Shine the “Cold Light of Day” on Your Car Dealer

“I’m Mad as Hell and Not Going to Take it Anymore!”

I think you’ll agree with me when I say that bad things mostly happen when the perpetrators don’t think others will find out about it. We’re lucky we live in a country which makes a “thing” out of freedom of speech. Our media is free to say whatever they like and so are we. Some think we err on the side of too much freedom of speech and too much media. Even though I might agree, I’d rather have too much than too little.

I’ve been a car dealer for over half a century, and I can tell you that dealers’ lack of ethics and their preponderance of dishonesty hasn’t changed much since 1968. The Gallup Annual Poll on Honesty and Ethics in Professions backs me up on this, https://news.gallup.com/poll/388649/military-brass-judges-among-professions-new-image-lows.aspx. Car dealers have ranked at the bottom of this list since the first survey in 1977!

Sadly, bad behavior by car dealers isn’t trending any better for a variety of reasons. When bad behavior is readily allowed and unregulated for a long period of time it becomes the status quo. It has inertia…the tendency of an object in motion, to remain in motion. Think of driving on the typical expressway. No matter what the posted speed, the actual flow of traffic is at least 10 mph faster. Why? That’s for two reasons. The first is that every driver knows that they can “get away with” driving 10 mph over the speed limit. The second is that it’s somewhat dangerous to drive at or below the speed limit. All the other drivers will pass you, blow their horn, or nearly “rear-end” you. How many cars have you bought in your lifetime? How many of those purchases were a pleasant experience? If the Gallup poll is accurate, probably none of them.

This happens because our laws against false advertising and unfair and deceptive trade practices aren’t enforced. They’re not enforced because of the powerful lobbying influence of car dealers. It’s no coincidence that “lobbyists” sit at the bottom of the Gallup poll with car dealers. Almost all dealers are guilty of this bad behavior for the same reason that almost all motorist’s speed. If a car dealer did obey the laws when his competitors didn’t, he couldn’t effectively compete and eventually he’d be forced out of business.

The only way I know to change things is get the attention of our legislators and regulators by arousing the car-buyers who are also VOTERS. There’s only one thing that can influence a politician or a regulator more than a lobbyist with fat pockets for supporting their reelection. That’s you, the voter. Almost all voters have bought cars and most likely had nothing but bad experiences. We need to begin talking about this more. Here are some suggestions:

• Call or text my weekly radio show, Earl on Cars. You can stream the show on Facebook or YouTube, www.Facebook.com/EarlOnCars or www.YouTube.com/EarlOnCars. You can call the show at 800 960-9960 any Saturday morning between 8 and 10 EST.

• File your complaints against car dealers with your state’s attorney general or department of motor vehicles.

• Contact your local media, especially those who feature consumers’ advocate journalists.

• Check out this website, www.Markups.org. This is a new website that allows you to report your car dealers’ markups above MSRP and post a picture of their addendum label. I just learned about this and posted a $5,000 window sticker addendum used by Wallace Cadillac in Stuart, FL, https://markups.org/Cadillac/wallace-cadillac.html.

I think another reason why car dealers have been able to operate for so long “in the shadows” is that many car buyers don’t like to admit that they’ve been taken advantage of. We all want to believe that we made a good buy and, maybe even more importantly, we want our friends and neighbors to think so. By “shining the cold light of day” on car dealers’ bad behavior, more people will realize their friends and neighbors were also “screwed” and are also remaining silent.

Please help me end the silence.

Car Dealers Don’t Finance Purchased Vehicles

They’re Middlemen that Broker Finance Contracts to Banks

Some readers of my column may already know this, but it’s surprising to me that many don’t: Car dealers lead their buyers to believe that they’re financing your purchase. After you buy your car, you’re led to the finance office. The inside vernacular term for the finance office amongst dealers is “THE BOX” (my illustration above is from the classic film “Cool Hand Luke” as Paul Newman is led into "The Box"). They take your credit statement and ask you to sign finance contracts. 

(To be totally accurate, there is a very small percentage of car dealers, typically used car lots that sell lower priced cars to buyers with poor credit that do finance the cars.)

What they don’t tell you is that they sell that finance contracts to the real bank at large markup. They also sell you services like pre-paid maintenance, GAP insurance, and extended service agreements, which they add to the finance contract that they sell to the bank. Normally the profit from their markup to the bank is far more than their profit on the car they just sold you. AutoNation, the largest auto retailer in the USA, averages over $2,000 per vehicle sold on brokering their customers’ finance contracts to banks.

My advice to you is to eliminate the dealer-broker, the middleman, and finance your car directly with the bank or credit union. You can pocket that average $2,000 kick-back your dealer receives from the bank by getting a much lower interest rate and not being sold overpriced warranties and maintenance contracts. Also, remember that $2,000 is an average profit on all cars sold. Some buyers (too few) are savvy enough to finance their purchase with their bank or credit union and others pay cash. In reality, the profit per dealer brokered sale closer to $4,000.

You should check with your bank or credit union before you buy your next vehicle. This way you can shop banks just like you shop for your car. You can get preapproved for the amount you intend to finance. Knowing your interest rate and terms before you buy your car arms you against the pressure from the salesman and dealer finance manager who will try to persuade you to finance your through the dealer. Telling the salesman and finance manager that you have a low interest rate from your bank or credit union will save you a lot of time and aggravation. Be aware that most dealers don’t refer to their “finance offices” as such, they tell you it’s the “business office” where you need to “complete your paperwork”.

There’s an exception to choosing to not financing your next purchase through the dealer. That’s for a new vehicles when the manufacturer offers an unusually low interest rate…as low as zero percent. Usually, the manufacturer offers either a cash discount or the low rate. You should do the math, and calculate which is best. Financing for a longer term with less money down skews your decision toward the low rate vs. cash discount.

Gas Prices to $6.00+ Per Gallon?

 

I wrote a column on May 24, 2008, entitled “Stop Complaining about Gas Prices”. As you know, here we go again…soaring gas prices but for some different reasons. The good news is all vehicles’ gas mileage has improved considerably in the last 14 years, and we have a lot more hybrid vehicles, and even a few all-electric. I’ve made a few changes and updated my first column, but it’s still essentially the same advice. 

“God grant me the serenity to accept the things I cannot change, courage to change the things I can, and the wisdom to know the difference”. Whether you think our gas prices are soaring because of a conspiracy of the giant oil companies, speculators on Wall Street, OPEC, the war in Ukraine, President Biden, ex-President Trump, or Vladimir Putin (or all the above), there’s not much you can do about it. I thought it might be useful to suggest some things you can do about lowering your total cost of fuel even if you can’t lower oil and gas prices. 

1. Burn the lowest grade octane fuel in your car without causing a ping or knock. Even if your car’s owner’s manual recommends high test, there’s a good chance you can drop down one or two grades of octane and your engine will run just fine. Today’s engines are so sophisticated that they can automatically alter the way the engine runs to accommodate different octane fuels. There are lots of factors that affect how your car runs on a particular grade of fuel like ambient temperature and ethanol content. You can even experiment with mixing octanes. Buying a lower octane will save you several cents per gallon. 
2. Keep your tires inflated about halfway between the recommended inflations by the auto manufacturer and the tire manufacturer. The higher number is stamped on the tire by the tire manufacturer and the lower inflation number can be found in your owner’s manual. The auto manufacturer number is very low, because he wants the car to drive smoothly. The auto manufacturer doesn’t worry about tire life because that’s guaranteed by the tire manufacturer. The tire manufacturer’s number is the maximum inflation you should use. 
3. There’s a great app you can download, www.GasBuddy.com, that will show you the gas stations nearest your zip code with the lowest gas prices. I just checked my Gas Buddy app for my zip code, 33403, for price of mid-premium gasoline. The lowest price was $3.99, and the highest was $5.42. Buying the lower one would save me $8.60 on 20 gallons of gas!
4. Drive slower! Some of you may remember how some states lowered speed limits on highways during an earlier energy crunch. You burn far less gas at 50 mph than 75 or 80. I’ll be the first one to admit that driving slower than the traffic flow can be “hazardous to your health”. Be sure to drive in the right lane and drive near the the speed limit. 
5. Learn how to drive your car for maximum fuel efficiency. It’s not uncommon for one of my customers to complain that they aren’t getting the gas mileage on their model Toyota that the EPA sticker on their car when they bought it says they should. We always check the mileage by having one of our technicians drive the car and measure the mileage. Usually, the technician gets as good or better gas mileage than the EPA estimate. This is simply because he understands how to drive a car for maximum fuel efficiency. One of my technicians, Rick Kearney, tells our customers that the best thing they can do to improve their gas mileage is to “reach down and take the brick out of their shoe”. 😊 He also suggests that you imagine there is an “egg” between your foot and the gas pedal. Anticipate stops and curves so that you don’t have to brake, but just take your foot off the gas pedal. For longer stops like waiting for a bridge to go up or down, or a train going by, turn off your engine. 
6. Check your wheel alignment and rotate and balance your tires every time you bring your car in for your car’s factory recommended service. Also, check your tire inflation that mention in #2. 
7. Many cars today have an “Eco Mode” alert light, typically green, on the dash which tells you that your speed is maximizing your fuel economy. Watch this and you can save lots of fuel. 
8. Lastly, if you own a hybrid vehicle (lucky you), you need to drive it differently than you would an all-gas-powered car. A hybrid gets better fuel economy in city driving than highway. This is because your hybrid automatically recharges its battery whenever you take your foot off the gas and decelerate. Stop and go driving causes poor gas mileage in a totally gas powered car, but increases fuel economy in a hybrid. When driving your hybrid on long highway trips, try to maintain a steady speed around 55 or 60 mph. Driving 70 or 80 will cost your fuel economy. 

If you follow all these tips, don’t be surprised if you find yourself spending no more on fuel than you did before gas prices skyrocketed. You’ll also be driving a lot safer and feel less aggravation. 

The Decline & Fall of the 20th Century Car Dealer

“You must understand the past; no empire lasts forever”
- Ray Dalio

This is a recent quote from an article in the Wall Street Journal, The New Sticker Shock. “Some auto makers, such as Honda and Toyota are pulling individual dealers aside to talk about their charging above MSRP. Jack Hollis, Toyota Motor of North America senior VP of auto operations, said the company has encouraged dealers to look at the bigger picture instead of trying to capitalize on the current market. He said to his dealers, “If you’re thinking about it in the short run, I think you’re mis-stepping. If that customer’s experience is great during this time, they’ll be with you.”  (emphasis mine)

The car dealer retail network came into existence more than a century ago, after Henry Ford created the Model A Ford, but, more importantly, assembly line production. At first the car dealerships were owned by Ford and other manufacturers, but to handle the huge demand for lower priced cars, manufacturers began to contract with independent businessmen to retail their cars. The contracts were called franchise agreements. The contracts were for short periods of time, one or two years. The manufacturers wrote the contracts so that they had total control over the franchised car dealer. A manufacturer could cancel the contract with his dealer for virtually any reason, which was typically because the dealer didn’t sell enough cars. The manufacturers could add as many dealerships as close to the existing dealers as they wanted, creating so much competition as to force some dealers out of business.

 
The dealers began to organize with local, state, and national associations. Collectively they were an economic force almost as strong as the manufacturers, but the strength and influence that the manufacturers hadn’t anticipated was their dealers’ power and influence in their local, and state governments.

 
Car dealers were, and are, wealthy individuals. Today, there are more than 17,000 car dealerships in the US. They employ well over a million people. With this local and state power, car dealers successfully lobbied their local, state, and the national governments to protect them against the predatory, unfair, actions of auto manufacturers. Over the last 100 years car dealers have gone from victims of the manufacturers’ every whim to virtually untouchable. Car dealers of almost every manufacturer have the exclusive right to sell the vehicles built by that manufacturer. Manufacturers are prohibited by law from selling directly to the consumer. Tesla is the rare exception due to its recent arrival with a totally different technology and total online sales. Car dealers are granted exclusive rights to large areas in their markets. The manufacturer is prohibited by state law from adding a dealership “too close” to an existing dealer. Also, the length of dealers’ franchise contracts is virtually “forever”. State laws prohibit manufacturers from terminating dealers’ franchise agreements except under the most extreme cases, like being convicted of a serious crime. Manufacturers are forced to treat their dealers as “independent businessmen” that can, pretty much, do whatever they like.

 
What no one anticipated until it was too late, is that these same state laws intended to protect car dealers from their manufacturers, now allow them to deceive their customers with impunity. Most states have insufficient state laws protecting the car buyers, and don’t enforce the ones that exist. This is because of the huge lobbying strength of car dealers because of their independent wealth, Political Action Committees, and Dealer Associations. The average car dealer employs about 70 people. In most communities they’re, collectively, the largest or one of the largest employers. Most of their employees are also voters.

 
Therefore, car dealers have been able to get away with the bad behavior that you probably have experienced most of the times you purchased a vehicle. The Gallup annual poll on Honesty and Ethics in Professions (Google it), has ranked car dealers last or next to last for the past 56 years! Car-retailing unfair and deceptive behavior has been frozen in time for a hundred years.

 
The “thaw” has begun. It began in 1983 with the birth of the Internet which triggered the knowledge explosion. In 2022 a consumer can find the answer to any question she has, like “what is the lowest price paid in the last 30 days for car I want to buy?” A car buyer can go online today and buy a car without ever entering a car dealership and can get out-the-door prices from as many car dealerships as she wants.

 
Manufacturers and the smarter car dealers are “seeing the handwriting on the wall”. The educated consumer is the car dealers’ worst nightmare. Legislators and regulators who are, more and more, being elected by the educated and demanding consumers of the 21st century are also beginning to get a little nervous. This is because the educated voter is the politician’s worst nightmare. The media and the manufacturers are slowly gaining the courage to speak out about the terrible way car dealers treat their customers.

 
I’m predicting that the current, unconscionable, out of control pricing of new cars precipitated by the pandemic induced high-demand/low-supply will be the “straw that breaks the back” of the antiquated car dealer franchise system’s immunity from regulation by the laws and their manufacturers.

Take Good Care of Your Older Car

Save Thousands When You Replace it

I’m dedicating this column to Nancy Stewart, my wife and co-host of our radio show, Earl on Cars. On Monday mornings when I write this column, I often have “writer’s block”. I did this morning, and Nancy came up with this great suggestion. For those of you who know her from our radio show, you’ll know how “into” maintaining and taking care of her car she is.

 
Regular readers of this column know that I’ve been advising you for over a year not to buy a new or used car until these sky-high prices come down further. You might also want to admonish me for predicting prices would be lower now than they are. I stand guilty as charged; I was wrong! Although prices have come down from their peaks in the last quarter of 2021, their still higher than I, or anyone, expected. New car prices are slowly coming down and used may be beginning to follow. Supply chain issues, Covid variants, political/bureaucratic ineptitude, and car dealers’ insatiable greed are difficult to forecast.

 
You’re probably driving a car less than 10 years old, and that means that you’ve got most of the major safety features that have made car much safer than ever before in history. Your current car requires very little maintenance compared to cars 20 years ago. This doesn’t mean that you shouldn’t take good care of your car, but the cost of doing this is less than it’s ever been in previous cars you’ve owned.

 
You should drive your car to your chosen service department about every 6 months or 5,000 miles whichever comes first. I can easily understand why many people don’t understand why you should bring your vehicle in for service when you put very little miles on it. The main reason is a “checkup”, just like you should do with your doctor. The older you are, the more frequently it’s recommended you come in for an examination, even though you “feel fine”. You need to find a service department you can trust, just like a doctor you can trust. A good service department will check all the important parts of your car, especially safety related like your tires. These inspections are usually free, but you should have confidence that your service person is telling you the truth about repairs you’ll be charged for. If something is recommended that raises your eyebrow, get a second opinion just like you’d do with your doctor if he recommended surgery.

 
Familiarize yourself with your cars owner’s manual and the manufacturer’s recommended service. Don’t pay for any service that is recommended by the dealer, but not by the manufacturer. Most service departments have their own recommended services which are more numerous and expensive than what the manufacturer recommends. This has become more prevalent since the quality of cars has increased and the maintenance requirement have decreased. The service department of most dealerships is their most profitable department, but the surge in quality and lower maintenance requirements have seriously cut into that profitability.

 
If your car does require a major, expensive repair, you have a difficult decision to make. First, be sure your car does have major problem by getting at least one other opinion and preferably two. If it does, your difficult decision is whether to fix it or sell it. There are lots of variables. If you pay a lot of money to fix it, will the savings on your replacement car in 6 months or a year offset the cost of your repair? How much will the value of your car drop by that time. Used car prices are at historic highs. You can try to “have your cake and eat it too” by trading in your used car on the new or used of your choice today. The higher price of your trade-in will somewhat offset the inflated price of the car you buy. Or, you can simply sell your used car and try to make do without a car until prices come down…Uber, renting a car (very expensive), public transportation, carpooling, or borrowing a car from a friend.

 
We keep hearing commentary from the media about the “new” normal, but everyone is guessing and nobody knows what that might be. One aspect of the “new normal” might be car buyers keeping their cars much longer. I have customers and quite a few of my dealership’s technicians that drive their cars and trucks for 20+ years and hundreds of thousands of miles. If you saw or drove one of their vehicles, you’d swear it was almost new. These folks have been doing what I’m, suggesting to you, take good care of your car. Car manufacturers and dealers have been admonishing the public to buy a new car every 3 or 4 year for the last 100 years. Does that really make since when today’s cars last many, many years longer and cost far less to maintain?

The Dealer Won’t Repair Your Car Under Warranty

What Action Should You Take with the Dealer or Manufacturer?

Most manufacturers give you a 3-year 36,000 mile “bumper to bumper” warranty on your new car. A few makes like Hyundai and Kia have a 5-year or 60,000 miles. There are more new car warranties for longer times on certain components of the vehicle like the powertrains and emission related devices. 

Most people think that “bumper to bumper” means the warranty includes EVERYTHING. This isn’t true. For example, your tires are not covered by your new car warranty; they’re covered by the tire manufacturer’s warranty. If you have a problem with your tires, you’ll have to deal directly with the tire manufacturer, unless you dealer does you the “favor” of handling this for you.

Another common problem with new car warranties is the opinion by the manufacturer and dealer of why the failure occurred? For example, if your paint fades, the manufacturer may deny the warranty repair because you didn’t wax your car more frequently or didn’t keep it garaged or shaded from the sun. These differences of opinions on warranty eligibility of paint issues can include “love bugs” not being washed of quickly or “environmental fall out”.

If you do have a problem with your warranty not being honored, these are my suggestions:

(1) Choose a dealer for the make of your car that you feel will “go to bat” for you on your warranty issue. Hopefully, this is the same dealer you bought your car from. Try to find a dealer that has good Google reviews and is well respected in the community.

(2) Speak directly to the service manager, or the general manager or owner if that’s possible. Be sure you are speaking to, at least, the service manager. Oftentimes service personnel infer that they manage the service department but are just service salesmen aka ASM or “assistant service managers”.

(3) Make your request in a low-key, friendly manner, short and sweet. Be as brief as you can and still include all the pertinent details.

(4) The manufacturers/dealers can agree to make the repair at no cost or a reduced cost even if the manufacturer “sticks to his guns” about the fix not qualifying for warranty. This comes under the category of “Goodwill” which means you don’t have to pay, or pay much less than you normally would have.

(5) Goodwill is granted to keep you happy as a customer, keeping you coming back to buy more cars and service, and tell all your friends how “nice” your car dealer and manufacturer are. The biggest factor in winning both goodwill on a “dubious” warranty repair is customer loyalty. The more cars you’ve bought from this manufacturer and dealer, the stronger your loyalty and goodwill credentials.

(6) A “dirty little secret” of why some dealers can get things covered under warranty and some can’t is that manufacturers don’t trust some of their dealers. This is because some dealers take advantage of their manufacturers by lying or being careless about submitting claims for reimbursement for warranty that aren’t legitimate. Car dealers make a lot of money when they perform a warranty repair on your car…about the same as they make when you pay them for a repair not covered by warranty. Also, remember that virtually everybody in the dealer’s service department is paid on commission. The mechanic that fixes your car, the service advisor that writes up the warranty application, and the service manager all get a “piece of the pie” …in this case the money paid to the dealer for your warranty or goodwill repair. By choosing a dealer that is on very good terms with his manufacturer and is trusted, you greatly enhance your chances of getting your warranty or goodwill repair paid for by the manufacturer.

(7) Now, here’s your “ace in the hole” play when all else fails. If you can persuade your dealer to reduce the cost of the parts and labor that he charges the manufacturer for your warranty or goodwill repair, it greatly enhances your chances of getting your repair 100% paid for by the manufacturer or, at least, a significant reduction in cost to you. Why? Firstly, it proves to the manufacturer that the dealer isn’t “BS’ing” him about believing that you’re a good customer entitled to assistance. Secondly, it significantly reduces the cost of the repair to the manufacturer. I hate to brag, but I invented this ploy and I’m “batting almost 1000 on winning” approval. I offer to sell my parts at my cost to the manufacturer and do the labor at what I pay my mechanic. I make ZERO PROFIT on the repair; only my mechanic makes money. If this is the only way you can have your warranty/goodwill taken care of, why wouldn’t your dealer agree?

Good luck with your next warranty or goodwill repair.

Save Thousands by Ordering your New Car: Do Not Buy from a Dealer’s Inventory

The Covid pandemic is a watershed moment in human history. Counterintuitively, many good things will come from this terrible time. Online buying has given you, the consumer, more options than ever before to shop for the lowest price. The convenience of not having to drive to the store and have almost everything you buy delivered to your home is a huge time and cost saver.

 
Before Covid, almost all new cars were bought from dealers’ inventories. There are many reasons for this and most of them are because the manufacturers and the dealers know they can sell more new cars faster and at higher prices when they sell them to you from the dealers’ on-the-ground inventory. Purchasing a new car is an exciting, important, and emotional time in your life. When you enter a car dealer’s showroom and see, touch, and smell those shiny, beautiful machines, your logical mind “takes a back seat” to your emotional mind. Clearly, making the second largest purchase of most people lives is not something that should be done impulsively.

 
There’s another reason that buying a new car from a dealer’s inventory makes no sense. Very rarely does a car dealer have the exact year-make-model with the exact options, accessories, or interior/exterior color that the buyer wants. Most buyers end up with a compromise on the exact vehicle they would like to drive for the next 5 years or longer. It’s impossible for a car dealer to keep enough cars in inventory to meet all the combinations of year, color, interiors, options, and models. The average price of a new car today is about $48,000! Isn’t something that expensive worth waiting for? If you order that perfect car for you, you’ll be driving exactly what you want.

There are many other decisions that you make when you buy a new car quickly from a dealer’s inventory that you probably don’t spend enough time and research on. These are the financing, extended warranties, maintenance plans, GAP insurance and other “products/services” all dealers will push on you after you buy your car. When you order your new car, you have plenty of time to shop for the best interest rate with banks and credit unions and decide if you need extended warranties or maintenance plans and, if so, what’s a fair price?

Arguably, the biggest reason you shouldn’t buy a new car from a dealer’s inventory today is because you’ll pay a much higher price. You already know that car prices are higher than ever before, thousands higher than just 2 years ago. Dealers have always known that they can make a lot more money when they can deliver that new car ASAP, preferably the same day you walk into the dealership. During the covid caused microchip shortage creating the huge supply and demand imbalance, this is truer than ever before. When you let it be known that you want to order your new car from the manufacturer, the salesman will do everything in his power to discourage you and talk you into buying one from his very small inventory. He may also exaggerate how long it will take for the car to arrive. He knows how much you’ll want to have that new car ASAP. Verify the delivery time by checking with other car dealers that you must check with for the best price.

 
Your next step is to locate the Costco certified dealers for the make car you’re buying. If you’re not a member of Costco, you can purchase an annual membership for $65. Costco requires their certified auto dealers to sell Costco members a new car at a lower price than they sell that car to any other buyer. When you order your new car from the Costco dealer, be sure to make it part of your purchase contract that the price you pay is the Costco price for that car when it arrives in the dealership for you to take delivery. Depending on how long it takes your new car to arrive, you’ll save thousands of dollars over what you’d pay today for a car that wasn’t even exactly what your wanted to buy. New car prices are coming down slowly and will continue to drop over the next few months. You’ll be asked for a deposit. It’s in your best interest to agree to a deposit because the dealer may be tempted to sell your car to someone when it arrives for a lot more money than you contracted for. A deposit makes your purchase more legally binding on the dealership (and on you).

 
If you’re someone who must buy a car because you don’t have one, or the one you’re driving needs repair, you have a financial question to answer. Can you make do with transportation during the time it’ll take your new car to arrive for less cost than you’ll be saving? Your options are public transportation, car-pooling, Uber/Lyft, renting a car, or fixing your current car so that it can be safely driven. If you currently lease, you can usually get an extension for a few months. You can rent a car for as little as $800 per month. If you have a good mechanic you can trust, he can often make a car safe to drive for far less than he’d normally charge when you explain your dilemma.

Leasing or Owning a Vehicle Today

Is a Valuable Hedge when Buying or Leasing Another


You probably know that new and used car prices are at historic highs. In previous columns I’ve recommended that you don’t buy a new or used vehicle today, because waiting until the microchip shortage abates and supplies of vehicles rise will see prices drop by thousands of dollars. This advice is particularly aimed at those who don’t have another car to trade in. This is because the car you trade in is worth about as much more as the vehicle you’re buying increased. In other words, the value of your trade-in largely offsets the increased cost of the car you’re buying.

About a third of new cars on the road today are leased. A lease contract includes a clause giving you the legal right (option) to purchase that vehicle at a price that was fixed when you leased it, about 3 years ago. This amount is the “residual” and was forecasted (guessed at) by the leasing company. Oftentimes those forecasted prices are inaccurate because markets change. Over the last 2+ years with the Covid pandemic, rampant inflation, and the microchip shortage precipitating the vehicle shortage has caused those lease residuals to be much much lower than today’s market value of your leased vehicle. Many are unaware of their option to buy their leased vehicle, and the leasing company or the car dealer takes the vehicle back, sells it at the auto auction, and makes a huge profit above your option price.

To take advantage of the increased value, you must first establish today’s market value. You can do this by shopping your vehicle to several potential buyers. The used car departments at franchised dealers for the same make you drive will make offers. Go online to used car companies like www.Carvana.com, www.WeBuyAnyCar.com, www.CarMax.com, www.Vroom.com, and many more. Google “Used Car Buyers” and you’ll find many more. It’s a “seller’s market” and the more you shop your leased car, the higher the price you’ll get. Of course, technically you don’t own the car; the leasing company does. But that won’t deter you from hearing the offers. You’ll have to exercise your purchase option before you can sell it.

Different leasing companies have different policies on exercising your option to buy. GM, Honda, Toyota, and Ally Leasing will sell you the lease car at the residual and this is the safest, easiest way. Your leasing company, if they won’t buy your off-lease car, will require you to return it through one of their dealers. Unfortunately, most dealers will add bogus fees, often over a thousand dollar to your option price. If you must go through a dealer, shop the dealers to find the one that charges the lowest extra fees.

If you don’t want to buy and then sell, your off-lease car, you may be able to get an extension on driving the lease for up to six months. The longer you can wait to make another purchase or lease, the lower the prices will be when you do have to commit.

If you own a car now, you can realize all the advantages described above without all the hassle. Just be sure you shop your trade-in to as many of the used car buying sources as you can.

How to Know if a Florida Car Dealer is Breaking the Law

Most of the “skullduggery” Florida car dealers use to trick you into overpaying for the vehicles they sell are illegal. Florida Statute Title XXXIII, REGULATION OF TRADE, COMMERCE, INVESTMENTS, AND SOLICITATIONS, 501.976 regulates "actionable, unfair, or deceptive acts or practices" in trade and commerce.If you want to read the whole text, just visit www.FloridaLawProtectingCarBuyers.com.

When you click on this link, you’ll have too much information and legal gobbledygook. Unfortunately, this is the way all our laws and regulations are written. They’re in a language that can only be interpreted by lawyers. You must hire a lawyer to explain the laws. If you break a law (that was written by lawyer), you’ll be prosecuted by a lawyer and you’ll have to hire another lawyer to defend you. Politicians (mostly lawyers) and regulators (mostly lawyers appointed by politicians) are supposed to fairly enforce the laws!

This law is decades old and was passed during the reign of Bob Butterworth, Florida’s longest serving Attorney General, elected in 1987, serving 15 years as AG. This law would have never been passed had not a Bob’s wife been taken advantage of by a car dealer in Tampa who charged her for “undercoat” on her new car, adding the price to the advertised price she thought she was paying. Since this law has been written, much of it is obsolete and irrelevant, but no other Florida attorney general or legislator would dare to modernize it, much less toughen the law. If they did, they would suffer the ire of the powerful car dealer lobbying groups and PACs, like the Florida and National auto dealers associations.

However, there’s still some “teeth” in this law that can protect you against unscrupulous car dealers. Most car dealers in Florida don’t know or understand the law. Even if they do, they ignore it because our regulators and legislators are afraid to enforce it. This column will point out some small sections of this law which can protect you from dealers adding hidden fees to the prices they advertise, quote you, and are illegally charging you.

It is illegal under Title XXXIII 501.976 (11) to “add to the cash price of a vehicle defined in s. 520.02 (02) any fee or charge other than those provided in that section and in rule 69V-50.001, Florida Administrative Code. All fees or charges permitted to be added to the cash price by rule 69V-50.001, Florida Administrative Code. All fees or charges permitted to be added to the cash price by rule 69V-50.001, Florida Administrative Code, must be fully disclosed to customers in all binding contracts concerning the vehicles selling price.” The translation of the above paragraph is simply, the advertised and quoted price must include everything you must pay, plus government fees only (sales tax and license).

It is illegal under Title XXXIII 501.976 (16) to….” The advertised price must include all fees or charges that the customer must pay, including freight or destination charge, dealer preparation charge, and charges for undercoating or rustproofing. State and local taxes, tags, registration fees, and title fees, unless otherwise required by local law or standard need not be disclosed in the advertisement. …” The freight/destination charge is charged in the dealer’s invoice and in the MSRP. If a dealer charges you for that, he’s “double-dipping…getting paid twice.

It is illegal under Title XXXIII 501.976 (17) to….Charge a customer for any predelivery service required by the manufacturer, distributor, or importer for which the dealer is reimbursed by the manufacturer, distributor or importer. All new car dealers are reimbursed by their manufacturers for preparing the car for delivery. Charging you for that is also “double dipping” getting paid for the same service twice.
It is illegal under Title XXXIII 501.976 (18) to “Charge a customer for any predelivery service without having printed on all documents that include a line item for predelivery service the following disclosure: ‘This charge represents costs and profit to the dealer for items such as inspecting, cleaning, and adjusting vehicles, and preparing documents related to the sale.’”

“Knowledge is power” (Nancy Stewart’s favorite phrase) and letting the car dealer know that you’re familiar with this Florida statute will often motivate him to remove these illegal charges.

Earl On Cars, Weekly Live Talk Radio

 

Current Advice on Buying, Leasing, & Servicing Your Car

Many readers of my weekly articles appearing on my blog (www.EarlOnCars.com), Florida Weekly, and Hometown News may not know about my weekly radio show which has been on the air for nearly 20 years.

 
Earl on Cars airs every Saturday morning from 8-10 EST. You can access this show in South Florida at True Oldies Radio, 95.9 and 105.9 FM (WIRK-HD3). You can stream it directly at www.StreamEarlOnCars.com. You can also stream it at www.Facebook.com/EarlOnCars and at www.YouTube.com/EarlOnCars; or access Earl on Cars via the app, TuneIn Radio.

 
Why listen to a live radio show when you have all these other resources of information? The number one reason is that conditions change rapidly with respect to buying, leasing, and maintaining your vehicle. In the past two years (Covid pandemic) these conditions have radically changed, I’ve been a car dealer for over 50 years, and I’ve never seen such change…both for the good and the bad. Listening to Earl on Cars weekly keeps you on top of the car-buying and repairing/servicing market.

Our live-talk radio show thrives on callers’ input…questions, personal anecdotes for their buying and servicing experiences, as well as suggestions and constructive criticisms. There are multiple channels for you to covey your input. Primarily is our telephone 877 959-9960. You can text us at 772 497-6530. Post your input on Facebook and YouTube as indicated in the second paragraph of this article. We even have a unique form of communication to those who prefer to remain ANONYMOUS. Click on this line, www.YourAnonymousFeedback.com. Who you are and where you’re located is completely anonymous. We generally can respond to all input during the 2-hour show. If we miss one, we address it in the following week’s show.

 
The Earl on Cars team consists of me, Earl Stewart, currently a car dealer in North Palm Beach Florida. This radio show, my blog, newspaper columns and my book, Confessions of a Recovering Car Dealer are part of my role as an advocate for you, the consumer. I stress that my radio show is not an “infomercial” attempting to sell you a car. In fact, I currently recommend that you don’t buy a car unless you must because of historically high prices.

 
Nancy Stewart is my co-host, wife, and co-founder of the show 15 years ago. Nancy’s primary role is to act as an advocate for the women buyers of vehicles and service. Since the inception of the show, Nancy has built the female listening audience from near “zero” to about half. Car selling and buying is evolving (too slowly) from a “good old boys club” to the enlightenment of dealers and manufacturers that women are arguably even more important than the male market. Every week, Nancy pays the first two, new women callers $50 cash…no strings attached. If you’re female and reading this, that’s something to think about.

 
Rick Kearney is a Certified Diagnostic Master Technician for Toyota and has all the current qualifications from ASE, the national organization, American Service Excellence. He can answer any question about servicing, maintaining, and repairing your vehicle. Contact the show any Saturday morning and get a free diagnosis on a problem you’re experiencing with your vehicle.

 
Stu Stewart (Earl Stewart III) is my son and the general manager of my Toyota dealership in North Palm Beach, FL. He has real-time, hands-on experience of how cars are being sold and serviced TODAY and every day. Stu directs our weekly MYSTERY SHOPPING REPORT.

 
The Mystery Shopping Report is the highlight of our show, both from an information and entertainment perspective. Every week we send a person into a different car dealership to pretend to buy, lease, or maintain/repair their car. We name the dealership, the individuals dealt with, and the events exactly as they happen. When we see a violation of the law occur, we say so. When we observe unethical, deceptive advertising and sales practices we say so. When we see honest, ethical practices in place at a dealership we say so. Each week the dealership is given a grade from A to F, and we list the grades on two lists accessible at  www.GoodDealerBadDealerList.com. How do you know that we’re telling the truth and being accurate? The answer is this: In the nearly 20 years we’ve been mystery shopping car dealers, we’ve never been sued. Car dealers know (and their lawyers know) that the perfect defense against Libel and Slander is TRUTH.

Jonathan Kantor is the “behind the scenes guy” whose technical, digital prowess enables Earl on Cars to be heard and seen around the world. He also preserves the best parts of our show, categorized by topic, and makes them available on YouTube, accessible at any time. All the past shows are archived and easily accessible. The camerawork during the show includes aiming the cameras at the right person at the right time and providing all the other visual effects, like the background and video clips.

 
Tune in some Saturday morning between 8 and 10 eastern time and give us a shout…or just listen for a few minutes. I promise that you won’t be disappointed.

Earl On Cars Predictions

Buying, Leasing, and Repairing Cars in 2022

When immersed in a watershed moment of history, those living it often don’t appreciate the magnitude of change on the World. WWI, the Great Depression, and WWII were watershed moments. My father, Earl Stewart Sr., was born in 1892 and was a young man during all three of those watershed moments in history. I don’t think he ever fully appreciated how much the world changed from those 3 events.

 
We’ve been experiencing the COVID-19 Pandemic for about 2 years. Coinciding with this is the knowledge explosion from quantum computing the “Cloud”, and Artificial Intelligence. The Internet (unheard of before 1990) offers answers to every question that a human being can conceive of. As I write this article a giant telescope is speeding toward an orbit around the sun that will show us “pictures” of the beginning of the universe, 13.7 billion years ago.

 
Lots of people make forecasts, but few put them in writing. I’m going out on a limb and asking that you save this article and let me know in year how many of my forecasts I got right and wrong. 😊

• Prices of new and used cars will drop substantially. As I write this article the average price paid for a new car in November 2021 was $45,872, up from $39,984 one year ago…about a $6,000 increase which is several thousands of dollars above MSRP. I predict that by the end of 2022 car prices will average MSRP, manufacturer’s suggested retail price. This will be significantly less than today, but significantly more than prices pre-covid. The average price paid for a used car now is above $29,000 up from $22,679 in 2020. Used car price will come down to about $26,000 by the end of 2022.

• Car dealers’ bait and switch advertising and deceptive sales practices will be reduced significantly. The quantum leap in consumers knowledge because of the Internet via Google et al in 2022, has increased the percentage of educated buyers as never before. With a PC and the “click of mouse”, any car buyer can learn the average, and even the lowest price charged by a dealer. Consumers can learn the dealer cost and which dealers have the better reputations for fairness and lower prices. Manufacturers who have been very reluctant to “control” their dealers are “seeing the handwriting on the wall”. With smart buyers, the dealers with the best reputations for honesty and transparency will out-sell the high pressure, bait, and switch style dealers.

• Some auto manufacturers will follow Tesla’s lead and sell cars directly to the consumer, without an independent dealer network. The only reason this didn’t happen a long time ago was due to state franchise laws enacted almost 100 years ago. Dealers have lobbied to have laws passed in all 50 states that allow only a franchised car dealer can sell a new car. It’s illegal in all 50 states for anyone to buy a car, except a Tesla, directly from the manufacturer. These laws will be challenged and overturned by some manufacturers in some states, like New York.

• Female car buyers will become the most important buyer for both auto manufacturers and car dealers. For nearly 100 years, the auto manufacturers and car dealers have been a “good old boys club”. Most of the advertising has been directed toward men. Most cars are designed and engineered for men. Even the National Highway Traffic Safety Association, NHTSA, designed safety crash tests designed to protect men, not women. Most employees, over 90%, of auto manufacturers and car dealers are men. Automotive dealer training school graduates are almost exclusively men. Thanks to the 21st century knowledge explosion, women have become more educated and capable car buyers than men. Women, by their nature, have been proven to be more careful about the car they buy and the price they pay.

• Electric cars will surge in popularity beyond everyone’s expectations. This prediction is my most personal one. Some of you know that I’m a Toyota dealer in North Palm Beach, Florida. For the last 47 years I’ve driven only Toyota products, including Lexus. Toyota builds great cars and I never saw myself ever driving anything else. My curiosity overcame my loyalty to Toyota, and I recently bought a 2021 Tesla Plaid. I can only say that driving an all-electric car like a Tesla is all it will take for you to forsake all other combustion engine powered cars. I get 350 miles on one charge when I plug the Tesla into my garage electric outlet overnight. Words can’t describe the pleasure of passing crowded, over-priced gas stations. The electric motor is more powerful, by far, than any combustion engine vehicle. There is no transmission or shifting, only one, smooth continuous acceleration. I rarely ever touch my brakes because I rely on the automatic braking when I take my foot of the accelerator. I haven’t enjoyed driving a car as much since I was sixteen years old and that’s along time ago…I’m 81 years old.

• Today’s auto manufacturers will decrease in number by 50%. The automobile as we know it today is obsolete. The car of the future is all electric and totally autonomous. The strong manufacturers, like Toyota and Volkswagen will survive but most will perish. There will be mergers, acquisitions, and bankruptcies. The auto manufacturer of 2023 will become a software company. The final phase of this radical change will be the cessation of car ownership. The fastest growing form of transportation in 2025 will be ridesharing of autonomous, all electric vehicles. You’ll summon the vehicle of your choice only when you need it and pay only for that time. The vehicle will arrive in seconds (faster than you can walk to your own garage and back your car out). You’ll arrive at your destination in less than half the time it now takes. There will be no more rush hours because all cars will travel at the same high speed (100 mph or more). Traffic accidents and injuries will be a tiny fraction of what they are today.

Buying a Car During the Omicron Threat

Just When We Thought It Was Safe To Go Back in the Water

You’ve already read or heard this all over the news media. Omicron, the latest mutation of the COVID virus, appears to be setting the world back from an optimistic recovery from Covid to the worst surge ever. Only time will tell, all too soon, just how bad this will be.

My job as a consumer advocate for auto buyers is to make it “safer” for you to buy your next new or used cars. My regular readers know that I been doing weekly “mystery shops” of car dealerships for many years. The information from these has been my primary guide to advise you how to buy or lease a car without being taken advantage of by a car dealer.

 
One problem that my mystery shopping reports have revealed in the past two years is that the precautions car dealerships take against Covid-19 varies tremendously. My mystery shoppers have visited dealerships where no precautions were taken…nobody in those dealerships was wearing a mask…much less asking their customers to. In those dealerships where some did wear masks, we almost never saw the N95 or KN95 masks which provide much better protection, about twice that of any other. Many of those wearing masks wore them improperly.

 
In previous articles I wrote that you should not buy a new or used car now because the covid induced microchip shortage has raised all car prices to historically high levels. But, if you must buy a car, these are some precautions that that you should take.

 

• If you’re like most people, you find yourself buying almost everything online. My wife, Nancy, and I buy almost everything on Amazon. It’s more difficult to buy a car online, but it can be done. There are a few car dealers that will give you their lowest out-the-door price online, appraise your trade-in online, allow you to electronically sign all the paperwork, and deliver your new car to your home. You should test drive the car you buy before you buy it. Insist that the car dealer bring it to your home and allow you this opportunity. 

• If you cannot, or choose not to buy online, call the dealerships that you are considering buying from and ask them what their COVID protection protocol is. You should get answers to these questions: a. Do all your salespeople properly wear N95 or KN95 masks? Of course, this should apply to all personnel you may meet like receptionists and sales managers. (b) Also ask what the dealership’s vaccination policy for employees is. Are employees that come face-to-face with customers required to be fully vaccinated. The latest recommendation from scientists is that the definition of “fully” vaccinated should include a booster shot. (c) Does the dealership have a policy of requiring periodic COVID tests of their employees.

• Some people buy all their cars through an auto-broker. Brokers are often former car salesmen or sales manager who go into business for themselves. Dealing with one auto broker on the phone, or even in person, instead of several people at a car dealership is much safer. You should do your “do diligence” on the price the broker offers you. As I said earlier in the article, all car prices are currently at historic highs. A broker receives a commission from the car dealer and that’s increasing your already high price. These broker commissions can range from $500 to $5,000.

As you may know, I’m not only a consumer advocate for car buyers but I have a Toyota dealership in North Palm Beach. I “walk the talk” when it comes to protecting my customers and employees from COVID. We hire no one who’s not been fully vaccinated. Most of our employees are fully vaccinated and those few who aren’t must wear N95 or KN95 masks. In fact, with the onset of Omicron, we’re going back to all employees wearing KN-95 masks. We even ask our customers to wear masks and furnish masks to those who don’t have one.

How to Get a Better Price on a Car In a High-Priced, Seller’s Market

There’s an old saying about the stock market…” You can never buy at the bottom or sell at the top.” This is because nobody, not even the experts, can predict the absolute tops and bottoms of markets But, if you’re careful, you can predict the best “approximate” time to buy or sell. This same truism holds for buying a car in a seller’s market, where demand exceeds supply.

I’m somewhat of an expert on the auto market because I’ve been a car dealer for more than a half a century, since 1968. I’ve seen a lot of “peaks and valleys”. This current, unprecedented rise in prices peaked about a month ago. Prices are still very high, although they are slowly coming down and will continue to decline for up to six months. If you’re thinking about buying, be prepared to pay more than you’ll pay next month or the month…probably $1,000 to $2,000 more. By June, you’ll save $3,000 to $4,000.

If you must buy today, you’ll have to accept a target price of close to MSRP. I spoke to a woman last week whose current vehicle had been totaled in a car accident, but her insurance company paid her a very good price to replace it. She had to buy a car and I sold her one from my dealership for MSRP, out-the-door plus sales tax and license plate. That’s about $2,000-$3,00 more that I would have sold her the same car in 2 or 3 months. Most dealers are still charging thousands of dollars over MSRP, using addendum labels, hidden fees, and dealer installed accessories. You can read a mystery shopping report that I conducted last week on a large, South Florida Toyota dealership that refused to sell a new Toyota Corolla for MSRP, asking $1,300 above by clicking on this link www.MSRPTooLow.com.

Here are some pointers to guide you through this high, stormy new car market:

• If you must buy a car soon, wait until Saturday, New Year’s Day, 1-1-22 or the Sunday and Monday immediately after. The first 3 or 4 days of January, in the new year is when auto manufacturers and car dealers push to “hit their numbers”. They close their books to sales after 3-4 days of the previous year. The motivation to manufacturers and dealers to sell cars peaks every year on these few days. Prices plummet briefly, relative to prices from the previous year. Auto execs want 2021 to look as good as possible to their board of directors, stockholders, and Wall Street. Car dealers feel the same way, especially the public traded ones like AutoNation. You should have done your due diligence/homework in the weeks before to choose the right car and dealership. The more flexible you are on color, model, trim, and accessories you are, the lower the price you’ll get. Be prepared for a very limited inventory of stock cars, or those in-transit to choose from.

• Utilize www.CostcoAuto.com. After the first of 2022, the slow downward trend in prices will continue. Consider ordering the exact car you want…color, options, make and model. If you’re not already a Costco member, pay the $65 annual membership fee and contract to buy your car from a Costco Certified Dealer. Stipulate on the official vehicle buyer’s order that the price you pay the dealer will be the Costco member’s price at the time your ordered car arrives at the dealership. Costco certified dealers are contractually obligated to sell you the car at a lower price than they’ve sold that model to any other customer for.

• Pay no more than MSRP, if you must buy your car at a different time than suggested in items (1) and (2). This may take some searching and flexibility on model, color, and options, but there are a few dealers out there will, reluctantly, sell you a new car near MSRP. The best way to encourage them to do so is by shopping the best out-the-door price you get from one dealer with his closest competitor for the same make. This is much less time-consuming if you do it online. In your communication with each dealer, be sure to define out-the-door price as the price you can write the check out for to buy the car plus state sales tax and license plate. In other words, nothing added to the price except government fees. The test of government fee is that there’s no sales tax charged for a true government fee.

Pandemics, Bad Credit, and Car Buying

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

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

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

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

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

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

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

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

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

Only Suckers Pay MSRP for New Vehicles?

Nope! Today, It's the Smart People Paying MSRP!

The most informative and “entertaining” part of my radio show, Earl on Cars, is the Mystery Shopping Report. Every week for about 20 years, I dispatch an undercover, pretend buyer of a new or used car, to a different car dealership. We report the unexpurgated results, live on the air every Saturday morning between 8 and 10 am, EST. [95.9 and 105.9 FM; www.FaceBook.com/EarlOnCars, www.YouTube.com/EarlOnCars]. Dealerships are graded and displayed on our list of good dealers and bad dealers. You can check this out at www.GoodDealerBadDealerList.com. 

As you know, for almost 2 years, ever since the COVID pandemic induced microchip shortage, new and used car prices have spiked to unprecedented heights.  New and used vehicles that were formerly discounted thousands of dollars below MSRP were marked up thousands of dollars above. New car buyers are, unbelievably, paying as much as $40,000 above sticker for new vehicles like a Toyota RAV4 Prime. Google “Downtown Oakland Toyota” for a recent, specific case. 

I have some good news and bad news for you. The good news is that new car prices have begun to come down; the bad news is that they’ve come down only to MSRP and only at a few dealerships. For the last 2 months my mystery shopper has discovered 4 dealerships offering to sell new cars at very close to MSRP. Interestingly, most of them have Been Ford dealerships; I’m not sure why that is. 

My advice to you is DO NOT BUY A NEW OR USED CAR UNLESS YOU MUST, for the next 30 to 90 days. If you must, insist on paying no more than MSRP. You’ll probably have to shop several car dealerships that sell the brand you want to buy. You can do this very efficiently and quickly online, or by phone if you’re not good with computers. Send the dealership this email, “I will buy the specific car we’ve discussed for its MSRP plus sales tax and license/registration (nontaxable fees only), out-the-door. I will pay you this total amount with my check and drive my new car home with no further payment. If this is agreeable to you, confirm by email and I will come in today to pick up my new car.” 

Most car dealers typically add hidden fees (not nontaxable government fees but added profit to the dealer) and dealer installed accessories that are not in the advertised or quoted price. Even If some or all of these are included in the total out-the-door price, no higher than MSRP, it’s OK. You’ve accomplished your goal. 

Dealer Fees Aren’t Bad; Hidden Fees Are

The phrase “dealer fee” has become a generic term for all the hidden fees that car dealers have added to the advertised prices of their cars for the last 50 years. When I started in the car business with my father in 1968, Stewart Pontiac in West Palm Beach, FL charged a $6.50 fee named “doc fee”. I guess my father chose “doc fee” for this hidden profit because it sounds like an amount that would be charged for processing documents. I never gave this a second thought, because the fee was quite small, and all car dealers had similar charges.

 
Today dealer fees have surged in amount and number of fees charged on a single sale. A few states regulate the fees effectively like California which caps theirs at $80. Most states have NO LIMIT on the amount. Florida’s is one of those and their average dealer fee, according to Edmunds.com, is $799. But in South Florida, dealer fees exceed $1,000 on the average and some dealers have as much as $3,000!
The first thing you need to know about dealer fees is that almost no car dealer names their hidden fee “dealer fee”. All dealers have come up with legitimate sounding names designed to make the car buyer believe the fee is a government fee like sales tax or license/registration. A few examples are tag agency fee, electronic filing fee, e-filing fee, administrative fee, doc fee, notary fee, dealer prep fee, etc. In fact, some dealers advertise that they don’t charge a dealer fee, because they can say they named their “hidden fee” something else.

 
Secondly, you may not even be aware of their hidden fees until you are signing the final documents in the dealer’s business office. In your mind, you’ve already bought the car. The salesman’s job is complete, and you’ve signed some paperwork. The salesman escorts you to the “business office” to finalize the paperwork. This is where the hidden fees often first appear, mired in the rehems of paper and fine print spit out by the highspeed computer/printer. Most car buyers never know that additional dealer profit was added to the price they “thought” they paid for the car.

 
Hopefully, the above explanation of how difficult it is for you spot all the hidden fees and the total amount is well understood. The purpose of this article is to relieve you of even having to attempt this almost impossible task. Even if you did find all the hidden fees, you’ll never win an argument with the salesman or sales manager on their legitimacy. In fact, many salesmen and manager have been misinformed by their superiors and may believe that these fees are commonplace, legal, and even ethical. When you argue with a salesman about taking off the hidden fees, he knows that his boss won’t allow it, and he can only make you happy by reducing the price of the car by the amount of the hidden fees. Reducing the price, reduces his 25% commission. Taking off an $800 dealer fee off the price of the car costs him $200 in commission.
The solution to the “hidden fee game”, is to refuse to play. Let them give you bottom line price that includes as much in hidden fees as they want to. That’s when you tell the salesman and manager, that you going to take that bottom line price to at least three other car dealers, his competitors, and see if they can offer you a lower one. Their only choice is to decide how high an out-the-door price they can give you and have you come back to buy from them. You must remember that the definition of an out-the-door price is the amount of money you can write out your check for, hand it to the salesman, and drive your new car home.

 
Don’t fall for the old tricks…” this price is good for today only”, “the car you chose will probably be sold when you come back”, or “I won’t give you my best price in writing”. When you hear these sorts of remarks, simply say “If I leave here without your lowest out-the-door price in writing, you might sell me a car’. If you don’t give me this price, you have zero chance of selling me the car because you’ll never see or hear from me again”. At his point, you turn around, walk out the door, get in your car and drive away. Nine times out of ten, they’ll give you the price you asked for. You might even have to get in your car, start it, and begin driving away. Be sure to check your rear-view mirror for a salesman frantically chasing behind you. 😊

Begin your New Car Buying Process Today... Target Date for Delivery/Payment in 60-90 Days

It’s time to decide which 2022 new vehicle, make model and accessories, is best for you. You’re fortunate that you don’t have to buy a car today, because you understand that supply and demand conditions brought on by the microchip shortage and other COVID-precipitated factors has driven new car prices to record levels.

 
Choosing the right new car is relatively easy because there’s one source of accurate, unbiased information that you can bank on…Consumer Reports, the “Bible” of consumer information on automobiles. Go to www.ConsumerReports.org, and check out any new vehicle that strikes your fancy. Choose the one that you like best esthetically…styling, performance, etc., but then check them out for the less obvious, but important criteria. Safety, fuel economy, maintenance and insurance costs, reliability, and rate of depreciation.

 
Test drive the vehicle that you choose to order. To avoid a lot of time and sales pressure, make it clear to the salesman that you will not be buying that car today. Finding the exact vehicle in a 2022 model can be a challenge, depending on how soon you begin your buying process. You’re buying a 2022 because a 2021 model is a one-year-old car today…essentially an “undriven used car”. The discount that dealers may give you on a 2021 never offset the extra cost of depreciation when you trade that car in on another. As I write this column, new vehicle inventories are at historic lows, especially 2022’s. If there are no major changes in the 2022 you order vs. the 2021, you can settle for driving the older model. Test driving a new car isn’t just “driving it around the block”. Take it out on the highways and the same roads that you routinely drive on. Drive it at all the various speeds you drive, back it up, and park it. Ideally, you should take a car home overnight and park it in your garage.

 
Locate the Costco certified auto dealers in your region. Go to this web address, www.CostcoAuto.com. If you’re not a member of Costco, you should buy an annual membership for only $65. The Costco auto buying program requires their certified dealers to sell Costco members a new car at a lower price than they have sold that car to any other buyer for. Costco will initially offer you only one certified dealership…the one closest to your zip code. You can obtain more certified Costco dealers by calling Costco directly. As you probably know, car dealers charge different prices to each of their customers for the same car, including Costco dealers. What sets Costco dealers apart is that the price you pay is the lowest price they will sell anybody that car for.

 
Be sure the Costco certified dealers will agree to sell you the car at their Costco price on the date you are prepared to take delivery of your new car. Eliminate any Costco dealer that refuses to do this. Contract with those that do agree and the one from whom you choose to buy your new car at the Costco price in effect at your expected time of delivery.

 
Choose a delivery date no sooner than December 2021 and, optimally, closer to March 2022. New car prices will begin coming down slowly this month (October 2021). They’ll continue to decline through the first quarter of 2022. Once you’ve finalized this purchase agreement, you can monitor the Costco price on the car you’ve chosen as often as you like. You may find that the price has come down enough to buy the car sooner than your planned delivery date. You might have to choose from a color or equipment of a car in stock that’s a little different than the one you have on order.

 
Buy low and sell high is the title to this article. You’re buying your new car low, and you CAN sell your used car very high today. I devoted little of that to this article because you probably need your current car. This morning, before I started writing this article, CNBC announced that the average used car is selling today for 56% higher than two years ago. That’s a record increase in used car prices. If you can get along without your current car, sell it today. But don’t trade it in on your new car, sell it directly to a dealer after shopping for the highest price. Also, check with these online companies, www.Carvana.com,www.Varoon.com, www.CarMax.com and www.WeBuyAnyCar.com.