Nominate Your Favorite Car Dealership: "Best Of" 2021 Awards

What better way to find out the best and safest place to buy or service your next car than to find out what others’ experiences has been? What better way to help others, than by sharing your own experience?

Your nominations for Best Of 2021 will be accepted up until November 11. Just click on this website,www.NominateBestCarDealer.com. You can nominate candidates in these categories: Best Auto Dealer Service Department, Best New Car Dealer, and Best Used Car Dealer. Please be sure to nominate a dealership for each of these.

The most reliable measure of any company are the rankings given it by its customers. This is especially true of car dealerships because no other retail business can match car dealers for deceptive advertising and unfair and deceptive sales practices. If you have experienced a car dealer that you can trust to buy or service a car from, it’s your “civic duty” to share his name with others.

After all the nominations have been made (deadline November 11), voting will begin in December. Be sure that your favorite car dealer is nominated.

How Can I Learn the Dealer’s Cost on a Car?

It’s almost impossible for you to determine the true cost of a new car. This might sound crazy, but many dealers don’t know the true cost of their cars. The manufacturers and distributors invoice their dealers for an amount when they ship them a car that is almost always several thousands of dollars more than the true cost. It’s fair to say that in virtually every case the “invoice” for a new car is much higher than the true cost. By true cost, I am referring to cost as defined by GAAP, generally accepted accounting principals.

You probably have heard about “holdback”. That is an amount of money added into the invoice of a car ranging from 1% to 3% of the MSRP which is kicked back to the dealer after he has paid the invoice. In some cases there are two holdbacks…one from the manufacturer and one from a distributor. Some manufacturers include the cost of regional advertising in the invoice which offsets the dealer’s advertising costs. Another common charge included in invoices is “floor plan assistance”. This goes to offset the dealer’s cost of financing the new cars in his inventory. Another is “PDI” or pre-delivery inspection expense which reimburses the dealer for preparing the car for delivery to you. I could name several more, depending on the manufacturer or distributor. Some of these monies that are returned to the dealer are not shown as profit on dealers’ financial statement and some are. Technically a dealer could say that the cost he showed you reflected all the profit (by definition of his financial statement), but the fact would remain that more money would come to back to him after he sold you the car. To me (and the IRS) that’s called profit.

Besides holdbacks and reimbursements for expenses, you must contend with customer and dealer incentives (usually referred to as customer cash or dealer cash) when trying to figure out the cost of that new car. You will probably be aware of the customer incentives, but not the dealer incentives. Most dealers prefer and lobby the manufacturers for dealer rather than customer incentives just for that reason. Also, performance incentives are paid to dealers for selling a certain number of cars during a given time frame. These usually expire at the end of a month and are one reason why it really is smart to buy a new car on the last day of the month.

Last but not least, remember the “dealer fee”, “dealer prep fee”, “doc fee”, “dealer inspection fee”, electronic filing fee, tag agency fee, etc. which is added to the price you were quoted by the salesman.. It is printed on the buyer’s order and is lumped into the real fees such as Florida sales tax and tag and registration fees. Most dealers in Florida (it is illegal in many states) charge this fee which ranges from $500 to $3,000. If you are making your buying decision on your perceived cost of the car, even if you were right, here is up to $3,000 more in profit to the dealer.

Hopefully you can now understand why it is virtually impossible to precisely know the cost of the new car you are contemplating buying. Most often the salesman and sales manager is not completely versed on the cost either. Checking the cost on a good Internet site like www.kbb.com or www.edmunds.com is about the best you can do. Consumer Reports is another good source. One reason that Internet sites don’t always have the right invoice price is that different distributors for cars invoice their dealers at different prices.

Do not decide to buy a car because the dealer has agreed to sell it to you for “X dollars above his cost/invoice”. This statement is virtually meaningless. You are playing into the dealer’s hands when you offer to buy or he offers to sell his car at a certain amount above his cost. As I have advised you in an earlier column, you can only be assured of getting the best price by shopping several dealers for the exact same car and getting an “out the door” price plus tax and tag only.

DON’T GET “SLAM DUNKED” BY A CAR DEALER

Back in the day when I was an evil car dealer, I had a monthly “Slam Dunk Club” for my salespeople. To join the club, you had to make at least a $4,000 profit on a customer. This is about three times the normal profit. The salesman got a $500 bonus on top of his 25% commission of $1,000. He also got a gift certificate to Ruth’s Chris steakhouse with his significant other for a free dinner. Some of my salesmen would “score” slam dunks every month and some several. Others rarely did.

You should know that no two customers pay the same price for the same car in the same car dealership in the same time frame. Each customer pays the highest price his or her salesperson can “extract”. When a Toyota dealer looks at his financial statement at the end of the month and sees his profit per new Camry was $1,500, it doesn’t tell the full story. That $1,500 is the average of all the Camrys he sold with profits per car sold ranging from as much as $10,000 to as little as $100.

You’d think that a car dealer would want all his salespeople to sell all his cars for very high profits like $4,000 or higher. You’d be wrong. The reason is that all people aren’t equal when it comes to education, intelligence, experience in car buying, and negotiating skills. A smart, highly skilled negotiator would never pay a car dealer a $4,000 profit; if the salesman wouldn’t budge on the price, the car dealer would lose a sale. He would rather have a lesser profit than no sale at all…” a half a loaf is better than none”. Dealers study each salesman’s profits on all the cars he sells each month to be sure that he has some very high profits and some very low ones. This is a “healthy pattern” because it ensures the dealer that this salesman is making as much money on each customer as that customer as that customer’s negotiating/buying skills will tolerate. If a dealer sees that a salesman’s monthly profit pattern is in too narrow a range, he’s “not asking for all the money” and/or “he’s walking customers at too high a profit”. Car dealers all believe that you can’t ask for too high a profit on a car because you can always reduce the price before the customer leaves. Most car dealerships instruct their sales people to “start the asking price at above MSRP”.

Those readers of this column who’re familiar with my weekly radio show, EarlOnCars, Saturday mornings 8-10, know about my weekly mystery shopping report. [Tru Oldies 95.9 FM & 106.9 FM WIRK-HD3] My undercover shopper visits a different car dealership each week and goes through the motions of buying or leasing a car. I report everything that happens, naming names and dealerships, and we add that dealer to our “Recommended List” or “Don’t Buy from this Dealer List”. You can read all the mystery shopping reports in my archive at www.EarlOnCars.com. The latest shopping report was my inspiration for this column. You can click on this link to read the entire report.

The salesman who greeted the mystery shopper made every attempt to get my shopper to BUY TODAY, even to the extent of taking the new Camry home to show her husband and even to the husband’s workplace. This, of course, is to be sure that the buyer doesn’t have time to shop and compare the price he quoted. He quoted her an out-the-door price of $28,804. The salesman and the manager assured her that this was a very low price and guaranteed that it was lower than any of the competitive Toyota dealers would offer.

When my shopper refused to listen to them and wouldn’t make a buying decision that same day, they asked her to wait a minute and they’d be back with a lower price...in their words “an even sweeter deal”. They came back with an out-the-door price on the same new Camry of $23,254! THIS PRICE IS $5,550 LESS than the first price they gave her. My mystery shopper left the dealership at that point.

This was, tactically, a very poor way to “sales manage the deal”. A savvier sales manager would have negotiated the price down slower, in small increments. When you drop your price too fast, you can scare the prospective customer away. The customer will think, “if he can drop the price $5,500 this fast, how much more can he drop the price?” The price was a very low price, only about $100 profit to the dealership…a GREAT price. The dealers only hope of increasing his profit was to charge her a high interest rate in the finance office and/or sell her warranties, GAP insurance, and maintenance plans. Or, sneak in some hidden fees on the real papers she signs, because all she’s been shown so far were “worksheets”, not legal documents.

Of course, the best protection against being “slam dunked” is to never buy a car on the first day you begin shopping and always get competitive out-the-door prices from at least three different car dealers.

EARL ON CARS’ VOLUNTEERS ASSISTING CAR BUYERS

I’m very excited to announce a major enhancement to our Earl on Cars weekly radio show andwww.EarlOnCars blog. Effective immediately, we’re forming a cadre of volunteers, an army of educated, informed listeners to Earl On Cars radio show and readers of www.EarlOnCars blog to assist car buyers who need help avoiding being taken advantage of (ripped off) by car dealers.

I’ve often said on our radio show that I know, to a great extent, “we’re preaching to the choir” by offering advice to our listeners. Many have been listening to “Earl on Cars” radio and reading www.EarlOnCars.com blog for years. They often call and text the show with great advice and suggestions. We’re going ask this vast, untapped, new source of wisdom and expertise in car-buying to volunteer to help the less. We’re asking those informed and educated listeners and readers to volunteer to help those “less informed” in car buying skills.

If you consider yourself an educated consumer when it comes to buying a car, and are willing to volunteer your services, please text us at 772 497-6530 or call us any Saturday morning between 8 and 10 at 877 960-9960. We’ll screen those that we don’t know as to their ability to help others in car-buying. You can choose your level of commitment by being accessible via only email, text, phone calls, or in person accompanying those in need to the car dealership.

We’ll post the names and contact information of all qualified volunteers online at www.EarlOnCars.com, and announce them regularly on our Saturday radio show. Of course, I and all members of our Earl on Cars team will be readily available to our volunteers for advice. Since we’ve expanded our radio snow online to Facebook, YouTube, Twitter, Periscope and Instagram, we’re reaching all over the United States (and beyond). We’d love to have volunteers from as many locations as possible.

Competition is Car Dealer’s Kryptonite

Every week, for approximately the last 20 years, I’ve been writing a blog like this to help my readers buy a car without being ripped off by car dealers. I’ve also written a book on the subject (Confessions of a Recovering Car Dealer, available on Amazon) and I have a two-hour, weekly radio show on the same subject.

This morning, as I sat down, brainstorming this week’s topic, I began to think that I’m “over-complicating” things for my readers. This column will follow the KISS principle of communications…KEEP IT SIMPLE, STUPID! Car dealers are very powerful and smart at what they do, but they have a weakness, just like the one Superman had…KRYPTONITE! Kryptonite saps all the strength from Superman. COMPETITION saps all the strength from Car Dealers.

All new car dealers, selling the same make of car, pay the same price to the manufacturer as all other dealers. A dealer selling 1,000 cars per month pays the same price per car as the dealer selling 10 cars per month. All new Hondas are the same, as are all new Fords, Chevy’s, Toyotas, etc., and all with identical costs. They’re like the commodities gold, silver, and copper…an ounce of pure gold should cost the same no matter where you buy it. The only difference between new cars and other commodities like gold and silver, are that other commodity prices are readily available to buyers while CAR DEALERS WON’T TELL YOU THEIR TRUE PRICES until you’ve bought the car.

But you can render a car dealer helpless and unable to resist giving you an honest price with CAR DEALER KRYPTONITE…aka COMPETTION. When a car dealer knows that you’ll be getting out-the-door prices from at least two other car dealers for the exact same new car you plan to buy, YOU LEAVE HIM NO CHOICE BUT TO GIVE YOU HIS LOWEST PRICE.

It’s truly that simple, but it’s not easy because the car dealer will try every trick in his bag to avoid giving you his lowest price. I always recommend buying your car online and avoiding face-to-face contact during the buying process. Car dealer are pros and masters of intimidation and manipulation. They can’t practice this as effectively via email or text. I’d also minimize the use of the telephone. Make it crystal clear in all your communications with the dealer that you want their out-the-door price which is the amount you can write your check for and drive the new car home.