Rebuilding Car Dealers’ Character

At a recent lunch between a group of Wall Street Journal Reporters and the new dean of the Harvard Business School, Nitin Nohria, he spoke on “changes in business education and how to teach character-building.” He said that “ethics” were the centerpiece of Harvard’s recent curriculum overhaul. Of course, a lot of this was fueled by the financial meltdown that the USA entered around 2006-7. The meltdown has been largely attributed to greed, lack of ethics, and illegal acts by businesses. Before the meltdown companies like Enron, AIG, and Lehman Brothers were considered role models for business students. Now, these companies and many more are held in no higher regard than politicians, lawyers, and car dealers (not necessarily in that order).

One of the WSJ reporters asked if it wasn’t too late to change a person’s “moral compass” by the time he’s going to graduate school. The dean responded that he didn’t believe that but believed that morals and character are a lifelong development. I totally concur because I grew my character in a positive way after I was out of school. I had a good foundation from my parents but there’s nothing like life’s school of hard knocks to jolt some sense into you. I half jokingly refer to myself as a “recovering car dealer” because I began positively adjusting my character and my moral compass considerably when I reached my mid fifties. People ask me all the time, what spurred this change. First, I tell them it’s a work in progress and I’ll continue to try to get better until the day I die. Then I tell them there is no one thing that brought this about. You can take your pick…Maturity, my sons and wife becoming part of my business, grandchildren, a near death experience with colon cancer, the realization that treating my customers with courtesy, respect, and integrity was actually better for business than the old way.

Abraham Lincoln said that people think that the real test of a person’s character is how they deal with adversity. I’ve been hearing a lot of excuses from dealers who say that they can’t stop charging the dealer fee because business is so bad. If they stop charging it, they would go out of business and just think of the number of innocent employees would be unemployed! I’m sure that rationale is why a lot of car dealers add thousands of dollars to the MSRP of their advertised cars so that they can trick their customers into believing they’re getting a large discount. Or why dealers charge customers twice for freight and even mark up the license registration electronic filing fee. But the dean of Business at Harvard thinks the biggest reason for the collapse of morals and ethics in business is “power”. Lord Acton (1834-1902), British historian, said “Power tends to corrupt and absolute power corrupts absolutely”. This explains why we have so many corrupt politicians, lawyers, and, yes, car dealers. Being able to handle power in a humble fashion is the truest test of character.

Unfortunately, car dealers fly much lower on the radar than the Exxon’s, Lehman Brothers, and AIG’s of the world. There are more than 10,000 car dealerships in the USA and most of them operate independently. For this reason, laws controlling them and regulations are a state issue. California, for example has good laws and regulations protecting car buyers but Florida does not. Some attempt has been made to bring Federal regulation to bear through the Federal Trade Commission, but powerful dealer lobbyists like the National Automobile Dealers Association (NADA) have fought that successfully so far.

The only advice I can give you at this time is “don’t take it lying down”. The only way to get the attention of our politicians and regulators is to make lots of noise. This is why I write this blog, my newspaper column, and do my weekly radio shows. If a car dealer wrongs you, call the Department of Motor Vehicles, the Count Office of Consumer Affairs, the Attorney General’s Office, and/or the manufacturer. Put your complaint in writing. And of course, you can always email or call me and I will make your message known.

BUYERS ARE LIARS!

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

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

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

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

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

The Lemon Law... Your Nuclear Option

Lemon laws are state laws which give rights to purchasers of new vehicles if they find that they have bought a car with a defect that cannot be fixed in a timely fashion by the dealer or the manufacturer. Every states lemon law is somewhat different  but they all have a lot in common and are aimed at the same result. Most car buyers have misconceptions of the lemon law. These are some the most common ones: The car owners think they are going against their car dealer when they are really going against their car’s manufacturer. If you prevail it costs the car dealer nothing. The manufacturer pays. The law applies only to cars purchased as new, not used. If you win a lemon law dispute, the manufacturer or dealer does not simply replace your car with a brand new on. The amount of credit you win toward a replacement vehicle is arrived at by deducting a charge for the usage of your lemon car based on time and mileage.

The complete lemon law process is a difficult and time consuming task for all concerned… you, the car dealer, and the manufacturer. It’s difficult for you because the law requires specific and extensive documentation. You must have allowed your dealer to try to fix the problem at least three times and you must have detailed written documentation of this. You must be sure that your complaint is clearly spelled out by the dealer on your repair order and that his failure to fix it is also a matter of written record. After three times, you must notify the manufacturer by certified letter that you are invoking the lemon law. Now the manufacturer has one last chance to fix your car. At this time, the manufacturer may take your car to another dealer who he feels is more competent in repairing your car. If the fourth attempt to fix your car fails, your case is assigned to a board of arbitrators. Their ruling is final. This entire process usually takes a very long time. A time of several months is not uncommon. Meanwhile, you’re saddled with a car that has a problem nobody can fix.

When you formally invoke the lemon law with your certified letter, you sever all communications with the manufacturer other than formal, legal communications as dictated by the law. The manufacturer considers you a legal adversary and their attorneys consider anything they say to you as something that can be used against them in the arbitration. At this point they are legally barred from fixing your car or talking to you about fixing your car.

All of the above is why I advise that you use the lemon law only as a last resort…the nuclear option.  Put emotion aside and focus on what your purpose should be which is to have a car that you can drive without the problem that has been driving your crazy since you bought it. Your priority should not be to punish the dealer because as I already said, he suffers nothing from your winning a lemon law decision. You are punishing the manufacturer to some extent, but this is “business as usual” to all manufacturers who fight (and usually win) thousands of lemon laws annually. What I’m suggesting is that you might want to consider giving the dealer and manufacturer a little more time to fix your car after the first three attempts. If they look like they are sincere and trying hard, it could save you a lot of time driving your broken car (not to mention the mental anguish) compared to waiting months for the lemon law process to work itself out.

I’m not saying that you shouldn’t tell the dealer and manufacturer that you will invoke the lemon law if you have no other choice. You definitely should do that. You should let both the dealer and the manufacturer know in no uncertain terms that you have meticulous documentation of their failed efforts to fix your car, you have familiarized yourself completely with the specifics of your state’s lemon law, and you will not hesitate to invoke it if you are left no other choice. This will instill a sense of urgency to fix your car ASAP if it’s within their abilities. The reason is the dealer and the manufacturer want to keep you as a customer. In fact, the dealer may stretch to give you a better deal on a new car to replace yours than you would ever otherwise have gotten. He can’t do that once the lemon law has been invoked because he would be trading in a “lemon”. A “legal lemon” has the same stigma as a flood car or totaled car that has been rebuilt. The manufacturer not only wants to keep you as a customer but wants to avoid the cost of arbitration (the manufacturer is responsible for all of the costs), the cost of disposing of a lemon, and the cost of the damage to their reputation by chalking up another lemon laws loss in the record books. For more information about the lemon law, Florida residents can call the lemon law hotline, 800 321-5366 or you can click this link: http://www.myfloridalegal.com/lemonlaw.