Consider Carpooling, Uber/Lyft, or Rentals Instead of Buying Until Car Prices Drop

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.

How to EFFECTIVELY Complain to Your Car Dealer

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.

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.

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.