Monday, October 18, 2021
Did you hear the one about the 6-foot man who drowned while trying to wade across a river with an AVERAGE depth of 3 feet?
A recent Consumer Reports article reported that the average price (MSRP) of a new car has risen over $45,000 for the first time ever. The average transaction price has risen 7.7%. The interesting thing is that this 7.7% increase in the average price you pay represents more than a 300% PROFIT increase for the car dealer.
Of course, that $3,465 price increase (7.7% of $45,000) is a huge increase in profit to the dealer. The interesting thing is that this 7.7% average price increase represents more than a 300% profit increase to the dealer.
The average dealer margin on new cars was about $1,000 before the microchip shortage. Most car dealers, pre-covid, made relatively little net profit in their new car departments. In fact, quite a few lost money. They relied heavily on the large profits they made in the finance and service departments. The covid pandemic with its subsequent worldwide microchip shortage has brought unprecedented, record profits to car dealers. Car dealers are making so much profit on each car they sell, they can sell far fewer cars and make far more money than ever before.
What make this even worse for the car buyer is that the highest prices are being paid by those that can least afford it. These are the car buyers I often refer to in my articles as the “victims” …the less sophisticated, educated, English language impaired, the very young and the very old. Remember that AVERAGE big price increase of $3,465 is made up of lower prices by the sophisticated, educated buyers and higher prices by the victims. Unlike all other retail products sold, only automobiles are sold at a different price to each buyer…based on their ability to search out and negotiate the lowest price.
A shrewd buyer can buy a car for thousands of dollars less than a typical victim. I estimate that the average price increase to victims approaches $7,000 compared to the $3,465 average price for everybody. Sadly, these are also the people that are most likely to need a car. They are also the people that will pay very high interest rates in the dealer’s finance department.
If you’re interested in helping potential victims from being taken advantage of by unscrupulous car dealers, please consider volunteering for “Earl’s Vigilantes”. Please click on www.earlsvigilantes.com. If you qualify, I’ll even send you a free “Earl’s Vigilante” hat. 😊
Monday, October 11, 2021
This column was prompted by a Facebook friend who reminded me yesterday that I’d sent her a post with my cell phone number included. She warned me not to display this in the social media. Certainly, conventional wisdom and most people feel the same way. I fully understand that I “march to the beat of a different drummer”.
I’ve had this cell phone number, 561 358-1474 before I formed “Stewart Cellular Communications Inc” in 1993, the first agent for Bell South Mobility in South Florida. I’ve been sharing this number with my customers for many years; it’s on my personal business card which I freely pass out to all my customers and prospective customers. The switchboard operator at my dealership passes my business card out to anyone who asks. When someone calls the business number, 561 844-3461, and asks for me, the call is automatically passed directly to my cell phone.
I must confess that I was nervous about this when I first began doing it, but my fears were never realized. Sure, I get a few unwanted solicitations and crank calls, but far fewer than I thought. People are a lot more respectful of my time than I ever dreamed. Since I began opening myself to all my thousands of customers, I’ve learned more ways to improve my business than ever before. The negatives to this openness are dwarfed by the positives.
I share this with you, not only to brag because I’m the only car dealer in the World that dares to do this, but to advise car buyers to make it a point to get the cell phone numbers of those they deal with when buying or servicing their car. The salesmen and service advisors always ask for your cell number, don’t they? Before you give them yours, insist on getting theirs. If you have a problem, they can’t “disappear”. But, don’t stop there. Ask for the cell phone number for their manager. If he refuses, that will tell you something right away about his sincerity, transparency, and honesty. It tells you that he wants you to trust him, but he doesn’t trust you. Now, if you really want fewer problems after your purchase or service, ask for the personal cell phone number of the “manager’s manager”. If you can get all three of these numbers, each of those individuals is far more likely to honor their promises and be more transparent, especially the salesman or service advisor that know his bosses also gave you their cell number.
If you don’t believe that I do what I just said I did, give me a call at 561 358-1474. If I don’t answer right away, please leave a message and I promise I’ll call you back. I’ll admit that I don’t always return calls from folks who call, hang up and don’t leave a message. But I always get back to those who leave a message and are customers, prospective customers, or others who are not solicitors or cranks.
Monday, October 04, 2021
I’ve been a car dealer since 1968 and never dreamed that one day I’d be advising potential customers not to buy a new or used car right away. But, as you know, the COVID 19 Pandemic has changed everything in our lives, worldwide…most of it for the worst, but, counterintuitively, made a lot of money for some businesses…including auto manufacturers and car dealers.
This is the second column I’ve written on this subject and I’ve added a few more pointers for those people that believe they must buy a new or used car today. The good news is that car prices have peaked and can only come down from here. Next month, November, will offer lower prices and December will be even lower. The first quarter of 2022 will see prices back to normal, Pre-Covid. The longer you can postpone your purchase of a new or used car, the lower the price you will pay.
Here are some more tips for those that can’t wait to buy:
Whether you want to buy a late model new or a brand-new car today, price the “other” too. Some used cars are selling today at higher prices than the new ones. Car dealers know you can easily compare new car prices with other dealers, but it’s much more difficult to compare used car prices…no two used cars are identical, like new ones.
- Don’t buy a new car from the dealer’s on-the-ground inventory, because he will charge you much more than if you order the car through that dealer from the manufacturer. The dealer knows that if you refuse to pay the exorbitantly high price for the new car on his showroom somebodywill come in soon and agree to it. He has only one or two of that particular model, and if he sells it for less, he can’t make up that lost profit.
- Late model used cars are selling, as I stated in (1) above, at, and even higher, than the new equivalent. Reliable older cars are priced much fairer than late models. Therefore, they’ll retain their value more and make it less expensive for you to trade it in on late model or new car later.
- Before you “take the plunge” and buy that new or used car today, ask yourself “Are the thousands of dollars I’m overpaying to buy a car today vs 90 days hence, worth it? How expensive and inconvenient will it be for me to repair my current car, use public transportation, take Uber or Lyft, or carpool?
- Paying Costco $65, if you’re not already a Costco member, and utilizing the Costco auto buying program is, by far the single best solution to this problem, www.CostcoAuto.com. If you do buy a new or used car today (against my advice), the Costco price is the “lowest high price” you can get. The smartest move you can possibly make is to contract with the selling Costco Certified Dealer that they will honor the Costco member price on your ordered new car when it arrives from the manufacturer. It’s imperative that you get this in writing. If you don’t, the dealer will sell your car to somebody else at a much higher price.
Monday, September 13, 2021
The modern, high-tech remote keys for our vehicles are amazing. They can, not only start your car, but lock and unlock the doors, open the trunk, and help you find your car at the mall by flashing lights or blowing the horn. Some of us didn’t really want or need the extra “bells and whistles”, but you can’t buy a car today with an old-fashioned, inexpensive key that will “only” start your car.
The auto manufacturer executives must have been thrilled when they discovered a minicomputer, they named a “keyless remote”, aka key fob, with so many bells and whistles. The design and manufacturing engineers must have “joyously” met with the marketing people to come up with a “big fat” price to maximize this new source of profits in their new vehicles. We may never know what it costs an auto manufacturer to make a key fob. This sort of thing is top secret, but we do know that a key fob is far less complex to design and far less costly to manufacturer than a smart phone; however, you can buy smartphones today for less than $200 which is on the low end of what many key fobs cost. Remember that prices are set by supply and demand, not what it costs to manufacture. The best way to bring down your cost of buying a key fob, is to shop and compare prices with what the car dealers charges you with other retailers. Dealers pay their manufacturers too much for key fobs too, and then their dealers mark them up even more, charging you “an arm and a leg”.
My motivation for writing this column is to offer you several sources, rather than just your car dealer, to buy another key fob at a significantly lower price. In full disclosure, I’m taking this information from October 2021 edition of Consumer Reports, the very best of source of information to consumers of every product.
1. If you would prefer, or must, buy an OEM key fob made by the manufacturer of your car, you don’t necessarily have to buy it from the car dealer. My favorite source for buying almost anything is Amazon. www.CarAndTruckRemotes and www.Walmart.com are two more good online sources. Or, you can “Google” key fob for your particular year-make-model car and find other online sources. Consumer Reports found a genuine Hyundai key fob for a 2017 for $93 including shipping, $208 less than the Hyundai dealer charges.
2. Or, buy an aftermarket key fob online. Consumer Reports was able to save $208 by buying a key fob for a 2008 Chrysler Town G Country minivan through Amazon.
3. You can buy a key fob from your local locksmith. Consumer Reports paid $95 less for key fob for a 2009 Honda than the Honda dealer would have charged.
4. Ace Hardware and Batteries Plus are two national chains that offer significant saving over car dealers.
When more and more car owners boycott car dealerships in buying replacement and second keyless remotes/key fobs, the auto manufacturers will lower their prices to their dealers, and you will be able to buy one at a fair price.
Monday, August 02, 2021
Regular readers of my column know I recommend that you don’t buy a new or used car until the last quarter of this year unless you must. This is because of the extreme, but temporary, spike in new and used car prices. This record increase in all vehicle prices emanates from the extreme shortage from the microchip shortage with simultaneous extreme demand from the booming economy. Of course, no one anticipated that such a thing would occur because of the global COVID-19 pandemic. I’ve been a cars dealer since 1968 and I never recall a time when most new cars were being sold above sticker, MSRP.
I came up with a solution to this temporary hyper-inflation problem. Simply and succinctly stated, you can buy your new car today, but pay the price that it will sell for after prices drop sharply in October, November, and December. The caveat is that you cannot buy a new car from dealer’s stock and take delivery
today or even soon. You must order your new vehicle from the dealer’s manufacturer. It typically takes 2 to 3 months to receive a custom ordered car. By the time you’ve done your homework selecting the right vehicle, shopping for the best price, and placed your order with the manufacturer, your new vehicle will arrive in the last quarter of this year. The price will be several thousands of dollars lower than you’ll pay today.
You accomplish this by making it part of your new car purchase contract that you pay the best price you can get in October-November-December than the price you’d have to pay today. I caution you that you’ll have to talk to a dealership manager, maybe a general manager or the dealer himself, to finalize this agreement. A salesman is highly unlikely to agree to this because he’s not authorized, and he’s mainly interested in selling a car today from stock at MSRP+ to earn a huge commission.
Yes, you’ll have to wait for your new car, but you’ll get exactly the car you want…model, color, and options. Buying a car from dealer stock today, you’re almost sure to make lots of compromises, not to mention the highest markup you’ll ever pay again on a new car.
How can you be certain that you will pay a very low and fair price in October-November-December? Buy your new car through www.CostcoAuto.com or www.TrueCar.com. I recommend that you use Costco. If you’re not a Costco member, pay the $65 annual membership fee just for the privilege of buying your new car through a Costco approved dealer. Costco dealers are contractually obligated to sell their members cars at a lower price than they sell anybody else that same car. Today, because Costco dealers are selling all their cars at highly inflated prices, the Costco price is still too high, even though it’s lower that all their other prices.
If you plan on trading in your current car, you have a problem because used car prices are also at record high prices. Your trade in value will drop, but not enough to entirely offset the savings on your new car. This is how you can “have your new car cake and eat it too.” Sell your trade-in to the highest bidder today. You’ll get a record high price for your trade. Now you’ll save thousands on buying your new car and almost as much on selling your trade-in…a “twofer”. Be sure to shop your used car with at least three buyers…the dealership you bought your new car from, CarMax, www.WeBuyAnyCar.com, www.Carvana.com, and www.Vroom.com.
You’ll ask, how am I going to get along without my old car for three months? The answer can be carpooling, Uber or Lyft, or doubling up on another car in your family. Renting a car is very expensive today, but you have ask, will the thousand or more dollars I get on my car today vs. three months from now offset my substitute transportation costs?Have Your “New Car Cake”
Monday, July 26, 2021
If you’re a regular reader of this column and/or a listener to my radio show, thank you very much. Did you know that everything I’ve ever said for the past 20 years on my radio show and this column is available at www.EarlOnCars.com?
If you go to www.EarlOnCars.com, you can click on links or search for virtually everything we’ve ever explained or discussed on the radio show, written in newspaper columns, and posted on Facebook, YouTube, and Twitter.
These are just a few of the resources you’ll find at www.EarlOnCars.com:
- You can listen to podcasts of all our past radio shows. Just click on the Apple Podcast app, TuneIn Radio, Google Podcasts or whatever your favorite podcast app is.
- We’ve archived our past mystery shopping Reports. Every week for years we’ve dispatched an undercover, mystery shopper to pretend to buy or lease a car at different car dealerships. We read the report on the air. We name names…car dealerships, salesmen, and sales managers. We vote to “grade” each car dealership on a scale of A to F. Passing dealerships are listed on our “Recommended Dealer List” with their grades and those who get an F are on the “Do Not Buy” list. The proof of our honesty and accuracy is in the fact that WE’VE NEVER BEEN SUED BY ANY CAR DEALER WE’VE MYSTERY SHOPPED since we began mystery shopping weekly 20 years ago. Why? Any lawyer will tell you that the perfect defense against libel and slander is the TRUTH.
- You can file a formal complaint with government agencies when you click on our link that lists the car dealer complaint contact information for the Attorney General, Department of Motor Vehicles, and Department of Consumer Affairs.
- You can Search www.EarlOnCars.com for any subject pertaining to buying, leasing, maintaining or repairing your car. There are lots of article on leasing, financing, negotiating, deceptive advertising, and third-party sources to get the lowest, honest prices on cars.
- Contact information (phone numbers, emails, and text numbers for every member of the Earl Cars team…Nancy Stewart (my co-host), Stu Stewart (my son and mystery shopping spymaster), and Rick Kearney, Certified Diagnostic Master Auto Technician.
- Join “Earl’s Vigilantes” or locate a vigilante in your area. We’ve formed a team of volunteers around the country and are recruiting more weekly. If you’re a knowledgeable person on buying, leasing, repairing and maintaining cars and comfortable with online, digital shopping, please sign up. The information application is available at www.EarlOnCars.com. This is particularly important for seniors who are not digitally skilled to shop online.
Monday, July 12, 2021
- You DON’T have to have your car serviced by the selling dealer. But you must have new car warranty work performed by a franchised dealer of the make car you own…it doesn’t have to be the dealer that sold you your car. Your warranty requires that you maintain your car according to your car manufacturer’sowner’s manual. Most car dealers will have an “enhanced” list of recommended maintenance which is designed to enhance their service department’s profits. A good rule of thumb is to ignore any service recommended by your dealer that’s not listed in the manufacturer’s owner manual. You should always keep receipts of all service you have done by whomever maintains your car. It might be necessary to prove to your car’s manufacturer that their recommended maintenance was performed in the event of a warranty claim.
- Car dealers make a lot more money servicing cars than selling them. AutoNation, the largest new car dealership group in the USA, made over seven times as much money from their service and parts operations than their new car sales last year. The person that greets you in the dealership service drive is a commissioned salesperson even though their nametag might say “Service Advisor” or “Assistant Sales Manager”. The more service this salesman sells you, the more money he makes. The mechanic that works on your car and the service manager are also paid on commission.
- Most car dealerships charge hidden fees in addition to the service you thought you were paying. These fees are disguised with names that make them look legitimate. Some examples are “Sundry or miscellaneous supplies”, “Hazardous Waste Disposal Fee”, and “Nuts, bolts, screws and other fasteners”. These may, or may not be costs to the service department, but they’re costs of doing business and should have been included in the price quoted to you. Typically, they’re calculated by a percent of the total invoice, usually 10%. These fees are always added at the bottom of your service invoice. There’s a good chance that the service cashier or service manager will remove this bogus charge if you complain. Most people never notice.
- Car dealers advertise low prices on common maintenance items like oil changes, tire rotations, wheel balances, and tires. They know they must do this to “get you in the door”. Where they make their big money is on major repairs like transmissions, air-conditioners and water pumps. These expensive items are negotiable, and you should always get competitive bids from other service departments.
- Always get a written estimate for your total charges before signing the repair order. Many states, including Florida, require the repairer to provide a written estimate if asked. In Florida, the repairer cannot exceed that written estimate by more than 10%.
- In most states, the repairer can hold your car until you pay for your service. The legal term is a “mechanic’s lien”. If you don’t pay your bill, the repairer can sell your car and keep the portion of the proceeds to cover what you owe. A mechanics lien takes precedent over bank’s lien if your car is financed.
Monday, June 28, 2021
New and used car prices have spiked and, in my opinion, peaked because of the surge in demand related to the Covid virus and the precipitous drop in auto inventories due to the microchip shortage. It’s almost certain, that new and used car prices will plummet in the 4th quarter of 2021, about the time the 2022 new models arrive. If you don’t need to buy a new or used car, you should wait.
But even if you think you need to buy another car, but are a low-mileage driver, you should reconsider. Eighty percent of Americans drive an average of less than 40 miles per day. Many older Americans drive far less than that. I have many retired customers who drive less than 5,000 miles per year (14 miles per day).
There are many others in the same boat as you that may be interested in carpooling; or you can hire an Uber or Lyft whenever you need transportation. I live 12 miles from my place of work, and I can “Uber” there for $12. If you don’t need a car every day, “Uber” to Publix, Walgreens, or the mall. If you do use your car most days, rent a car for about $45 per day. If you rented a car for 3 months, about the time when car prices will return to normal, it would cost you about $3,500. Rental car prices are also a lot higher today, but still a better option than buying today.
The money you’d spend is far less than the money you’ll save by buying your next new or used car in October or November. Plus, you can sell your present car, no matter how bad a shape it’s in, for a lot more than it’ll be worth in the fourth quarter of 2021. There’s even a “kicker” if you’re buying a new car. Today, you’d be buying a new 2021 which is almost a year old when you buy it. In the fourth quarter you’re buying a “brand-spanking-new” 2022. You’re saving thousands of dollars in depreciation. When you trade that car in 4 years later, the dealer or other buyer doesn’t know or care that that you bought that 2021 brand new. All they care about is that it’s “one model year older” than a 2022. Your trade-in allowance will be thousands less.
My fellow car dealers hate me for writing articles like this. Educated consumers who read this will postpone their purchase and cost car dealers (and me) sales. But, despite what other car dealers might think, I’m not stupid. I learned a long time ago that smart businesses look at their long run success, often at the expense of the short run. Telling your customer the truth about when it’s a good or bad time or to buy their next car is, not only the right thing to do, but far better for your long run success.
Monday, June 21, 2021
Or, Any Business That Doesn’t Fulfill Their Promises
I’ve owned and operated many car dealerships for more than a half-century. I’ve also been a consumer advocate, advising car buyers and owner for past 25 years. It’s safe to say that I’ve personally heard and responded to more car buyers’ and owners’ complaints than almost anybody. Of course, like you, I’m also a consumer who has had to complain about bad treatment by businesses. If you don’t know about me, just Google “Earl Stewart” or check out my blog at www.EarlOnCars.com. I can unashamedly and immodestly say that I’m a bonified expert on how to complain effectively to get what you’re entitled to when wronged by a business. Here are some simple rules to follow:
- Never, ever lose your temper. Losing your temper lessens the likelihood that you’ll have your problem resolved by at least half. It may have worked for you in the past, but you’ll never know how many disputes that you lost that would have been resolved had you not “blown your stack”. Shouting and name calling might “feel good” in the short run, but you need to ask yourself which is more important…feeling good about telling somebody off or getting your complaint resolved ASAP. Remember that the person you’re shouting at might not be the one responsible. Also, remember that most people react to verbal abuse the same as you…they return “tit for tat”.
- Keep your complaint as short and factual as possible. If you complain verbally, you should always accompany this in writing…text, email, or a letter if you’re not good with texts and emails. Leave out the “fluff” and emotion. Twenty-five words or less is great, if you can include all the important facts. Too many paragraphs and pages lessen the likelihood your complaint will be addressed promptly and completely. Copy all of those involved. For example, if you just bought a car, inform the salesman and copy the sales manager, general manager, owner and manufacturer.
- Keep your complaint as positive as possible. If you’ve always had good experiences in the past, let them know it. If the dealership is highly recommended and has a good reputation, tell them that. Don’t demand but ask for help. The people reading or listening to your complaint are a lot like you…they feel better about helping someone that’s pleasant and treats them with courtesy and respect.
- Don’t threaten the car dealership. How do you react to threats? Most businesses feel the same way. Telling a car dealership, at this stage of the complaint that you’ll sue them, blast them on Facebook-Twitter-Instagram, or picket them in front of the dealership with a sign is counterproductive. No one wants to be forced to backdown when threatened. Businesses don’t need to be reminded what “can happen” if they don’t do the right thing, “rattling their cage” isn’t necessary and, in fact, works against you.
- Take the complaint up the ladder as high as necessary. Be sure that the “managers” you complain to are real managers and not just carrying a title or claiming to be a manager. For example, car dealers often call their commissioned service salesmen “Assistant Service Managers”. If at first, you don’t succeed, go to the supervisor of the department that caused your problem. After that, take your complaint to the general manager of the dealership. If that doesn’t work, go to the owner. Complaining to the auto manufacturer can be helpful in getting the attention of the dealership’s owner. The manufacturer always lets the owner and general managers know of complaints they receive.
- When all the above fails, you pull out the stops…”no more Mr. Nice Guy”. Contact the state department of motor vehicles, the state attorney general, or the state office of consumer affairs. The last resort is to hire a lawyer that specializes in suing car dealers. Find a lawyer that will take your case on contingency with no out-of-pocket costs unless you win the lawsuit.
Monday, June 14, 2021
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
“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
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
Monday, May 17, 2021
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
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
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
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.