Get it in Writing... Especially When Buying a Car

You'll agree that you've never bought a new or used car where the dealer didn't get all phases of the transaction affecting him in writing. You didn’t read everything you signed because it's too voluminous and includes undecipherable fine print. Most of this vast paperwork is signed after you “thought” you'd bought the car, and your salesperson has already thanked you for “buying” the car and introduced you to the “business” manager. What you've signed so far is probably just a simple worksheet, which you probably did read but has no legal significance. In fact, the fine print on the worksheet says it's not legally binding. You read very little of the vast amount of legally binding documents in the business office. These are the documents that the dealers' lawyer prepared and/or recommended to protect the dealer’s interests, not yours.

The best way to balance the scales and protect your interests is to commit to writing all the commitments and promises made by the salesperson and sales manager. This can be cumbersome and time-consuming in a one-on-one, in-person transaction inside the dealership, although it can be done. My recommendation is that you buy your car online, which requires either email or texts. Minimize the use of the phone call and, when necessary, confirm in writing.

The most important item you need to commit the dealership to in writing is the out-the-door price. The definition of out-the-door is the price you can write on a check, present it to the salesman in exchange for the car you purchased, and drive it home. The second most important thing to get in writing (text/email) is the complete description of the car including VIN, MSRP, mileage, color of exterior and interior, and all the accessories and options. Finally, confirm in writing any promises your salesperson made such as a free loaner car whenever your car is in for service, a free detail, car wash, or tank of gas, etc.

These text/email communiqués are, technically, not legal signed contracts, but when responded to and accepted in writing by the dealership, they are almost as good as a signed contract. They constitute prima facie evidence to the court. The dealer knows this and knows that if you did sue and took him to court, he'd lose and likely be responsible for, not just making you whole, but your legal fees, as well as his.

If a dealer won’t respond by email or text confirming your written comments to him, you've found out that he was lying to you upfront, without having to waste a lot of time arguing.

Car Buyers Pay $9,600 More Because of Hidden Junk Fees

The average new car sold for $48,006 in March of 2023, according to Kelly Blue Book (KBB). However, car buyers "pay upwards of 20 percent more than they would have, had the actual price been disclosed upfront,” as stated by the Federal Trade Commission (FTC).

Why?

Car dealers are fiercely competitive. There are 18,257 new car dealers in the USA. Most metro areas boast large numbers of dealers where consumers can shop and compare prices. My Toyota dealership is in North Palm Beach, FL, and there are sixteen Toyota dealerships in my South Florida market. With the rise of online shopping, the number of dealerships available for price comparisons is nearly limitless. This should be a “consumer's dream market” because new car buyers can choose from a vast number of dealers who control the selling price for identical products.

All new car dealers selling a specific brand pay the manufacturer the same price. The manufacturer also permits their dealers to sell those cars at any price the dealer chooses. The manufacturer’s price sticker (Monroney label) is merely a “suggested” retail price. Naturally, the price dealers select is “AS MUCH AS THEY CAN GET.”

One might start to recognize a significant challenge for car dealers: how can they sell their new cars at a reasonable, or even fair, profit when numerous other dealers nearby sell the exact same car, possibly for less? Like all businesses, car dealers need to sell their products above what they pay the manufacturer, in addition to covering costs like sales commissions, building leases or rents, utilities, advertising, etc.

Since all Toyota dealers in a market sell the exact same car, the primary incentive they can offer a potential Toyota buyer is a reduced price. If a buyer decides she wants a new Toyota Camry, she'll buy it from the Toyota dealer she believes offers the lowest price. Therefore, the only way for a dealer to attract this potential Toyota buyer is to advertise or quote a price lower than competitors. This underscores the car dealers’ challenge: enticing a customer "in the door" (literally or figuratively) to at least attempt selling her a new Toyota.

How?

The dealer's solution to this challenge? Deception. Misleading potential customers in advertisements and price quotations. They might feel compelled to advertise prices lower than all other Toyota dealers in their area. Advertising a higher price would risk not making the sale. If all dealers advertised identical prices, they'd risk accusations of “price fixing”, which can lead to substantial fines and incarceration.

Once a dealer convinces customers he offers a price lower than competitors, the next hurdle is increasing that price discreetly, leading to hidden junk fees.

The Federal Trade Commission notes, “Junk fees make it difficult for consumers to determine actual costs. Many shop based on an advertised price, like a car price in a TV commercial. When dealers add fees at the end of a transaction, or bury them in fine print, it complicates consumers' ability to ascertain the car's total price. Even when junk fees are individually listed, the sheer number of them can obscure the all-in cost of the car.”

Most car dealers recognize that adding junk fees can boost profits. In a market where these fees are common, dealers who strive for fair, transparent pricing appear more expensive than competitors, leading to lost market share. When junk fees are allowed, there's an incentive for dealers to concoct new ones instead of improving quality or reducing car prices.

Auto manufacturers aren't innocent in this junk fee scheme. They intentionally saturate the market with dealerships across the USA. More dealers mean more sales. Since manufacturers receive their asking price for every wholesale car, having more dealers increases sales and revenue. This places dealers in the tough position of meeting the manufacturers' sales quotas while still turning a profit. Both dealers and manufacturers thrive by deceiving the primary retail buyer.

The Higher Up You Complain, the Greater Your Chance of Satisfaction

Many readers of this column may not remember Harry Truman, the 33rd President of the United States, but those of you who do will remember the sign he had on his desk in the Oval Office: "The Buck Stops Here." The sign meant that he accepted responsibility for all acts, policies, and decisions under his command. To be realistic, we know that the chances of you or me making a complaint directly to "POTUS" are zero, but the higher up you complain, the better your chances of being heard and accommodated.

There are two reasons why higher-ups in any business, organization, or government are more inclined to be honest, transparent, and fair with you. (1) The most cynical of those reasons is called "deniability." Some top company executives know that their underlings aren't treating customers fairly but believe that this allows the company (and them) to make more money and likely can go undetected. However, as insurance, in case they get "caught," they can claim that they didn't know these bad practices were happening. (2) They really don't know what's going on at the lower levels, which can often happen in larger companies.

Car dealerships come in all shapes and sizes, but the trend in recent years has been toward larger dealerships and the consolidation of many dealerships under one CEO. Fifty years ago, car dealerships were mostly small, family businesses. The owner was also the dealer, general manager, and the CEO. Today, family dealerships are dying out and being acquired by giant publicly and privately owned companies like AutoNation, Terry Taylor, Sonic, Lithia, Penske, and Larry Morgan. If you have a problem with a car dealership, the likelihood of reaching the very top is slim, but you should endeavor to do so, and the higher up you reach, the better off you are.

Regular readers of this column and listeners to my Saturday morning live radio talk show, Earl on Cars, know that we get a lot of calls to the show from "victims" of car dealers. A few weeks ago, we had a caller named Ellen who spoke to my wife, Nancy, my co-host, about her bad experience when she bought a new 2023 Toyota Camry from "Al Hendrickson Toyota" in Coconut Creek, FL (near Ft. Lauderdale), which is in the top 3 car volume car dealership in the USA. Ellen was very upset because, after signing all the papers and taking delivery, she realized that she'd paid way too much. She returned to talk to the salesman and sales manager (Brandson Angel and Scott Zuckerman), but they were unapologetic and denied overcharging her for the new Camry.

Ellen was under the impression that the dealership was owned by Al Henrickson and didn't know that it had been sold a few months ago to the Moran Auto Group, owned by Larry Morgan. Many car dealerships retain their original owner's name after the sale. The Morgan Group bought the three Arrigo Chrysler-Dodge-Jeep dealerships three years ago, but the Arrigo brothers' name is still on the dealerships, and they still do the TV commercials.

Nancy and I suggested to Ellen that she contact the real owner of Al Hendrickson Toyota, Larry Morgan. She did so, Larry apologized, and asked her to return to Al Hendrickson Toyota and said that he'd instructed them to make her happy. She did return and was given $2,600 back off the price she'd paid for the new Camry.

Ellen was fortunate to have called our radio show and learned who really owned Al Hendrickson Toyota, and she was fortunate to find the contact information to reach Larry Morgan. My advice to you, when you buy your next car, is to do the research first before you buy the car. With Google and AI, like ChatGPT, you can find out almost anything today. Find out who really owns the dealership and what the management structure is inside that dealership. You must insist on getting the contact information (cell phone numbers are mandatory) of all the managers in the sales department and the General Manager or owner. Make this a precondition of buying the car.

The mere act of demanding this information will likely ensure that you get more honest and transparent treatment than if you had not. A car salesman is far less likely to cheat somebody who has his boss's cell phone number. His boss is also less likely not to make things right if you have his boss's cell phone number, etc...

A Good Auto Mechanic Is Worth Searching For

One of my favorite jokes is, “What do you call a doctor who graduated last in his class from medical school?” The answer: a doctor. Your doctor is probably a very nice person with lots of empathy and a great smile. But do you know from which medical school he graduated and how he ranked in his graduating class?

We still refer to people who fix our cars as “mechanics”, a term used over a century ago when they were working on Model A and T Fords. Today, the word “car” is a misnomer, and those qualified to repair them are closer to computer scientists than the old-fashioned mechanic or “grease-monkey”. Today's cars are computers on wheels, no longer just mechanical devices.

The Automotive Service Excellence (ASE) society was formed 53 years ago. It’s a non-profit organization and has been the “Gold Standard” for rating auto technicians. All reputable independent auto repair facilities, both independent and car dealership-affiliated, employ only ASE members.

ASE members never stop attending training schools as auto technology is evolving steadily at an accelerating pace. A car manufactured ten years ago is virtually obsolete in terms of safety, security, and convenience technologies. There are fifty-eight certification tests covering every imaginable aspect of auto repair and service. When you choose an auto tech, be sure he’s wearing an ASE patch on his sleeve and that he has certification in the area your car is having a problem with, such as air-conditioning or transmission.

Another question you must have answered before you allow someone to repair your car is their experience—how many years have they been repairing cars? Virtually all auto technicians begin by performing oil changes, lubrications, and rotating and balancing your tires and wheels. There’s “supposed” to be a seasoned ASE technician overseeing these new apprentices’ work. Even though changing oil and rotating wheels and tires are relatively simple tasks, botching these easy tasks can be the most dangerous mistake made in auto repair. Lug nuts (which hold the tire onto the wheel) that aren’t tightened enough can cause your wheel and tire to come off on I-95! Over-tightened lug nuts can be impossible to remove when you need to change a tire. I’d recommend that you allow only ASE certified techs with at least 2 years’ experience to work on your car.

Just because you choose an experienced ASE certified technician to work on your car, that doesn’t mean you’ll be charged a fair price. Always shop around and compare repair prices before you commit to having the repair done. A recent survey by Mayo Clinic showed that two-thirds of the diagnoses were not completely correct and 21% resulted in a completely different diagnosis. Most insurance companies require a second opinion before surgery.

Always ask that the problem with your car be clearly spelled out in the Repair Order (R.O) with an estimate of the total cost. Most repair facilities charge for the diagnosis, which is waived if you have the work done with them. You should always try to negotiate down the diagnostic charge, and many repair facilities will reduce or even waive it—especially if they fear you will take your car elsewhere.

Breakthrough For Autonomous Vehicles!

My wife, Nancy, and I purchased a Tesla Model S Plaid two years ago. Many were puzzled as to why a Toyota dealer would opt for another brand, especially an EV (considering Toyota “missed the all-EV boat” and instead pursued Hydrogen fuel cells). One significant reason was that Tesla wasn't just at the forefront of electric vehicles but also in autonomy. Now in our eighties, Nancy and I realize that there will come a time when we may not be fit to drive. Seniors who come across this column will relate to the melancholy of the day when you have to “hand over your keys” to your offspring. Sixteen years ago, I penned a column titled "Grandma and Grandpa’s Freedom Machine." At 66, I knew many clients whose families had confronted this somber moment. It became my concern when their children reached out, suggesting I shouldn't allow their parents to drive. Understandably, there wasn't much I could, or would, do, leaving the difficult decision to the concerned offspring.

Our enthusiasm was palpable when we received our new Tesla Plaid, equipped with the FSD (full self-driving) software. However, our elation was short-lived when the so-called fully autonomous software fell drastically short of our safety expectations. For three consecutive years, Elon Musk's recurring promises that “safe, fully self-driving Teslas would materialize within the year” proved to be overconfident. Despite numerous updates, the software consistently failed to safely pilot our Tesla Plaid. Often, we had to interject, overriding the autopilot to manage the steering, brakes, or accelerator. On multiple occasions, we were on the verge of mishaps.

From Walter Isaacson's recent biography of Elon Musk, I gathered that there was a pivotal shift in the development of autonomous software. Instead of using “instructions” like DON’T CROSS A DOUBLE LINE or STOP AT RED LIGHTS, the new approach harnessed video clips from proficient Tesla drivers covering millions of miles. Software teams are now meticulously analyzing clips from myriad Tesla users, selectively preserving those that reflect the caliber of a “Five Star Uber Driver,” as Musk would say. Tesla's innovative “Neuro-linking” method programs computers to mimic the neural wiring of human brains. Just as children emulate adults to learn basic tasks like walking, drinking, or using the restroom, machines too can learn from human demonstrations.

Tesla has already transitioned to manufacturing cars devoid of radar and will soon roll out vehicles solely equipped with cameras. While most of the industry leans on lasers and radar, believing cameras insufficient, Tesla, having embraced camera technology from its inception and with a significantly larger fleet on the roads, holds a treasure trove of valuable driving data.

I'm going to venture a prediction: within the next year, Tesla will be rolling out fully self-driving cars that surpass the safety of most human-driven vehicles. Perhaps Nancy and I won’t have to part with our “Freedom Machine” after all.