Monday, August 08, 2022

Auto Sales Commissions: The Root of all Evil





Of course, the real quote from the Bible, Timothy 6:10, is “The love of money is the root of all evil”. If you don’t already know this, almost all car salespeople are compensated, almost totally, by a percentage of how much profit they make when they sell you a car. The average commission is about 25%. Virtually all car dealers are marking their cars up thousands above MSRP. With the average profit made on a car today being over $5,000, a salesperson earns about $1,250 for each car he sells. An average car salesman sells about 10 cars per month and a good car salesman will sell about 20. They’re earning $12,500 to $25,000 monthly.
As you know, auto sales dealerships are the only retail companies that allow their products’ markups to be determined by the salespeople. The upper management and owners of all other retail companies set the prices of their products to their customers. A car salesman is compensated and motivated to mark up the profit margin on the car he sells you “as much as he can get away with”. On any given day, the exact same MSRP, year-make-model car is sold at widely varying markups to different buyers. The shrewd, experienced negotiator-buyer might buy a new car close to MSRP, but a more gullible, inexperienced buyer could buy $10,000+ above MSRP. In today’s uniquely low supply, high demand automotive environment, car salespeople and dealers are making more money when they sell you a car than ever before in auto-retail history, about 100 years!

It's unethical, immoral and it should be illegal to sell the same product to every buyer at a different price determined by the buyer’s gullibility and inexperience. This is usually correlated to a buyers’ age, education, sophistication, and comprehension of the English language. Our civil rights laws protect certain classes of people against various kinds of discrimination. Interest rates on car loans are even covered by these laws; Why aren’t they also protected against outrageous markups on cars that are sold to others at much lower prices?
 
A car dealer that allows his salespeople to mark up each car he sells as high as he can get away with is guilty of discrimination, pure and simple. This needs to be codified into law by our lawmakers and enforced by our regulators. Ironically, our lawmakers and regulators are members of the privileged class that gets the lowest prices. In fact, one could make the argument that the unrealistically lower prices they’re able to command, may even cause other buyers to pay more. What kind of a “deal” do you think a governor, senator, or congressman gets when he or she buys a car, compared to your price? How about an Attorney General or the head of the County Office of Consumer Affairs?

All car dealers should be required by law to post the out-the-door price on every car they sell and sell every car to every customer at that price. The legal definition of the out-the-door price should be “a price with no added charges except government fees (sales tax and license plate). The governor of the state or the President of the United States should have to pay the same out-the-door price as you and me.

Monday, July 18, 2022

The Warranty on Your New Car May Be Less Than You Were Promised


There’s a very good chance that the warranty on your new car is for a shorter time than you thought. This likelihood is much greater since the COVID crisis precipitated the microchip and other parts shortages, limiting production while consumer demand and prices climbed to all-time highs.
 
The featured Op-ed story in a recent Automotive News (the auto industries trade journal) was entitled “Yes, a car must be delivered to count as sold.” What the editor of this op-ed was alluding to was that many car dealers are lying to their manufacturers about the number of cars they’re truly selling, in order to “earn” more production from the manufacturer than they are entitled to. All auto manufacturers calculate the number of cars they sell and ship to each dealer by the number of cars that dealer “sells”. The only way that a manufacturer knows that a car is sold by a particular dealer is when that dealer emails his retail daily reports (RDR’s) which include the customer’s name and VIN of the vehicle purchased. It’s important that dealers report sales every day for any vehicles he sells, because a replacement vehicle is then shipped immediately.
 
Most dealers, most of the time, have falsified these Retail Sales Reports to get new inventory ahead of their competitive dealers, especially with high demand/low supply vehicles… like the Corvette, Subaru WRX, and most hybrids. Most dealers have always reported these sold, whether they were or not as soon as they learned the VIN. This deception is motivated purely by greed to receive new cars the dealer is not entitled to because the factory believed the dealer was really selling and delivering them to a buyer. The car may not be truly sold for weeks or months after its reported sold to the manufacturer.
 
The big problem for the real car buyers with all of this is that the manufacturer began the “new car warranty clock” ticking as soon as they received the dealers bogus retail sales report. If you bought one of those, and it’s very likely you might have, your new car warranty will actually end days, weeks, or even months before what your new car warranty promises. If you had a transmission problem today and you supposedly had a 5 year/50,000-mile warranty, you’d have to pay out-of-pocket because the dealer had lied to his manufacturer about the true sale date, weeks, or months earlier.
 
Your best protection against this is to ask the dealer, before you pay for the car, to show you the dated retail sales report he sent to his manufacturer. That date should match the day you take your new car home. If it doesn’t, your options are several. You can insist that he correct this false report to show the current date. He may be reluctant to do this because the manufacturer will penalize his new car allocation based to bogus sales reporting. You can contact the manufacturer directly and expose the dealer’s deception. Of course, you can simply refuse to buy the car. A final option would be to get a written commitment from the dealer to repair anything that should have been covered by warranty that wasn’t because of his deception. Remember that this commitment would be good only for this specific dealer. If you were out-of-state and had to go do a different dealer, you’d be out of luck.

Monday, June 27, 2022

Open Letter to Gov. Ron DeSantis


Dear Governor DeSantis,
 
You probably don’t know me, but I’m a native Floridian, born in Ft. Lauderdale in 1940. I’ve owned and operated Earl Stewart Toyota in North Palm Beach since 1975, after beginning in the car business as a Pontiac dealer in 1968. For about the last 20 years I’ve evolved into a consumer advocate for car-buyers, advising them how to buy a car in Florida without getting ripped off.
 
I became a consumer advocate for car-buyers because I came to realize that my chosen profession as a car dealer was regarded by the public as the most dishonest and unethical of all other professions. Governor, did you know that the Gallup Annual Poll on Honesty and Ethics in Professions has ranked car dealers at the bottom or next to the bottom for the past 48 years? The honesty and ethics of car dealers in our state, Florida, is the worst of all 50 states. Florida is the beast; South Florida is the “belly of the beast”.
 
Governor DeSantis, I challenge you to find one price advertisement for a new vehicle in Florida that is honest. In other words, one that allows you to buy the car for the ad price (excluding only the government fees of sales tax and license plate). If you can do this, I’ll write an apology to you and the car dealers that advertised those prices.
 
Only car dealers are allowed by Florida’s regulators to get away with this. All other retailers comply with Florida laws to advertise real prices without hidden fees or extra, undisclosed options. The two largest retailers in World, Walmart and Amazon comply. Check Florida Statute 501, section 976, actionable, unfair, or deceptive acts or practices and you’ll confirm that virtually all Florida car dealer price advertisements are illegal. They’re illegal, not only by Florida law but federal law, the FTC. The Federal Trade Commission prohibits any fine print that will serve to increase the advertised price.
 
Your Attorney General, Ashley Moody, should be acting against all car dealers violating Florida and federal laws. Other AGs in many other states are acting, including against Florida car dealers. Why do Floridians need to rely on an Attorney General from Arizona to discipline Ed Napleton, a Florida car dealer?

By the way, Governor, I’m a realist and pragmatist. I understand how politics work and I know what it takes to get elected. I have my problems with politics and politicians, but our system is the greatest on the Planet and every day I’m thankful to be an American. I think you’re missing a huge opportunity by not coming down on dishonest, unethical car dealers. Most voters’ own cars and must do business with car dealers regularly. Most voters also fear and/or despise their experience…” I’d rather have a root canal than buy a car”. If you became a champion for the car buyers of Florida and the nation, you’d garner a lot of admiration and thanks, maybe resulting in the casting of their votes for you for he next President of the United States.

Yours Truly,

Earl Stewart
The Recovering Car Dealer

*Note: This column appears in The Florida Weekly. The Hometown News, who publishes my regular column, refused to print this column, citing my references to politicians and car dealers.

Monday, June 20, 2022

Your Car is Safer to Drive after a Collision When it’s Repaired at a Certified Dealer’s Body Shop


Fewer than 1 out of 5 vehicles involved in crashes are repaired at a dealership certified by the manufacturer of that vehicle. Most insurance owned body shops and independently owned body shops will use the cheapest fenders, bumpers, roof and door panels and other crash parts to repair your car. These parts aren’t made by the manufacturer of your car and are often Imported from other countries. No other countries have as strict and safe requirements regarding the manufacturing of auto parts than the United States.
 
When your car was sold as new, it was required by the NHTSA, National Highway Traffic Safety Association, to use crash parts that have passed safety crash tests. Only original equipment manufacturer, OEM, parts are safety tested. Other non-OEM parts manufacturers and your insurance company will tell you that their parts are “certified”, but that only alludes to quality, not safety. Your insurance company does not require OEM parts because they’re more expensive and therefore insurance company owned body shops and independent body shops use mostly aftermarket, non-safety tested, crash parts.

The dealer for the manufacturer of your car can buy original equipment parts from the manufacturer for about 40% less, than a non-dealership operated body shop. Therefore, he has the motivation to use the best and safest parts to repair your car. Non-dealership body shops must buy the parts to repair your car form dealership of that make. Of course, the dealership marks up the price well above his cost. Therefore, these non-dealership body shops usually buy cheap, non-safety tested parts overseas.
 
Imagine a front-end collision at 40 mph and think how quickly and precisely your airbag must open to keep you safe. The computer that opens your airbag must “know” how fast the bumper, hood, fenders, and doors of your car will collapse to safely deploy your airbag. Deploying your airbag too soon or too late could be fatal. NHTSA testing verifies that all crash parts will collapse at a speed specified by the NHTSA. Crash parts not manufactured to these specifications can collapse too fast or too slow, causing you injury or death.
 
After a collision, most victims are anxious and upset, more likely to be vulnerable to bad advice. Don’t let this happen to you. There are a lot of entities that might “have their fingers in the pie”. That is, have “something to gain” by steering you to a specific body shop. Your insurance company probably has “preferred shops” that they’ll suggest but remember that they’re paying for the repair. The police on the scene may have a suggestion for a body shop they’re familiar with and usually know a towing company. The police’s first concern is getting the wrecked cars out of the street as quickly as possible. The towing companies often have relationships with insurance companies. They’re paid by the insurance company for towing and for storing your car on their lot.
 
Remember that you have the legal right to choose the body shop that repairs your vehicle. You should insist on your right to choose the best and safest place to repair your car. Nobody cares more about your safety and the safety of your family than you.

Monday, June 13, 2022

You Were Overcharged When You Purchased Your Leased Car


Participate in a Class Action Lawsuit to Repay You

Almost one-third of all vehicles on the road are leased. All lease contracts include an option to purchase the vehicle at a price predetermined by the leasing company.
 
Many lessees don’t know about their option to purchase at a specific price. Those who do know are usually unaware that the dealer and leasing company cannot increase the purchase option price included in the lease contract. In fact, this is common practice by almost all car dealers and the leasing companies are almost always complicit in this violation of the federal Consumer Leasing Act of 1976.
 
The violation of the law has been very common, perhaps because few people asked to exercise this option. In the past 2 ½ years, with the advent of the Covid pandemic, more people are leasing, and far more people are exercising their option to purchase. This is because the prices of all used cars have soared!

According to the U.S. Bureau of Labor Statistics, the consumer price index for used cars and truck jumped up by 40.5% from January 2021. That means that if you leased a used car in January of 2021, your purchase option price is about 40% lower that the market value. The leasing company that established the purchase option price didn’t foresee the surge in used car prices. Most people driving lease cars have several thousands of dollars in PROFIT baked into today’s market value of the car they’re driving.

Of course, auto dealers and leasing companies are very much aware of the profit opportunity in your lease cars option to purchase. They hope you don’t know about the option because they want the car for themselves. If you do know about and exercise the option, the dealers are adding thousands of dollars on top of your option price. This is illegal and a violation of the federal Consumer Leasing Act of 1976.

If you’ve already been victimized, there’s still hope that you can “be made whole” again. Public awareness is growing. WPLG, Channel 10 in Ft. Lauderdale recently reported on this crime and there are many car dealers being sued. I’ve written several articles about this, and you can access those articles at www.EarlOnCars.com.
 
You also have an opportunity to participate in a national class action suit which may be filed against Ally Financial and Ally Bank Lease Trust. If you leased Chevrolet, Buick, GMC truck, Cadillac, Jeep, Chrysler, Dodge or Mitsubishi, you probably used Ally. If you’ve been told by your car dealer that you must pay a price higher than the purchase option amount on your lease contract or if you’ve already done so, you have a cause for action.
 
A South Florida resident, Moshe Katzburg, will represent the class action, and you can join in. Email Moshe Katzburg at moshekatzburg@hotmail.com with a complete description of how you were taken advantage of…dealer’s name and information on the car you leased and the purchase option price. Describe the extra charges above the option price that the dealer insisted on. Mr. Katzburg would prefer email but will speak to you if you need to call. His cell phone number is 845-323-6143 and you may text him there also.

Monday, June 06, 2022

Punishment Should Fit the Crime... and the Criminal’s Pocket Book


Have you ever wondered why 95% of all drivers routinely exceed the speed limit? Not only do most drivers wantonly exceed most speed limits, but it’s also often dangerous if you don’t speed when everyone else is. According to Bankrate.com, the average speeding fine in most states is only $150. This cost is relatively low to the average car owner, and a driver’s odds of being the one pulled over by the police are miniscule. The result of these low, “slap-on-the-wrist” traffic fines that are rarely administered is that virtually every driver speeds and traffic deaths and injuries are very high.
 
Regular readers of this column know about the recent “slap on the wrist” given a large auto dealer group owned by Ed Napleton. The FTC settled with the Napleton group, 71 franchises in 7 states for $10 million for allegedly cheating his customers out of $70 million. That’s a “pretty good deal” for Napleton…700% return on his “investment”. Oh, and guess what? My EarlOnCars.com mystery shopper went into two of his South Florida dealerships after he was fined and learned that he’s still deceiving his customers for the same things that he settled with the FTC for!

The May 30, 2022, edition of Automotive News (the trade journal for all auto dealers and manufacturers) features an editorial entitled “Weak Fines do little to deter bad behavior”. They mentioned Chrysler Corp., now known as Stellantis, pleading guilty in the federal courthouse over fraudulent emission testing. Chrysler-Jeep-Dodge/Stellantis will pay $300 million in penalties. Now, I know that sounds like lots of money to you and me but compare this to the $2 billion that Volkswagen agreed to pay in 2017 for the same crime. The $300 Million settlement by Chrysler-Jeep/Stellantis represents “29 hours” of their North American first quarter revenue!

There is a concept in our law called “Punitive Damages”. All businesses fear this when they’re sued because the amount of the fine is left up to a jury and the amount of the fine can’t be covered by insurance. The jury is instructed by the court to take into consideration the extent of the crime and the net worth of the company or individual charged. That means that punitive damages for you or me would be far less than those for Elon Musk or Jeff Bezos for the same crime or bad behavior.
 
This principle should be incorporated into all fines and penalties. Why should a working mom, struggling to make ends meet pay the same fine as Warren Buffet? By the way, Warren Buffet, himself, says that his “secretary” pays more income tax than he does. Folks, there’s something seriously wrong without system of laws and fines.
 
As most of my regular readers know, most car dealers have been breaking the same laws on advertising and sales practices repeatedly for nearly 100 years. Their powerful lobbyists protect them from new laws to protect car-buyers, the enforcement of old laws already on the books, and minimize the fines when they are caught.

Monday, May 30, 2022

Full Disclosure & Transparency or Digital Deception & Opaqueness


Recently, a woman and a mother called into my weekly radio talk-show, "Earl on Cars”, and told us of a bad experience her young son had in purchasing a new car. He purchased a new Kia and brought it home for his mother to see. She asked him how much he’d paid for the Kia, but he was “kind of vague” about the numbers. She asked him to show her the “paperwork” from the purchase, vehicle buyer’s order and instalment sales contract. He reached into his pocket and handed her a “thumb drive”. In case you’re not familiar with a “thumb drive” (many people aren’t), it’s a device about 2” X .5” X .25” that stores digital data. You can only read this data if you insert the thumb drive into your PC (assuming your PC has a slot to do this; some don’t). This also assumes that you were savvy enough to accomplish the technical steps to insert the thumb drive in the right place and make the proper keystrokes on the PC to bring up the information. The son didn’t even own a PC and the mother didn’t know how to read the thumb drive on hers.
 
They went to the Kia dealer and learned that her son had paid $6,000 more for the new Kia than he’d been led to believe he was paying. When they both strongly objected, the sales manager told them that his son had signed the vehicle buyer’s order and installment sales contract and taken delivery of the new Kia. He told them that there’s nothing he could do because the sale was legally consummated.
 
When I first heard this on my radio show, I didn’t believe that this was a legal sales transaction because there hadn’t been FULL DISCLOSURE. Full disclosure is the most important part of contract law. It simply means that before a transaction can be legally consummated between a buyer and seller, both parties must have totally and transparently disclosed all the terms of the sale. My son, Stu Stewart, who is a member of the Earl on Cars team (along with Nancy Stewart and Rick Kearney) told me that other car dealers were also handing customers thumb drives. He said that this is all just part of the digital revolution and online buying.
 
After the radio show, I called an attorney that represents the Florida Auto Dealers Association, FADA, named Alex Kurkin. He told me, much to my chagrin and disappointment, that a thumb drive is considered full disclosure when purchasing anything, including a car. I was very surprised and disappointed.
 
There is the “letter of the law” and there’s the “spirit of the law”. In my opinion, giving a buyer a “thumb drive” violates the spirit of the law, because many people today can’t see and read what the seller has given them to describe all the terms of the transaction, especially the full out-the-door PRICE.
It's hard enough to understand all the terms and conditions of buying a car when full disclosure is in writing on paper. When the seller makes this information “invisible” on a thumb drive that can be seen only by someone who is digitally savvy about thumb drives and PC’s.
 
Humans are caught up in a whirlwind of technology unlike anything seen before in our history. With the Internet, Google, PC’s, smartphones, artificial intelligence, quantum computing, the Cloud, and the Metaverse, many humans were left behind in the twentieth century. The law must not allow these older, perhaps less educated people to be victimized (accidentally or on purpose) by car dealers or any other businesses. All buyers should be given a paper copy of all details of every purchase transaction.