MY TRIBUTE TO THE GREATEST “CAR GUY”

Jim Moran died at 88 on Tuesday morning, April 24, 2007. Jim Moran is a common, Irish name but this Jim Moran was a very uncommon Irishman. He was the founder of the JM Family in Deerfield Beach which is made up of several companies, the largest being Southeast Toyota. They distribute new Toyotas to all the dealers in the southeast USA. His company was just ranked the 18th largest privately owned company in America. He was a multibillionaire when he died.

I first met Jim Moran at a meeting for Pontiac dealers in Ft. Lauderdale over 40 years ago. Jim had recently moved down from Chicago where he had sold Courtesy Ford, which he built to become the largest Ford dealership in the world. Previously he had done the same with a Hudson dealership. Jim grew up in Chicago. His parents were poor but he worked hard at various jobs, saving his money until he could buy a Sinclair gas station. He began selling a few used cars from his gas station and that’s what motivated him to buy a small Hudson dealership.

The reason Jim moved to Florida in the early sixties, was his doctor telling him that he had cancer and as little as six months to live. After he sold his Ford dealership and moved to Florida, he found out his doctor was mistaken. So, Jim got back into the car business. First he bought a small Pontiac dealership in Homestead. He soon sold that for a nice profit and built the biggest Pontiac dealership in the USA in Hollywood, Florida. He set his sights on his next project to be the first Volkswagen dealership on Miami Beach. Back in the sixties, the VW franchise was the most profitable franchise around. Volkswagen turned him down, so he took the money he had planned to invest in the VW dealership, $100,000, and bought a distributorship for a Japanese car that very few people had even heard of, named Toyota. The rest is history.

Some will say that Jim Moran was just plain lucky. Nobody wanted a Toyota distributorship in the sixties. The quality of Toyotas at that time was terrible and big American cars dominated the market. He may have been lucky, but he was also very, very smart, worked very hard, and I have never known anyone so focused on success. Beyond this, he was blessed with the God given talents of extreme charisma and the ability to find, train, and motivate great people to work for him. He built a network of dealers to sell Toyotas in Florida, Georgia, Alabama, South Carolina, and North Carolina. He also built a support structure for the dealers including a finance company, insurance company, car accessory company, JM Lexus (the largest Lexus dealership in the world) and a port preparation company. His other companies are now nationwide and service all makes of cars, not just Toyota.

I like to think I had a special relationship with Jim Moran. We were both “just a couple of Pontiac dealers” when we met. I bought my Toyota dealership in North Palm Beach/Lake Park in 1975. Those were the “wild and wooly days” in the car business. Jim Moran was an advertising genius as well as a car genius. His marketing and advertising techniques were copied by the Japanese to increase the sales of Toyotas in the rest of the USA when they realized that Southeast Toyota was outselling every other region. The “Toyotathon” was invented by Jim Moran. Top Toyota Japanese management had huge respect for Jim Moran. “Moran san”, they called him. He coached them on styling and designing Toyotas to suit American taste. He often flew to Tokyo in his private Gulfstream IV or V Jet to meet with the top management of Toyota. Jim Press, the highest ranking American in Toyota and the only non-Japanese member of Toyota’s board of directors was sent to work for Jim Moran at Southeast Toyota while he was being groomed for top management. It is a fact that Jim Moran positively and significantly affected the success of Toyota in America.

This is one of literally hundreds of eulogies that will be written about this man. Most will paint him to be perfect, a man for all seasons, and all things to all people. They will write about his charitable contributions, his family, and all of them good things he did during his life, which were significant. Because I knew Jim for a longer time than most and because I knew him very early in his career, I have a different perspective. Back in those days, the rules of the game were a little looser than they are today. There were fewer laws and regulations. It was the Wild, Wild West when it came to marketing cars. Jim Moran was blessed with incredible talents, including charisma, drive, and intelligence. He was the most competitive man I have ever known, the Michael Jordan or Tiger Woods of the car business. Like all great performers, he loved doing what he did better than anything…yes anything. Everything else in this great man’s life was secondary to his becoming the very biggest and best Hudson Dealer, Ford Dealer, Pontiac Dealer, Lexus Dealer, or Toyota Distributor in the world. Underneath the smooth facade was always the rough, tough Chicago Irishman. I don’t believe it is possible to be the best in the world at anything unless you are blessed, or is it cursed, with this kind of focus and ambition.

The last conversation I had with Jim Moran was his phone call to me about a year and a half ago. He had heard that I had just recovered from colon cancer surgery and called to ask how I was doing and wish me well. He reminded me about his doctors in Chicago telling him that he had cancer and as little as six months to live more than 40 years ago. He congratulated me on my dealership’s great increase in sales since I moved into my new, much larger dealership. Then he said to me, “Earl, I’ve been telling to build that new dealership for the last ten years!” We both laughed.

I am proud and lucky to have known Jim Moran. I learned a huge amount from him and I would have to say that he had a greater influence on my business life than anyone except my father.

AUTO BUYING PROGRAMS AT WHOLESALE CLUBS

Everyone is familiar with wholesale warehouse-style buying clubs. The stores always resemble warehouses and skimp on the typical amenities you find in a conventional retail department store. The products are often sold in bulk which sometime requires you to buy a lot more than you might need. Usually you have to help yourself and there are no sale people to assist you. The brands and products they buy change often because they buy large quantities of a particular brand when they can buy it a low price. You pay an annual fee to be a member. Some of the more popular and wider spread wholesale clubs are Costco, Sam’s Club, and BJ’s Wholesale Club.

In general, this concept works and prices are generally lower at these kinds of stores. It is easy to see how wholesale clubs can afford to sell products cheaper than conventional department stores. But most wholesale clubs have begun to branch out into other areas that are outside their original concept. One of these relative new areas is an “auto-buying service”. Unfortunately for the consumers, wholesale clubs are unable to buy cars from the manufacturers in bulk and pass along the savings to their customers like they do rice and TV sets. What the wholesale clubs do is sign agreements with car dealers like me who are supposed to sell you cars at a very low price. The car dealers pay the wholesale clubs a monthly fee for the privilege of being the exclusive dealer of that make authorized to sell cars to their members. The fee the dealer pays the wholesale warehouse increases their cost of sales to wholesale club members, but the theory is that the referral of members will increase their volume to more than offset this fee.

I am signed up with one local wholesale club and am in discussions with another. What disappoints me about these programs is that many wholesale club members buy cars from the dealer associates based on their trust in the wholesale club. The problem with this is that many dealers often do not abide by the prices they are supposed to quote. Dealers are supposed to have one person designated as the wholesale club member contact. But what often happens is that the first salesman who sees the wholesale member enter the showroom handles the sale. Salesmen are paid on commission and will mark up the price as far as they can get away with. Because wholesale clubs have hundreds of dealers and thousands of club members, it is impossible to police what is happening on the showroom floors during the sale to club members.

What all this means is that, just because you are a member of a wholesale club with an auto-buying program, don’t relax your vigilance when buying a car…even if it’s from the dealer endorsed by your wholesale club. There is a lot of due diligence that you must do before you pay a dealer for a new or used car. The most important is shopping and comparing prices on the same year, make, and model car you have decided on. You should get at least 3 “bids” and the Internet is the easiest place to do this. You should shop your financing separately and choose the dealer’s financing only if it is lower or competitive. You should shop the value of your trade-in separately, getting at least three bids on its value. When you have done all of this homework and preparation, only then venture into the dealership recommended by your wholesale club. Hopefully, the price from this recommended dealer will be lower, but I’m betting in most cases it won’t be. The wholesale clubs will show you statistics about the savings the club members have realized by using their recommended dealers, but these savings are from lots of people who did not do their homework, especially with competitive comparison of prices.

When you enter a dealership recommended by your warehouse club, insist on speaking to their designated representative. If he is off that day, come back when he is there. If you get an uneasy feeling about the price you are quoted or anything else regarding your visit then contact your wholesale club immediately and report it. Some wholesale clubs are taking steps against dealer fees, but some are not. The price that you and the wholesale club think you are paying often does not include the dealer fee which can range up to $900 or more. If your club does not insist that its dealers include their dealer fee (simply additional profit for the dealer) in their club pricing, they should.

HOW TO COMMUNICATE BEST WITH YOUR CAR DEALER

As many of you know, I communicate directly with my customers. Some would say to a fault. I don’t have a secretary or administrative assistant. My dealership’s telephone receptionist never asks the caller “who’s calling” or “may I ask the nature of your call?” and she puts my calls (and the calls to all my employees) right through. If I am not in my office, she puts them through automatically to my cell phone…7 days a week. I also have four red phones in four locations of my dealership…the showroom floor by the receptionist, the service customer waiting lounge, outdoors in the service drive, and in the body shop waiting lounge. Each phone has a picture of me with the message, “Customer Hotline To Earl Stewart. The Buck Stops Here. Have We Not Exceeded Your Expectations? Please Let Me Know. Simply Pick Up The Receiver And Wait For Me To Answer.” As if all this wasn’t enough, I put my home telephone number and cell phone number on my business cards and pass them out to my new customers at our bimonthly New Owners Dinner.

I say all this, not to brag (or maybe just a little). It might surprise you that I am not deluged with phone calls. I get quite a few, but considering I sell 400-500 cars a month and service thousands of cars each month, I doubt if I average more that 25 calls per day. Most of them are positive, complimentary calls. I believe one reason for this is that my employees are motivated to work harder to satisfy my customers because they know, if they don’t, I’m going to hear about it very quickly. Another reason is that my customers are remarkably respectful of the fact that they can call me and do not take advantage of it. Frankly, my wife, Nancy, was very nervous about this when I first started passing out my business card with my home telephone number. Would you believe that I don’t get more than 5 or 6 home calls a week? When you extend your trust to people, they almost always respect that and do not take advantage.

Of course, you are not going to find a lot of car dealers who do what I do. But here is how you can improve your communications in other ways that will allow you to get problems solved and promises kept. Always ask for the business card of every person you deal with. If they don’t have a card, be sure to get their name. This improves your service right away because the person is no longer anonymous. Ask the person for his cell phone number. There was a time when it was considered wrong to call someone on his cell phone, but that was before cell phone rates became so cheap and the cell phone became universal. If this is a critical person you are dealing with, ask for his home telephone number too. Here is a little trick that I use when I do this. I always start out by giving them my cell phone and my home phone number. Then I say “and may I have yours?” I can’t remember ever having been refused. If someone you are doing business with refuses to give you his cell or home phone number, maybe you should wonder why.

Also, make it a point to be introduced to this person’s manager. Get the manager’s business card and as many contact numbers as he is willing to share with you. When you do this, you have put the salesman or service advisor on notice that if he doesn’t return your phone calls you will be calling his boss. If you really want to have an edge, ask to meet the general manager and/or owner of the dealership. Get his telephone numbers. Now you will have everybody’s attention when you come into the dealership to transact business.

If you are a “computer person”, collect email addresses from everybody you deal with. Email is not as timely as a telephone, but it has the advantage over the telephone because it is “on the record”. When you make a request of a person by email, he can’t deny it because you have a copy of the message. I know that with Microsoft Outlook email, I get an acknowledgement every time somebody opens an email that I sent them. Furthermore you can copy as many people as you like with an email. You can send copies that the primary recipient knows about or make them blind copies that he can’t tell were sent. Someone is a lot more likely to act on your request when he knows that it is a matter of record and his boss was copied with the email.

If you can force yourself into the habit of getting names, telephone numbers, and email addresses from everybody you deal with and their managers, conducting business with your car dealer (or any other business) will be much smoother and trouble free.

CLASS ACTION SUES S.C. DEALERS ABOUT DEALER FEE

The Tallahassee law firm of Myers & Fuller is representing several car dealers that have been named as defendants in a class action suit along with almost every other new car dealer in the state of South Carolina related to the charging of dealer fees aka documentary fees, dealer prep, etc.

The plaintiff’s lawyers representing the class of consumers who are bringing the lawsuit claim that “the placement of such fees on a dealer’s buyer’s order or invoice is deceptive in that it implies that the fee is separate and distinct from the general overhead that car buyers expected to be included in the sale price for a car and that such placement suggest that the fee is mandatory”.

Readers of this column have seen several articles I have written about or mentioned dealer fees. Virtually every car dealer in Florida charges a dealer fee although it may carry some other label, like documentary fee or dealer prep fee. Several states have made this illegal and it looks like South Carolina may be next.

A particularly onerous part of the dealer fee is that dealers are legally required to “charge every customer this fee if he charges just one customer”. I supposed the lawmakers were well intentioned when they made this ruling, but like so many other well intended lawmakers, they inadvertently “bit the car buyer right in the butt”. I think their reasoning when they passed this law was to prevent car dealers from discriminating against the less informed and sophisticated buyers. In hindsight we can see how stupid this law is because it allows the car dealer to charge everybody the dealer fee, including the informed, sophisticated buyer.

Because virtually all car dealers in Florida charge this fee (My dealership is the only one I know that doesn’t), the car dealer overcomes objections to the dealer fee by saying “this is a fee that all Florida car dealers charge”. What is a car buyer to say? He has been told that everybody charges it and that it is illegal for the dealer to take it off his buyer’s order or invoice.

Florida did pass one law to protect the consumer against the dealer fee. This law says that the dealer must include the dealer fee in advertised prices (The price a salesman quotes you is not considered an “advertised price”). Many dealers don’t know about the law or simply ignore it. You can pick up the PB Post any weekend and find several car ads with prices that do not include the dealer fee. In the fine print at the bottom of the ad, it will say “plus dealer fees” or in some cases tell you the amount of the dealer fee. Florida law also provides a loophole in this law, which was the subject of my last column. The loophole is that dealer group ads don’t have to abide by the law!

Dealers who do understand the law and wish to abide by it have figured out a way to get around it. They simply pick one car of a particular model and advertise that price including the dealer fee. You don’t know that there is only one car available with the dealer fee included in the price. The only disclosure is a number along side the car like #2668A which is supposed to let you know that this is the only car available with the dealer fee included in the price. That innocuous number is the stock number of that particular car. There is usually another “gotcha” which is “price good on date of publication only” in the fine print. The ad often says something like “25 others available and similar savings”. The reason it says “similar” and not the “same” is because they add the dealer fee to the prices of the others. The chances are that the car they advertised is not the right color and equipment for you and, even if it were, the chances that they will have it there when you arrive are slim and none. If the odds aren’t already stacked totally against you, the sales people are often not paid any commission or a very small commission on all advertised cars. How easy do you think it will be to buy that advertised car from a salesman who can make a lot more money by selling you one without the dealer fee included?

The class action suit in South Carolina is symptomatic of the rising consumer awareness around the country. Today’s consumers are more educated and sophisticated than ever before. They are also less tolerant of being taken advantage of. Call me a “cockeyed optimist”, but I think it won’t be long before we see a law in Florida to protect car buyers from the dealer fee.

A LOOPHOLE IN THE DEALER FEE LAW

If you are a reader of my columns, you know all about the “dealer fee” scam perpetrated on car buyers in Florida and other states where it is still legal. This fee ranges from $495 to $995 and even higher. It is profit to the dealer but is printed on the buyer’s order, disguised as a “fee” meant to be confused with legitimate state, local, and federal fees, like sales tax and license fees.

Virtually every dealer in Florida adds a dealer fee to the price he quotes you on the car. In fact, when questioned, many dealers’ justification is that “all dealers in Florida charge a dealer fee”. Strange as it may seem, Florida law prohibits a dealer from removing the dealer fee from the price he gives a customer. If he charges one person a dealer fee, he must charge all people. This is also the rationale you might hear if you object which, is “Florida law will not allow me to remove the fee”. The way to counter this objection, when haggling about the dealer fee, is to tell the salesman to reduce the overall price by the amount of the dealer fee and leave the dealer fee alone.

The only control placed on dealer fees by Florida law is for advertised prices. This law says that an advertised price must include the dealer fee. Dealers get around this by advertising just one vehicle at an advertised price with “many more at similar savings”. If the one car that is advertised is already sold, the dealer can sell you one just like it and add back the dealer fee.

Unfortunately, I recently discovered that there is a loophole to this sole law to protect the car buyer from dealer fees. The loophole is that lease payments and prices advertised by multiple dealers in the same ad do not have to include the dealer fee. This means that if a manufacturer advertises a price on a new car listing several dealers, the dealer fee can be excluded. When I inquired about this, I was told that this is to permit manufacturers and distributors to advertise the same car priced from multiple dealerships. I was told that they cannot include the dealer fee because each dealer fee is usually different. That doesn’t sound like a very good excuse to me. Ads including multiple dealerships usually include the names, phone numbers, addresses, and Web site URL’s of each dealer. Why not list each dealer’s “dealer fee”? You know the answer as well as I…they don’t want you to know there is a dealer fee, much less the amount of the dealer fee.

The reason for the law requiring that advertised prices include the dealer fee is very clear. It is to prevent the consumer from being fooled into coming in on a low price and then charged a higher one. If that principle applies to one dealer’s ad, why doesn’t it apply to multiple dealers advertising in one ad? To comply with the same law applying to one dealer, all multiple dealer ads would have to say is “price plus tax, tag, and dealer fee” and beside each dealer’s name list his particular dealer fee. This would also encourage dealers to lower their dealer fees and even eliminate them entirely.

Because I don’t charge a dealer fee, when my dealership is included in an ad with seven other South Florida dealerships, I have the lowest price but the reader of the ad cannot know that. The ad says “plus tax, tag, and dealer fees” in the fine print at the bottom of the ad, but does not disclose the amount of the dealer fees for each dealer. The uninformed prospective car buyer can pay up to $995 more for that advertised car than he would pay at my dealership because the dealer fee amounts are not disclosed. Does that sound right to you?

Consumer Reports is Your Best Friend in Choosing a Car

If you don’t already subscribe to Consumer Reports, you should. I have been a subscriber for as long as I can remember. I rarely buy any product without consulting this great magazine. I also subscribe to Consumer Reports online edition which is even more current than the regular magazine. I recently received their annual auto issue, which no car buying family should be without. All libraries would have this on hand.

Don’t be fooled by other magazines with similar names purporting to objectively analyze and recommend products. There is only one Consumer Reports. They do not except any advertising and therefore are not beholden to any corporation. They even go beyond this and will not allow a retailer or manufacturer to use the name Consumer Reports in their advertising. Even if Consumer Reports gives a product a great rating, that company cannot mention this in their advertising. If they do, they get sued by Consumer Reports. No other company goes this far and is this “squeaky clean”. J.D. Powers is a company that ranks and compares lots of products including cars, but they allow companies to use the JD Power name to advertise their products when they rated them good. You can understand why a consumer might be just a little more skeptical of J. D. Powers’ objectivity than Consumer Reports’.

I am not saying that Consumer Reports is infallible. They do make mistakes and they have been successfully sued by some companies that were affected by their mistakes in testing. But this is very rare. As a car dealer for over forty years, I have not always liked what I read about all of the makes and models of cars I have sold, but I grudgingly had to admit that the reports were almost always accurate. I have to confess that with some make and model cars I have sold over the years, I was very thankful that the circulation of Consumer Reports is not very large. Their circulation is growing as consumers become more educated and sophisticated. It’s not as easy as it once was to sell a Yugo to most consumers.

This annual auto issue which is on the newsstands now should be a mandatory read before you buy your next used or new car. Here are some of the articles in this issue…Top Picks (the best new vehicles they have tested), Best and Worst (tells you the ones you definitely shouldn’t buy), Coming for 2008, Who Make The Best Cars (best manufacturers), Buy Better on the Web (The Internet is the best place to buy your next car), Reliability trends (repair histories on all makes and models), What’s Next in Auto Safety, and Used Cars, Best and Worst.

Consumer Reports also offers other car buying services like their “New Car Price Service” which discloses the actual cost to the dealers, rebate and incentive information, negotiating strategies, and their expert recommendations. They also offer a “Used Car Price Service” which provides an evaluation tool kit that helps you establish the right price for most used cars made from 1995 to 2005.

Open Response to Al Sammartino: Nitrogen Filled Tires

This is my letter in reply to Al Sammartino’s letter to the editor of the Home Town News questioning the accuracy of my recent column, “Don’t Pay for Nitrogen in Your Tires” which ran in the March 2nd newspaper.

Dear Mr. Sammartino,

Thanks for your letter which raises some good questions. I will address the specific points made by you, but rather than turn this into a boring scientific, academic debate, I also have an interesting proposal for you. You and I will each fork over $10,000 to be held in escrow by an independent third party. We will select an impartial, qualified tester of tires like the American Automobile Association or the New England Technical Institute. We will ask this organization, using scientific method, to determine whether or not nitrogen filled tires cause a car to get better gas mileage and longer tire wear than tires filled with air. If the results are that nitrogen filled tires are proven to give statistically significant better gas mileage and wear, my escrow check will be donated to your favorite charity. If not, my favorite charity is the Salvation Army. Please call me on my cell phone, 561 358-1474 so that we can get started. It’s a win-win. Money goes to charity either way and one of us is going to learn something he didn’t know.

Before I address the points you made in your letter, I think it is only fair that the readers of my column and your letter know that you and I have met before. I was surprised that you didn’t mention that in your letter. I know that you will recall that the company owned by you, Coastal Automotive Equipment Sales, Inc. was an unsuccessful bidder three years ago when I was buying $250,000 worth of hydraulic lifts for my new service department. I only mention this in the interests of complete disclosure to our readers.

The first point I will address are your words “I’m not sure where Earl got his pricing”. This refers to my statement that car dealers were charging as much as $199 for nitrogen in four tires. I am enclosing a picture of a price sticker showing a $199 price from a dealer who may well be one of your nitrogen customers.

click on image to enlarge

Some of your statements about nitrogen are accurate. Nitrogen does expand less than air, very slightly less. The coeffient of expansion of nitrogen is about 20% less than that of air, but, of course air is 78% nitrogen. It is also true that filling a tire with nitrogen will reduce the amount of humidity inside the tire. Nitrogen molecules are larger than Oxygen molecules and will take longer to permeate the tire wall, but, as you know, 78% of air is already made of nitrogen. What all of your points citing the superiority of nitrogen don’t mention is that because air is already mainly nitrogen, the differences are so slight they can’t even be measured. As I said in my column, I tested tires nitrogen and with air in my rental fleet for many weeks and there was no measurable difference in inflation.

A good analogy to using nitrogen in your tires is those Olympic swimmers that shave their entire body with the hope of cutting off one one-hundredth of a second in a 200 meter race. I can see why NASCAR uses nitrogen in tires. Their cars run over 200 mph at extremely high temperatures and winners are measured in hundredths of seconds. A lot of people put nitrogen in their tires because they like to believe it helps, but I challenge anybody to show me a valid, scientific, independent study that proves nitrogen improves gas mileage or tire wear.

I don’t have a problem with you selling nitrogen to someone for a low price. My wife and I take a lot of vitamins and herbs that have never been proven to improve our health by medical science, but we are careful not to take any that can be harmful. We look at it this way. It might help, it can’t hurt, and the vitamins are cheap. The only thing that nitrogen can harm is the pocket book of the buyer and $199 for four tires filled with a gas that has never been proven to help gas mileage or tire wear is insane.

MINIMIZING THE PAIN OF HAVING YOUR CAR SERVICED

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

(1) Choose the dealer with the best service department. Remember that you don’t have to have the same dealership service your car that sold you your car. You probably bought your car from the dealer who gave you the best price. You should have your car serviced at the dealer who can best maintain and repair your car. The price of service is important, but secondary to the quality of the service and repairs. Do a little research. Ask friends and neighbors who drive your make of car. Check with the BBB and the County Office of Consumer Affairs. Ask the service manager at the dealership to show you his factory score on CSI (customer satisfaction index). Every manufacturer surveys dealers’ service customers and ranks that dealer by how well he treats his customers.
(2) Establish a personal relationship with your service advisor. The person in the service drive who writes up your repair order is very important. Be sure you get a good one. He should be knowledgeable, attentive to your needs, promptly return phone calls, and recommend only necessary services. You might not find this person on your first visit, but if you aren’t comfortable with the person you are dealing with, ask for one with whom you are. When you make an appointment to have your car serviced, always ask for that service advisor.
(3) Don’t pay the “gotcha”, miscellaneous supplies fee. Almost all car dealers tack on a phony fee when you pay your bill which is simply more profit to the dealer, but is disguised by various labels. It is also sometimes called “environmental impact fee”, “sundry shop supplies” and many others. The cashier just adds a percentage ranging from 5% to 10% to your bill. This is no different than the “dealer fee” that the sales department tacked on to the price they quoted you on the price of the car. Most dealers will waive this fee if you complain about it, especially if you threaten to call the BBB, their manufacturer, or the Florida Attorney General’s office.
(4) Always road test your car, preferably with the technician. If you brought your car in for a drivability problem such as a noise, vibration, or pulling to the right or left, don’t accept the car back until you ride in the car with the technician or service advisor and confirm that the problem has been remedied. I also recommend that you drive the car with the service advisor to demonstrate the problem when you bring it in. Experiencing what you experience always communicates your problem more accurately than listening to your description of the problem.
(5) Ask for a written estimate of the total cost of repairs and maintenance. Florida law requires that the dealer give you a written estimate. By law, they may not exceed this by more than 10%.
(6) Make an appointment ahead of time. You should insist on making an appointment and you should try to make that appointment at a time when the dealer’s service department will be least busy…typically the middle of the afternoon on weekdays or Saturday and Sunday. Avoid the 7:30-8:00 morning rush. When your service advisor has written up your repair order, ask him how long it will take. After he tells you, ask him to let you know ahead of time if, for any unforeseen reason, your car will not be ready in the promised time. Often times when you call a service department they will tell you to “bring the car in anytime” or “come right over”. Service advisors will tell you this because they are either too busy or too lazy to take the time to make a proper appointment. When they tell you this, tell them that your time is very valuable and that you insist on an appointment at a time when they can get you in and out quickly. Always write down the name of the person that gave you the appointment.
(7) Shop and compare high cost repair prices. Most service departments are competitive on maintenance items like oil changes, wheel alignments, and tire rotations. However, the costs of major repairs can vary considerably. If you are looking at an air-conditoner, transmission, or engine repair that can cost several thousands of dollars, get bids from more than one service department. Often just suggesting that you will do this will keep the cost down from the dealership you prefer.
(8) Introduce yourself to the service manager. This falls along the same philosophy as developing a good personal relationship with your service advisor. It can’t hurt to know the “boss”. If you are on first name basis with the service manager, it just might earn you a slightly higher level of treatment from those that work for him.

The Lease Acquisition Fee…the Bank’s “Gotcha”

You may have read my columns denouncing the “dealer fee” which is a charge car dealers add to the price they have already quoted you on the car. They refer to it as a fee to fool you into thinking it’s a legitimate fee like sales tax or a license fee. What it is, is profit to the dealer. That’s exactly what banks and leasing companies do when they lease you a car. They most commonly label their “fee” the “lease acquisition fee”, but all it is is profit to the bank or leasing company, and in some cases a smaller portion is kicked back to the car dealer. This fee is also called by different names like “administrative fee”.

Yesterday I got a complaint letter from a customer in North Palm Beach who was a reader of this column. He had just discovered that he had paid an $895 “lease acquisition fee” when he leased his new Toyota from my dealership. I called him, apologized, and told him that I agreed with him that this was not the right thing for banks to do, but that they all did it. I also agreed with him that the “lease acquisition fee” should be disclosed and explained on the lease contract. It should be called “profit to the bank” and in cases where the dealer gets a portion of this fee, “profit to the bank and dealer”.

When a car dealer sells you a car, you expect him to make his profit by adding a markup to the wholesale price he paid the manufacturer. You expect and understand this. Therefore you can shop and compare prices between different dealerships. You expect a bank or a leasing company to make their lease profit by marking up the cost of their money during the time you drive their car. On a lease, it’s called a lease factor and on a purchase it’s called an interest rate. The bank owns the car because they bought if from the dealer. If you drive their car for 36 months, your monthly payments must cover their costs of depreciation, money, overhead and also pay them a profit. You expect and understand this. Therefore you can shop and compare lease factors and residuals. The residual establishes the cost of depreciation and the lease factor establishes the cost of money. The mark up over these two costs should be the profit to the bank. The “lease acquisition fee” does not appear on the contract. It is disclosed on a separate form which includes everything in the “capitalized cost” of the car you are leasing. Most people understandably think that the capitalized cost of the car is just for the car, not some extra profit for the bank.

I don’t know any bank or leasing company that does not charge a lease acquisition fee. This fact is often used to legitimize it. When a customer does object, the answer is “all banks charge this fee”. That doesn’t make it right! That’s the same explanation that car dealers give when they get caught charging their “dealer fee”. Just because almost everybody does something does not make it right. These fees vary over about the same range as dealer fees…from about $495 up to about $895.

Oh, there are some other fees that the banks and leasing companies charge you when you lease a car that you probably didn’t know about when you signed in. If you buy your car at the end of the lease, there is a “purchase option fee”. If you don’t buy it there is a “lease disposal fee”. These vary from $150 to $450. The bank knew in advanced that you were either going to buy the car or not buy the car at the end of the lease. Their efforts associated with your choice are simply the overhead cost of operating a leasing company and should be built into their rates. When you quote your customers a price and then increase the price after the purchase or lease where will it stop. How about a “fuel adjustment fee” because of rising gasoline prices or a “power fee” to help the banks pay their light bills?

Pricing of products should be transparent, up front, and not convoluted so that the consumer can easily shop and compare. Costs of doing business should be included in the pricing of products, not tacked on after the price is quoted and/or the contract is signed. Of course, that’s exactly why banks and car dealers have obscure fees like this, so you can’t easily shop and compare. Right now there isn’t much you can do about the lease acquisition fee except voice your opinion to your bank and your congressman.

Car Dealers Exploiting the Elderly

I use the term “car dealer” often in my columns and I want to make it clear that I am not trying to get personal. I could use the terms “car salesman” or “car sales manager”, but the dealer is the boss and I firmly believe the placard Harry Truman had on his desk, “The buck stops here”. The guy that owns the place is responsible for the actions of his employees. Just because he doesn’t know that there are some salesmen or managers taking advantage of his customers, is no excuse.

When I became a senior citizen I truly began to see the world in a different light. I have been a car dealer for over 40 years, but I have seen my own business through the eyes of a senior citizen for only the last few. One thing that has helped this awareness has been my relative new public persona, brought on by my TV commercials. Seeing me on TV (and also reading this column) precipitates a lot of phone calls, emails, and letters from seniors in Palm Beach, Martin, and St. Lucie counties. Some of these are very complimentary. Many of them are also calls for help or advice from those who were taken advantage of when they bought their car.

I get more calls from widows than any other single category. In my dealership last Friday, I was introduced to a widow in her seventies who had come in to buy a car with her nephew. She had never bought a car before. Her husband had always handled this responsibility. He passed away 2 years ago. She was very wise to bring along her nephew to assist her in her first car purchase.

I am learning as I approach 70 that I’m not quite as sharp in some areas as I once was. My memory is not as good and I am not as fast as I used to be. This is not to say that I am not as smart as I was when I was younger. In fact, I’m a lot smarter. There was a great article in the February 16 Wall Street Journal entitled “The Upside of Aging”. It explained how recent scientific studies have proven that even though certain mental abilities like memory and reaction times regress as we age, other more important mental abilities like judgment, empathy, vocabulary, and semantic memory more than offset the negatives. Semantic memory is the recollection of facts and figures from your field of endeavor or hobby and is most robust in seniors. If you would like to read this article, send me your email address or fax number and I will send it to you.

Buying the right car at the right price is no easy task. There are a lot of variables like trade-in allowances, monthly payments, discounts, interest rates, lease or buy, finance or pay cash, and all that I just mentioned has to do only with the cost of the car. What about which is the best make and model for you? This process should take lots of time in the study and preparation but too often purchases are made in just a few hours with little or no preparation.

The reasons why the elderly are so often targeted and exploited by car dealers (and other businesses) are many and complex. For one thing, there are just a lot of elderly people living in Palm Beach, Martin, and St. Lucie Counties. When a reporter asked John Dillinger why he robbed banks, Dillinger replied, “Because that’s where the money is”. Even though most senior citizens are smarter than ever, I believe that we are perceived by many as not being so smart. We are looked upon as easy prey. Also, I think that we pre-baby boomers grew up in a more trusting, family oriented time and we sometimes trust others more than we should.

In summary, if you are a pre-baby boomer like me, take extra precautions before you enter a car dealership. Do your homework carefully. Never, never make a rush decision. Do not buy that car on the same day you come into the dealership. Go home, discuss it with friends and family, and sleep on it. And if you call me, please call me before you buy the car, not after it’s too late.

Don’t Pay for Nitrogen In Your Tires

It’s bad enough that gas stations now make you pay to inflate your own tires with air. But at least you are getting what you paid for…air which does what it’s supposed to do and that is to keep your tires inflated.

Many car dealers are now charging customers to fill their tires with “pure” nitrogen. They tell you that nitrogen does not leak from your tires as quickly as air and this means that your tires will stay properly inflated longer before you have to add more nitrogen (and pay the dealer for this). What the dealers don’t tell you is that the air that is already in your tires is mostly nitrogen anyway. In fact, 78% of the air you breathe is nitrogen. Oxygen represents only 12% of the air. The rest of air includes carbon dioxide and other inert gases. I’m not sure what the purity of the nitrogen is that they pump into your tires for $199 (this is not a typo…one hundred and ninety-nine dollars for filling four tires full of mainly air). But, you can be assured that the purity of the nitrogen is not 100% and is probably closer to the 78% that regular air consists of.

Even knowing all of the above, I have to admit that I was curious about whether or not nitrogen could prolong tire live and improve fuel economy because I knew that NASCAR drivers used nitrogen filled tires and I heard that Volvo’s came from the factory with nitrogen in their tires. I have a BS in Physics from the University of Florida and a Master of Science from Purdue and these kinds of things interest me. So, to find out for myself, my dealership conducted an experiment. We have a fleet of rental cars and we filled two tires of each car with pure nitrogen and 2 tires with regular air. Over the course of many weeks, we measured the pounds of inflation in the nitrogen and air filled tires. There was no difference in the inflations of the nitrogen v. s. the air filled tires. If there is no difference in the inflation, there can be no benefit from nitrogen of better gas mileage or fuel economy.

You may have read my column last week, “Beware the Phony Monroney”. In that column I warned you about car dealers that add a window sticker designed to look exactly like the federally mandated Monroney sticker. This is where you should look for dealer installed accessories and additional dealer markups over MSRP. Often these accessories have a high price but a very low cost. In the case of nitrogen in four tires selling for $199, this is exactly the case. Since air is already 78% nitrogen, it costs virtually nothing to extract nitrogen from the air. To be generous, let’s say the dealer’s cost is $10 including labor. That is a 2000% markup when he charges $199.

Just when I thought I’d seen it all, I actually saw window stickers on a car today from another dealer who had actually modified the Monroney label to show nitrogen filled tires. To do this, the dealer actually had to remove the real Monroney label, make the modification showing the nitrogen tires, and re-paste the Monroney label to the window. Federal law requires that a Monroney label not be removed until the vehicle is delivered to the customer. It also requires that it not be modified. This new vehicle was one we had traded for from another dealer and still had the counterfeit Monroney and the modified real Monroney attached to the window. The modified Monroney looked so authentic, that one of my technicians and my service manager inquired of Toyota about the necessity of our carrying nitrogen tanks so that we could refill these tires with Nitrogen. If this could fool a Toyota dealer’s technicians and service manager, it might fool you too.

This particular dealer also had another charge added to the counterfeit Monroney sticker, a $4,995.00 “Market Value Adjustment”. Most prospective customers think that this is part of the manufacturer’s recommended retail price. They either end up paying too much money for the vehicle or think they are getting more for their trade-in or a bigger discount than they really are. It’s easy to allow someone an extra $5,000 on their trade-in when you have already marked the car up an extra $5,000 over sticker price.

BUYERS ARE LIARS!

I’m always amazed by the way car dealers who use deceptive advertising and unethical sales tactics rationalize their behavior by actually blaming you, their customer. The following is a direct quote from an anonymous car dealer’s email I received this morning in response to one of my recent columns in this newspaper: “I don't think you would make any of these comments if you sold fords in a non-metro market. How do you expect dealers to change when consumers think they should pay less than dealer cost for a car and then walk into any other form of retail store and pay what they are asking?? Your ideas are noble but there are other dealers who have tried 'your' methods who are no longer in business.” This dealer is saying that his customers are so ruthless and cunning that they won’t buy a car unless they can buy it below his cost and his only solution is to trick them into thinking that they are buying it below his cost, like tacking on a “dealer fee” to the price they quoted the customer. He also goes on to say that my “ideas are noble” but I can’t possibly be successful and I will go broke trying. I truly appreciate his concern and I want to assure him, if he is reading this article, that my business is doing very nicely.

This attitude is actually a prevailing part of the culture in many car dealerships. Many dealers, dealer managers, and sales people don’t trust their customers (how paradoxical!). They don’t even like their customers. A very common expression among car dealers and their sales staff is “Buyers are liars”. This means that a prospective customer will not tell you the truth about the condition of his trade-in, he will lie to you about the price he got from your competitor, and he is likely to remove those new tires that were on his trade-in when the dealer appraised it when he comes in to pick up his new car.

There are also a lot of dealerships where used car buyers and people with bad credit are held in especially low esteem. They have nicknames for people with bad credit like “slugs” and “roaches”. Apparently dehumanizing these unfortunate members of our society with derogatory labels makes it easier to treat them so shabbily. People with bad credit are targeted with direct mail and newspaper ads making absurd promises that convince prospective customers that they can finance a car no matter how bad their credit. In some dealerships applicants are coached on how to falsify credit application and pay records. In some cases the applicant may not even know he is signing a false credit application which is federal offence. In most cases the credit is refused and the applicants are not even given the courtesy of a return phone call to tell them this.

I don’t claim to be a psychologist (and I don’t even play one on TV), but I have read articles explaining how humans will stereotype other people in a fashion that falsely justifies their negative behavior toward those same people. We see this with racism and even in warfare. If you make yourself believe that car buyers are out to take advantage of you, “buyers are liars”, you can’t feel guilty about tricking them into paying a dealer fee. If you trick a “roach” or a “slug” into coming in to buy a car on credit when they probably can’t, why should you feel guilty? After all, roaches and slugs don’t have feelings.

What these kinds of dealerships don’t understand is that you must trust a person first before you can expect her to trust you. You have to treat a person with respect before you can expect that person to respect you. Somebody has got to go first. My experience over the past 40+ years as a car dealer is that 99.9% of my customers are good people who I can believe and trust. Those are pretty good odds and I just assume that every customer I am dealing with is part of that 99.9%. Once in a great while I get burned, but the loss from that one in a thousand that takes advantage is far out-weighted by the other 999 who respond positively to my trusting them and treating them with respect.

Beware the Phony Monroney

“Phony Monroney” should not be confused with “Boney Maroney” (I got a gal named Boney Maroney. She’s as skinny as a stick of macaroni). That song was first recorded by Larry Williams during my high school years, 1956-1958. You will appreciate this lame attempt at humor only if you are about my age, 66.

The Monroney label is the window sticker that is mandated by federal law to be affixed to every new vehicle sold in the United States up until the time the new owner takes delivery. The name, Monroney, derives from Senator Michael Monroney’s law passed by Congress in 1958. Prior to the proposal of this bill, there was often a large discrepancybetween the showroom price and the actual price of a new vehicle. The fact was that existing price tags did not tell the full story. Most customer-quoted prices were for "stripped-down" models and did not include additions for preparation charges, freight charges, federal, state, and local taxes, or optional factory-installed equipment requested by the purchaser. These hidden charges were used by some dealers to increase the selling price while giving the new vehicle buyer an inflated idea of their trade-in allowance. This price confusion led to a slump in auto sales during the early 1950's. Senator Monroney's bill was designed to prevent the abuse of the new vehicle list prices, but would not, however, prevent dealers and buyers from bargaining over vehicle prices.

Well, as you might expect, car dealers have figured out a way to evade this very good law. An alarmingly large number of Florida dealers use a label that is designed to look almost identical to the official Monroney label. It has the same coloring, fonts, type size and layout. This “phony Monroney” is affixed right next to the genuine article. Unless you really look close and read all of the fine print, you will have no idea that you are looking at a counterfeit Monroney label. This phony Monroney includes extra charges to artificially inflate the manufacturer’s suggested list price, MSRP.

One of the most egregious of these charges is an addition of pure markup just for profit which has a variety of names. Some of these are “Market Adjustment”, “Additional Dealer Markup”, “Adjusted Market Value”, “ADM”, “Market Adjustment Addendum” and “Market Value Adjustment”. This is simply an amount that the dealer adds to the manufacturer’s suggested retail price. It is virtually always used in high-demand, low supply cars. I have seen these labels with charges as much as $10,000 added to the MSRP. Additions of $1,500 to $3,995 are common. Dealers also use the counterfeit labels to price dealer-installed accessories, which are OK, as long as the accessories are not marked up higher than the manufacturer marks them up.

When customers confuse the phony Monroney with the real one, this distorts their point of reference for comparing prices between different dealerships. One manufacturer’s Monroney labels are consistent. A 2007 Honda Accord with the same factory accessories will have the same MSRP at every Honda dealership you visit. But if dealers fool you into thinking their label is part of the Monroney, you are not comparing “apples and apples”. This can adversely affect a good buying decision in a number of ways. Some buyers focus mainly on how big a trade-in allowance they can get for their old car. If one dealer has the same car marked up $3,000 more than another dealer, he can offer you $3,000 more for your trade and still make the same profit as the other dealer. Some buyers focus on how big a discount they get from “sticker”. It’s easy to give a higher discount if you have artificially inflated the MSRP by thousands of dollars.

My advice to you is carefully inspect the sticker on the new car you are contemplating buying. Read it completely and especially the fine print. If there is a second label on the car, it is possible that it is fair. This would be for purposes of adding an item, installed by the dealer like floor mats or stripes, priced the same as the manufacturer charges. If that second label includes a markup over MSRP for no reason other than profit for the dealer, make sure that you adjust for that number in your comparisons for discounts and trade-in allowance. Some dealers also add a second markup to these labels and that is the infamous “dealer fee” also sometimes called “doc fee” and “dealer prep”. Some dealers do not put this on the phony Monroney but print it on their buyer’s orders and program it into their computers.

Should I Buy a Car or Have a Colonoscopy?

If you are over 55, you should have had a colonoscopy. If you haven’t, call your doctor because this could save your life. It did mine, but that’s another story. I had another colonoscopy yesterday and I have to tell you that it’s a very unpleasant experience, mainly from the mental anguish anticipation and the discomfort of the preparation the previous day. I had a lot of time to think about my procedure and I started thinking about how this experience parallels that of buying a car. It’s something you must do and has a very good benefit, but you dread the process.

This column, my 39th for Hometown News, has consisted mainly of suggestions and inside information that can make your new or used car buying experience less of a fearful occasion. If this is the first column of mine you have read, you can read all of them on my Blog, www.EarlStewartOnCars.com. Some of the titles/subjects are “Always Get an Out the Door Price”, “Bait and Switch Advertising”, “Beware of Deceptive Internet Car Pricing”, “Beware of Direct Mail Car Advertising”, “Buying a Car When You Have a Credit Problem”, “Eight Steps to Ensure You Are Buying the Best Car for the Best Price”, “List Price and MSRP Might Not Be the Same”, “Negotiating to Buy a Car”, “Open Letter to Florida Car Dealers” (I, II, III, and IV), “Shop Your Financing and Trade”, “Should I Buy My Car at the End of the Lease?”, “Should I Lease or Buy my Next Car?”, “Should I Pay Cash or Finance My Next Car?”, “Should I Trade in My Old Car or Sell it Myself”, “Tell Your Car Dealer to be Nice”, “The Right Used Car is a Better Buy than a New Car”, “Translating Misleading Car Ads”, “What is the True Cost of that New Car?”, “What to do if You Are Treated Badly by a Car Dealer”, “When is a Car Sale Not a Car Sale?”, and “The Internet Price is the Lowest Price for a New Car”.

Almost every one of these articles originated from my customers’ and others’ experiences when buying cars from other car dealers. I get a lot of calls from people who have never bought a car from me. They call to tell me of their bad experience with another dealer and, when I get several calls on the same subject, I write a column on it. People often call me asking for advice or assistance after they have already bought, which is “closing the barn door after the horse is gone.” On more than one occasion I have called car dealers asking them to consider undoing a wrong they have caused one of their customers. I have to confess that I am “batting zero” on this effort. I won’t give up, however. I just made another call this afternoon on behalf of a customer whose installment sales contract, signed by her and the dealership had a higher interest rate than a second contract that the dealer sent to the lender. The customer told me she signed only one contract, the one she took home a copy of.

One thing that amazes me about these weekly columns that I have been writing for almost a year is that no car dealer has ever called me to complain or for any other reason. I have not been sued either. I think that says something about the truth of my articles. I’m not a lawyer, but I do know that you can’t successfully sue somebody for libel or slander if they write or say the truth. I know of one car dealer who threatened to cancel her advertising in the PB Post because she thought it owned the Hometown News. I am puzzled why not one single dealer would call me just out of curiosity. I don’t have a secretary and I don’t screen any of my calls…nor do any of my employees. They do know how successful my dealership is and how fast my sales are growing. They know that I am selling a lot of their former customers. Many of these new customers tell me how they told the other dealers why they chose to take their business elsewhere. I believe that before too much longer we will see some changes in the way other car dealers do business even if they refuse to call me, as I have repeatedly invited them to do. Sooner or later they will understand that treating your customers with courtesy and integrity is just plain good business.

BEWARE OF DECEPTIVE INTERNET CAR PRICING

Last September, I wrote a column for this newspaper entitled “The Internet Price is the Lowest Price for a New Car”. If you missed that, you can read all of my columns at www.EarlStewartOnCars.com. Although, I still believe you can find your best price on the Internet, I thought that I should write another column to stress how careful you must be in determining whether or not you have a real, bottom line, out-the-door price.

The reason that a dealer always tries to post his lowest new car price on the Internet is simple. If he doesn’t the Internet shopper will simply ignore the price quote and buy from another dealer who has a lower price. A car dealer gets “just one chance” to sell you a car when he puts his price out on the Internet. The Internet is theoretically the purest and best form of a competitive marketplace, favoring the buyer. Think about it…if you wanted to take the time you could get a price quote from every Honda, Toyota, or Ford dealer in the USA! There are about 1,300 Toyota dealers in the USA. It might take you a while (about 8 days if you worked 8 hours a day and spent 3 minutes per email), but you sure would know who was selling your selected model Toyota for the lowest price.

Whether you are reading newspaper ads, watching TV ads, reading direct mail advertising, or surfing car a dealer’s Web site you have to be careful of deception. Internet advertising on car dealer’s Web sites and their Internet price quotes can be more deceptive than other media. This is because the Internet is the “new frontier”. Legislation has not caught up with the Internet like it has newspaper, TV, and radio advertising. A dealer can get away with a lot more on his Web site and price quotes than he can in a newspaper ad. Electronic media and newspaper advertising are also a lot more visible to the regulators than the Internet.

I’ll give you an example of the type of violation you must be wary of. There’s a car dealer in West Palm Beach who quotes prices to his customers over the Internet excluding $879.90 which are dealer fees. He also calls them doc fees, but they are simply profit for him. Furthermore, he excludes any “dealer installed option”. This means that he can charge you anything he wants for stripes, glass etching, floor mats, undercoating, etc. that he has pre-installed on the car. He does disclose in fine print the fact that he does charge doc fees and dealer installed options, but does not tell the amount of the charge. This is your “surprise” when you come into his dealership to take delivery.

Your defense against this sort of thing is to call those dealers who have given you the lowest price quotes on the vehicle you want to buy. Start with the lowest price and simply ask, “Is there anything else added to my price other than Florida sales tax and a state fee for a license tag or tag transfer?” If they do add something, find out specifically what they do add so that you know you have an “out-the-door”, bottom line price when you come in to take delivery. If they won’t give you a clear answer or are ambiguous, hang up and call the next dealer.

Dealers who advertise deceptively have the philosophy that all that counts with their advertising is to “get them in the door”. Another slang dealers use for this is “driving floor traffic”. They calculate that if they can trick enough people to come through the door, they will be able to fool a certain percentage of them. It’s like Abraham Lincoln said, “You may fool all the people some of the time, you can even fool some of the people all of the time, but you cannot fool all of the people all of the time.” Well these dealers don’t have to fool all of the people to make lots of money. All they have to do is fool some of the people all of the time and that’s exactly what their advertising is designed to do. Don’t be one of those who are fooled.

IS A CAR DEALER CRAZY IF HE RECOMMENDS THAT YOU BUY A CAR FROM HIS COMPETITOR?

Well, I guess I’m “nuts” because I am recommending that you consider CarMax the next time you are in the market for a used car. In case you haven’t heard of CarMax, they are the largest seller of used cars in the USA. Unfortunately for readers of the Hometown News, the nearest location is in Boynton Beach, just off I-95, but it might be well worth your drive. CarMax is a publicly owned company that was spun off a few years ago from Circuit City. They are extremely profitable and if you had bought stock in CarMax one year ago, you would have more than doubled your money.

The reason they are so profitable is that they offer the buyer of a used car something that most other used car sellers can’t…a fear-free buying experience. There is only one thing scarier than buying a new car and that is buying a used car. At CarMax you can buy a used car with trust and confidence. For one thing, they offer a 5-day money back guarantee, with the only condition being that you return the car in the same condition it was when you purchased it. The cars that CarMax sells are carefully checked over and thoroughly reconditioned. They wholesale the cars that don’t meet their standards. At CarMax you aren’t dealing with traditional “used car salesmen”. They hire quality individuals from outside the retail car business and train them in the CarMax way of doing business. The price you see on the window and the price you are quoted is “almost” an out-the-door price. Unfortunately, they do add a $149 “dealer fee” which they call a “processing fee”. This is the only thing that CarMax does that I don’t like. However, compared to virtually every other Florida dealer, their “dealer fee is low”.

Another thing they do which I think is really great is buy your old car from you whether you buy a car from them or not. They don’t play games by over-pricing their used cars so that they can pretend to be giving you more for your trade-in then they really are. They do not discount their cars from their posted prices. You can compare their prices with other dealers knowing that the CarMax price you were quoted is their best price (plus $149). My experience with CarMax has been that they pay fair wholesale prices for used cars. My dealership will sometimes sell a non-Toyota trade-in to CarMax because they can appraise it for more money than we can. Sometimes we suggest that our prospective customers drive their trade-in to CarMax and get a price bid, if they feel we cannot offer them a high enough trade-in allowance.

One of the reasons that I know so much about CarMax is that I hired away one of their best managers several months ago. He worked for CarMax in South Florida for 9 years and I was able to persuade him to come to work for my dealership by telling him that we wanted to be as good as CarMax and one day even better. His name is Jeff Dallin and he is now my used Car Manager. We have implemented many of the CarMax ways and even improved on some of them. For example, we over a seven day unconditional money back guarantee on every used car we sell and we do not charge any dealer fee. We also survey all of our used car buyers to measure the level of customer satisfaction for our whole department and each individual salesman. We copied CarMax’s “Above and Beyond” award which is given to employees who do something extra special for a customer.

I’m not ashamed of the fact that I am copying a competitor who has done something better than I can. In fact, this is exactly how Toyota became the best auto manufacturer in the world. Some of you are old enough to remember the first car that Toyota sold in the USA in 1958. It was called the “Toyopet”. I won’t mince words…it was a piece of junk. But Toyota sent engineers to observe the way GM, Ford, and Chrysler manufactured cars, adopted their best practices, and improved on many of them. Today Toyota builds the highest quality cars on the Planet.

WHEN IS A CAR SALE NOT A SALE?

A common definition of the word sale is “an occasion (usually brief) for buying at specially reduced prices”. The problem with many sales advertised by car dealers and other retailers is that they are virtually always advertising a sale, which violates the part of the definition of a sale that it is brief. Also, the price they advertise is not “specially reduced”, but the same price you can always buy that car for.

It is very hard to tell a legitimate sale from one that’s not. One suggestion is to be somewhat skeptical if a dealership is constantly advertising sales and specials. If you are always having a sale, then by definition it is not a sale. Wal-Mart addresses this in a very upfront manner. They advertise that their prices are low every day and that’s exactly how they mark their merchandise. Wal-Mart doesn’t try to trick you into coming in on a certain day or weekend because, if you don’t, you won’t get the lowest price.

There is an axiom of advertising that says you must always have a “cause for action” built into your ads. When you say all the good things about your products and prices, you don’t have a good ad unless the reader has a specific reason to come into your store immediately or within a short time. The reason for this is pretty obvious. Most people are procrastinators. I am. That’s why I am typing this column at 4:26 PM on Friday and my deadline is 5:00 PM. That’s what sales are all about. Make the prospective buyer think that if he doesn’t come in by Sunday at 6:00 PM, the prices will go back up again on Monday. Unfortunately, that is rarely the truth. You can almost always buy that car on Monday for just as good a price.

As you know, buying a car is often a negotiation between the buyer and the seller for the highest trade allowance for the trade-in and the lowest price or monthly payment on the new car. A car dealer will sell you a used or new car at his lowest price, if you are a good negotiator, 7 days a week in almost every case. One of the few exceptions to that is when the manufacturer puts on an incentive for a short time because this effectively lowers the price to the dealer. He is likely to pass along some or that entire price cut to you. Another exception is when a dealer inadvertently stocks too many vehicles of one or more models. This isn’t something that would likely happen very often or certainly not all the time. Many dealers always advertise that they have too many cars in stock. If I owned a dealership that always had too many cars, I think I would consider replacing the man who ordered my cars.

If a sale is legitimate, it should be a relatively rare occasion and there should be an honest, understandable motivation for that car dealer to take a much lower profit on those particular cars. Of course the acid test is to shop the sale price with that dealer’s competitors. I find that dealers usually will quote their lowest price on the Internet and this is a great place to determine the validity of the “sale” price. Be careful when checking prices on the Internet and the newspaper because most dealers charge a “dealer fee/doc fee/dealer prep” on top of the selling price. This price ranges from around $500 up to $1,000. Florida law requires that dealer fees be included in advertised prices, but this law is regularly broken in the newspaper and Internet ads.

Another thing that you should be careful of is to find out how many of the type of cars that you might be interested in are on “sale”. The trick here is to advertise a car at a huge discount but there are only one or two cars available at that price. The chances of you buying one of them are slim and none. They may say, “Many others available at similar savings”, but the trick here is to know what the definition of “similar” is. Scientists say Humans are very similar to Chimpanzees. The other trick on switching you to another car at “similar” savings is that a dealer can now legally add his dealer fee/doc fee to the 2nd car because it was not advertised.

I must apologize to you for a stupid error I made in my column which ran in this paper on Friday December 29, “Should I Pay Cash or Finance My Car?” In the 3rd paragraph there is a sentence, “If you have a 3 year CD paying you 6%, on $25,000, you will earn $9,929.99 at the end of 3 years.” The actual interest earned on a 6% $25,000 CD for 3 years is only $4775.40. This big, dumb mistake did not change the point I was trying to make, but it sure made me feel silly. I sincerely apologize and I will try to be a lot more careful to check my arithmetic in the future.

SHOULD I BUY MY CAR AT THE END OF THE LEASE?

The best thing about making this decision is that you are holding the best hand in the card game between you, the leasing company, and the dealer. That is because you know your car better then they do. You probably have been driving it for close to three years, you know how well you have maintained it, how worn the tires are, whether or not its been wrecked and repaired, and how many dings, dents, or upholstery blemishes there are. You know if it was garaged and how you carefully you drove it. You also know, better than anybody, how well it runs. All of these things determine the value of your car.

Unless you buy a new car, you can not have as much confidence in any other used car that you may buy than your own used lease car. The only assurance that you have when you buy somebody else’s used car is their word or the dealer’s word about how it was driven and maintained. That mean that if you did take very good care of your lease car, drove it carefully, kept it in a garage, waxed and washed faithfully, and maintained it carefully it is worth more to you than anybody else because you are the only one who knows that. And you can never be sure about that for any other used car you might buy.

Given that you like your lease car and want to keep it, the next step is determine its wholesale market value. The leasing company usually is not in the business of selling cars, just leasing them. Getting rid of off-lease cars is expensive and time consuming for them. You have an advantage here too and you should be able to negotiate a good price. Remember, you know your car much better than they do. They will usually give you a price you can buy the car for without even looking at it. Oftentimes they will call you first about buying your lease car before the lease is up. Be careful when this happens because this can mean that they are facing a loss if they have to wholesale your car at the auction. They are calling you to sell you your car for more money than they can get for it at the auction.

That is why you need to establish the current wholesale market value for your car. Car dealers call this ACV, for actual cash value. Check the Internet for information on the value of your car. www.kbb.com, the Web site for Kelly Blue Book is one of the best sources. Consumer Reports can also give you this information. The best check on the wholesale value is to actually drive your car to 3 or 4 car dealerships that are franchised for your make. If you drive a Ford, visit as many Ford dealerships as you can and tell them you want to sell your car. You aren’t misleading them because it’s a lease car. You could exercise your option to buy it from the leasing company and them resell it to the dealer, if the dealer’s offer was higher. If you live near a CarMax store, the largest retailer of used cars anywhere, they buy a lot of used cars over the curb and their prices are usually very competitive.

Now that you are armed with the true market value for your car, you can negotiate the best price with the leasing company. Even if they won’t sell you the car for the ACV, wholesale value, paying as much as $2,000 over wholesale for a car you have absolute confidence in is a good deal. If you can buy it for wholesale or below, you should celebrate!

Another thing to be on the lookout for with the leasing company is when they offer to extend your lease for the same monthly payment you are currently making. That is not a good deal. They are doing this because they will lose money if they sell this car at the auction at the present time. They want you to keep making payments on the car so that their depreciation rate catches up with the residual value. The residual value is the price they guessed your car would be worth in 3 years. If you had leased the car for longer at the onset of your lease, the payments would be lower than they are now. Why should you pay the leasing company the same as they charged you for a shorter lease?

SHOULD I PAY CASH OR FINANCE MY CAR?

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

Many people think they can get a better deal on a car if they pay cash. This was true 40 years ago before dealers discovered the new profit center referred to as the Finance and Insurance Department. Today this is not true. In fact, paying cash may even make the actual vehicle cost you more! The reason for this is that car dealers make money when they handle the financing with the bank or with the manufacturer’s lenders like GMAC or Chrysler Credit. A dealer typically averages about $700 on every car he handles the financing on. Therefore, if the dealer’s minimum acceptable profit on a car was $1,000, he may sell it to someone who he could make $700 finance profit on for less than someone who he knew was a cash buyer. Dealers will sometimes sell a car for zero profit on the car because they can make a good profit on the financing.

One argument in favor of financing a car is being able to keep your money invested and earning a greater return than your interest cost of financing. The often overlooked fallacy is not making the comparison realistic by understanding that when you pay cash you are really “borrowing money from yourself”. If you have a 3 year CD paying you 6%, on $25,000, you will earn $4775.40 at the end of 3 years. If you finance a $25,000 car for 3 years at 6%, you pay only $2,379.80. But, to compare apples and apples you would have to pay yourself back for the $25,000 you “borrowed from yourself” to pay for your car. When you paid yourself back with interest monthly over three years, the interest you earned would equal the interest paid on the car loan. If you can earn more than 6% with your money, than financing the car for 6% would be a good idea.

One argument against paying cash for your car is that it becomes an asset of your estate and your net worth. This means that someone who won a lawsuit against you could seize your car for payment. If you had to declare bankruptcy, you could be forced to sell your car to settle your debts. If you owed the IRS money and could not pay, they could take your car. None of these things could occur if you had a loan on your car which offset the equity.

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

10 NEW YEAR’S RESOLUTIONS FOR FLORIDA CAR DEALERS

I am suggesting these New Year’s resolutions for car dealers.

(1) Stop charging your dealer fee (a. k. a. delivery fee and doc fee). This fee is really profit for the dealer disguised as an official fee charged by the state or federal government. When you quote a customer a price, it should include all charges except for sales tax and license fees. State law in Florida does not prohibit this or even put a cap on this fee as many other states now do, but it’s just the wrong thing to do.
(2) When you advertise a car at a price, clearly disclose to the reader how many cars are available at that price. Dealers get around the law by listing a stock number next to the car, as if this is will explain to the reader of the ad that there is only one available at this price.
(3) Don’t advertise a large discount on a car unless the discount is from MSRP. Dealers advertise huge discounts from prices that are artificially inflated. What good is a $15,000 discount if the dealer has a $15,000 markup above MSRP on that car?
(4) Don’t pander to folks with bad credit and give them false hope. Tell those with bad credit that if their credit is too bad, you cannot obtain financing for them. When you advertise…”No credit or Bad Credit is No Problem” you aren’t telling the truth. When you advertise that “no credit application is refused”, you are misleading the customers to think that no loan is refused because of bad credit. You are not telling them the truth.
(5) Don’t advertise that you can sell used cars as low as $99. There is no such thing as used car that can be profitably sold for $99. The scrap metal or the parts on a car that cannot run or is totaled in an accident is worth $150 or more.
(6) Have a heart! I received a call this morning from the son of an 81 year old man who had been diagnosed with bipolar disorder and committed to a mental health institution under the Baker Act. The day before he was committed, his father bought a brand new car for $32,000+ from a well known South Florida dealer. The son read my column instructing those with a problem with a car dealer to call the owner or the general manager before taking legal action or notifying the press. When he tried this, he was stonewalled by both the general manager and the president of the dealership. His father had bought the car the day before he was committed to an institution under the Baker Act. This is not only heartless but just plain stupid. What do you think this will do for that dealer’s reputation when their customer’s son contacts the local TV stations and newspaper?
(7) Be accessible to your customers. You might think that you own and operate a pristine business that never offends or takes advantage of anyone, but you can’t be sure about that if you insulate yourself from your customers. You might be amazed at what you find out when you speak directly to your customers and even to those who wanted to be your customer but changed their mind for some reason.
(8) Don’t surprise your service customers with a “miscellaneous supplies fee”. Sometimes this is called an “environmental fee”. The price you quote your service customers should be the price they pay…not that price plus 10% which is pure profit to the dealer.
(9) (9) Don’t mark up your “hot models” over MSRP. The manufacturer’s suggest retail price affords the dealer very generous profit margin. Don’t exploit the temporary situation where demand for that hot model exceeds supply. This is no different than some gas station operators do during fuel shortages before and after hurricanes.
(10) Do away with the fine print. If there is something important that is worth reading in your ad, print it in a font size that can be read without a magnifying glass. If it’ not important, don’t put it in the ad. The only reason for fine print in a car ad is to hide something that you don’t want the reader to find.