Monday, May 16, 2022

If You’re Driving a Leased Car, You May Have a “Happy Ending” Surprise




Leasing has become more and more popular, and today about a third of the cars on the road are leased. If you leased your car two or more years ago, the leasing company didn’t know what was going to happen to the price of new and used cars as the result of the COVID pandemic.
 
The main variable that determines the size of your monthly lease payment is the depreciation of the vehicle you’re leasing. The total depreciation is calculated by subtracting the estimated value of the leased car at the end of the lease from the cost of the new vehicle. To some extent, leasing companies must “look into their crystal balls” and estimate what the market value of the new car they lease you will be worth as a used car in 3 or 4 years. There are guidebooks for residual values based on historical supply and demand for different makes and models of vehicles. But these studies didn’t anticipate the Covid pandemic and resulting surge in demand and supply chain stoppage that sharply reduced supplies, especially of vehicles.

Consequently, depending on when you leased your vehicle and what make and model you leased, the actual market value may be thousands of dollars higher that your option to purchase it. Many people who lease cars never knew they have an option to purchase it at the anticipated residual value. Most people, if they did know, don’t exercise this option. People generally lease new vehicles because they like to drive a new car every 3 or 4 years and aren’t used car buyers.
 
Today, you should check the residual value of your lease that is on your lease contract. It’s not prominently displayed and will require some searching on your part. You should then compare this amount with the current market wholesale value of your leased vehicle. It’s easy to get this today because of the huge demand and low supply of used cars. All car dealers are frantically looking for and buying used cars. New companies have sprung up during the pandemic to exploit the high demand and low supply of used vehicles. Some of the new ones are www.WeBuyAnyCar.com, www.Carvana.com, and www.Vroom.com. www.CarMax.com has always been a good place to sell your used car. Include the used car lot for the dealer that sells the make you’re leasing. Get at least three bids to maximize the price you’ll get. You might be able to buy your leased car for thousands of dollars less than what you can immediately resell it for.
 
The biggest problem you’ll encounter is buying your leased car back from the leasing company at the promised option price. This is because you must go through a franchised dealer for the make of car you leased even though you’re buying it back from the leasing company. There are some leasing companies that will sell you your car back directly, but most require you go through a franchise car dealer for that make.
 
Almost without exception, the car dealer will try to add profit for himself to your purchase option price, amounting to thousands dollars. You should object strongly, check with other dealers of your make to see if they will be honest with you and call the leasing company directly. The leasing company, even if they won’t buy it directly, can direct you to a dealer who won’t take advantage of you.
 
Recently, lessees in South Florida have sued two dealers, Gunther Volkswagen, and Brickell Motors for adding profit for themselves to the purchase option prices in their lease contracts. This was reported last month by investigative reporter, Jeff Weinsier, for WPLG, Channel 10 in Ft. Lauderdale. The attorney representing the two lessees is asserting the law that states you cannot charge anything extra for an off-lease car that’s not in the initial lease agreement. The two attorneys suing these dealers are Josh Feygin and Jonathan Kane in case you have a problem with your option to purchase.
 
Thousands of unwary lessees are returning lease cars to dealers and leasing companies daily and losing the large profit opportunity, thousands of dollars, because they didn’t know or remember they have an option to purchase their lease vehicles at the end of the lease. Please spread the word if you have a friend who’s leasing.

Monday, May 09, 2022

Your Advocate Alliance


https://JoinYAA.com

Helping You Buy a Car Without Being Ripped Off

I’ve been writing this column and doing a weekly radio show for about 20 years. I often wonder why more people and groups don’t join in to help car buyers buy, lease, and maintain their cars without being taken advantage of. Whenever someone new comes along, I welcome them with open arms, and I congratulate Ray and Zack Shefska for co-founding this group in 2019. Their timing couldn’t have been better…pre-covid and the onset of the greatest auto dealer feeding frenzy, exploiting their customers in over 100 years.

I stumbled across YAA when a regular viewer and listener to my radio show on www.YouTube.com/EarlOnCars, Donavan from West “By God” Virginia contacted me. He’s one of our show’s regular and best-informed callers/posters. He had high praise for YAA and soon I received more emails and posts from educated consumers who were members of YAA.
YAA has a highly educated and competent staff of people including Arash Sohelli, PhD and software developer who was also a cofounder. Other staff members specialize in areas like negotiating and pricing, but most of the expertise comes from input of members, real life experiences. YAA reports on dealer’s pricing, sales, and advertising tactics nationwide. There are helpful videos and you can report your personal experiences with dealerships which appear for all members’ perusals.

There’s a free membership available and a paid one. YAA also sells extended warranties for vehicles. They say they derive all their revenue from these to sources. I checked out their pricing on their new car warranty for a new Camry and compared it with the warranty from my warranty company. It was considerably lower than mine, but at the time I’m writing this column, I haven’t had a chance to fairly compare the coverages of these two extended warranties. I will do this and report back to you.

I have a good feeling about YAA and I’m hoping we can work together and grow together to help you, the car buyers of America. You’ll be hearing more about YAA this Saturday morning on my radio show between 8 and 10am EST. You can view it at www.YouTube.com/EarlOnCars,www.Facebook.com/EarlOnCars, or www.StreamEarlOnCars.com. You can listen on radio at TuneIn radio.
 
I’m inviting Ray and/or Zack Shefska to call my show this Saturday. The show's number is 877-960-9960, so please give us a call to discuss!

Monday, May 02, 2022

Open Letter to Auto Manufacturers:


I Feel Your Pain

I’m sure you read the April 11 Op-Ed in our auto industry trade journal, Automotive News. You were probably as shocked as I, when you read it. However, you were shocked by the fact that the Automotive News dared to reveal our industry’s dirty little secret in writing, not about the facts of the article, entitled No room for predatory fees, racism in retail, but about the fact that our trade journal dared speak the truth. In the highly unlikely event that you didn’t read this op-ed, just click on this link, www.AutoNewsOpEdPredatoryFees.com.
 
Kudos to Keith E. and K.C. Crain, Auto News editor emeritus and publisher. You’re shining examples of what journalism should be, speaking the truth no matter what the consequences. The Automotive News derives virtually all its revenue, advertising, and subscriptions, from auto manufacturers, auto suppliers, and auto dealers. You “bit the hands that feed you”.
 
I’m unsure of how many of you know me. I’ve been a car dealer since 1968, including franchises for Pontiac, Mazda, Toyota, Peugeot, Fiat, and even Checker. I currently have only one dealership, Toyota in North Palm Beach, FL. In addition to my dealer hat, I wear the hat of consumer advocate for car-buyers. You can check out my credentials at www.EarlOnCars.com or read my book, Confessions of a Recovering Car Dealer (available on Amazon). If you Google Earl Stewart, you’ll find I’m quoted often by media, Wall Street Journal, Associated Press, Auto News, CNN, CBS, NBC, FOX, etc. I’m pretty sure that I’m quoted so often because I’m easily reachable by cell phone and not afraid to speak my mind (like the recent Auto News Op-Ed).
 
I understand why auto manufacturers have not been more proactive in pushing their dealers to “clean up their act”, but I’m sure that most folks outside our industry don’t understand. As auto manufacturers know, car dealers have actively lobbied in laws through their state legislatures protecting them against you, their manufacturer. When the auto franchise system began, car dealers existed at the whim of the manufacturer. The manufacturer said “jump” and the dealer said, “how high?” You could cancel a dealer’s franchise and replace him or eliminate the franchise entirely for almost any reason. Now, it’s virtually impossible for you to replace or cancel a dealership franchise. The verbiage you use is, “we can’t tell our dealers what to do because they’re independent businessmen”.
 
There’s another reason why your dealers treat their customers so badly that they rank last in the Gallup annual poll on Honesty and Ethics in Professions. Many of your largest volume dealers are also some of the most dishonest and deceptive. Most auto executives’ compensation and promotions are tied to auto sales volume. There are few industries that are more competitive. All auto makers fiduciary responsibility to their shareholders is higher sales volume and profits. You rely heavier on your big volume dealers to make this happen. You’re afraid to “bite the hands that feed you”.
 
There’s a third reason why you auto manufacturers have “sat on your hands”, watching your franchised dealers embarrass themselves and the entire auto industry. That reason is that the retail auto business has become so dominated by dealers that employ unethical, deceptive, and even dishonest advertising and sales practices that most want-to-be honest dealers feel compelled to compromise their integrity to survive. A franchised dealer selling Fords or Hondas in his marketplace believes that he cannot advertise prices that are substantially higher than his competitors. His competitor is advertising Fords or Hondas for thousands of dollars less than you (and he) can afford to sell one for. Customers attracted by his advertisements pay hundreds or thousands of dollars in addendums to the MSRP, hidden fees, and junk dealer-installed accessories. The educated consumers who catch this deception, can’t even get a final, official lowest price unless they buy the car then. There’s no other retail product that refuses to give their potential buyers a firm, out-the-door price. This deprives car buyers of their basic, American, economic right to shop and compare product prices.
 
The final reason that your dealers are out of control and invulnerable is their enormous lobbying power. We hear a lot about “Big Insurance” and the NRA, but car dealers (17,968 as of 2022, most of whom are millionaires), their PAC’s, and their state and national associations pack enormous financial clout. Elected and appointed state regulators and legislators know better that do go after franchised car dealers.
 
So, here’s my suggestion to you auto manufacturers. You’re all very smart men and women and you know that your industry is going through enormous changes like EV’s and autonomous vehicles. But the biggest change that doesn’t get as much press is the cultural and educationalchanges in your customers. Tie this to the information explosion with the Internet, the Cloud, quantum computing and AI. I know you’ve sensed this which has accelerated in the past 2 ½ years with the COVID pandemic and soaring demand and affluence of your customers. Yes, your profits and your dealers’ profits have NEVER been greater, but the buyers’ ire over being taken advantage of has never been greater either. We’re hearing a lot more about bad car dealers than ever before. Some of you have publicly spoken out and I salute you for that. I’ll bet a lot of you watch the financial news on CNBC. I’ve seen Jim Farley, Bob Carter and other top auto executives apologetically commenting about the behavior of their dealers. You won’t admit this, but most of you have wondered if auto manufacturers will one day sell directly to the consumers like Tesla does. All fifty states have laws against this that were lobbied in by your dealers, and that’s why you haven’t done it a long time ago. If Elon Musk figured out a way to sell direct, I’m betting that you’re working on a plan of action now. Elon was telling the truth when he was quoted as saying he “never had a pleasant experience buying a car”.


Earl Stewart