Monday, June 14, 2021

Buying a Car During the Microchip Shortage


Five Rules to Save You from Paying Sticker Price +

Most folks aren’t even sure what a “microchip” is. The Oxford dictionary defines a microchip as “A tiny wafer of semiconducting material used to make an integrated circuit”. Unless you’re a physicist, this probably doesn’t help you understand any better. In lay terms, a microchip is a fundamental part of all electronics and computers manufactured today. They replaced vacuum tubes which, if you’re old enough to remember the early and middle of the 20th century, were used in radios, TV sets and those first very large computers. My first job, after receiving my Master’s degree from Purdue University in 1964, was with Westinghouse Electric Corp working with engineers to design microchips/integrated circuits into everything that previously had used vacuum tubes. Microchips revolutionized the world because all electronic devices, especially computers, became much smaller, faster, and inexpensive.

Every vehicle manufactured today is a “computer on wheels” and the auto industry uses more microchips than any other industry. The car you’re driving today has far more computing power than Apollo 11, the first rocket ship to fly to the moon in 1969, carrying Neil Armstrong and Buzz Aldrin. This is the biggest reason the world-side auto industry is experiencing the most severe inventory shortage in history. Coupled with unprecedented demand driven by consumers clamoring to buy, lease, and rent new and used vehicles, prices have SKYROCKETED for all new and used cars. About TWO-THIRDS of all cars sold last month were at, or over, full sticker price.

Here are my suggestions if you’re considering buying a new or use car today:
  • Don’t buy, lease, or rent a car today unless you must or don’t mind paying a lot more than you would in a few months. Near the end of this year, prices will drop considerably when inventories rise as the microchip shortage is mitigated.
  • If you’re thinking of buying a new car, check the price of an equivalent used one of the same make and model. Also, check the price of an equivalent new car, if you’re thinking of buying a used one. The acute inventory shortage has created crazy pricing by dealers with the used version of a new car selling for nearly the same as a new one; and sometimes vis versa.
  • If you’re currently leasing a car, you have anoption to purchase it the end of the lease, or before. In a “normal” market, this wouldn’t be as important, but with used car prices skyrocketing this can be a financial windfall for you. You may be able to exercise your purchase option and buy your leased car at a bargain-basement price. You can keep this vehicle and drive for another 3 or more years or “flip it”. This means you buy your car back from the leasing company and then simultaneously sell it back to the highest bidder. It may be your dealer, CarMax, www.WeBuyAnyCar.com, www.Vroom.com, orwww.Carvana.com. Do not let the dealer that leased you the car keep your leased car without knowing how much below current market value it is. He will take your windfall and keep it for extra profit for himself while selling or leasing you a new car.
  • If you must buy a new car today, take advantage of a reputable third-party car buying sources likewww.CostcoAuto.com, www.TrueCar.com, orwww.ConsumerReports.com. You’ll still pay a relatively higher price than 4 months from now, but you won’t pay a much higher price than everybody else does.
  • If you prefer to buy directly from the dealer, be sure to get at least three competitive bids on the exact same vehicle (same MSRP). Also get at least 3 bids on your trade-in, which will greatly mitigate the very high price you’ll pay for the new car.

Monday, June 07, 2021

The Best of Times for Car Dealers... The Worst of Times for Car Buyers

Quote from J.D. Power in May 31, 2021 issue of Automotive News:

“Dealers are exceptionally profitable right now”, said Tyson Jominy, vice president of data and analytics at J.D. Power. He pointed to figures released Friday, May 28, that show total car dealer profit per vehicle, including grosses and F&I income, is on pace to reach an all-time high of $3,245—more than DOUBLE the $1,567 earned a year earlier. Vehicle gross profits have exceeded $2,000 for nine of the last 10 months according to J.D. Power. Sticker Shock: Figures from J.D. Power show the stark rise in the prices at which dealers are selling new vehicles. Here are the percentages of new vehicle transactions that were near or above manufacturers’ suggested retail price, MSRP, in the first 26 days of May, compared with full month results in previous years: May 2021, 69%, May 2020, 41%, May 2019 36%.

I hasten to add that the “exceptional profits” quoted above are average profits. Car dealers are the only retailers who sell the exact same product for wildly varying prices to each buyer, based on the buyer’s negotiating skills. What this means is that, unless you’re one of those shrewd buyers, your price will be much higher than the 69% of buyers who pay at or above MSRP…full sticker. Furthermore, these record prices don’t account for the overpriced dealer add-ons (nitrogen in tires, paint sealant, mudguards, etc.).

Unless you must buy a car now, the wise course of action is to wait until supply equals demand. The free marketplace always corrects itself, seeking to reach “supply = demand”. I don’t have a crystal ball, but this will likely happen by early August. In fact, when this correction occurs, the marketplace typically overcorrects which will mean supply exceeds demand. This will result in prices plummeting. The 2022 models will begin to become available in August. If you can wait until this time to buy you next car, you will avoid today’s grossly higher prices plus buy a year newer model, saving the “instant depreciation” of several thousand dollars on last year’s model.

If you’re currently leasing a car with several months left on your lease, you’ll be “hounded” by dealers and the manufacturer to terminate your lease early and buy or lease another car. The dealer and manufacturer know that your current lease car is worth a lot more than they thought it would be at this time when they leased it to you. For this reason, they want to benefit from this unexpected windfall in used car values by leasing or selling you another car. It’s a lose-lose for you if you let them trick you into doing this. If you don’t want to continue leasing your car, you have a contractual option to buy it at, what is likely, a much lower price than the current inflated market price. You can exercise this purchase option and continue to drive it, or sell the car back to a dealer (or individual) at a much higher price. You can use this profit to mitigate today’s temporarily higher cost of new (or used) cars.

Most of you know that I’m a car dealer, and you must be wondering why I would try to talk you out of buying or leasing a car until later in the year. I’ve been a car dealer since 1968 (54 years) and have learned that what’s best for my customers is best for my business in the long run. If I mislead my customers into buying a car this month, some of them will realize this, and never do business with me again; but if I suggest something that is clearly in their best interests, even to my detriment, they will be more likely to believe me later, when I tell them I can offer them a good price. Furthermore, my customers will tell their relatives, friends, and neighbors that they know an honest car dealer.

Monday, May 24, 2021

Open Letter to Elon Musk: Eliminate Hidden Fees on Teslas

Dear Elon,

I’m a new customer of yours and Tesla, having recently purchased a new 2021 “Model S Plaid”, and I’m anxiously looking forward to taking delivery this next month. I’m also a long-time fan and follower of your incredible technological and business accomplishments. You’ve never heard of me, but I’m a car dealer and a consumer advocate. You can Google me or check me out at www.EarlOnCars.com, www.YouTube.com/EarlStewart or read my book, Confessions of a Recovering Car Dealer, available on Amazon (100% of all proceeds are donated towww.BigDogRanchRescue.org). I’d love to have you call my live radio talk show, Earl on Cars, some Saturday morning between 8 and 9 am EST. You can stream it live atwww.StreamEarlOnCars.com. Or, please call or text me personally at 561 358-1474.

Regarding the headline of this article, please believe that I don’t believe that you are aware that your Teslas are beingadvertised and sold without clear and conspicuous disclosure of additional profits to Tesla. In the displayed attachment to this article of my Model S Plaid invoice, there are two items added to the advertised and quoted price of the Model S Plaid…$1,200 for “Destination and Documentation Fees” and a $100 “order fee”. As, I’m sure you’ll agree, these costs your recovering by adding it to the price, (after the ad price) should be included in the price your communicating to your buyers.



As a “recovering automobile dealer”, I’ve greatly admired how you’ve reinvented the auto retail business by making the buying experience of a Tesla an honest and transparent one…” almost”. Tesla doesn’t resort to bait and switch advertising or any other forms of high-pressure haggling and deceptive selling practices. Competing car dealers consider Tesla a threat to the current dealer franchise system which prohibits any entity other than a franchised car dealer sell a new vehicle in the USA. All other auto manufacturers are required by “ancient” state auto-franchise laws to sell only through their franchised dealers. This allows car dealers to get away with blatant unfair and deceptive sales practices.

Hopefully this letter and the revelation of Tesla’s $1,300 in hidden fees will come to your attention. If it does, I know that you will, not only eliminate this $1,300 in added profit to Tesla, but retroactively refund the hidden fees charged to Tesla customers in the past. My suggestion to you is that you simply raise the price of all Teslas by $1,300. This certainly wouldn’t have made a difference in my purchasing my new Model S Plaid, nor do I believe it will deter most Tesla buyers. Your buyers are like me and are drawn to buy a Tesla because it’s arguably the best, most exciting automobile ever built. You have no competition at the present time, but when the competition gets serious, you should preserve Tesla’s reputation of being, not only the best car made, but the only one sold with total honesty and transparency

- Earl


Monday, May 17, 2021

Used Car Prices Soar to All-Time High Wholesale Prices Up 54.3%

 

One of the biggest unexpected and unintended consequences from the Covid pandemic and the resulting economic impact are record used car prices. It’s very important for you to know and understand this if you’re thinking of selling your car, trading it in, or if you’re currently driving a leased car.

Selling your car today will be the first time you’ve ever been able to sell a car today for more than it was worth over a year ago. Yes, your car didn’t depreciate last year, it appreciated. When selling or trading your current car, I usually recommend getting bids from 3 difference buyers. With these extraordinary, soaring and volatile used car prices, my recommendation is to get as many bids as you can…at least 5 or 6. I’ve been a car dealer for over 50 years, and even I’m being surprised by these prices, especially the volatility. Your best bets on getting the highest price for your used car are from CarMax.com, Carvana.com, Varoom.com, WeBuyAnyCar.com, or the used car lots for any dealer of the make of used car you own.

Trading in your car, it’s imperative that you don’t trade it to the dealer you’re buying your next car from, until you’ve gotten at least 5 or 6 bids from the sources I recommended in the last paragraph. Don’t accept book values like Kelly Blue Book to justify the trade-in allowance as being fair. Book values are often wrong, especially in today’s volatile and rapidly changing market. You should give the dealer from whom you’re buying your next car the “last look” at buying your

trade-in to enjoy the sales tax exemption of the trade in allowance. Florida sales tax is 6%, so you’d save $1,200 on a $20,000 trade-in by trading it to the dealer you’re buying your next car from. Most states have similar exemptions.

If you’re leasing a car, you have the rare opportunity to make money by exercising your right to purchase your lease car at the end of the lease. In the past, most of the time, the residual value (your purchase option price), is higher than the current wholesale value. Today, you can often exercise your lease purchase option at a price below the current wholesale. This means you can buy your car at a great price and continue to drive it or buy it to “flip” …sell it back to a dealer at more than you paid. As always, there are obstacles which you must deal with when car dealers are involved. The leasing dealer will probably charge you extra fees, his dealer fees which are hidden fees he adds to cars he normally sells. Also, the leasing company can charge you a “lease disposition fee” which is waived if you buy or lease another car from their dealer. You can return your lease car to any dealer of the make of car you lease, and you should seek out one that will charge you the lowest dealer fees.

When shopping your car withthe sources I’ve suggested, remember that the more bids you get, the more likely you’ll find a very high price. Companies like CarMax and Carvana will sometimes pay more than anybody else, even the “bible”, Manheim Auto Auction price. Why would they do this? Because the used car market, wholesale and retail, is so volatile that, at any given time there are lots of anomalies. CarMax or Carvana may see a sudden spike in the retail price in certain models that the Manheim auction hasn’t adjusted for

Monday, May 10, 2021

Buy this New Car for Only $99 per Month


Chances are, since you’re reading this, you’re not very likely to visit a new car dealership, believing you can buy any new (or used) car for only $99 per month. Sadly, lots and lots of people aren’t as savvy as you and do believe it.

Since I’m largely “preaching to the choir” because most readers of my blog and column are educated consumers, why do I write about this? It’s because most of the large volume dealers do resort to this, almost obscene, form of bait and switch advertising. They wouldn’t be spending hundreds of thousands of dollars on TV, digital, radio, and billboards telling their readers and listeners they can buy this car for $99/mo. if it didn’t work.

The targets of this unethical, immoral, deceptive, and illegal advertising are the “victims” of our society. They’re the elderly, very young (buying their first car), the English language impaired, uneducated, and, yes, the just plain gullible. Some areas of our county have large populations of first- and second-generation immigrants; other parts have large elderly populations. South Florida has both. I get lots of emails and phone calls from elderly widows, baby-boomers and pre-boomers. Wives usually survive their husbands and they lived most of their lives during a time when the husband bought the cars in the family. I hear from many widows that are having to buy a car for the first time in their lives. Sadly, they’re easy marks for car dealers’ bait-and-switch ads.

So, my purpose in writing this article is not to inform you but asking you to help me inform others. Let it be knowns to your friends, family and neighbors that you’re available to advise them on buying their next car; or suggest that they read my blog, www.EarlOnCars.com, listen to my radio show Saturday mornings at www.StreamEarlOnCars.com, buy my book, Confessions of a Recovering Car Dealer on Amazon (100% of proceeds go to Big Dog Ranch Rescue,www.BDRR.org). Or read this column in Florida Weekly or Hometown News.

Or, click on SIGN UP NOW! on my blog page and join “Earl’s Vigilantes”. If I accept you as a qualified advisor on “how not to get ripped off by a car dealer”, I’ll send you a “cool hat”, free, with the Vigilante logo, and list your contact information on my blog so that people in your geographic area can contact you for help. Online skills are important for our vigilantes to have, because buying a car online today, is the very smartest way. Virtually all “victims” of $99/mo. ads visit the car dealerships where it’s easy for them to be tricked.

Thanks very much for considering applying as one of Earl’s Vigilantes. When you’re approved, I look forward to working with you to save as many victims of car dealers’ bait-and-switch advertising as possible.

Monday, May 03, 2021

Dealer Fees are Hidden Fees and Deliberately Deceiving


Shame on Florida’s regulators and legislators for aiding and abetting Unfair and Deceptive Trade Practices by 99.9% of all Florida car dealers. Almost every auto dealer in Florida adds hidden, extra charges to their advertised and quoted prices for autos and even service. The Attorney Generals have all “looked the other way” on this for many years. Our lawmakers in Tallahassee have done the same. Why? Without car dealers, their associations and Political Action Committee contributions, nobody can get elected to office in Florida or any other state.

Florida does have a law, ostensibly controlling “dealer fees”, but it may as well be not have such a law. It’s not enforced and, even if it was, it’s written with so many loopholes that smart dealers can technically comply and still deceive their customers. Because the law is never enforced, dealers generally ignore it. The law has been ignored for so long that, it may as well not exist. It’s very similar to the speed limit laws on most highways, especially I-95, Florida turnpike, and the Sawgrass Expressway. Every driver on these highways knows they can exceed the speed limit by 9 or 10 miles and mph with no chance of being stopped even faster with very little chance. Now, because every driver is speeding and practically no speeding tickets are issued, it’s actually dangerous not to speed.

The analogy to hidden fees by dealers is solid. It’s dangerous for a car dealer to not charge a dealer fee because all the competing dealers in his market do add hidden fees to their advertised and quoted prices. If he advertises a new Honda Accord for $1,000 more than his Honda dealer competitors, he has very little chance of selling the car. Honest, ethical car dealers are forced to “fight fire with fire”. I’ve had many car-dealer friends and associates over the year tell me, “Earl, I don’t like having to charge hidden fees, but, if I didn’t, I’d “go broke”! Car dealers profit margins as percent of sales is very slim, between 1% and 3%.

The average new car today sells for about $40,000. A 3% profit is only $1,200 and that’s the gross profit before expenses…commissions, advertising, and lots of other overheard expenses like rent, utilities, and insurance. The net profit on a new car is only $200 or $300. Because a dealer’s competitors are all advertising and quoting prices a $1000 or more below their cost, how can an honest dealer with no hidden fees to secretly raise the price survive?

The average hidden fees in South Florida are over $1,000. All dealers have several fees by different, official-sounding names, adding up to as much as $3,000. Some of the popular deceptive names are electronic filing fee, tag agency fee, doc fee, e-filing fee. Some dealers even double charge for the factory freight which is included in the price of all new cars.

Other dealers charge for “dealer prep”, purportedly to prepare the new car for delivery when they are generously reimbursed for this by their manufacturer. Incredibly, the Florida addressing dealer fees requires dealers to lie to their customers by “disclosing” their dealer fees by this verbiage…” This charge represents costs and profit to the dealer for items such as inspecting, cleaning, and adjusting vehicles,.”. Florida statute 501.976 (18) requires the dealer to tell you that they are charging you for performing the same work on your new car that they’ve ALREADY BEEN PAID FOR by their manufacturer.

This is not a re-run column. I’ve written many columns railing against the hidden dealer fees that are an out-of-control pandemic, especially in Florida. I won’t give up because I know that truth and justice will ultimately prevail. I know that consumers and voters are growing smarter at warp speed during this digital 21st Century. Consumers and voters will reach a breaking point, where they’ll no longer tolerate regulators and legislators who allow this unfair and deceptive affront to car buyers to exist any longer.

Monday, April 05, 2021

VOLUNTEERS WANTED: Online Assistance for Senior Car Buyers


I’m proud that my car dealership was featured last week on the NBC Today Show (View the video at www.EarlStewartCovidRescueTeam.com). Thus far, we’ve made Covid vaccination online appointment for over 200 senior citizens, unable to navigate the process themselves.

This inspired me to form a similar team of online-savvy, educated car-buyers to assist our very large elderly population in buying their next car online. If you’re a regular reader of this column, newspaper columns, or a listener to my radio show, you know that the safest way to buy a car today at a low price today is online. A high percentage of our elderly population can’t operate, or are uncomfortable with, computers and smartphones.

If you’re computer-savvy” and have the time and car-buying skills, please let me know. Click on www.EarlOnCars.com and the link on the right, Volunteers for Senior Online Car Buying Assistance. I’ll ask for a summary of your qualifications and your contact information. I’m looking for volunteers from all over the USA who listen to my radio show, read this blog and newspaper column, and follow me on Facebook and YouTube. Thank you for your consideration.