It Was the Best of Times (for Car Dealers), It Was the Worst of Times (for Car Buyers)

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. 😊

My Personal Cell Phone Number

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.

COVID PANDEMIC + MICROCHIP SHORTAGE EQUALS HIGHEST EVER PRICES AND PROITS FOR CAR DEALERS

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.