2023 New Year’s Resolutions For Car Dealers

Car dealers are running out of time to radically change the way they retail their new and used cars, as well as their service and parts. Car dealerships have been “frozen in time” for about a century in the deceptive way they sell cars. You must have realized this when you bought your last car. The out-the-door price you paid was much higher than the advertised price, and you paid a different price for the same car that others paid a higher or lower one. If you financed your car through the dealer, your finance costs were considerably higher than your bank or credit union would have charged.

 
Why do I say car dealers are “running out of time”? The answer is the KNOWLEDGE EXPLOSION, occurring for the first time in human history. My father was born in 1892 and in 1900 human knowledge doubled about every 100 years. Car dealers came into existence in the early 1900’s after Henry Ford invented the Model A Ford and assembly line production. By the end of 1945 human knowledge was doubling every 25 years. In the 21st century we witnessed some scientific breakthroughs that have turbocharged human knowledge. This began with the Internet which sparked the digital age bringing Google, quantum computing, the Cloud, and the 800 lb. gorilla, ARTIFICAL INTELLIGENCE, A.I. Today human knowledge is doubling about every 13 months and very shortly will be doubling every 12 hours.

 
What all this means is that all humans, including car buyers, are immensely smarter, with instant access to more knowledge than anyone could have imagined a few years ago. Not only are car buyers a lot smarter, but so are the politicians, and voters. Up until now, lack of consumer awareness of car dealers’ deception has allowed regulators and legislators to permit car dealers to “run amuck”. Auto manufacturers and dealers have had politicians and regulators “in their pockets” for a long time. Without the support of Big Auto, a politician can’t get elected. The new voter, benefiting from the knowledge explosion, will no longer elect politicians that “play ball” with car dealers and manufacturers. In fact, the new voter will elect politicians who will “play ball” with them, the car buyers. To get elected, politicians will have to convince the voters that they will “come down” on crooked car dealers, enforce the consumer protection laws already on the books, and add more if needed.

 
Here are my recommendation for car dealers who would like to remain in business in the 21st century by being able to sell cars to the new fully informed car buyer.

Car Dealer 2023 New Year’s Resolutions

Advertise and post the price online that you’ll sell your cars for, no more or no less. Every other retailer has already learned this lesson.

 

Eliminate all fine print that secretly increases the advertised price (like a large down payment). Manufacturers as well as dealers are guilty of this. Both violate Federal Trade Commission rules when they do.

 

Do not advertise that you have cars in your inventory that you do not. Cars that you ordered from your manufacturer can take months to arrive.

 

Do not add options and accessories to your cars unless you include the cost of those in your advertised price.

 

Do not add hidden charges, often called dealer fees or junk fees, to your advertised prices. These charges are, in truth, additional profit to you. All costs should be included in your advertised and posted prices. Federal, state, and local government fees are the only exception…sales tax and license plate.

 

Inform your customer that your dealership makes a profit when it finances new and used vehicles. This profit averages about $2,000 for every car sold and derives from interest rate markup and “products/services” like GAP insurance, extended warranties/service contracts, prepaid maintenance, road hazard and roadside assistance. Car buyers should be informed that they should compare financing from their bank or credit union.

 
The average car dealer reading these resolutions will either laugh in disbelief at my naivety, because he doesn’t believe my basic premise; or he’ll be horrified at what adhering to such changes would do to his profits (GIGANTIC at the present time). Here’s something I wish each dealer would consider. Because most dealer will ignore my suggestions, you can be one of the few that actually prospers because you will be the choice of the new, 21st century, fully informed and aware car buyer. He'll bypass your competition to buy a car from you because he understands and trusts the way you do business. If you disagree, check out my Toyota dealership in North Palm Beach, Florida where “the educated consumer is my best customer”.

Don’t be “Rip van Winkle” When You Buy Your Next Car

Marketing experts know that consumers see or hear only advertisements for products that they might consider buying. For example, if you were recently gifted the perfect microwave oven for your birthday, you wouldn’t notice, much less look for, advertisements for microwave ovens. The same psychological principal applies to reading news articles about products that you don’t have an interest in buying. There may be a surplus, over-supply of microwave ovens or a severe shortage, but if you just bought or were given a microwave oven, you “don’t see” those articles.

 
Just in case you’ve never read or heard about the legend of Rip van Winkle who lived in the Catskill Mountains, he fell asleep for 20 years. When he awoke, he thought he’s just slept through the night. I’m guessing his 6-foot-long beard led him to wonder what had happened!

 
I’m a car dealer and have been one since 1968. I live, sleep, eat, and breathe cars. My dealership is family owned and operated and my three sons and wife, also immersed in the retail car business, regularly get calls from “Rip van Winkles” about buying their next cars. The typical assumption from these car buyers who have been out of the market (asleep) for 3 or more years is that they’d like to come to my dealership and pick out the right new or used cars from my very large, nearly 1,000 vehicle inventory.

 
These “Winkles” want to buy their next new or used car immediately and are very specific what year-make-model, exterior and interior color, options and accessories they would like. They also intend to shop and compare my price (especially those that are educated consumers) with my competition. Of course, I and my family members and managers explain the “upside down” auto retail and manufacturing markets existing for nearly 3 years. Demand soared, supply plummeted, and prices ran up and off-the-chart. Before Rip van Winkle dozed off, cars were sold for thousands of dollars less than today and the selection was huge.

 
The danger to these “Winkles” is that most car dealers and manufacturers are pretending as if these exorbitantly high prices and virtually nonexistent inventories aren’t real. The advertising you see from car dealers and manufacturers continues just like it was 2019, not 2022…big sales, discounts, huge inventories, etc. How and why the FTC and state Attorney Generals allow them to get away with this is fodder for another column. In plain English, the dealers and auto manufacturers are lying to their potential customers. An honest car ad today would read, TODAY IS A BAD TIME TO BUY A NEW OR USED CAR. You and I both understand why we don’t see too many honest ads like this.

 
As I’ve said often before, don’t buy a new or used car now unless you must. If you must, shop around for the lowest price which won’t be below MSRP, especially when you spot the hidden, junk fees and dealer installed accessories. Your selection will be very limited and you’ll have to make many compromises on color, options, and probably models. Your waiting time will likely be months. Rip, I hate to be the bearer of bad news, because I know the truth hurts.

Car Dealers Secret Profit Rapidly Rising to Record Levels

OK, you just “bought” that new or used car and you breathe a sigh of relief. All your hard work, aggravation with the car dealers you’ve dealt with, and worry about price and affordability are behind you…RIGHT? Maybe, if you’re paying cash or financing through your bank or credit union. But, most people finance their cars at the car dealership they bought from and, for them, their aggravation, problems, and expense have just begun.

 
“Mr. and Mrs. Schor, thank you so much for trusting us with your purchase. If you’ll just follow me, I’ll take you to our ‘business office’ and introduce you to Elliot, our manager. He’ll assist you in taking care of the paperwork associated with your car purchase.” Nothing could be further from the truth. The office isn’t just a “business office”; it’s the most lucrative profit center in the entire car dealership for R.O.I. (return on investment). This small office and a few more like it are staffed by, on average, three or four employees and the only investment in equipment is a PC and printer. This department generates millions of dollars yearly for the average car dealership…more than $2,000 for every new and used car sold.

What the salesman told you was the “business office” is the Finance and Insurance Office, aka the F&I office. The “business manager”, Elliott, is paid a commission percentage for every dollar he can extract from you in interest expense and high priced “products” like extended service contracts, maintenance agreements, road hazard insurance, GAP insurance (guaranteed asset protection), roadside assistance insurance, and anything else the dealer can think of to add to the cost of the car you just bought. Many dealers have their own “insurance companies” which allow them to set their prices as high they like. F&I departments also “broker” loans from banks. This means they buy the money from the bank at the lowest rate and then mark it up on your finance contract. One of the largest retail automobile dealer groups in the USA, AutoNation, made $2,766 on every one of the tens of thousands of cars they sold in third quarter of this year. This $2,766 is much higher for every car financed because some buyers pay cash. In reality, if you finance your car with the dealer, his profit averages over $5,000 on every car.

 
Unless you’ve been in a coma for last three years, you know that new and used cars are selling at the highest prices in history. Sadly, interest rates are rising too. There’s not much you can do about the price of car; that’s dictated by supply and demand. The good news is that car prices are coming down very slowly. You don’t have much of an option other than buying the “lowest high price” you can find. You do have an option when financing your car. FINANCE YOUR NEW OR USED CAR THROUGH YOUR BANK OR CREDIT UNION. 

You’ll save yourself thousands of dollars.

Please Don’t Take Away Grandma and Grandpa’s “Freedom Machine”

This column is a prequel to last week’s column, “Earl and Nancy Drive Autonomously”. If you missed last week’s column, you could read it atwww.EarlOnCars.com. I wrote this column fifteen years ago, just about the time I turned 67 and I began to think what my life would be like if I couldn’t drive a car anymore. If you're nearing retirement, you’ve probably had these thoughts; or, if your parents are elderly, you’re concerned about them driving. Today, almost miraculous technology has offered the real possibility of fully autonomous vehicles that may allow everyone, regardless of age or disability, to have personal transportation at their disposal.

Originally published Sunday, November 24th 2007:

You may have read in the newspaper a couple of weeks ago about a 94-year-old man who hit a woman riding a bicycle. It wasn’t the man’s fault; the woman, in her fifties, ran a stop sign. They put the old man in jail overnight and he was given probation because he was driving with no license. It had been taken away because he failed his driver’s test. He said he had to drive because he had to take his wife to the doctor and pick up medicine for her.

There is another reason that a lot of younger people don’t seem to understand why this old man still owned a car. If you are one of these people, think back to the first time you ever drove a car. Think back to the time you owned your first car. Can you recall that wonderful feeling of FREEDOM? No longer did Mom or Dad have to take you to school, to work, to the store, or to a friend’s house. Or, you didn’t have to take the bus, the street car, or impose on a friend who already owned a “freedom machine”. If you are a guy, do you remember how you felt when you first picked your girlfriend up at her home in your very own car? I don’t know about you, but I still feel a tingle when I think about it. I really can’t think of a more memorable experience in any young person’s life. Your first kiss is probably a close second [My first car was a 1951 Pontiac Chieftain & my first kiss was from Mary Ann Riggle during a “spin the bottle game”].

If you are one of those younger people who curse at that gray haired driver in front of you because she is driving too slowly, just remember that she is probably a safer driver than you. Newspapers like to feature stories of senior citizens having accidents and questioning their mental and physical faculties for driving but insurance companies charge senior citizens lower premiums than you. That means they have fewer accidents and cause fewer injuries. Admittedly that is partly because we seniors drive fewer miles but it’s also because most of us drive slower and more carefully than you.

My Uncle Charlie died eight years ago. He was 94. My Aunt Marion died within a year of Uncle Charlie. They lived in the same very modest, small house on Valencia Drive in West Palm Beach for fifty years. But they always owned a Cadillac and it was always parked outside in their driveway. Up until the time they were in their late eighties, the highlight of their week was to take a Sunday drive in their shiny Cadillac. Uncle Charlie always drove. When his eyesight got too bad to drive, he still kept that Cadillac in their driveway, always clean and shiny. His eyesight was still good enough so that, from his rocking chair in his living room, he could see that big Cadillac sitting outside (and so could his neighbors).

My father died when he was 86 and he drove a Pontiac TransAm up until the very last. He had cataracts removed from both eyes and back then, you had to wear “coke bottle” style glasses to see after this operation. He had no peripheral vision and there were a lot of scrapes, dings, and dents that appeared on both sides of that TransAm. Thank God he never had a serious accident. I saw Dad every day and I would see that the dents and scratches were regularly repaired. He always said he didn’t know where they came from and I never questioned him about that. Maybe I was wrong, but I didn’t have the heart to ask him not to drive anymore. I knew how important that car was to Dad and I knew how devastating it would be to him if he couldn’t drive anymore.

You may have heard of George Greenberg a. k. a. the “Mayor of Clematis”. He died a few months ago at the age of 91. He owned Pioneer Linens on Clematis Street in West Palm Beach, a store founded by his father, Max, in 1912. George and I were close friends and I delivered a eulogy at George’s funeral at the request of his grandson and daughter. George always drove an old Buick station wagon, although he was a wealthy man and could have bought any car he wanted. A couple of years ago, George finally treated himself to a new Mercedes Benz SLK-Class convertible! Boy did George look good in that car and he was always smiling when he drove it! When he was diagnosed with brain cancer and given only months to live, he finally had to stop driving his freedom machine. His grandson drove him to our monthly dinner at Carmine’s Ocean Grille and picked him up. It never was the same for George after that.

At my Toyota dealership in North Palm Beach, we have a lot of older customers. It’s just the demographics of northern Palm Beach County. My average customer is 55 and I have lots of customers in their seventies, eighties, and nineties. Maybe it’s because I’m a senior citizen too, but I especially like talking to my older customers and I’ve become personal friends with some. I can tell you from personal experience how important their cars are to them in their latter years. During your middle years when you have so much more going on in your life, your car becomes more utilitarian and you take it for granted. But when you retire and your life is not as hectic your car returns to the importance it had when you were sixteen…your “freedom machine”.

We recently leased a new Camry to one of our very good customers. This was the third car that she got from us over the last seven years and she had just turned 90. One of my managers, who has worked for me for 20 years and is a neighbor of hers, handled the lease. About a month after she took her new Camry home, her Grandson learned of the transaction and demanded that we rescind the lease. When we spoke to our customer, she let us know that her Grandson was very upset with her for leasing the car. He didn’t think she should be driving a car anymore and that she wouldn’t live long enough to make all the payments on a 4 year lease. We offered to refund all of the profit on the lease (about $850), but the Grandson insisted that we take the lease car back. This would cost my company thousands of dollars because of the depreciation a car takes on as soon as it is titled as a used car.

Yesterday afternoon my customer’s Grandson and Stepson visited me in my office. They continued to demand that I rescind the lease [Only the leasing company, Southeast Toyota Finance can rescind the lease] and absorb the thousands of dollars in depreciation on 1 month old used car. They suggested that I may have broken laws by exploiting the elderly and that if I did not succumb to their demands they would sue me. They had already called Toyota to complain about my actions. Not so politely, I asked them to leave my office.

This experience troubled me for the rest of the day and even last night and is what inspired this column. Now I understand why I was so angry at the actions of my customer’s Grandson and Stepson. They didn’t seem to understand how much that car meant to their Grandmother/Stepmother’s happiness and what an important thing her “freedom machine” was to her. I have to wonder how much of their ire was due to genuine concern for her or the potential financial impact on her estate. Her Grandson told me that she had put only 1,500 miles on her last car and what does she need a new car for? He just doesn’t get it! A new car is a lot more than just a way to get to the drug store. To a senior citizen it’s a source of pleasure, pride, and comfort, knowing that it’s in their driveway for everyone to see and it’s there if they need it.

One of my sons just called me to double check on the correct time for him to come over for Thanksgiving dinner today. I told him that I was writing this column and we discussed the subject. I also told him that I hoped that neither he, nor his two brothers would ever take away my “freedom machine”.