ve described is just one more reason why you should be extremely careful when you buy or lease a car. In the back of our minds most of us believe that when we are doing business with a car dealer, or anybody else, if we are taken advantage of we have the right to sue to force the company to make things right. This is not true with 99.9% of car dealers. You should realize this and be even more careful when you purchase a car. Access my blog for articles on every facet of doing business with a car dealer. There are hundreds of articles accessible in the archives of www.EarlStewartOnCars.com. You will learn never to go car shopping alone, get all promises by the salesman in writing, spend at least two weeks researching the purchase of car, and always get at least 3 competitive bids on the car you’re buying, your trade-in, and your financing.

HOW TO BUY A CAR DURING A PANDEMIC

First, don’t buy a car now unless you must. New and used cars are in increasingly short supply, and this results in increased prices. Availability of models, options and color you prefer are limited and growing fewer. Favorable financing is increasingly difficult, because banks and credit unions are tightening due to the worsening economy. If you lease your car, the bank will probably extend your lease for a few months. Auto production is increasing, but it will be while before auto inventories rise to pre-pandemic levels.

If you feel you must buy a car, these are some rules you should follow:

Research your purchase online from the comfort and safety of your home before you venture out. The only reason to leave your home is to test drive the vehicle you’ve chosen. www.ConsumerReports.org,www.KBB.com, www.Edmunds.com, www.TrueCar.com are some very reputable sources of information for pricing, safety, reliability, and cost of maintenance. Communicate with the dealerships solely by phone, email, or text. When you select the dealership with the lowest price, (via competitive bidding) verify that this is the OUT-THE-DOOR price. The definition of an OUT-THE-DOOR price is the number you can write your check out for, get into your new car, and drive it home. DO NOT LET A CAR DEALER SURPRISE YOU BY ADDING HIDDEN FEES AND DEALER INSTALLED ACCESSORIES. 

If you’re going to finance your vehicle, pre-arrange this with your bank or credit union. Dealer financing is almost always more costly. The exception can be manufacturer’s financing, but their low rates (0% is not uncommon) requires excellent credit. Also, if you do have excellent credit, the manufacturer’s financing usually offers an alternative cash rebate which might be better than the 0%.
If you have a trade-in, get bids to buy it from several sources before you ask the dealer what he will offer.www.Carvana.com, www.WeBuyAnyCar.com, www.TrueCar.com, and www.CarMax.com are three reliable sources. Competing dealers selling the make of car you’ve chosen to buy will also make offers. Used cars are scarce now and dealers are actively buying cars directly from owners to stock their used car lots. If your dealer will match the best price you received, you should trade it in to him. Especially if your state (like Florida) allows you to reduce the sales taxed price by the trade-in allowance. 

Insist that the dealer bring the exact vehicle you’ve chosen to your home so that you can test-drive itbefore signing a finance contract or buyer’s order. The dealership should assure you that the person bringing the car to you is wearing a face mask, and that the vehicle has been RECENTLY DISINFECTED. You should make it an extensive test drive, not just “around the block”. Drive the car where and how you normally drive everyday…lower speeds and higher speeds on the same roads you normally travel on.

When you’re completely satisfied that the vehicle you’ve chosen drives the way you expected it to, arranged the best financing, received the highest price for your trade in, you’re almost reading to sign and present your check for the OUT-THE-DOOR price. The final step is to ask the dealer what the conditionsare that allow you to return the vehicle and get all of your money back, should you change your mind after you’ve signed the papers and/or given him your check? Some people believe that you have 72 hours to change your mind. THIS IS UNTRUE. Legally, when you sign on the dotted line you own the car and cannot return it for any reason. However, some dealers do offer you the right to return the vehicle for a period of days with certain CONDITIONS. More dealers have begun doing this during the pandemic, but be very sure you carefully read and understand all the CONDITIONS. Some typical conditions are “not a cash refund, but the right to exchange it for another vehicle”, mileage limitation, time limitation, and the car must be in same condition as when you took delivery. Most dealers offer no guarantee, but you should at least try to get something in writing before you take delivery. Some guarantee is better than none. The depreciation on a new car, once you’ve taken delivery, is ENORMOUS…thousands of dollars. If something happened that made it necessary for you to return a new car, it would cost you THOUSANDS.

I began this article by saying “don’t buy a car during this pandemic unless you have to. This is not something you should reveal to the dealers you’re getting prices some. You’ll always get a better price when the dealer thinks you don’t have to buy a car and could easily postpose your purchase.

CAR DEALERSHIPS ENDANGERING CUSTOMERS

MOST SALESPEOPLE ARE NOT WEARING FACE MASKS!

Regular readers of this column know that I mystery shop a South Florida car dealer every week. I’ve been doing this for over 17 years. You can access the archive of all my mystery shopping reports at www.EarlOnCars.com. I send my mystery shopper into a different car dealership each week and he or she pretends to buy or lease a new or used car. We report exactly what happened in the sales process, naming the dealership and the salespeople. From these reports we comprise two lists…” Recommended Car Dealerships” and NOT Recommended Car Dealerships.

In Florida and most states, car dealerships were ruled as “essential businesses” like grocery stores and pharmacies. They’re allowed to remain open during this pandemic. We continued the mystery shops during most of the pandemic with a brief hiatus when we quarantined ourselves, the “Earl on Cars” team, for 3 weeks. We’ve shoppednine car dealerships in just over the last two months and the salespeople in TWO THIRDS of the dealerships are NOT WEARING FACEMASKS.

The following 3 car dealership’s salespeople ARE wearing masks…Ed Morse Honda in Riviera Beach, Bev Smith Toyota in Ft. Pierce, Braman Honda in Greenacres/Lake Worth.

The following 6 car dealerships salespeople were NOT WEARING MASKS…HGreg Nissan in Delray, Sutherlin Nissan in Ft. Pierce, Advantage Ford in Stuart, Wallace Nissan in Stuart, Napleton Chrysler-Jeep-Dodge in North Palm Beach, and AutoNation Chevrolet in Greenacres/Lake Worth.
None of the 9 car dealerships we shopped required, or even asked or recommended, that their customers wear masks.

As of today, June 15, 2020, Florida is one of 5 RED STATES that has seen the Covid19 virus surge, after pandemic controls were relaxed. In Palm Beach County, today was another record day for Corona virus cases. The total grew by 391 to 8,833 as deaths reached 439.

You don’t see this lack of caring and disrespect for the lives of employees and customers in any other retail business except car dealerships. All grocery stores, pharmacies, restaurants, Walmart, Costco, Target, Apple…virtually all retailers require all employees to wear masks and many are requiring their customers too.
I know there’re those that believe they don’t need to wear masks during the Covid19 pandemic. There’re are also those that believe they don’t need to wear a motorcycle helmet when riding, abstain from drinking while driving, or quit smoking cigarettes. We cherish our freedoms in America and our laws and constitution allow us the freedom to even do stupid things if we don’t harm other Americans by our actions. We all know that the right of free speech ends when you “shout FIRE in a crowded theatre”. When you don’t wear a mask while you’re close to others during a pandemic, you’re infringing on their rights for LIFE, liberty, and the pursuit of happiness.
I strongly recommend that you not patronize a car dealership or any other retail business that doesn’t require all employees to wear facemasks and ENFORCES the rule. I also urge you to wear your facemask, even if the retailer does not require it. A boycott of car dealerships and any retail store that doesn’t require face masks will quickly get their attention and likely bring about change.

PRIMER FOR NOVICE NEW CAR BUYERS

Top 10 Rules Protecting You from Predatory Car Dealers
This article is for those prospective car buyers that are the least prepared to safely navigate the “mine field” known as the car dealership. You may be very young and are purchasing your first car; or you may be an elderly widow whose husband had purchased all your cars. You might be an immigrant, new to our country and not proficient in the English language. You may have had to leave school and gone to work to support your family before you received as complete an education as you would have liked. Whether or not you fall into any of these categories, you can still benefit from these 10 rules. I promise you that, if you rigorously follow them, you will buy your next new car at a low price, and will not be taken advantage of by a car dealer. 

• Never, never, never buy a new vehicle in response to a car dealer’s or manufacturer’s advertisement. All auto advertisements are lies designed to get you “in the door” and sell you a car at a price much higher than the advertised price. To skeptics of this statement, I challenge anyone to show me a new car advertisement that they responded to and bought (paid in full for) the same car at the advertised price. 

• Spend several days, preferably weeks, searching for and studying which is the best vehicle for you and your budget. Online sources are vast and excellent. My personal favorites are www.ConsumerReports.org,www.Kbb.com (Kelly Bluebook), and www.Edmunds.com.

• Begin price-shopping only when you’ve identified the specific vehicle you will buy. You must know the year, make, model, included options, and the MSRP. The MSRP (Federally required Monroney Label), the manufacturer’s suggested retail price, allows you to compare discounts between competing dealers. This way you’re comparing “apples and apples”. Dealers will try anything to switch you to a different vehicle so that you cannot accurately compare their price with their competitors’.

• You must test-drive the specific vehicle you plan to buy. This is the only time you’ll physically visit the car dealership. Don’t go in alone. Two heads are better than one, and there’s less likelihood that you’re later involved in a “He said…she said argument”. Do not let the salesman know that you’re planning to buy soon; he’ll turn up the pressure to sell you a car TODAY. Tell him that you’ve just begin to look around and want to take a test drive. Be sure you allow yourself a long test drive, not just around the block. Once you take delivery of your new car, there’s no bringing it back.

• Now the fun begins! From the safety and comfort of your home, you can shop and compare prices with as many car dealers as you want. Do your shopping online via email. Create a separate free email address with Google, Microsoft, Yahoo, or Apple so that you’re not deluged by car salesmen. Withhold your real phone number. If the online template requires a phone number, make one up (or give them the number of somebody you don’t like…just kidding. 😊

• Make it clear in your online communications, that the price you’re asking for is the OUT-THE-DOOR price. This is the most difficult and necessary part of this “primer”. Car dealers almost NEVER give their prospective customers out-the-door prices; In fact, car salesmen can be FIRED for doing this because they’ve armed the prospective customer with a price that can be shown to their competition. If the competitor offers a lower price, the first dealer loses the sale. So, why would they give YOU an out-the-door price? You make it clear that, if they don’t, they’ll never hear from you again and they will definitely lose the sale; but if they do give you their out-the-door price, you’ll show their competition, and if they don’t beat it, you will buy from this dealer. With “no out-the-door price”, they have NO chance; with an out-the-door price, they have some chance. “Half a loaf is better than none.

• Definition of the Out-The-Door Price: The amount of money you can write a check out for, present it to the salesman, and then drive your new car home. Most of the profit car dealers make is added to the price you saw advertised or were quoted by the salesman. It’s added in the form of hidden fees and dealer-installed accessories. The only legitimate fees that can legally be added are government fees like sales tax and license/registration. The reason you must insist that ALL charges be included in the out-the-door price is that car dealers are experts at disguising dealer-hidden-fees as legitimate government fees with names like tag agency fee, electronic filing fee, notary fee and doc fee. These are simply added price/profit to the dealer.

• Don’t play the dealers’ game by arguing about hidden fees and dealer installed accessories. Car salesmen are trained to overcome all objections, including those raised against hidden fees and dealer installed accessories. Virtually all dealers charge hidden fees and add unwanted accessories to the car after you’ve committed to the sale. By insisting on a TRUE out-the-door price which you will compare to their competition, you’ve taken away all the value to the dealer of hidden fees and accessories. That value to the dealer is sneaking those price increases, in and making you believe its “Standard Operating Procedure”, or maybe you just don’t even notice. When they include their hidden profit in their out-the-door price, who cares? Their competition will keep them honest by beating their price if they can.

• Get financing quotes from your bank and/or your credit union. The interest rate, terms and down payment will probably be better than what the dealer offers. Also, you won’t be subject to being sold a lot of overpriced products in the dealer’s F&I department.

• If you have a trade-in, get bids from www.WeBuyAnyCar.com, CarMax, www.CarVana.com, or from the used car departments of dealers that carry the make of new car your buying. Only trade your old car in if the dealer can offer you a competitive price. Keep in mind that most states allow you a sales tax deduction on a new car equal to the sales tax percent of the value of the trade-in.

OPEN LETTER TO FLORIDA CAR DEALERS

SUBJECT: 

ELIMINATE HIDDEN FEES
Dear fellow Florida car dealer, I started in the retail auto business in 1968, about 52 years ago, and I have seen a lot of changes in the way we dealers sell cars and the expectations of our customers. My remarks in this column are made sincerely and with a positive intent toward you and your customers. I’m not trying to tell you how to run your business; I’m suggesting a change that will reward both you and your customers.

Virtually every car dealer in Florida adds a multiple, hidden charges to the price of the cars he sells, variously referred to as a “dealer fee”, “doc fee”, “dealer prep fee”, “tag agency fee”, “electronic filing fee”, dealer services fee”, etc.. This extra charge is printed on your buyer’s orders and is programmed into your computers. It has been regulated and minimized in many states including California. Florida has virtually no regulation and no regulation that is enforced. You charge these hidden fees to every customer and it ranges from a few hundred dollars tothousands. Florida law requires that you disclose in writing on the vehicle buyer’s order that these charges represent profit to the dealer. Florida law also requires that you include these fees in all advertised prices. You almost never do this, and another way that you get around the law by limiting the number of advertised vehicles (typically one).

The argument that I hear from most car dealers when I raise this issue is that the hidden fees are fully disclosed to the buyer on the vehicle buyer’s order. But most car buyers are totally unaware that they are paying this. Usually they negotiate the car purchase on your “worksheet” which is not a legal document. The legal buyer’s order is only “revealed” in the finance office when it’s spit out of the computer with dozens of other documents the buyer must sign. Who reads all the voluminous paperwork associated with buying a car? The few who notice it assume it’s an “official” fee like state sales tax or license and registration fee. Those few astute buyers who do question the fee are often told that your dealership must charge this fee on very car, which is untrue. These astute buyers are also told that all other car dealers charge similar fees. This is almost true, but, as you know, my dealership does not.

The reason you charge this fee is simply to increase the price of the car and your profit in such a manner that it’shidden from your customer. This is just plain wrong. Dealers will admit this to me in private conversations and some will admit that they have considered eliminating the fee as I did but are afraid of the drastic negative impact to their bottom line. By being able to count on an extra $500 to $3,000 in profit that the customer is not aware of or believes is an “official fee”, you can advertise and quote prices below cost and end up making a big profit. Or, if the price you quote the customer does pay you a nice profit, you can increase that profit by several hundred or thousands of dollars.

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

If you don’t know me, I should tell you that I don’t profess to be some “holier than thou” car dealer who was always perfect. Although, I never did anything illegal, when I look at some of my advertising and sales tactics 30+ years ago, I’m not always proud. But I have evolved as my customers have evolved. My customers’ expectations, level of education, and sophistication are much higher today. Your customers are no different. As I began treating my customers, and employees, better I discovered that they began treating me better. Yes, I used to charge a dealer fee ($495), and when I stopped charging it many years ago, it was scary. But I did it because I could no longer, in good conscious, mislead my customers. Just because everybody else was doing the same thing did not make it right.

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

Why am I writing this letter? I’m not going to tell you that I think of myself as the new Marshal that has come to “clean up Dodge”. In fact, I understand this letter is to some extent self-serving. Lots of people will read this letter to you and learn why they should buy a car from me, not you. And, I’m also aware that most dealers who read this will either get angry and ignore it or not have the courage to follow my lead. But maybe you will be the exception. If you have any interest in following my lead, call me anytime. I don’t have a secretary and I don’t screen any of my phone calls. I would love to chat with you about this. My personal cell phone number is 561 358-1474.

Sincerely,



Earl Stewart

Why Do Car Dealers Lie about their Prices?

You probably already know that you can’t buy a new or used car for the advertised price; the out-the-door price always ends up thousands of dollars higher. Car dealers are the only retailers that routinely trick their customers like this, at least to the degree that car prices are understated.

Have you ever wondered why virtually all car dealers do this? Imagine that you owned a Ford, Honda, Chevrolet, or Toyota dealership in Southeast Florida. Each of these car brands has as many as 20 dealers and no fewer than 12 selling the IDENTICAL product. Toyota has 19 car dealerships between Ft. Pierce and Key West. Every Toyota dealer pays Toyota the exact same price for their cars; but Toyota dealers don’t sell those cars to their customers for the exact same price. They mark up each car as much as they can…the highest price that the customer will pay. If a Honda dealer sells 25 identical Honda Accords in a given month, the likelihood is that each sold for a different price; the typical variation in profits on the identical vehicle can range from a few hundred to a few thousand dollars.

Let’s say you owned a Honda dealership. The Honda manufacturer gives you a quota…a minimum number of Hondas you must sell monthly and annually to fulfill your contract allowing you to sell Hondas and often to receive volume cash bonuses. The only way you can do this is to price your Hondas “competitively”. But, you also must maintain a high enough markup on each Honda, so that your dealership remains profitable. This is the “Catch 22” and dilemma of all car dealers. A South Florida Honda dealer has EIGHTEEN other Honda dealers advertising the same cars he sells. If you advertise a Honda Accord for a higher price than most other Honda dealers, you won’t sell enough to meet your quota; if you advertise that Honda Accord for a lower price you’ll sell lots of Accords, but you’ll lose money on every car.

Therefore, all Honda dealers and all car dealers of all makes see only one viable course of action. Advertise their cars at a very low price, lower than their competition (and lower than they can or will sell the car for), so that the customers will come in to buy. Once the customer is in the dealership, the “games begin” to raise the advertised price to a price as profitable to the dealer as he can negotiate. The tools the dealers use to accomplish this are many…hidden profits (aka dealer fees) disguised as government fees, dealer pre-installed accessories, and switching the customer to a different vehicle or a lease rather than a purchase.

Car dealers see themselves as having no choice but to sell cars this way if they’re to remain in business. They blame their actions on the auto franchise system and there is some truth to this. Apple sells you iPhones directly, but Toyota cannot sell you a Toyota directly; car manufacturers MUST sell through their dealers. This system is mandated and entrenched by state law in all 50 states. The manufacturers created the dealer franchise system in the early twentieth century because they couldn’t sell their cars fast enough directly. Once a critical mass of dealers was created by the auto manufacturers, the dealers organized and lobbied their state legislatures to created laws protecting their franchises from the manufacturers. The main reason they did this was because the manufacturers were granting franchise agreements to too many dealers…” over-dealering”. Too many car dealers selling the same car in a market creates too much competition because it drives the prices down. Unfortunately for the dealers, there were (and are) already too many. Today, car dealers are overprotected, enjoying exclusive markets with state laws making it almost impossible to control, much less, eliminate even the most “problem” car dealers.

The auto franchise system is over 100 years old and obsolete, but it’s entrenched and will remain for the foreseeable future. New vehicles will, one day, be sold online directly by the manufacturers and maybe even through Amazon or Walmart. Vehicles will be built to order and delivered within a week. The price you see will be the price you pay, and you will be able to return the car for a full cash refund if you change your mind. Service, maintenance, and repairs on modern vehicles is minimal. Separate service centers will still exist to handle this need. Service centers will also have new vehicles of each model for you to inspect and test drive. Tesla is doing today exactly what I described, except for the one-week delivery time and unconditional moneyback guarantee.

But there’s a larger reason why car dealers get away with their deceptions. That is “because they can”. Auto manufacturers realize they’re stuck with the dealer franchise system and “if you can’t beat ‘em, join ‘em”. Auto manufacturers have huge political lobbying clout and, when you add the car dealers and their associations’ money, state and federal politicians have no choice but to “play ball”. There are about 17,000 franchised car dealers. They have enormous lobbying power nationally through NADA, the National Auto Dealers Association, and they also have enormous lobbying power in all 50 state legislatures. The political donations that Big Auto and Car Dealers give politicians make the NRA look small by comparison.