Car Dealers & Buggy Whips

We car dealers have had a pretty good “run for our money”. The first car dealership was established in 1897 by William E Metzger, but didn’t only gained momentum after Henry Ford figured out how to mass produce cars in 1908 with the Model T. That’s 114 years ago. My father, Earl Stewart Sr., born in 1892, started his dealership in 1937. I started in business with him in 1968 at Stewart Pontiac Co. in West Palm Beach, FL. Today, my family and I operate a Toyota dealership in North Palm Beach. 

Car dealerships today were “frozen in time” as retailers about 80 years ago after powerful and wealthy car dealerships, their lobbying associations, political action committees, and dealer associations got franchise laws imbedded in the laws of all fifty states. These franchise laws protected car dealerships from their manufacturers as well as state and federal laws and regulation. Therefore, buying a car is unlike any other retail experience. Only a franchised new car dealer can legally sell you a car. Auto manufacturers are not allowed to sell directly to the public. Car dealers can and do set the price of new cars at any price they decide. Each vehicle is sold at the highest price a car dealer can “get away with” and no two buyers pay the same price for the same car. The Gallup annual poll on Honesty and Ethics in Professions have ranked car dealerships last (or next to last) for the last 47 years. 

You’ve probably heard the expression, “I’d rather have a root canal than visit a car dealership”. Despite this common view of the car buying experience, car dealers have grown in number and prospered as never before, thanks to their invulnerability due to state franchise laws and their lobbying prowess. It took the 21^st century quantum leap in technology…the Internet, super-quantum computing, artificial intelligence, Metaverse, etc. to precipitate the decline and fall of car dealerships. 

Ten years ago, who would have believed battery technology would make the combustion engine obsolete and today California will allow only the sale of all electric vehicles in 2035! Autonomous vehicles will be on the scene faster than we saw electric vehicles. The car I’m driving now, a Tesla model S, Plaid, has fully autonomous capability built into its software. Of course, fully autonomous vehicles aren’t legal today and the technology isn’t perfected, but it will be very soon. 

Technology isn’t the only thing that’s changing at warp speed. We humans are getting smarter and smarter. We prioritize things differently than we did in the 20^th century. When I was growing up in, the 1950’s and ‘60’s, there were few things more important than cars…the faster the better. I couldn’t wait to get my driver’s license and then couldn’t wait to have my own car. Today, most people born after 1980 don’t fall in love with cars their cars; they look at them more as “a way to get from point A to point B”. Time is very important to us today and the idea of a 2 hour round trip commute every day is bad. Spending over $40,000 on car that we use only about 10% of the time we’re making payments on it is a bad idea.

Fast forward to 2040. Virtually all vehicles are all electric and totally autonomous. They require virtually no maintenance. No one owns a vehicle; they only pay for the time they use a vehicle. Think “Uber or Lyft” today, only with every vehicle on the road being just like Uber or Lyft. It’s time to go to work, school, or anywhere. You choose the app on your smartphone to summon the vehicle of your choice…an SUV, van, sports car, luxury car, or a ride share, economy car. You enter your destination the cost goes to your credit card and the vehicle arrives within one minute. You get into the vehicle, and it takes you to your destination at a higher speed and a shorter time than can imagine today. Why? Because all vehicles are autonomous, and they all travel on the expressways and roads at the same high speed...100 mph or more. It’s also far safer than you’re driving today. It’s already been proven that computers can drive cars safer than humans. Computers don’t drink and drive, use their cell phones for texting, or eat their lunch while their driving. Your cost of transportation will be only small fraction of your total cost of owning a car…including maintenance, repairs, insurance, depreciation, collision repair, interest expense, etc. 

Maybe the best part of this whole scenario is that you’ll never have to walk into a car dealership again. 😊

 

Chat with Earl on Cars In-Person at your Group

If you’re a regular reader of this column or a regular listener to our live radio weekly talk show, we thank you very much. However, we believe that our advice to you “regulars” is like “preaching to the choir”. Nancy, Rick, Stu, and I often comment during the radio show (Earl on Cars; 8-10 am EST Saturdays) that we learn as much from our callers/texters that they learn from us. Our regular listening and reading audience are mostly smart, savvy consumers. In fact, that’s why we formed www.EarlsVigilantes.com, a group of educated consumer volunteers to advise those less informed in their communities about how to buy, lease, maintain, and repair their vehicles without being taken advantage of.

 
This column is just another attempt to reach those who most need our and your help when “dealing with car dealers”. Our followers know that car dealers have been ranked last or next to last since 1977 on the Gallup annual poll on Honesty and Ethics in Professions (Google it for more details).

 
Before the COVID pandemic, the “Earl on Cars” team was “on the road”. We regularly spoke at public libraries, service clubs like Kiwanis and Rotary, public schools, women’s and men’s clubs, condominium groups, seniors’ associations, and just about any group that needed our help. With the pandemic more under control, we’ve begun venturing out again. Last week we spoke before the Wellington, FL Rotary club and we’ve accepted an invitation to speak at the Computer Club of Valencia Falls in Delray on February 9. I, Nancy Stewart (my wife and co-host of Earl on Cars), and Rick Kearney (Certified Diagnostic Master Auto Technician) comprise our public speaking team.

 
We would love to hear from your group if you’d enjoy having us as guest speakers. We typically offer advice on how buy or lease a vehicle as well as maintain and repair it without being taken advantage of by a car dealer. There’s no charge, of course. We offer our advice to your group, just as we do in this column and our radio show (we’ve been doing this for about 20 years). In full transparency and disclosure, I’ve owned a Toyota dealership since 1975, but our advice is purely as consumer advocates to help your group. I promise we will, in no way, endeavor to “sell you a car”.

 
We’re accepting speaking engagements in South Florida for the remainder of 2022 and all of 2023. Naturally, we can’t accommodate every request, so we’ll be more likely to accommodate the earlier requests. Please call 561 612-6606, and give my assistant, Diane Dorsey, the complete information for the speaking engagement. This should include the time and date (if possible, one or more alternatives), name and location of your group, contact information, approximate number of attendees, and any specific auto topics you’d like us to focus on. The time length of our speaking engagements typically vary from 30 minutes for luncheon meetings to an hour.

 
We hope to meet and talk with you and your group in the near future.


Earl Stewart

Auto Sales Commissions: The Root of all Evil

Of course, the real quote from the Bible, Timothy 6:10, is “The love of money is the root of all evil”. If you don’t already know this, almost all car salespeople are compensated, almost totally, by a percentage of how much profit they make when they sell you a car. The average commission is about 25%. Virtually all car dealers are marking their cars up thousands above MSRP. With the average profit made on a car today being over $5,000, a salesperson earns about $1,250 for each car he sells. An average car salesman sells about 10 cars per month and a good car salesman will sell about 20. They’re earning $12,500 to $25,000 monthly.
As you know, auto sales dealerships are the only retail companies that allow their products’ markups to be determined by the salespeople. The upper management and owners of all other retail companies set the prices of their products to their customers. A car salesman is compensated and motivated to mark up the profit margin on the car he sells you “as much as he can get away with”. On any given day, the exact same MSRP, year-make-model car is sold at widely varying markups to different buyers. The shrewd, experienced negotiator-buyer might buy a new car close to MSRP, but a more gullible, inexperienced buyer could buy $10,000+ above MSRP. In today’s uniquely low supply, high demand automotive environment, car salespeople and dealers are making more money when they sell you a car than ever before in auto-retail history, about 100 years!

It's unethical, immoral and it should be illegal to sell the same product to every buyer at a different price determined by the buyer’s gullibility and inexperience. This is usually correlated to a buyers’ age, education, sophistication, and comprehension of the English language. Our civil rights laws protect certain classes of people against various kinds of discrimination. Interest rates on car loans are even covered by these laws; Why aren’t they also protected against outrageous markups on cars that are sold to others at much lower prices?

 
A car dealer that allows his salespeople to mark up each car he sells as high as he can get away with is guilty of discrimination, pure and simple. This needs to be codified into law by our lawmakers and enforced by our regulators. Ironically, our lawmakers and regulators are members of the privileged class that gets the lowest prices. In fact, one could make the argument that the unrealistically lower prices they’re able to command, may even cause other buyers to pay more. What kind of a “deal” do you think a governor, senator, or congressman gets when he or she buys a car, compared to your price? How about an Attorney General or the head of the County Office of Consumer Affairs?

All car dealers should be required by law to post the out-the-door price on every car they sell and sell every car to every customer at that price. The legal definition of the out-the-door price should be “a price with no added charges except government fees (sales tax and license plate). The governor of the state or the President of the United States should have to pay the same out-the-door price as you and me.