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Tuesday, May 28, 2013

Anatomy of a Car Ad

Most car advertisements are deceptive to the extreme. That doesn’t mean that all car dealers are bad people. I believe that many car dealers believe that they have no alternative but to “fight fire with fire”. Some car dealers are bad people in the sense that they choose to deliberately trick prospective customers into coming into their dealerships. In the minds of the other car dealers, who would rather advertise honestly, they have no choice but to “out exaggerate” and even “out lie” the bad dealers. The bottom line is there is no difference in the net effect on you, the car buyer. One could argue that the real villains in all of this are the regulators or even the media. The state attorney general, the Department of Motor Vehicles, the County Office of Consumer Affairs and even the BBB look the other way when it comes to unfair and deceptive advertising of car dealers. With the exception of the BBB, their defense is that their “just too busy” with other concerns. In the case of the BBB, as long as a member pays his dues and responds to all complaints, he will usually have a high BBB rating. The dealer who ran the advertisement this article is about, Napleton Hyundai, has an A+ BBB rating! The media are complacent in running ads that are obviously deceptive, pleading ignorance. They also recognize that car dealers are one of their, if not their, largest advertisers.

This full page newspaper ad appeared in Sunday’s (5-20-13) PB Post and Sun Sentinel. You can view the ad by clicking on The upper LH side of the ad has a picture of the General Manager with the caption, “Thanks for making us your #1 volume Hyundai store 55 months in a row in PBC.” The ad is for the North Palm Beach and WPB Napleton Hyundai stores. There are 3 Hyundai dealers in Palm Beach County, 2 of which are owned by Napleton. The 3rd is Delray Hyundai and it’s not surprising that 2 Hyundai stores sell more than one.

Reading left to right, “Double your Rebate up to $8,000”. In the fine print it says on “select models” off of dealer list. The key word is “dealer” list which is not MSRP, but a markup over MSRP by as much as Napleton chooses…thousands of dollars over the manufacturer’s suggested retail price. Furthermore the fine print says “trade-in required”. This is so Napleton can allow you far less for your trade than it’s worth to help him cover doubling the rebate. The ad also says “free leather” or $1,000. Napleton can give you a “free 5 caret diamond ring” if you allow him to mark his dealer list price up high enough!

Reading further to the right you will see, “$1 over invoice”. The dealer invoice is not what the dealer really pays the manufacturer for the car. The average car invoice packs in thousands of dollars in profit to the dealer in the form of holdbacks, advertising subsidies, dealer cash incentives, and customer cash incentives to name a few. Any dealer would be happy to average the “invoice profit” on every car he sells.

Reading further to the right, “$4,500 for your trade” even if you have to “push, pull, or drag it” into the dealership. Napleton can give $45,000 for all trades if you’ll let him mark up the new car as high as he wants…remember his cars are all priced at “dealer list”, not MSRP which is displayed on the federally mandated Monroney sticker.

Just below this is 0% financing, $0 down payment, and 0 payments for one year. Of course to get 0% financing, you can buy only the Sonata and Santa Fe models and pay (you guessed it!) dealer list. $0 money down and 0 payments for one year are available only with credit approval by the banks (banks usually prefer a down payment and will not waive payments for one year). Oh, none of the above is available on the cars in this advertisement (fine print).

On the top far right of this ad, “We will beat any Hyundai dealer in the USA by $500 or we will give you $1,000.”  This requires a valid buyer’s order from the other dealership signed by you and the manager. Virtually no car dealer will give you this unless you are buying the car and driving it home at the same time. They do not want to allow you to show a firm price to their competition which they can beat. Also in the fine print, Napleton reserves the right to buy the car on which the other car dealer gave you the low price, at that price. I can promise you that no car dealer is going to sell a car to his competitor and allow that competitor to steal his customer and sell him a car. If Ed Napleton can show me proof that he has ever honored this “Price Beater Guarantee”, I will contribute $10,000 to his favorite charity.

Just under the phony guarantee is “Drive a 2013 Hyundai Santa Fe sport for only $179 per month lease. The fine print requires $3,967 down payment. You also must qualify for all rebates and incentives. This means that you must be an active member of the military and a college graduate of an accredited 4 year university within the last 6 months. It may also include loyalty or competitive conquest rebates. This means that you would have to be driving a specific year and model Hyundai or a specific year and model of a competitive make to be eligible for  the advertised payment.
There are 7 more models with advertised lease prices, just like the Santa Fe, each requires a large down payment. Also, in the fine print, all lease payments are “plus dealer installed accessories”. This means that Napleton can add thousands of dollars in virtually worthless accessories to the advertised prices. Typical dealer accessories are nitrogen in the tires, paint sealant, stripes, emergency road service, and glass etching. This can add thousands of dollars to the already highly marked up dealer list.

Finally, almost every advertised car carries a number next to the price. One example is stock #46413F45 for the Elantra. In the fine print it says that the $795 dealer fee is included in the price. Florida law requires that the dealer fee be included in the price of every advertised car. But, if you buy any other Elantra than stock #46413F45, you will pay an extra $795, even if that Elantra is identical to the advertised car. The salesman is also not paid a commission on the advertised car, so you can imagine how good your chances are of buying that car even if it hasn’t already been sold.

My last column was an “Open Letter to Our Attorney General, Pam Bondi”. I asked her to consider reprioritizing her focus objectives to rid Florida of crime and unfair and deceptive trade practices. I hope she will look at this column and this advertisement by Napleton Hyundai. 

Monday, May 13, 2013

An Open Letter to Pam Bondi Florida’s Attorney General

Dear Ms. Bondi,

Thanks for working so hard to protect Floridians from being taken advantage of by those individuals and businesses that would deceive us to unjustly enrich themselves. I know that your responsibilities are enormous and that your resources are limited, especially given the current fragile state of Florida’s economy. I fully understand why you must choose your objectives carefully and then focus those limited resources in your fight against crime and unfair and deceptive businesses and individuals.

I respectfully suggest that you consider the deceptive advertising and sale of automobiles by Florida car dealers as one of your focused targets. Speaking to advertising, the easiest way for you to learn how prevalent deceptive car advertisements are would be to go online and read the auto classifieds in any major Florida newspaper. I suggest you start with the Palm Beach Post and the Sun Sentinel any Saturday, which is the day you will find most of the auto dealers’ advertisements. Viewing the e-editions of these two newspapers will allow you to also read the fine print which is helpful in discovering the almost universal “bait and switch” nature of these advertisements. The TV, radio, and direct mail advertisements are arguably even more deceptive. The TV and radio “fine print” disclosure is nonexistent because it cannot be read or heard by anyone even with the sharpest eyes and hearing. The car dealers don’t even try to legitimatize many of their direct mail advertisements because they know they fly below the radar of the regulators since they can specifically target all recipients.

Speaking to deceptive sales practices, I consider myself an authority on this because I have been “mystery shopping” car dealers in South Florida weekly for several years. I send in a mystery shopper who purports to be responding to an advertised used or new car. In the vast majority of these hundreds of shopping reports I’ve discovered unfair and deceptive sales practices. In many cases sales people will openly admit to the shopper that the advertisement is a lie and that its sole purpose is to get people to come into the dealership. Probably the most common violation is the failure to disclose the “dealer fee”. In recent years most dealers have begun charging customers for their “electronic filing fee”, marking up their cost for tag and registration by as much as $300-$400. This new version of the dealer fee most often  not disclosed on vehicle buyer’s orders as is required by Florida law for the dealer fee although it is a dealer fee by another name.

A car purchase is the 2nd most expensive purchase a person makes and, unlike a home purchase, the purchase is made about every 4 years. For most Floridians, nothing else requires a higher percentage of their earnings than their cars. If I’m right and most transactions involving car purchasing in Florida includes deceptive advertising and sales practices, this should be a priority item for your office to regulate.

For many years I have attempted to persuade the Florida Automobile Dealers Association, FADA, to regulate themselves. Although the chairman and president of FADA are receptive to this, they have been unable to get agreement from the executive committee and directors. I have suggested that FADA ask dealer volunteers in the various markets around Florida to monitor advertising and investigate consumer complaints. If a dealer was found to be engaging in unfair and deceptive advertising and/or sales practices, FADA would send him a warning letter. If he ceased and desisted from these practices, that would be the only action taken. If the dealer did not, FADA would notify your office and you would take whatever actions necessary to bring this car dealer into line.
I think it is in the best interest of Florida car dealers to regulate themselves, but there must be some “teeth” in that regulation. I believe if you wrote Larry Morgan, the chairman of FADA and Ted Smith, the president, a letter asking that FADA consider some self-regulation and submit that plan to the Florida Attorney General’s Office for approval, this might get the “self-regulation ball” rolling. Please call on me any time I can be of assistance. My cell phone number is 561 358-1474 and my email address is


Monday, May 06, 2013


There are fewer things more sensitive or embarrassing than having to share your personal credit problems with a stranger. Having credit problems can also put many buyers in a weakened and defensive position when buying a car. Many people with bad, or too little, credit feel like the car dealer is somehow “doing them a favor” by selling them a car and getting them financed. Make no mistake about it. A car dealer is probably making more money selling a person with bad credit a car than one with good credit. If you have a credit problem, go about buying a car with the same care and due diligence as if you had the very best credit. Shop and compare your financing, your interest rate, and your trade-in allowance. Get at least three quotes on each of these.

Lenders who specialize in lending to those with bad credit are known as “special finance” lenders. Many of these lenders charge the dealer a large upfront fee, as much as $2,500. Legally, the dealer is not supposed to add this fee to the price of the car you buy but, in the real world, the price of the car is usually higher as the result of this fee. In addition to an upfront fee, the interest rates are very high from special finance lenders. Because they anticipate a much higher amount of repossession losses, they must make more on each transaction. Don’t automatically accept a dealer’s opinion that you must finance through such a lender. There are many conventional banks these days that loan to people with bad credit. Their interest rates are lower and they don’t charge large upfront fees.  

There is much fraud in special finance lending. Credit applications are falsified to show more time on the job, higher incomes, etc. W-2 forms and check stubs are counterfeited. Buyer’s orders show accessories and equipment that do not really exist on the car. Hold checks or promissory notes are misrepresented as cash down payment. Co-signers signatures are forged. Confederates pose as employers, answering pay phones to verify employment. These falsifications are performed by finance managers, salesmen, brokers for special finance lenders (who are paid on commission) and the customers themselves. If you sign a credit application, be sure that you know all of the information on that application is accurate. Be sure that you understand and agree to all parts of the transaction including down payments, accessories on the car, etc. Never be a party to falsifying information to a lender to obtain a loan. This is a criminal offense.

Advertisements aimed at people with bad credit usually exaggerate with claims like, “We finance everyone”, “Wanted, good people with bad credit”, “No credit, no problem”, and, my favorite, “No credit application refused” (it doesn’t say your loan won’t be refused, just your application). My advice is to ignore these kinds of ads and these kinds of dealers. Their strategy is to take advantage of people with bad credit who they believe will buy any car, pay any amount of interest, and any profit to the dealers as long as the dealer can get them a loan.

It is common practice in Florida to encourage the car buyer to drive the car home immediately upon signing all of the papers. In some states like New York this is not permitted until all the car has been registered with the state in the new owner’s name. The reason for this immediate delivery (commonly referred to as the “spot delivery”) is to discourage and possibly even prevent the buyer from changing his mind. Taking possession of the car is a legal consideration making the purchase more binding. I recommend that you not rush the purchase or the delivery. For one thing you want to be sure that the car is exactly the way you want it…clean inside and out, all the accessories properly installed, no dings, dents or scratches, and that you have a complete understanding of how to operate all of the features of the vehicle.

I mention the risk of the “spot delivery” in this column on buying a car with bad credit because it can be especially harmful to someone whose credit is denied after the car has been delivered. You will most likely be required to sign a “Rescission Agreement” before you drive the car home. This is a legal document which requires you to return the car if your credit is denied. You will probably be told that your credit will be approved, but sometimes the dealer is wrong. The rescission agreement will have a charge for time and mileage that you have put on the car you are driving. Usually this is a very high charge from 25 cents per mile plus $50 per day and higher. It can take weeks for a special finance lender to rule on a credit application. If your credit is denied you could owe the dealer thousands of dollars which the down payment you made might not even cover.

As frightening as all of the above may sound, the one single thing you can do to prevent bad things from happening when you purchase a car is to choose your car dealer very carefully. How long has he been in business? What is his track record with the Better Business Bureau, the County Office for Consumer Affairs, and the Florida Attorney General’s Office? Ask friends, neighbors, or relatives who have dealt with this car dealer what their experiences have been like. Choosing a good dealer with integrity will resolve 95% of all your concerns.