The Dealer Fee, Bestiality, and Tallahassee Politics

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A Victorious First Step toward Outlawing the Dealer Fee

My appearance before the Florida Senate Commerce Committee went quite well last Tuesday, March 4.

The Senators allowed me all the time I needed to make my presentation. I gave them copies of newspaper ads illustrating my objections to the dealer fee and copies of my presentation.

Many of the Senators on the committee asked me questions which were very supportive and positive.

Several representatives from the Florida Automobile Dealers Association [FADA] testified, including dealers Chris Craft from Tallahassee and Herb Yardley from Stuart and Ted Smith the President of FADA. The committee was negative toward most of their testimony and this was reflected by the Senators’ questions. Several Senators challenged the speakers on their misstatements of fact and obvious contradictions.

The Senate committee is preparing a bill which will be sent to the House for endorsement and then to Governor Crist to be signed into law. I don’t expect anything drastic like making dealer fees illegal but I do feel that there will be a lot more disclosure required and I do feel there will be a lot more enforcement of the existing and new law. This is not to say that I will settle for this kind of compromise, but it’s a first step of a long journey until we outlaw the Dealer Fee.

But we have to keep the pressure on because in Tallahassee (just like Washington D.C.), “the squeaky wheel gets the oil”. Bills have a way of dying a natural death before they can become law. It’s a long, rocky road between the Senate Commerce Committee and Governor Crist’s office. I will continue to push, with your vital support, for the outlawing of the Dealer Fee, this license to steal from Florida’s car buyers.

Please call [and encourage others to call] our “NO DEALER FEE HOTLINE”, 1-800 909-9879 and visit our Web page www.NoDealerFee.com.

Below are my comments to Senator Alex Diaz de la Portilla and his committee.

Comments to Florida Senate Commerce Committee
Tuesday, March 4, 2:30 PM, Tallahassee


My name is Earl Stewart. I was born in Ft. Lauderdale, FL in 1940. I graduated from PBHS in 1958, University of Florida in 1963, BS Physics, and Purdue University, 1964, MSIA. I worked for Westinghouse for four years as an Electronics Engineer. I jointed my father in business in 1968. He founded Stewart Pontiac in West Palm Beach in 1937. I’ve been primarily in the retail automobile business for the last 40 years. I’m currently the sole owner and general manager of Earl Stewart Toyota in North Palm Beach and have been in the same location for the last 33 years. My three sons are employed in my business and my wife, Nancy, is also involved part time.

I’ve been a member of the SFADA and the FADA for my entire career and have serviced as a director for both organizations and on the Executive committee of FADA. I am currently chairman of the board of FLADCO, a Florida dealer-owned cooperative buying company.

(1) What’s bad about the dealer fee?

(a) In most cases the customer either does not know he paid the dealer fee or believes it is some kind of federal, state, or local “official fee”.
(b) In practice dealers do not include the dealer fee in the price of the car that is quoted to the customer. It isn’t included in Internet quotes and also not in verbal quotes over the telephone or in person.
(c) Although Florida law says that the dealer fee must be included in the advertised price, this is not happening in most cases. In the first place, there is virtually no enforcement of this part of the law. I’ve shown Senators Jeff Atwater and Alex Diaz de la Portilla copies of auto classified ads flagrantly violating this part of the law addressing dealer fees. Those dealers who do technically comply, get around it in practice by what I call “the old stock number trick” [Explain].
(d) There is no cap on the dealer fee and each dealer chooses whatever fee he likes. There is no one name for the fee. The Senate Investigative Report discovered 22 names and they only scratched the surface.

(2) Why the existing Dealer Fee Law is a Bad Law?

(a) It is written in such a way that dealers’ legal counsel have advised them “If you charge one customer a dealer fee, you must charge all customers the same fee”. Now, when the rare very astute consumer questions the legitimacy of the dealer fee, the sales person is instructed to reply, “All dealers charge this fee” and “We are required by law to charge everybody this same fee”.
(b) There is a provision that a “group ad” does not have to include the dealer fee in the advertised price. The argument for the exception to this part of the law on advertised prices is that it would be “too confusing” to list all of the different prices resulting from different dealer fees by different dealers.
(c) The law does not address ads which show discounts from MSRP instead of an actual price. Because the MSRP is standardized, a discount from MSRP is no different than a quoted price.
(d) The law allows dealers to advertise just one car at the advertised price. Dealers don’t disclose this by using an obscure alpha numeric code, usually included along with all of the listed options and accessories. This, unknown to the reader of the ad, is a “stock number” which means that the dealer is advertising only this one car at the price which includes the dealer fee. A typical stock number looks like this…#A23554B. The ads often also say, “12 more models available at this price”. But the other models are not the advertised car and now the dealer can add the dealer fee on top of the advertised price. Car salesmen are not paid a commission on this advertised car. Car salesmen work on 100% commission and have no incentive to sell an advertised car. In fact, their incentive is to be sure that you buy a different car. The odds of a customer actually being able to buy an advertised car are “slim and none”.

(3) What is my true motivation for opposing the Dealer Fee?

(a) I strongly believe that I’m doing the right thing. The dealer fee is a profit to the dealer…pure and simple. The law alludes to it covering certain costs of the dealer and requires that the dealer so state next to his dealer fee, but this is fallacious. When a customer pays me a sum to cover one of my expenses, she is increasing my profits. Saying that a customer should pay for a dealers cost of paperwork or preparation of the car is no different than saying the customer should pay the salesman’s commission, the dealer’s advertising, or part of his power bill. Any business’s overhead costs should be priced into the price of its product…not passed along to their customer separately from the pricing of their product.
(b) Because all car dealers have different dealer fees and some range up to at least $1,000, we cannot compete fairly on a level playing field. I am unable to advertise prices because those dealers who have dealer fees can understate their real price, knowing that they can add their dealer fee on at the last minute. For example, a Toyota Yaris with an MSRP of $15,145 has a profit to the dealer of only $584. Al Hendrickson Toyota in Coconut Creek, FL has a $999 dealer fee. This dealer can advertise a new Yaris for below his cost and make better profit than I can if I advertised and sold the car at MSRP.
(c) Our customers should have the right to shop and compare prices of cars just like they do TV’s, refrigerators, computers, or any other product. The Monroney label made a standardized MSRP the law for new car manufacturers over 50 years ago. The purpose for this law was to give the consumer the ability to accurately compare prices between different car dealers. If a car buyer is considering a Chevrolet Impala with a specific MSRP, he can shop for the dealer who gives him the biggest discount. Now, with virtually every dealer adding a dealer fee of a different amount, the intent of this federal law is circumvented.
(d) I would be less than honest if I didn’t confess that I’m benefiting from the positive publicity I get by opposing the dealer fee. If I’m not successful, I’m still a winner because the car buyers of Florida do agree with me. Any dealer could achieve the same status as I by unilaterally giving up the dealer fee.
(e) Car dealers rank among the most vilified businesses and professions. Along with lawyers and politicians, we are commonly ridiculed by comedians like Jay Leno and David Letterman. My sons will take over my business one day and I have four grandchildren who may continue it even further. My oldest son, Earl III, told me something a few years ago that I will never forget. He said that he enjoyed working for me and he enjoyed his job very much but what was most important to him was that he was proud to tell his son, Jake, my grandson, what he did for a living.

Senate Commission on Dealer Fee

My appearance before the Senate Commerce Committee went quite well yesterday.

The Senators allowed me all the time I needed to make my presentation. I gave them copies of newspaper ads illustrating my objections to the dealer fee and copies of my presentation.

Many of the Senators on the committee asked me questions which were very supportive and positive.

Several people from the Florida Automobile Dealers Association testified, including dealers Chris Craft and Herb Yardley and Ted Smith the President of FADA. The committee was negative toward most of their testimony and this was reflected by their questions. Several Senators challenged the speakers on their misstatements of fact and obvious contradictions.

The Senate committee is preparing a bill which will be sent to the House for endorsement and then to Governor Crist to be signed into law. I don’t expect anything drastic like making dealer fees illegal but I do feel that there will be a lot more disclosure required and I do feel there will be a lot more enforcement of the existing and new law.

Please check out the article that appeared in today's Sun-Sentinel about yesterday's hearing:

Senate panel takes up crusade against auto dealership fees
By Joshua Hafenbrack
Tallahassee Bureau
March 5, 2008
TALLAHASSEE
In South Florida car dealer Earl Stewart's ubiquitous TV ad testimonials, he likes to point out he doesn't charge "dealer fees." He even started a radio show and a blog to rail against the fees charged by many of his competitors in Palm Beach and Broward counties.They're the often-hidden costs — running $500 or more in many cases — tacked onto a car's price once customers are hauled into a back office to fill out financing papers.Now Stewart's fight against dealer fees has moved to the state Legislature, with a Senate committee agreeing Tuesday to craft consumer protections that would require greater transparency about the fees that usually aren't included in price quotes or Internet advertising.Testifying before the Senate Commerce Committee, Stewart, who owns a Toyota dealership in North Palm Beach, said dealer fees are meant to obscure a car's real price from customers and pad dealers' profit margins."It prohibits the legitimate dealer from competing on a level playing field," said Stewart, a Fort Lauderdale native whose family has been in the car business in South Florida since 1937.After hearing testimony from South Florida car dealers on both sides of the issues, the Senate panel moved to draft legislation to require dealers to disclose dealer fees in their cars' sticker prices.This approach doesn't go as far as 13 other states that have capped dealer fees, with limits ranging from $45 to $250, according to Senate investigators.Herbert Yardley, whose owns Massey Yardley Chrysler Jeep in Plantation, said the $599 dealer fee he charges is just one part of arriving at a car's overall price, a process he described as an "art, not a science." "I don't know that the state does belong in pricing," Yardley told senators. "Please let pricing be an individual issue."Josh Hafenbrack can be reached at jhafenbrack@sun-sentinel.com or 850-224-6214.

LET YOUR VOICE BE HEARD: OUTLAW THE DEALER FEE!

You can help us make the “DEALER FEE” Illegal in Florida.

If you call our No Dealer Fee Hotline, you can voice your opinion on the Dealer Fee, to the Florida Senate Commerce Committee.

They are conducting a hearing this Tuesday, March 4th, in Tallahassee to hear consumers views on whether this “license to steal” should be made illegal in Florida, as it has in 13 other states.

Click on http://www.nodealerfee.com/ for more information.

PLEASE DIAL 1-800-909-9879

FLORIDA POLITICS AND DEALER FEES

Boy am I getting a fast-track political education! I reached the ripe old age of 67 remaining a political novice. Lots of friends and associates kid me about being so politically naive. It’s not that I don’t read a lot of newspapers and watch a lot of politics on the news. I haven’t missed a vote for a local, state, or national candidate since 1961 when I became 21. But voting was as far as I went for most of my adult life. I did start making political contributions when I became a director of the Florida Automobile Dealers Association (FADA) a few years back. I felt that as a director I had to set an example. I remember asking my fellow dealers why we were giving money to politicians whose political philosophies were anti-business and they answered “because he promised to help us”. How could I disagree with that logic? The car dealers contribute individually, to a national PAC (Political Action Committee), DEAC and to a state PAC, CAR PAC. FADA uses this money to contribute to the campaigns of those politicians who promise to help car dealers get their agenda enacted into laws in Tallahassee. The #1 agenda item in 2008 is SAVE OUR DEALER FEE. Monies raised from members’ dues and other fund raising methods pay the salaries of lobbyists who spend lots of time schmoozing, persuading, and influencing, by any legal means, the votes of Florida Senators and Representatives.

I guess you could call this period of time in my life, Politics 101. Now that I’ve taken a position against the FADA and begun advocating making the dealer fee illegal, I’m working on my advanced degree in Political Science. There’s no better teacher than experience and that is what I’m getting. I’ve been publically decrying the dealer fee for several years. I’ve told anybody who will listen that I think it’s wrong that Florida law allows and in some ways facilitates and legitimatizes car dealers in increasing the price (and his profit) on the price he quotes his customers in a manner that often goes undetected or assumed by the buyer to be an official fee.

I guess some of the folks who listened to what I had to say about the dealer fee called Ken Pruitt who is the President of the Florida Senate. Under the pressure of his constituents, he formed a committee to investigate the dealer’s fee. This was a bit awkward for Senator Pruitt because the FADA is a very big supporter of his. This was another lesson in my political education. No matter how much a politician accepts in contributions from an individual, company, or organization, the voice of his constituents will trump that influence. The Senate investigation was not a very good one. In fact, it relied heavily on the input of the FADA. The Senate committee did not talk to a single car buyer. Senator Jeff Atwater told me that he was quite disappointed with this obvious flaw in the methodology.

By the way, Senator Jeff Atwater has been “anointed” to be the next President of the Senate, replacing Ken Pruitt, if he wins re-election this year. The President of the Senate is arguably the most powerful politician in Tallahassee. Senator Atwater knows that he has his work cut out for him to win re-election. This is because we also elect the next President of the United States this November. Senator Atwater’s district is heavily Democratic but he’s a Republican. In presidential election years there is always a much larger voter turnout. Former Democratic state Senator Skipp Campbell is running for Jeff Atwater’s Senate seat. It’s going to be a very close race to see who gets elected, Jeff or Skipp. It might not take much to swing enough voters one way or the other. Virtually all registered voters buy cars and that means almost all of them pay a dealer fee if they buy their cars in Florida. I’ll just bet that if somebody let all of the voters in Jeff Atwater’s district know just what a rip off the dealer fee is, this might influence who they vote for in the next election. Jeff has appeared on my radio show, met with me in person, and talked to me often on the phone about this subject. He believes that the current law addressing the dealer’s fee needs to be changed. He strongly believes that there should be much better enforcement of the current law.

On the other hand, Skipp Campbell simply believes that the dealer fee should be made illegal…no ifs, ands, buts, or compromises. In a meeting with Skipp three weeks ago, he told me that, if elected, he would work hard to make the dealer fee illegal. This is in contrast to Jeff Atwater’s view that a compromise between the consumers and car dealers can be accomplished by modifying the existing law and improving its enforcement by the Attorney General’s Office. In my opinion this issue between the two candidates can be a great thing for the car-buyers of Florida.

We have another politician who has appeared on the scene, Senator Alex Diaz de Portilla from Miami. Senator Portilla is the chairman of the Senate Commerce Committee, addressing issues like the dealer fee that affects consumers. Senator Portilla’s committee held a hearing to discuss the Senate Report on the Dealer Fee on Tuesday, February 19. I sent the chairman and all the other senators on his committee lots of information including my postings from this blog on the dealer fee and dozens of emails I have received from car-buyers who consider the dealer fee a “license to steal”. Chairman Portilla called me after the hearing and told me that he decided to table the dealer fee issue until the next committee meeting on Tuesday, March 4 at 1:15 PM. That is this coming Tuesday. He tabled the dealer fee issue because there were no consumers there to argue against it. But, he told me, the room was full of car dealers and their lobbyist. FADA had rallied the troops to defend their precious dealer fee. Senator Portilla saw no sense in hearing only one side of the debate and tabled it until this Tuesday. He has agreed to meet with me personally on Thursday or Friday, February 28 or 29.

I’m writing this column on Friday, February 22 and it won't be read in The Hometown News until a week later. It will be posted here on EarlStewartOnCars.com today. That gives me 11 days until the next Commerce Committee hearing to rally some car-buyers to sit alongside FADA’s car dealers and lobbyists. Only the loud, honest, voices of the voter’s of Florida can trump FADA. Will we be successful?

You can help me by calling and/or emailing Senator Portilla and the members of his committee:

First Name
Last Name
Dst
City
Local Phone
Email Address
Victor
Crist
12
Tampa
(850) 487-5068
crist.victor.web@flsenate.gov
Alex
Diaz de la Portilla
36
Miami
(850) 487-5109
portilla.alex.web@flsenate.gov
Rudy
Garcia
40
Hialeah
(850) 487-5106
garcia.rudy.web@flsenate.gov
Charlie
Justice
16
St. Petersburg
(850) 487-5075
justice.charlie.web@flsenate.gov
Evelyn J.
Lynn
7
Daytona Beach
(850) 487-5033
lynn.evelyn.web@flsenate.gov
Steve
Oelrich
14
Gainesville
(850) 487-5020
oelrich.steve.web@flsenate.gov
Jeremy
Ring
32
Margate
(850) 487-5094
ring.jeremy.web@flsenate.gov
Burt L.
Saunders (B)
37
Naples
(850) 487-5124
saunders.burt.web@flsenate.gov
Gary
Siplin
19
Orlando
(850) 487-5190
siplin.gary.web@flsenate.gov

MY CONVERSATION WITH SENATOR ATWATER ON THE DEALER FEE

Followers of this column know that I’ve been trying for several weeks to discuss the dealer fee issue with Senator Jeff Atwater, the next President of the Florida Senate. I was successful and I met with the Senator for nearly two hours on Saturday, January 26. Not only that, but he agreed to call in to my radio show [Seaview AM 960, WSVU airing Saturday mornings between 9 and 10] this Saturday, February 9].

Regular readers please excuse a little recap to bring those up to date who aren’t aware of the dealer fee and the pending legislation. The dealer fee is a “license to steal”, made legal by a bad Florida law. A dealer fee goes by at least 22 different names, according to the State Senate Investigating Committee. Dealer fee, documentary fee, dealer prep fee, and administrative are just a few. The highest dealer fee I know of is $999 charged by a dealer in Coconut Creek (west of Ft. Lauderdale). The lowest I know of is $389 and the average is around $700. This “fee” is just dealer profit disguised to make people believe they are paying an official fee to state, local, or federal government. Lots of dealers omit this from their advertised price (which is illegal) and surprise those customers who happen to notice it in the paperwork when they take delivery. Most customers never notice the dealer fee at all. Those who advertise legally and do include the dealer fee in the price, generally advertise just one vehicle at that price. Unfortunately this specific car has always “just been sold” when you come in on the ad. But, they tell you, we have lots more just like it. The other cars might be just like it, but not the price. Now, the law allows the dealer to add the dealer fee to the price. Enough people have complained about this that Ken Pruitt, the current Senate President, formed a committee to investigate making the dealer fee illegal or capping it. This recommendation was sent to the legislature several months ago. You can read this report by clicking on http://www.earlstewart.com/.

In my meeting with Jeff Atwater I was quite surprised to learn that he knew virtually nothing about the dealer fee or the Senate Investigating Committee’s report. There are many, many issues that state senators must deal with and this is just one. Jeff Atwater has been spending a large amount of his time on insurance and property tax issues. I furnished him with lots of information including a copy of the Senate Investigating Committee’s report, copies of every auto classified ad in the PB Post on Saturday [with my annotations] , January 26, copies of dealer’s vehicle buyers’ orders disclosing their dealer fees, and copies of articles I had written on this subject for my Blog and Hometown News. With all modesty, I must say that I did a very good job of educating Jeff Atwater on why this dealer fee is so bad for Florida car buyers.

The Senator expressed surprise and disappointment with the lack of thoroughness of the Senate committee’s report. The committee worked hand in hand with the Florida Automobile Dealers Association (FADA) who is heavily lobbying the Florida legislature for the preservation of the dealer fee. I told Jeff Atwater that this was like “sending a rabbit after lettuce”. Furthermore, no one in the senate committee ever talked to a single consumer, a car buyer. How can a committee possible make an intelligent recommendation that will protect the rights of the consumer when they hear only the car dealer’s side of the story?

I showed Jeff Atwater quotes from the FADA magazine, Velocity, “Senator Atwater- to support his campaign for Senate because he has promised to help us again this year-goal is $50,000.” Dealers have already contributed $24,500. The FADA has listed the preservation of the Dealer Fee as their #1 agenda item…”The Senate’s threat to cap your dealership service fees could reduce your gross profit on each new and used vehicle”. And FADA is hiring new lobbyist. Quoting from Velocity, “HELP US HIRE A LOBBYING TEAM. The attack on your dealer service fee will require a TEAM of new lobbyists-those funds cannot come from our political action committee (CAR-PAC). Every dealer who charges a service fee should cut a healthy check payable to “FADA” for our legislative action fund. We will hire top-notch lobbyists with your contributions.”

It’s clear that the car dealers of Florida will fight tooth, nail, and wallet to preserve their Florida State “license to steal” aka the Dealer Fee. But the good news is that we have a huge opportunity to prevail with the help of Senator Jeff Atwater. What can you, the readers of this column and my Blog, do? Let Jeff Atwater know how you feel. Relate your experience with the dealer fee when you bought your last car. Most car buyers don’t even realize they paid a dealer fee but the chances are 99.9% that if you bought a car in Florida you paid one. You can email Jeff Atwater at Jeff@SenatorJeff.com and you can call him at 561 625-5102. If you email him, please cc me at earls@earlstewarttoyota.com. If you have a question you would like me to ask the Senator when he calls into my radio show this February 9 between 9:05 AM and 9:20 AM, please email it to earlstewart@seaviewam960.com or you can call me on my cell phone at 561 358-1474.

BEWARE OF DECEPTIVE INTERNET CAR PRICING

BULLETIN: Senator Jeff Atwater will call into my radio show this Saturday, February 9 at 9:05 AM. You can listen in at Seaview AM 960, WSVU. You can stream the show on the Internet by clicking on www.seaviewam960.com.


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 $699.95 for a “dealer fee” plus $199.95 for a “doc fee”. This totals $899.90 in a surprise price increase when you come into the dealership to pick up your car. The written warning you have is an asterisk denoting some fine print at the bottom of the Internet quote that says *plus tax, tag, and fees. The “fees” mean $899 in additional price and profit to the dealer on top of the price you were quoted. As if this practice isn’t bad enough, many people come in, sign the papers, and drive their new car home without even realizing that they paid an extra $899.90 because it is hidden in the voluminous paperwork that you sign rapidly in the dealer’s finance office.

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.

SHOULD YOU BUY A CAR THROUGH A BROKER?

If you aren’t familiar with car brokers, they are third parties [mostly individuals but some companies] who act as an intermediary between you and the car dealer, supposedly to get you a better price than you would be able to obtain by yourself.

Most dealerships, including mine, deal with brokers. Virtually all brokers are paid a fee by the dealer and some also charge the customer…a “double dip” you might say. The fee the brokers charge range all over the map. I don’t remember paying a broker less than $500 and have paid up to $5,000. The charges to the customers range from $250 to $750. If the broker is charging you a fee, you can be almost certain he is also charging the dealer at least as large a fee.

Another way brokers do business is to actually buy the car and then sell it again to you. To do this they must have a dealer license; otherwise they would have to pay sales tax on the transaction. Buying the car allows them to mark the car up to you as their compensation. They may charge you a fee too.

As you can see, the price of going through a broker raises the price of the car that you buy. The only question is does it raise the price above what you could buy the car directly? The answer to this question depends entirely on your buying skills. If you are of average intelligence and follow the advice that I’ve given in these columns, you should be able to buy most cars at as low a price as a broker can. This means you will save anywhere from $500 to $5,500 in fees that you don’t have to pay. I don’t care what a broker may tell you, a dealer will always sell you the car at just as low a price as he charges a broker…if you are a skilled buyer and do your homework.

Of course there are reasons other than price that car buyers seek out brokers. As I’ve often said, buying a car can be a very unpleasant experience. One of my columns is entitled, “Should I Buy a Car or Have a Colonoscopy?” If you go about buying a car the right way, you minimize the unpleasantness. Don’t ever go into a dealership without doing your homework about the exact year, make, and model you want, accessorized exactly as you wish. Always get at least three competitive prices. If at all possible do your shopping in the comfort of your home on the Internet. If you’re not cyber savvy, ask for help from a friend, son or daughter, or grandchild who is. You will get your best price on the Internet without ever having to leave the comfort of your home. Two excellent Web sites you can consult are www.kbb.com and www.edmunds.com. They have vast amounts of free information on dealer cost, quality ratings, trade in values, etc.

A lot of people rely on their credit unions for advice on which dealer they should buy a car from. It sounds like a good idea because your credit union handles thousands of these transactions and has experience with lots of car dealers. I must warn you that there are employees in credit unions who are paid by the car dealers for referrals…not any different than a broker’s fee. Also many credit unions sell extended warranties on cars that they finance and they may refer you to dealers who agree not to offer to sell you their extended warranty. This is a potential conflict of interest. I advise you to get at least three competitive prices from three dealers, including the one that your credit union referred you too.

If you are accustomed to going through a broker to buy your cars, I suggest that on your next purchase that you also get prices directly from two other dealers. Compare those prices with your broker’s price and be sure you don’t pay him his fee unless you buy the car through him.

SOMETIMES NICE GUYS DO WIN

Leo Durocher is often quoted as saying “Nice guys don’t win ball games” [He later denied ever saying this]. But this expression is quoted often too justify aggressive, rude, exploitive and unethical business practices. A surprisingly large number of otherwise intelligent business leaders actually believe this saying. This is especially prevalent in the retail car business. I’m a member of an organization called a “20 Group”. This group of car dealers (about 20, hence the name) meets for 3 days 3 times a year to compare business practices and financial results. Our members are from all over the USA. The majority of the members of this group think my way of doing business is not smart. Most Florida dealers I know don’t understand or agree with my business practices.

This column is not a forum to celebrate my accomplishments or for trying to sell you a Toyota, but to share my knowledge with you about how to buy your next car or have your car serviced without being taken advantage of. With that said, I tell you that my Toyota dealership sold more new Toyotas last year than the other Toyota dealerships in Palm Beach County, one in West Palm Beach and one in Delray. Of course I’m proud of that accomplishment, 33 years in the making. After all, my dealership is in Lake Park, which many of you may not have even heard of. I always mention North Palm Beach in mentioning my dealership’s location because we are on the city limit of Lake Park and North Palm Beach. Our population in Lake Park in northern county is much less than that of West Palm Beach and Delray. We just aren’t “supposed to” sell more cars than the dealers from the “big city”.

Was it Will Rogers who said, “It ain’t braggin’ if it’s so”? I’m not sure if I agree with that and I always feel a little funny about tooting my own horn. The reason I’m writing about my dealership’s accomplishment is not because of what we did but how we did it. We were able to accomplish this truly amazing feat by being “nice guys” and we did win spite of what Leo Durocher may have said. What most other car dealers can’t understand is how we can be so successful without advertising the way they do. By that I mean we virtually never advertise cars, prices, special sale events [Once last year we did advertise a sale on new Priuses because we temporarily had an oversupply]. If you have seen my ads, you know how I advertise. It’s all about my direct personal access via my red phone, my decrying the dealer fee and calling for it being made illegal, and telling you that you will always be treated with integrity, respect, and courtesy in my dealership.

Our sales practices and our service practices are like our advertising. We truly walk the talk. I have four red telephones located in the service drive, customer waiting lounge, show room, and the body shop. Beside the red phone is a sign with my picture saying, “The buck stops here. If we have not exceeded your expectations, pick up this red phone and be directly connected to me, the owner”. These red phones immediately ring my cell phone which I have with me 24/7 [I turn it off when I go to sleep at night]. I invite all of my new customers to a reception every two months, speak to them, and give each one my business card with my home telephone number. We don’t have secretaries in my company and we don’t have voice mails. Nobody, including me, has their calls screened. In fact, if the person you are calling is out of the dealership, the call is directly connected to her cell phone. My instruction to all of my employees is “If the customer thinks she is right, take care of the problem”. The important thing about this philosophy is not debating who is right. The important thing is what our customer believes. Our motto is “It’s what you do for your customer when you don’t have to that is the true measure of character…like sticking up for somebody that can’t defend himself”.

There is another reason that I’m “bragging” in this column. Other businesses and especially other car dealers are sitting up and taking notice. Hopefully we will see some of them change their business practices like dropping the dealer fee and changing their bait and switch advertising tactics. If you’re a car dealer reading this column, give me a call and let’s talk. I want to tell you how much better you will do by treating your customers the way your mother probably told you you should. Not only will your business do better but you will sleep a lot better at night.

Pitfalls to avoid when having your car serviced

Before I get into the pitfalls, it is important for you to understand how important it is to have your car serviced according to the manufacturer’s recommendations. The pitfalls and consequences of not doing so can be equal to or greater than those you might experience at the hands of an incompetent or unethical service department.

I strongly recommend that you have your car serviced and repaired by a franchised dealer of the make of your vehicle. I know that this statement, coming from a franchised car dealer, may be met with some skepticism. Listen to my reasons before passing judgment. Modern vehicles are highly complex computerized machines requiring very sophisticated diagnostic equipment and highly trained technicians. The evolution of new, expensive diagnostic equipment requires constant updating. The evolution of car technology requires continuing education of dealers’ factory trained technicians who attend many weeks of schools every year. Forty years ago, it was possible for a really good mechanic to fix anybody’s car. Those days are gone and your car needs a highly trained specialist with the very latest diagnostic equipment. It is impossible for an independent service company to be competent in servicing and repairing all makes of automobiles.

Carefully choose the dealership that will service your car. You do not have to take your car to the dealership that sold you the car for warranty repairs, as many believe. Every dealership of your make car will welcome your warranty and non warranty work. Do your homework on which dealer has the best service department. Every dealer is graded in customer satisfaction by the manufacturer. Ask to see a copy of his CSI (customer satisfaction index) scores. Check with the BBB and the County Office of Consumer Affairs.

When you take your car in for maintenance or repairs, always ask for an estimate. State law requires that a service department not exceed a written estimate by more than 10%. When paying your bill, scrutinize the detail to be sure that you know exactly what each charge means. Most service departments add a fee on top of everything else with various labels like “miscellaneous supplies”, “sundry supplies”, “environmental handling”, etc. This fee is simply a 5% or 10% charge tacked onto the total bill. If you object to this fee, which you certainly should, dealers will often waive it.

You will find that prices for maintenance like oil changes, alignments, tire rotation and balancing, etc. are usually priced competitively. Where you have to be careful is in the pricing of major repair items like transmission, engines, and air-conditioners. When quoted a price on a big repair, don’t be afraid to negotiate. If you let it be known that you are willing to take your car elsewhere (even if you’re bluffing), you can often negotiate the price down significantly.

You should always make an appointment before bringing your car in. Appointments should be scheduled at relative slow times and days. Avoid bringing your car in early on a Monday morning and other very busy times. You want the service advisor to spend as much time with you as is necessary. This will allow you to drive the car with the service advisor if necessary to identify a specific problem like a squeak, rattle or vibration. Pick your car up at a time when the service advisor or technician has time to road test the car with you again to be sure that the problem was fixed.

Don’t be shy about asking for a loaner car when you have to take your car back a 2nd or 3rd time for a repair that was not done properly. It’s the dealership’s fault and you should not be inconvenienced. On a comeback, always talk with the service manager directly. Also ask that they assign their best technician to the job.

As I have said in earlier columns, there is nothing more important than choosing the right dealership to do business with. No service department is perfect and never makes a mistake. What you want to find is that service department that, in addition to being competent, will fess up to their occasional mistakes, sincerely apologize and make them right.

The SubPrime Crisis and Car Sales

You have read a lot about the subprime crisis, especially if you invest in the stock market. All the talk so far has been about its effect on the housing market, which continues to decline, more so in South Florida than just about any other place in the USA.

Subprime loans are those made to those with poorer or lesser credit. When lenders get overly aggressive and careless in making these kinds of loans, it causes huge losses by the lenders, institutions that buy packages of these kinds of loans, and investors.

I can already see this affecting the retail automobile business. With the exception of a few imports like Honda, Toyota, and Hyundai, most car sales are way off. This is partly do to the plunge in the home building market, but it is also due to lenders tightening their credit reins which affect the subprime market first and most.

Those manufacturers of cars and dealers selling those makes whose sales are way off sometime resort to desperate measures to prop up their sales. The subprime customer is an “easy sale”. In fact, the subprime customer requires very little selling at all, just the ability to find someone to make him a car loan. The dealer can “sell” that kind of a customer any car at any price. The customer is just grateful that the dealer was able to get him financed. Dealers have a nickname for these kinds of customers…”Get-Me-Dones”.

There are a number of things that those with marginal or bad credit should be very careful of when buying a car. Oftentimes dealers will falsify credit applications in order to get the loans approved. The customer signs the credit application, testifying to the truth of all of the information. You are breaking a federal law if you obtain a loan by lying to the bank about your credit. More often than not, the car salesman or finance manager actually fills out the credit application and the customer just signs it. You should read your credit application very carefully and be sure that all of the information is accurate.

Another thing you should verify before signing a finance contract with a lender is that the options and accessories on the car you are buying have been accurately represented to the lender. Dealers will often represent to the lender non-existent accessories like leather, sunroofs, CD players, and even misrepresent the model of the car to make the bank think their collateral is worth more. This allows the dealer to obtain a larger loan than the bank should be making and also allows the dealer to make a larger profit.

You will notice more ads today aimed at those with credit problems. Dealers will advertise, “No credit-no problem” or “No credit application refused”. Another favorite is “We’re looking for good people with bad credit”. These ads are to target the desperate buyers who are easy to sell cars to and are likely to be very careless about verifying that their credit application is accurate. In fact, some buyers are desperate enough that they will join in the deception of the lenders.

The subprime crisis, which has been underway in the housing market for almost one year, is just getting started in the retail car market. There are a lot of bad subprime loans being carried by subprime lenders. They are already tightening up in their credit requirements and they are being much more careful about verifying the accuracy of credit applications and the accessories that are represented to be on the cars they finance. Lenders are calling the customers directly to ask them if they have leather or a sunroof on the car they just bought. More subprime lenders will be either going out of business or switching to conventional lending only.

All of this will hurt the sales of those makes and those dealers that have relied heavily on subprime customers. I wouldn’t advise you to buy stock in Ford, GM, Chrysler, or any other struggling auto manufacturer at this time. In my opinion, their sales will be dropping a lot more due to the subprime crisis.

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 accept any advertising and therefore are not beholding to any companies. 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 almost 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. In fact, the last issue of CR gave negative reviews to two models of the cars I now sell, Toyota. I have to confess that with some makes 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.

This annual auto issue 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.

Reply to letter to the editor about my column, “Don’t take away grandma and grandpa’s freedom machine”

Thanks for your letter disagreeing with my column about seniors driving.

You write, “If you are no longer physically or mentally competent to drive, you are a danger to yourself and everybody else on the road.” I totally agree with that statement. This should apply to all ages and our state should be diligent about testing everybody’s mental and physical faculties before allowing them to have a driver’s license.

The media does seem to feature stories of older people involved in accidents. And some of them should not possess licenses. In fact, some of them don’t, like the 94 year old man I mentioned in my column. But, the fact is that younger people cause far more accidents than senior citizens. The proof of this is that insurance companies charge older drivers lower premiums than younger drivers. I’m not sure why media makes a bigger deal about old people causing accidents than young people. Maybe it sells more newspapers.

What motivated me to write my column were the unfeeling and selfish attitudes of a grandson and a stepson who didn’t want their grandmother/stepmother to lease a new car. This 90 year old woman is mentally acute and physically fit. She is perfectly capable of driving her car. In fact, as a footnote to my column, the stepson filed a complaint against me with a state agency that protects the elderly from abuse. The state sent an investigator and a police officer to interview the woman in her home and found her to be sharp as a tack, mentally and physically. In my opinion the grandson and the stepson were more concerned about depleting their inheritance than the well being of this nice, old woman.

I see a lot of younger people who don’t have the respect for their elders that I did when I was young. I hope you’re not one of them. Many young people today seem oblivious to the fact that they too will be old one day (if they’re lucky). They stereotype all senior citizens as a bunch of doddering old f---s who are mentally and physically incompetent. We old folks are not much different that you young whippersnappers…some of us are sharp and some of us aren’t.

2008 New Years Resolutions for Car Dealers

Last year I wrote a list of ten recommended resolutions too, but it appears that most of the car dealers missed that column. Things have not improved. This year’s list is modified and enhanced.

(1) Don’t surprise your customers with a Dealer Fee. Since last year the heat has been turned up on dealers who add this dealer profit onto the price, disguising it as an official fee. The Florida senate recently completed an investigation of this practice and made recommendations to the Florida legislature to pass a law capping or eliminating dealer fees. Just last week a class action suit was certified by the court against a Jacksonville dealer. Both of these events will likely have severe consequences on dealers who charge dealer fees and this applies to most every car dealer in Florida.
(2) Don’t advertise a price on a car that you won’t sell. How would you feel if you went into Best Buy to purchase a flat screen plasma TV only to find out that there was only one being sold at the advertised price? You would be angry, wouldn’t you? Do you think your customers feel any differently when you advertise a very low price on a car in the newspaper and you have just one car which is never available? You also don’t pay your salesman a commission if they sell this car. Even if the car is there, how anxious will your salesman be to show your customer that car.
(3) Don’t mark your cars up over MSRP. The Monroney label is a federal sticker required to be on every new car you sell. When you add thousands of dollars to a “phony Monroney” you are tricking your customer. You make him believe he is getting a bigger discount than he really is. You can also trick him into thinking he is getting a bigger trade-in allowance than he really is.
(4) Don’t lie to people with no credit or bad credit. This is just like taking advantage of a child or a handicapped person. You are kicking someone while they’re down. There are a lot of people out there who have bad credit. When you advertise that “no credit application is refused” or “no credit and bad credit and are no problem” you are simply lying. You do this because if you fool enough people, you can find some that will squeak by on credit approval. Or you will surprise the person with a huge down payment and/or interest rate. Some of you even lie, or encourage your customer to lie, on their credit application. This is a federal crime.
(5) Don’t include used cars in your new car ads. You advertise new cars and current model used cars together in your ad which is seemingly a new car ad. In the very fine print, you have a disclosure that says “some cars may be pre-owned”. Of course you can price a used car much lower and trick the customer to come in thinking he can buy a new one for that.
(6) Don’t take advantage of the elderly. Most of the calls I receive complaining about being scammed by a car dealer are from the elderly, especially widows. Widows often left the car buying up to their husbands and have never bought a car on their own. Last week I got a call from a widow who bought a new Honda only to discover that the car had been previously totaled and sold at a salvage auction. When she complained, they took all the original paperwork back (all the evidence) and replaced the car with a lower priced model. How would you like it if your mother, grandmother or your widow was taken advantage of like this?
(7) Make yourself totally accessible to your customers. You might think you know what is going on in your dealership, but you haven’t a clue unless you communicate regularly with your customers. You might be a good person who means well, but when most of your employees are paid on commission you have to keep a very close watch on them and your customers. I don’t have a secretary, nobody screens my phone calls, and I give my business card with my home and cell phone numbers on it to all of my customers. I probably sell more a lot more cars than you...about 450 a month. If I can be totally accessible to all of my customers, why can’t you?
(8) When you quote a customer a price for service, don’t surprise him at the cashier with a “sundry supplies fee”. Some dealers call it a “hazardous waste disposal fee” and some call it a “miscellaneous supplies fee”. It’s just more profit to you and you calculate this by simply tacking on 5% or 10% of the bill when your customer is paying at the cashier.
(9) Don’t hide big down payments in the fine print. You advertise very low monthly payments on purchase or leases buy in the fine print which is often readable only with a magnifying glass, you require a large down payment. $4000 or more is common.
(10) Don’t surprise your customers with “dealer installed accessories”. Don’t advertise a low price with a disclaimer in the fine print that the price will be increased by whatever accessories you chose to add at to the car at whatever price you decide to charge for those accessories.

Grandma’s and Grandpa’s “Freedom Machine”

You may have read in the newspaper a couple of weeks ago about a 94 year old man who hit a woman riding a bicycle. It wasn’t the man’s fault; the woman, in her fifties, ran a stop sign. They put the old man in jail overnight and he was given probation because he was driving with no license. It had been taken away because he failed his driver’s test. He said he had to drive because he had to take his wife to the doctor and pick up medicine for her.

There is another reason that a lot of younger people don’t seem to understand why this old man still owned a car. If you are one of these people, think back to the first time you ever drove a car. Think back to the time you owned your first car. Can you recall that wonderful feeling of FREEDOM? No longer did Mom or Dad have to take you to school, to work, to the store, or to a friend’s house. Or, you didn’t have to take the bus, the street car, or impose on a friend who already owned a “freedom machine”. If you are a guy, do you remember how you felt when you first picked your girlfriend up at her home in your very own car? I don’t know about you, but I still feel a tingle when I think about it. I really can’t think of a more memorable experience in any young person’s life. Your first kiss is probably a close second [My first car was a 1951 Pontiac Chieftain & my first kiss was from Mary Ann Riggle during a “spin the bottle game”].

If you are one of those younger people who curse at that gray haired driver in front of you because she is driving too slowly, just remember that she is probably a safer driver than you. Newspapers like to feature stories of senior citizens having accidents and questioning their mental and physical faculties for driving but insurance companies charge senior citizens lower premiums than you. That means they have fewer accidents and cause fewer injuries. Admittedly that is partly because we seniors drive fewer miles but it’s also because most of us drive slower and more carefully than you.

My Uncle Charlie died eight years ago. He was 94. My Aunt Marion died within a year of Uncle Charlie. They lived in the same very modest, small house on Valencia Drive in West Palm Beach for fifty years. But they always owned a Cadillac and it was always parked outside in their driveway. Up until the time they were in their late eighties, the highlight of their week was to take a Sunday drive in their shiny Cadillac. Uncle Charlie always drove. When his eyesight got too bad to drive, he still kept that Cadillac in their driveway, always clean and shiny. His eyesight was still good enough so that, from his rocking chair in his living room, he could see that big Cadillac sitting outside (and so could his neighbors).

My father died when he was 86 and he drove a Pontiac TransAm up until the very last. He had cataracts removed from both eyes and back then, you had to wear “coke bottle” style glasses to see after this operation. He had no peripheral vision and there were a lot of scrapes, dings, and dents that appeared on both sides of that TransAm. Thank God he never had a serious accident. I saw Dad every day and I would see that the dents and scratches were regularly repaired. He always said he didn’t know where they came from and I never questioned him about that. Maybe I was wrong, but I didn’t have the heart to ask him not to drive anymore. I knew how important that car was to Dad and I knew how devastating it would be to him if he couldn’t drive anymore.

You may have heard of George Greenberg a. k. a. the “Mayor of Clematis”. He died a few months ago at the age of 91. He owned Pioneer Linens on Clematis Street in West Palm Beach, a store founded by his father, Max, in 1912. George and I were close friends and I delivered a eulogy at George’s funeral at the request of his grandson and daughter. George always drove an old Buick station wagon, although he was a wealthy man and could have bought any car he wanted. A couple of years ago, George finally treated himself to a new Mercedes Benz SLK-Class convertible! Boy did George look good in that car and he was always smiling when he drove it! When he was diagnosed with brain cancer and given only months to live, he finally had to stop driving his freedom machine. His grandson drove him to our monthly dinner at Carmine’s Ocean Grille and picked him up. It never was the same for George after that.

At my Toyota dealership in North Palm Beach, we have a lot of older customers. It’s just the demographics of northern Palm Beach County. My average customer is 55 and I have lots of customers in their seventies, eighties, and nineties. Maybe it’s because I’m a senior citizen too, but I especially like talking to my older customers and I’ve become personal friends with some. I can tell you from personal experience how important their cars are to them in their latter years. During your middle years when you have so much more going on in your life, your car becomes more utilitarian and you take it for granted. But when you retire and your life is not as hectic your car returns to the importance it had when you were sixteen…your “freedom machine”.

We recently leased a new Camry to one of our very good customers. This was the third car that she got from us over the last seven years and she had just turned 90. One of my managers, who has worked for me for 20 years and is a neighbor of hers, handled the lease. About a month after she took her new Camry home, her Grandson learned of the transaction and demanded that we rescind the lease. When we spoke to our customer, she let us know that her Grandson was very upset with her for leasing the car. He didn’t think she should be driving a car anymore and that she wouldn’t live long enough to make all the payments on a 4 year lease. We offered to refund all of the profit on the lease (about $850), but the Grandson insisted that we take the lease car back. This would cost my company thousands of dollars because of the depreciation a car takes on as soon as it is titled as a used car.

Yesterday afternoon my customer’s Grandson and Stepson visited me in my office. They continued to demand that I rescind the lease [Only the leasing company, Southeast Toyota Finance can rescind the lease] and absorb the thousands of dollars in depreciation on 1 month old used car. They suggested that I may have broken laws by exploiting the elderly and that if I did not succumb to their demands they would sue me. They had already called Toyota to complain about my actions. Not so politely, I asked them to leave my office.

This experience troubled me for the rest of the day and even last night and is what inspired this column. Now I understand why I was so angry at the actions of my customer’s Grandson and Stepson. They didn’t seem to understand how much that car meant to their Grandmother/Stepmother’s happiness and what an important thing her “freedom machine” was to her. I have to wonder how much of their ire was due to genuine concern for her or the potential financial impact on her estate. Her Grandson told me that she had put only 1,500 miles on her last car and what does she need a new car for? He just doesn’t get it! A new car is a lot more than just a way to get to the drug store. To a senior citizen it’s a source of pleasure, pride, and comfort, knowing that it’s in their driveway for everyone to see and it’s there if they need it.

One of my sons just called me to double check on the correct time for him to come over for Thanksgiving dinner today. I told him that I was writing this column and we discussed the subject. I also told him that I hoped that neither he, nor his two brothers would ever take away my “freedom machine”.

Avoiding the Minefield of Fine Print in Car Ads

I wrote a column for this paper on September 7 entitled “Quick reference Guide to Fine Print in Car Ads”. Since then dealers have come up with so many more gimmicks and trickery that I felt compelled to write another column adding the latest bait and switch fine print disclaimers. All of these are taken directly from the PB Post auto classified section. You will probably need a magnifying glass to read some of these. I do.

Several of the fine print disclaimers you will read below are illegal under Florida law but the dealers constantly run them with impunity. For example, Florida law requires that the advertised price of the car must include all charges except for sales tax and license tag. The dealer fee must be included in the advertised price and some dealers either are ignorant of this law or just ignore.

I don’t understand why the Florida Attorney General’s office ignores this. In fact, I don’t understand why the local newspapers that run these ads don’t take a stand. I guess Bill McCollum and Tom Giuffrida don’t read my column.

Smart buyers read the fine print What do you suppose motivates this dealer to hide this sentence in the fine print of his very deceptive newspaper ads? Is this just a very bad joke on his customers? Does he think that the customer will forgive him for being baited and switched because he has also included this sarcastic phrase?

Some vehicles listed may be pre-owned This dealer will have used cars mixed in among the new cars that he has advertised. Unless you can read the fine print, you don’t find out until you come into the dealership.

“$1,000 cash offer” paid out in any form or combination of forms I’m not exactly sure what the dealer intends to communicate here, but interpreting this literally means he can pay you with a credit toward the purchase of another car, in extended payments over time, or maybe even in shiny beads and trinkets like we used when we bought Manhattan from the Indians.

Must take delivery today To get the advertised price you have to drive it home the same day. If you take delivery you also have to sign all of the papers including finance arrangements. This precludes you from doing any do diligence in getting competitive bids on the car you’re buying, the interest rate and trade in allowance.

Price includes $2,000 cash or trade equity This simply means that the price that you can read in the full sized print has been reduced by $2,000. If you find and can read the fine print, it tells you have to pay an extra $2,000 above the advertised price.

Hazardous Waste Disposal Fee This is just one of many phony fees you can be charged in dealers’ service departments. Other names dealers dreamed up for this extra, surprise profit to the dealer are shop supplies, miscellaneous supplies, and sundry supplies. This fee added by taking a percent of your total service bill up to 10%. If you take issue with this charge, there is a good chance the dealer will waive it.

700 miles per month This is a limitation on the number of miles you can accumulate on your lease car without paying a penalty at the end of your lease. The amount of miles allowed varies but they usually are much less than an average driver drives. If you average 15,000 miles per year, your penalty on a 36 month lease with a 700 mile per month limit and a $.25 per mile penalty would be $4,950!

Offers may be cancelled at any time without notice This is pretty self explanatory if you can read the fine print. If the dealer decides that he doesn’t want to honor the price offered in the his ad, he can just say “I changed my mind”.

Very short lease term & high down payment Nothing sells cars like low monthly payments. A car dealer can make a monthly lease payment as low as he wants by reducing the number of months of the lease and increasing the down payment. I’m looking at an ad in the PB Post right now advertising an SUV for $19,999 or just $199 per month. In the fine print it says 27 month lease and $3,000 down plus a $799 dealer fee.

Plus dealer installed options The price you see advertised in the paper is not the full price. This loophole allows the dealer to tack on thousands of dollars in overpriced accessories to the price that was advertised.

With approved credit The lease payment or purchase payment you see advertised is based on someone with very, very good credit. Sometimes the ad will specify a minimum Beacon score of 750 or even 760. An almost negligible percent of people have a credit score that high. This payment gets you in the door and then they tell you your credit isn’t good enough to qualify for that payment.

Advertised offer good on select in-stock vehicles only Dealers often advertise just one car at a price below their cost. They don’t pay the salesman a commission if he sells that vehicle. The chances of that car being available for you to buy are “slim and none”. Even if the car was still there, the salesman would do everything in his power to sell you a different car that he could earn a commission on.

Owner Loyalty Rebate Manufacturers offer special cash rebates to current owners of their car. These rebates are not available to you if you don’t currently own that particular make of car. For example, if you own a Honda, and want to buy a Toyota, you don’t qualify for a Toyota loyalty rebate. That price you see advertised won’t be available.

Military Rebate If you are on active duty in the US Armed Forces you qualify for this rebate. Of course the price you read in the paper already discounts the price by this amount and the dealer increases it if you are not a “soldier”.

College Graduate Rebate If you have graduated from an accredited 4 year college within the last six months, you qualify for this rebate. And the price in the paper is discounted by this amount.

Dealer Loyalty Rebate To qualify for this rebate that is already taken out of the advertised price you must have bought a car from this particularly dealer within the last year.

Price …plus, tax, tag, and fees The red flag word here is “fees”. The fees these dealers refer to is a “dealer fee” which is synonymous for dealer profit. Most people think it’s a federal or state tax of some kind. It’s nothing more than more money for the dealer that is not disclosed in the price of the car.

Offers expire date of publication or may be cancelled at any time without notice This simply means that the prices, payments, etc. you have read have no validity whatsoever. The prices are not good tomorrow, but they aren’t even any good today because the dealer can cancel the offer without notice.

Not responsible for typographical errors This is just one more way for a dealer to explain why they can’t sell you the car for the advertised price…We don’t have to honor that price because it was a “typographical error”.

Vehicle Art for illustrations only. This means that that car you are looking at with the really great looking wheels might not have those wheels on the one you buy. Or, maybe it doesn’t even have that sunroof you see in the picture.

Minimum trade based on dealer list price The dealer list price is not the same thing as the manufacturer’s suggest price. Dealers add markups to the Monroney label also known as MSRP or manufacturer’s suggested retail price. They label this markup (often on a sticker designed to imitate the official federal Monroney label). Dealer markups of $3,000 and much more are common on such “counterfeit Monroney” labels. In this case, the dealer has marked up the MSRP far enough so that he can offer a minimum $10,000 trade-in allowance.

Offer not available on advertised cars Folks, it’s hard to believe that even a car dealer would have the unmitigated gall to print an offer in his newspaper advertisement with an asterisk that referred to fine print saying it doesn’t apply to any cars in this advertisement.

My advice to you is to ignore all car dealers’ newspaper advertising. Most car ads are designed to “get you in the door” so that they can sell you some other car than the one advertised so that they can make more money. If you must respond to a dealer’s newspaper ad, please be sure you break out your magnifying glass and carefully read the fine print.

Results of Florida Senate Dealer Fee Investigation

An attorney, Renee Gordon, from the committee formed by Senator Ken Pruitt to investigate fees that car dealers add to the prices of their cars in Florida sent me a copy of this study last week. You can access this study directly by clicking on this Web link, http://www.earlstewart.com/ and then “Results of Florida Senate Dealer Fee Investigation” in red.

(1) The report defines these dealer fees as a “discretionary charge that represents costs and profit to the dealer for items such as inspecting, cleaning, and adjusting vehicles, and preparing documents related to the sale.” My argument with this definition is that when a business charges a customer for a business expense/cost, that charge becomes a profit to the business. Why is it necessary to use the phrase “costs for items such as inspecting, cleaning, and adjusting vehicles, and preparing documents related to the sale?” Once a customer pays the business for these costs, that payment becomes profit to the dealer. This profit is no different than the markup included in the price of the product the business is selling. And this is exactly where the dealer fee should be, included in the price of the car as part of the profit margin.
(2) All new car manufacturers that I know of reimburse the dealers for “such items as inspecting, cleaning, and adjusting new vehicles”. Charging the customers for this doubles the profit to the dealer for these items. This senate study notes that Florida law “prohibits dealers from charging customers for any pre-delivery service required by the manufacturer, distributor, or importer, for which they are reimbursed by the manufacturer, distributor, or importer.” Since all new cars dealers are reimbursed, why is this part of the disclosure that the dealer must print on his buyer’s order?
(3) The study says that the dealer fee varies among customers of the same dealership. And in a footnote, the study says “as with all charges imposed by the dealer, this fee may be negotiable.” This contradicts my understanding of the regulations on dealer fees. My understanding is that if the dealer elects to charge a dealer fee, he must charge every customer the exact same dealer fee. It is my understanding that if he removes the dealer fee from one transaction, he exposes himself to the liability of having to refund the dealer fee to all of his past customers. The way a dealer can get around this is to lower the price of the car by the amount of the dealer fee, but leave the dealer fee on the buyer’s order.
(4) The Florida Automobile Dealers Association is quoted in the study as saying that the dealer fee must be included in all advertising. This is not being done and, in fact, the rules leave “what is advertising” up to subjective interpretation. For example, prices on the Internet do not have to include dealer fees. Take a look at any South Florida newspaper, read the fine print, and you will see many ads excluding dealer fees from the advertised prices.
(5) FADA, the Florida Automobile Dealers Association spokesman told this study that a reason for the dealer fee was because manufacturers had reduced dealers’ profit margins. The fact is that manufacturers have no say so as to a dealer’s profit margin. A dealer may charge his customer any price he decides for a new car. A manufacturer can set the suggested retail price of a car, but it’s exactly that…suggested. In the first place most dealers would be thrilled to sell all of their cars at the MSRP and many dealers add price addendums beside the Monroney label marking the MSRP up.
(6) The study said that the state had no record of complaints on the dealer fee because they don’t separately categorize such complaints! This kind of makes me wonder how they do categorize complaints or do the sort them at all! There are two reasons why there aren’t more complaints. The first is that many car buyers don’t even know that they did pay a dealer fee and the second is that almost all dealers charge a dealer fee and tell the customers that they cannot remove the charge by Florida law.
(7) The study says that dealer fees in Florida range from $189 to $699. This is based on a very small sample (67 responses) from well over 1,000 car dealers in Florida. I know of several car dealers in Palm Beach County that charge over $699 in fees. At least one local dealer charges two fees…a $699 dealer fee and a $199 doc fee totaling $898. My guess is that the dealers with the higher dealer fees opted not to fill out and return the survey.

I was encouraged by these statements by the senate committee: “There is enough ambiguity in current law to allow that the consumers may not be specifically aware that the pre-delivery service fee is imposed, and the amount of the fee, prior to receipt of the Buyer’s Order. The law requires the fee to be “included” rather than “specifically delineated” in the advertised price. Furthermore, the fee is not required to be delineated on the dealer window sticker.”

Also, “Should the Legislature choose to address the issues identified in this report, it may consider expanding the notice requirements for the dealer imposed pre-delivery service fee, or, as other states have done, impose a cap on such fees.”

The ball is in your court now. You are the car buyers and you are the ones that are being deprived of full information on the prices of the cars you are buying. You are being lured into car dealerships by a car advertised at one price and when you come in, you are told that that car is no longer available but there are several more “just like it”. The only problem is that Florida law now allows the dealer to add their dealer fee to those cars “just like” the advertised car because they were not advertised. This is “bait and switch” pure and simple. No dealer in Florida should be allowed to quote a price on a car to any customer unless it is an “out the door price” plus tax and tag only.

If you agree with me, call, write or email your legislator and tell him so. If you remain silent, the chances are the Florida legislature will do nothing.

Nitrogen Scam Foisted on Palm Tran

I’m rerunning below the column I wrote last year about Nitrogen because it came to my attention that the Palm Beach County bus system, Palm Tran, was planning on investing over $80,000 for equipment to fill their bus’ tires with Nitrogen.

I wrote County Commissioner, Karen Marcus, an email explaining why this was a mistake and I sent her a copy of the column which you can read below, if you missed it last year. Below is a copy of my email:

Good morning, Mrs. Marcus,

Gary Todd, a friend of mine, told me this morning that Palm Tran had spent $65,000 on Nitrogen tire inflation systems purportedly to improve fuel economy and tire life in Palm Beach County buses.

I Googled the news article in last Friday’s PB Post and it gave as a reason for this decision to spend taxpayers’ money that “NASCAR and commercial and military aircraft” use Nitrogen in their tires.

NASCAR and commercial and military airplanes use Nitrogen in their tires for entirely different reasons than reducing tire wear and increasing fuel economy. Race cars and landing airplanes are subjected to extremely high temperatures never experienced in car or bus tires. Airplanes also experience extremes in atmospheric pressure which car and bus tires don’t.

I’ve attached a column that I wrote for the Hometown News last year, “Don’t Pay for Nitrogen in Your Tires”. I wrote this article to benefit those who might persuaded to pay for Nitrogen instead of free air [which is already 78% Nitrogen] to put in their tires. I even considered doing this for my customers at my Toyota dealerships and for my rental car fleet until I did some research on the pros and cons. I even bought canisters of Nitrogen and ran pure Nitrogen alternatively with air in my rental fleet for a period of time. The bottom line is that there is no measurable difference in fuel economy or tire wear with air v. s. Nitrogen.

Please read my article and feel free to call me to discuss this at any time. My cell number is 561 358-1474. I wouldn’t expect you to take my word for cancelling this expenditure, but if you instruct Palm Tran to conduct an actual test of fuel economy and tire wear with and without Nitrogen, I think they will come to the same conclusion as I.

Best wishes,
Earl

There was an article in the October 25th Wall Street Journal which concluded that Nitrogen was of no useful, measurable benefits to fuel economy, safety, or tire life. It concluded that if the Nitrogen was free, no harm can result from using it.

CNN recently ran a story exposing the Nitrogen scam you can see the video clip on this story by clicking on http://www.cnn.com/video/#/video/tech/2007/10/26/hunter.check.your.tires.cnn?iref=videosearch. The article discussed a study that Consumer Reports did on the effectiveness of Nitrogen in tires and interviewed the CR tester. Consumer Report filled a large number of tires of all makes and models, half with air and half with pure Nitrogen. After one year, there was only a 1.3 pound pressure difference in the tires filled with air and Nitrogen. The obvious conclusion was that Nitrogen for your tires is a waste of money.

Costco is often cited as a reason to buy Nitrogen for your tires. When you buy a set of tires from Costco, they fill the tires with Nitrogen free. When you bring your car back to Costco’s auto service center, they will top off your tires with Nitrogen for you free. I can understand Costco’s motive in this because I also operate an automotive service center and I also sell tires. All auto service center operators want to give their customers a good reason for bringing their cars back to them regularly for service. Why? Because we want to sell you more services. Need I say more?

Here's the original posting:

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.

Earl Stewart Featured on Front Page of the Palm Beach Post's Accent Section

http://www.palmbeachpost.com/search/content/accent/epaper/a1e_stewart_web_1023.html

Always get an “Out the Door” Price (originally posted 4/23/06)

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

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

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

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

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