When I heard a few weeks ago that Steven Rattner was writing Overhall, “an insider’s account of the Obama Administration’s emergency rescue of the auto industry”, I couldn’t wait to read the book. It was supposed to be released by the publisher in October and I pre-ordered it on Amazon.com immediately. I was so excited when I got an email from Amazon telling me that the book had been released early and it came in the mail on Thursday, September 16. I began reading it immediately and finished it over the weekend.
What a letdown! I guess the purpose of this column is to save you $27 in the bookstore or $17.95 on Amazon. Do not buy this book unless you would like to read some cute quotations from President Obama like “Why should we save GM?” and “Why can’t GM build a Corolla”...Or from the President’s Chief of Staff, Rahm Emmanuel, “F**k the U.A.W.!”
The author, Steven Rattner, obviously had two reasons for writing this book. The first and most obvious was to make a lot of money and that goes without saying. The second one is pretty obvious too which is to tell the World how he singlehandedly saved the American auto industry.
When rumors began circulating over two years ago that the government was looking for an “auto czar’ to rescue Detroit, GM, Chrysler, and the UAW…not necessarily in that order, I jokingly sent my resume to President Obama. I had a hunch that they would pick somebody without a clue about auto manufacturing or retailing and that it would be a politically motivated choice. Boy was I right! Steven Rattner’s background is as a journalist for the NY Times, writer of Op-ed articles for various newspapers, investment banking, but his key endeavor was as a professional Washington D.C. insider and fundraiser for the Democratic Party. He dates back to Jimmy Carter, counts Al Gore as a close friend, and was a big fund raiser for Bill Clinton, Hillary Clinton, and, last but not least, Barrack Obama. His appointment as auto czar was to pay off a political I.O.U.
I surprisingly agree with some of what he has to say in the book. He fully understands that General Motors and Chrysler dug their own graves by mismanagement and then tried to blame their woes on the great global recession. It’s his lack of understanding of business, capitalism, and the free market system which allows him to conclude that running a business badly is no reason for a company to fail.
He inexplicably thinks that the American auto industry is represented by GM and Chrysler. How can he believe that Ford, Toyota, Honda, Volkswagen, BMW, Mercedes, Hyundai, Nissan don’t represent the American auto industry far more importantly than GM and Chrysler? These other manufacturers build better cars according to all objective third parties like Consumer Reports and JD Powers. Many of these manufacturers build most of their cars in America using American part suppliers and American workers. You can argue that “the profits are sent overseas’, but the profits go to the stockholders. Any American can buy stock in Toyota or any other foreign owned company. The American car-buyer would get along just fine without GM and Chrysler products. As far as the United Auto Workers union is concerned, they would be forced to earn their money rather than “bask in the sun of entitlements” they demanded and received from GM and Chrysler.
Steven Rattner says there’s a good chance GM and Chrysler are going to survive but then again what else can he say? He hedges a bit on whether or not we taxpayers will get back all of the $80B we gave them. I can see why he’s nervous about that. About the time he was finishing his book, Ed Whitacre (GM CEO #3 in the last year and a half) said GM would sell their IPO stock before the election and raise enough to pay back all of the money owned the taxpayers. But GM CEO #4, Dan Ackerson, suddenly replaced Whitacre and now he says GM won’t be able to repay all of the money like Ed said and won’t be going public with the IPO this year after all.
Oh, I almost forgot. Steven Rattner suddenly resigned as Auto Czar when it was made public that his investment company, Quandrangle, is under investigation by the New York Attorney General. It seems that Rattner’s company had been making payments to an indicted intermediary, Hank Morris. Morris is an associate of the New York state pension plan and was helping Quandrangle raise money from the New York state pension plan. Maybe the taxpayers will have to bail out Rattner next?
Monday, September 20, 2010
Wednesday, September 15, 2010
CASH FOR CLUNKERS COVER UP?
“Cash for Clunkers” aka CARS, the government stimulus program for the auto manufactures and dealers last August was generally regarded as one of the more effective stimulus programs of the Obama administration. It cost us taxpayers $3 Billion but it sold almost one million new cars. There are arguments on how many extra new cars it sold and how many of those that were sold would have been sold eventually anyway. But, overall, it is generally considered a far more effective stimulus than TARP and certainly a lot less expensive.
What puzzles me is why there is so little media coverage of the fact that most customers who bought new cars under this program did not receive a fair trade-in for their clunker. There was a class action lawsuit filed in New York against one of the largest dealer groups in the country on this point and the Oregon Attorney General has ruled that all car dealers must pay their clunker customers what they received from the salvage yards to which they sold the clunker. Both of these incidences received virtually no national or local media coverage.
In my judgment, the clear intent of the Cash for Clunkers program was that the buyer should receive a trade-in allowance commensurate with the value of her clunker, just like a normal sale with a trade-in would. Unfortunately, the government did not make this abundantly clear and therefore most car dealers took advantage of this “loophole”. Most car dealers allowed hundreds of dollars less than they actually sold the clunkers to salvage yards for. Some dealers gave their clunker customers absolutely nothing for their trades.
I read in the auto manufacturer/dealer trade publication, Automotive News, that the average trade-in allowance estimate for clunkers was $75. Since the government did allow the dealer to keep $50 for administrative costs, this meant that the average clunker customer netted $25. I sold 286 new Toytota in the clunker program and my average sale to the salvage yards was for $445. If this average applied nationally to the one million clunkers, this would mean that car buyers under the clunker program were underpaid on their trade-ins by about $400 million.
One has to ask, why the media is ignoring this at least ethical violation which has cost American car buyers hundreds of millions of dollars. I can think of only one reason and that is the fact that car dealers and manufacturers are among the largest advertisers. Asking the same question of why the NHTSA doesn’t take action I can think of only one reason too. That is that the National Automobile Dealers Association, NADA, is a very powerful lobbying group. They are so powerful that they were able to at least temporarily halt the cancellation of GM and Chrysler dealers by GM and Ford which was mandated under the government bailout program.
The amount that a clunker was sold to a salvage yard for is a matter of public information and should be available from NHTSA under the Freedom of Information Act. If you bought a car under this program, you might be interested to know how much you should have received as a trade-in vs. how much you actually received. I’m working on accessing this information and I will advise all of my readers when I’m successful.
What puzzles me is why there is so little media coverage of the fact that most customers who bought new cars under this program did not receive a fair trade-in for their clunker. There was a class action lawsuit filed in New York against one of the largest dealer groups in the country on this point and the Oregon Attorney General has ruled that all car dealers must pay their clunker customers what they received from the salvage yards to which they sold the clunker. Both of these incidences received virtually no national or local media coverage.
In my judgment, the clear intent of the Cash for Clunkers program was that the buyer should receive a trade-in allowance commensurate with the value of her clunker, just like a normal sale with a trade-in would. Unfortunately, the government did not make this abundantly clear and therefore most car dealers took advantage of this “loophole”. Most car dealers allowed hundreds of dollars less than they actually sold the clunkers to salvage yards for. Some dealers gave their clunker customers absolutely nothing for their trades.
I read in the auto manufacturer/dealer trade publication, Automotive News, that the average trade-in allowance estimate for clunkers was $75. Since the government did allow the dealer to keep $50 for administrative costs, this meant that the average clunker customer netted $25. I sold 286 new Toytota in the clunker program and my average sale to the salvage yards was for $445. If this average applied nationally to the one million clunkers, this would mean that car buyers under the clunker program were underpaid on their trade-ins by about $400 million.
One has to ask, why the media is ignoring this at least ethical violation which has cost American car buyers hundreds of millions of dollars. I can think of only one reason and that is the fact that car dealers and manufacturers are among the largest advertisers. Asking the same question of why the NHTSA doesn’t take action I can think of only one reason too. That is that the National Automobile Dealers Association, NADA, is a very powerful lobbying group. They are so powerful that they were able to at least temporarily halt the cancellation of GM and Chrysler dealers by GM and Ford which was mandated under the government bailout program.
The amount that a clunker was sold to a salvage yard for is a matter of public information and should be available from NHTSA under the Freedom of Information Act. If you bought a car under this program, you might be interested to know how much you should have received as a trade-in vs. how much you actually received. I’m working on accessing this information and I will advise all of my readers when I’m successful.
Tuesday, September 07, 2010
What to do if you are Treated Badly by a Car Dealer
Hopefully the sales or service experience with your car dealer went well. But, sometimes they don’t. Now what? The advice I give you applies to all business transactions, not just car dealerships.
Your first step should be to communicate your complaint ASAP to the General Manager or, preferably, the owner. Be sure that you are talking to the real owner or the real general manger. A General Manager is over all employees in the entire company. A general “sales” manager is not a General Manager. If you can’t reach the owner (Many car dealerships are either publicly owned or owned by absentee owners), ask to see the General Manager. Often times the owner or General Manager is not aware of everything that goes on with all of their customers and employees. They might have new employee that should not have been hired or received inadequate training. Or, they may simply have a “rotten apple” that should not be working there. The ease and speed with which you can meet and speak to a General Manager or an owner is a pretty good measure of the integrity of the company as whole. If the owner or General Manager cares enough about her customers to allow total access, it is probably a very good place to do business. In fact, it is a good idea to find this out before you do business.
If you cannot reach the owner or General Manager, contact the manufacturer who franchises the dealership. Car dealers have a contract with the manufacturer called a franchise agreement and this contractual agreement requires that they treat their customers with courtesy, efficiency and integrity. Most manufacturers have a customer hotline that allows you to call and register a complaint directly. The owner or General Manager of the dealership will be made aware of your complaint. As you might guess, the manufacturer has quite of bit of clout with their dealer. If a dealer does not live up to his side of the contract, his franchise could be canceled or not renewed.
The third step I recommend, if numbers one and two don’t work, is to contact a consumer agency like The Better Business Bureau or the County Office of Consumer Affairs. These agencies will send your complaint to the dealership and request a written reply. No car dealership or business wants an unanswered complaint in the file of a governmental or private consumer agency.
The 4th step is to call the Florida Department of Motor Vehicles, DMV, and/or the Florida Attorney General’s office. These are extreme steps to be used for serious, even illegal, activities. The DMV has the power to suspend or cancel a dealer’s motor vehicle retail license, putting him out of business. The Attorney General’s Office can file criminal charges and assess large fines, even jail terms. The DMV phone number is (850) 617-2000 and the Attorney General’s phone number is 866-966-7226.
Your last resort is to contact an attorney. I list this last because hiring an attorney just about eliminates the possibility that you can quickly, amicably and inexpensively resolve your differences with the car dealer. Be very careful which attorney you choose. Try to choose one that is primarily interested in helping you and not in generating large fees for himself. Under the Florida Unfair and Deceptive Trade Practices Act, an attorney is entitled to his fees and costs from the defendant in a lawsuit if he wins. These fees can be much larger than the amount of your claim, motivating an unethical attorney to spend more time than is needed and dragging out a case to generate more fees than are necessary. This can be very dangerous for you because the car dealer’s attorney’s fees run roughly parallel to your lawyer’s and you can be held liable for those if you lose the case.
Hopefully you never have to resort to the final step of hiring a lawyer. In trying steps one, two, three and four try to present your complaint as concisely and politely as possible. You have every right to be angry when you are taken advantage of, but try to let your anger subside before you speak to or write to someone about your problem. We all react negatively to someone who is profane, raises his voice, or is sarcastic. Your goal of communicating and resolving your complaint is best reached by communicating clearly, politely and concisely.
Your first step should be to communicate your complaint ASAP to the General Manager or, preferably, the owner. Be sure that you are talking to the real owner or the real general manger. A General Manager is over all employees in the entire company. A general “sales” manager is not a General Manager. If you can’t reach the owner (Many car dealerships are either publicly owned or owned by absentee owners), ask to see the General Manager. Often times the owner or General Manager is not aware of everything that goes on with all of their customers and employees. They might have new employee that should not have been hired or received inadequate training. Or, they may simply have a “rotten apple” that should not be working there. The ease and speed with which you can meet and speak to a General Manager or an owner is a pretty good measure of the integrity of the company as whole. If the owner or General Manager cares enough about her customers to allow total access, it is probably a very good place to do business. In fact, it is a good idea to find this out before you do business.
If you cannot reach the owner or General Manager, contact the manufacturer who franchises the dealership. Car dealers have a contract with the manufacturer called a franchise agreement and this contractual agreement requires that they treat their customers with courtesy, efficiency and integrity. Most manufacturers have a customer hotline that allows you to call and register a complaint directly. The owner or General Manager of the dealership will be made aware of your complaint. As you might guess, the manufacturer has quite of bit of clout with their dealer. If a dealer does not live up to his side of the contract, his franchise could be canceled or not renewed.
The third step I recommend, if numbers one and two don’t work, is to contact a consumer agency like The Better Business Bureau or the County Office of Consumer Affairs. These agencies will send your complaint to the dealership and request a written reply. No car dealership or business wants an unanswered complaint in the file of a governmental or private consumer agency.
The 4th step is to call the Florida Department of Motor Vehicles, DMV, and/or the Florida Attorney General’s office. These are extreme steps to be used for serious, even illegal, activities. The DMV has the power to suspend or cancel a dealer’s motor vehicle retail license, putting him out of business. The Attorney General’s Office can file criminal charges and assess large fines, even jail terms. The DMV phone number is (850) 617-2000 and the Attorney General’s phone number is 866-966-7226.
Your last resort is to contact an attorney. I list this last because hiring an attorney just about eliminates the possibility that you can quickly, amicably and inexpensively resolve your differences with the car dealer. Be very careful which attorney you choose. Try to choose one that is primarily interested in helping you and not in generating large fees for himself. Under the Florida Unfair and Deceptive Trade Practices Act, an attorney is entitled to his fees and costs from the defendant in a lawsuit if he wins. These fees can be much larger than the amount of your claim, motivating an unethical attorney to spend more time than is needed and dragging out a case to generate more fees than are necessary. This can be very dangerous for you because the car dealer’s attorney’s fees run roughly parallel to your lawyer’s and you can be held liable for those if you lose the case.
Hopefully you never have to resort to the final step of hiring a lawyer. In trying steps one, two, three and four try to present your complaint as concisely and politely as possible. You have every right to be angry when you are taken advantage of, but try to let your anger subside before you speak to or write to someone about your problem. We all react negatively to someone who is profane, raises his voice, or is sarcastic. Your goal of communicating and resolving your complaint is best reached by communicating clearly, politely and concisely.
Monday, August 23, 2010
Earl’s List of the Best and Worst Car Dealers: Treasure Coast to Northern Broward County
I must explain that those dealers listed as “Good Guys” are far from perfect. I urge you to shop and compare prices, stick up for your rights, and do your homework in preparing to buy. South Florida is the Sodom and Gomorrah of the retail car business. Listing the best dealers is like listing the most honest inmates in Attica or Leavenworth.
I arrived at my opinion of these dealers, the good and the bad, from my constant interaction with you, the car buyers of South Florida. You call my weekly Saturday morning talk show, Earl Stewart on Cars, my cell phone, you send me emails and you write me letters about your experiences in buying and servicing your cars. You post comments on my blog, www.EarlStewartOnCars.com.
This list is not static and I will vary it regularly, adding more “good guys” and dropping the undeserving from the list. Hopefully, I will not have to add to the “bad buy” list but I will if I have to. These dealerships are the worst of the worst and should be totally avoided at all costs. You would be better served to drive an extra 50 miles to buy the make car you seek than buy it from one of these dealers. In fact, you would be better served to buy a different make from a good dealer.
I know I’ve angered a lot of car dealers (so what else is new?) by leaving them off the “good guy” list and especially the bad guys. I urge those of you who are sincere to call me personally and I will be glad to discuss with you what your customers told me about you that led me to omit you from the “good guy” lists. The “bad guys” won’t call me because they know exactly what they are doing and how they are premeditatedly deceiving their customers.
If the make car you are seeking does not show a dealer, it’s probably because not many people by that make. I listed only the most popular. I suggest that you choose a dealer a “good dealer” who is listed that also sells your make. For example, Schumacher also sells Mitsubishi and Infiniti and he is listed as a good dealer for Chevy and Buick.
The Bad Guys:
West Palm Beach Kia in West Palm Beach
Arrigo Chrysler Jeep Dodge in West Palm Beach
Delray Mazda-Kia in Delray
Ft. Pierce Nissan in Ft. Pierce
Palm Beach Acura in West Palm Beach
Napleton Nissan in Riviera Beach
Napleton Hyundai in North Palm Beach and West Palm Beach
Napleton Kia in Riviera Beach
Napleton Lincoln in North Palm Beach
Napleton North Lake Suzuki in North Palm Beach
North Jeep in North Palm Beach
Northlake Dodge in North Palm Beach
The Good Guys:
Acura
Coggin Acura in Ft. Pierce
Phil Smith Acura in Pompano
BMW
Coggin Motor Cars in Ft. Pierce
Vista Motor Company in Pompano Beach
Chevy
Maroone in Greenacres/Lake Worth
Maroone in Delray
Schumacher in North Palm Beach
Buick
Schumacher in North Palm Beach
Schumacher in West Palm Beach
Cadillac
Wallace in Stuart
Maroone in West Palm Beach
Coral in Pompano
Ford
Mullinax in North Palm Beach
Maroone in Delray
Honda
Coggin Ft. Pierce
Delray Honda in Delray
Pompano Honda in Pompano
Hyundai
Wallace Hyundai in Stuart
Delray Hyundai in Delray
Lexus
JM Lexus Coral Springs
Palm Beach Lexus West Palm Beach
Mercedes
Mercedes of Delray in Delray
Mercedes Benz of Ft. Pierce in Ft. Pierce
Nissan
Wallace in Stuart
Maroone in Delray
Toyota
Because I own and operate a Toyota dealership in North Palm Beach, I don’t feel objective if I name myself to this list and I don’t want to be perceived as unfairly biased by eliminating some of my close competition from this list. Please feel free to call me personally (cell phone 561 358-1474) for advice on the Toyota dealers nearest you.
I arrived at my opinion of these dealers, the good and the bad, from my constant interaction with you, the car buyers of South Florida. You call my weekly Saturday morning talk show, Earl Stewart on Cars, my cell phone, you send me emails and you write me letters about your experiences in buying and servicing your cars. You post comments on my blog, www.EarlStewartOnCars.com.
This list is not static and I will vary it regularly, adding more “good guys” and dropping the undeserving from the list. Hopefully, I will not have to add to the “bad buy” list but I will if I have to. These dealerships are the worst of the worst and should be totally avoided at all costs. You would be better served to drive an extra 50 miles to buy the make car you seek than buy it from one of these dealers. In fact, you would be better served to buy a different make from a good dealer.
I know I’ve angered a lot of car dealers (so what else is new?) by leaving them off the “good guy” list and especially the bad guys. I urge those of you who are sincere to call me personally and I will be glad to discuss with you what your customers told me about you that led me to omit you from the “good guy” lists. The “bad guys” won’t call me because they know exactly what they are doing and how they are premeditatedly deceiving their customers.
If the make car you are seeking does not show a dealer, it’s probably because not many people by that make. I listed only the most popular. I suggest that you choose a dealer a “good dealer” who is listed that also sells your make. For example, Schumacher also sells Mitsubishi and Infiniti and he is listed as a good dealer for Chevy and Buick.
The Bad Guys:
West Palm Beach Kia in West Palm Beach
Arrigo Chrysler Jeep Dodge in West Palm Beach
Delray Mazda-Kia in Delray
Ft. Pierce Nissan in Ft. Pierce
Palm Beach Acura in West Palm Beach
Napleton Nissan in Riviera Beach
Napleton Hyundai in North Palm Beach and West Palm Beach
Napleton Kia in Riviera Beach
Napleton Lincoln in North Palm Beach
Napleton North Lake Suzuki in North Palm Beach
North Jeep in North Palm Beach
Northlake Dodge in North Palm Beach
The Good Guys:
Acura
Coggin Acura in Ft. Pierce
Phil Smith Acura in Pompano
BMW
Coggin Motor Cars in Ft. Pierce
Vista Motor Company in Pompano Beach
Chevy
Maroone in Greenacres/Lake Worth
Maroone in Delray
Schumacher in North Palm Beach
Buick
Schumacher in North Palm Beach
Schumacher in West Palm Beach
Cadillac
Wallace in Stuart
Maroone in West Palm Beach
Coral in Pompano
Ford
Mullinax in North Palm Beach
Maroone in Delray
Honda
Coggin Ft. Pierce
Delray Honda in Delray
Pompano Honda in Pompano
Hyundai
Wallace Hyundai in Stuart
Delray Hyundai in Delray
Lexus
JM Lexus Coral Springs
Palm Beach Lexus West Palm Beach
Mercedes
Mercedes of Delray in Delray
Mercedes Benz of Ft. Pierce in Ft. Pierce
Nissan
Wallace in Stuart
Maroone in Delray
Toyota
Because I own and operate a Toyota dealership in North Palm Beach, I don’t feel objective if I name myself to this list and I don’t want to be perceived as unfairly biased by eliminating some of my close competition from this list. Please feel free to call me personally (cell phone 561 358-1474) for advice on the Toyota dealers nearest you.
Monday, August 16, 2010
Did Congress “Beat” a Confession out of Toyota with a Rubber Hose?
You may have read that in 25% of those cases involving innocent people imprisoned and later exonerated by DNA testing, those falsely imprisoned had “confessed” to a crime they did not commit. Since the discovery and implementation of DNA testing, hundreds of thousands of innocent men and women have been freed from our prisons, some on the verge of being executed. Unfortunately we will never know how many innocent people we have executed or how many are still in prison because there was no DNA evidence.
DNA testing of accused criminals is the result of applying the surging scientific knowledge we didn’t have only a few years ago. Analogous to DNA is the “black box” which used to be only in airplanes but now is being used increasingly in automobiles. This box contains scientific instruments that record the seconds and minutes before and after accidents. This black box can tell if the brake was applied and, if so, how long and how hard. It can tell us the same about the accelerator. Of course it can tell the speed, acceleration or deceleration and the direction the car is traveling.
Scientific tests like DNA have shown that, what we relied on most before for evidence, confessions and eye-witness accounts are extremely unreliable. How many innocent people were imprisoned or executed over the years by eye-witnesses or false confessions? We will never know.
If you’re a regular reader, you know where I’m going with this. The media has recently, but reluctantly, released the finding of the NHTSA that all of the black box tests on Toyotas so far have shown the crashes to be driver error. There is no evidence of any kind showing the electronic throttle controls or sticky accelerators to have caused one single crash or injury. In fact, the tests prove that the many drivers who swore their accelerators stuck and they could not brake to slow down or stop, never once applied the brake, clearly proving that they thought they were but instead were holding down the accelerator to the floor. I’m not suggesting that all of these drivers are lying so that they can sue Toyota, although there certainly some of that going on. I believe that these people firmly believe their foot was on the brake and not the accelerator the whole time. One woman was quoted as saying, I don’t care what the scientific evidence says, I know where my foot was. Similar statements have been made by eye-witnesses to crimes who were proven wrong by DNA tests.
All of this begs the question, why would Toyota or any innocent person or company confess to something they did not do. Back in the old days, that was an easy question to answer. Before we had the Miranda Act and before we videotaped confessions, all the cops had to do was “beat it out” of the accused. The cops can’t use rubber hoses anymore, but they can use psychological rubber hoses. They can make deals for shorter sentences or probation suggesting that if they are found guilty by a jury the sentence will be much, much worse. They can tell the accused that, if they don’t confess to this crime, the police will make a major effort to investigate them on a multitude of other possible crimes until they find something. The police can exert a large amount of duress without violating the rules. They can pretend that they have evidence they don’t, they can question an accused for long periods and repeatedly, they can suggest that they will let it be known on the street that the accused “ratted out” his friends, and they can shout and scream as much as they like. A big cop with a big gun can be pretty terrifying.
Scientific studies on false confessions have all come to the same conclusion. They all have one thing in common and that is a decision at some point during the interrogation process that confessing will be more beneficial to them than continuing to maintain their innocence. So there we have it. Jim Lentz, the President of Toyota Motor Sales, USA, Yoshi Inabla the President of Toyota of North America, and Akio Toyoda, the CEO of Toyota all felt they had far more to lose by telling the truth than by falsely confessing.
With the U.S. Congress and the National Highway Transportation Safety Association (NHTSA) fueled by a biased media on the attack, it would have been corporate PR hari kari for Toyota to blame their customers for the reported crashes. They had no choice but to apologize to Congress and the public and confess to a crime they didn’t commit because “confessing will be more beneficial to them than continuing to maintain their innocence”.
Now that Toyota’s innocence has been proven by scientific tests, you would think that somebody would apologize. Like Ray LaHood, chairman of NHTSA, who advised everybody driving a Toyota to “pull over to the side of the road and get out of the car”? How about Bart Stupak and John Dingell, the Congressmen from Michigan who are “in the tank” for the UAW who shouted at Jim Lentz to apologize to those families of those who his defective Toyotas had killed. The media will never apologize. In fact, they won’t even give the exoneration anywhere near the coverage they gave the erroneous allegations.
DNA testing of accused criminals is the result of applying the surging scientific knowledge we didn’t have only a few years ago. Analogous to DNA is the “black box” which used to be only in airplanes but now is being used increasingly in automobiles. This box contains scientific instruments that record the seconds and minutes before and after accidents. This black box can tell if the brake was applied and, if so, how long and how hard. It can tell us the same about the accelerator. Of course it can tell the speed, acceleration or deceleration and the direction the car is traveling.
Scientific tests like DNA have shown that, what we relied on most before for evidence, confessions and eye-witness accounts are extremely unreliable. How many innocent people were imprisoned or executed over the years by eye-witnesses or false confessions? We will never know.
If you’re a regular reader, you know where I’m going with this. The media has recently, but reluctantly, released the finding of the NHTSA that all of the black box tests on Toyotas so far have shown the crashes to be driver error. There is no evidence of any kind showing the electronic throttle controls or sticky accelerators to have caused one single crash or injury. In fact, the tests prove that the many drivers who swore their accelerators stuck and they could not brake to slow down or stop, never once applied the brake, clearly proving that they thought they were but instead were holding down the accelerator to the floor. I’m not suggesting that all of these drivers are lying so that they can sue Toyota, although there certainly some of that going on. I believe that these people firmly believe their foot was on the brake and not the accelerator the whole time. One woman was quoted as saying, I don’t care what the scientific evidence says, I know where my foot was. Similar statements have been made by eye-witnesses to crimes who were proven wrong by DNA tests.
All of this begs the question, why would Toyota or any innocent person or company confess to something they did not do. Back in the old days, that was an easy question to answer. Before we had the Miranda Act and before we videotaped confessions, all the cops had to do was “beat it out” of the accused. The cops can’t use rubber hoses anymore, but they can use psychological rubber hoses. They can make deals for shorter sentences or probation suggesting that if they are found guilty by a jury the sentence will be much, much worse. They can tell the accused that, if they don’t confess to this crime, the police will make a major effort to investigate them on a multitude of other possible crimes until they find something. The police can exert a large amount of duress without violating the rules. They can pretend that they have evidence they don’t, they can question an accused for long periods and repeatedly, they can suggest that they will let it be known on the street that the accused “ratted out” his friends, and they can shout and scream as much as they like. A big cop with a big gun can be pretty terrifying.
Scientific studies on false confessions have all come to the same conclusion. They all have one thing in common and that is a decision at some point during the interrogation process that confessing will be more beneficial to them than continuing to maintain their innocence. So there we have it. Jim Lentz, the President of Toyota Motor Sales, USA, Yoshi Inabla the President of Toyota of North America, and Akio Toyoda, the CEO of Toyota all felt they had far more to lose by telling the truth than by falsely confessing.
With the U.S. Congress and the National Highway Transportation Safety Association (NHTSA) fueled by a biased media on the attack, it would have been corporate PR hari kari for Toyota to blame their customers for the reported crashes. They had no choice but to apologize to Congress and the public and confess to a crime they didn’t commit because “confessing will be more beneficial to them than continuing to maintain their innocence”.
Now that Toyota’s innocence has been proven by scientific tests, you would think that somebody would apologize. Like Ray LaHood, chairman of NHTSA, who advised everybody driving a Toyota to “pull over to the side of the road and get out of the car”? How about Bart Stupak and John Dingell, the Congressmen from Michigan who are “in the tank” for the UAW who shouted at Jim Lentz to apologize to those families of those who his defective Toyotas had killed. The media will never apologize. In fact, they won’t even give the exoneration anywhere near the coverage they gave the erroneous allegations.
Monday, August 02, 2010
Journalistic Ethics in Car Advertising
Does a newspaper, TV or radio station have a social or ethical responsibility to screen out advertisement obviously designed to trick their audience? How about an illegal advertisement? Should a newspaper print an advertisement and accept payment for this ad knowing that the ad violates the Florida Unfair and Deceptive Trade Practices Act or the Federal Truth in Lending?
Back in the eighties, a magazine titled Soldier of Fortune regularly ran help wanted ads for people looking for “hit men” and assassins. The ads were worded in such a way that no one could miss their implication. “Ex Green Beret, trained to kill, will do anything for $5,000”. Bob Spearman was the friend of a good friend of mine. Bob hired two men to kill his wife, Anita, through a Soldier of Fortune advertisement. They successfully killed his wife Anita, but bungled the job so badly that they were caught and spilled the beans on Bob Spearman. He was convicted and sentenced to life in prison without parole. Should Soldier of Fortune Magazine been charged in this crime? They were sued and have since stopped running “murderer wanted” classified ads.
I’m writing this article on Monday, August 2nd and on page 8E of today’s PB Post is a full page color advertisement for Napleton Nissan VIEW AD HERE Napleton probably spends more money advertising in the PB Post than any other car dealer and may be the paper’s largest advertiser. This ad and many similar do it run over and over, not just in the PB Post, but other newspapers and local TV and radio stations. This ad says you can buy a new Nissan Altima for $99 per month. In the fine print it says that the $99 payment is “subsidized by the dealer for the first 6 months”. It doesn’t say how much it’s subsidized and it doesn’t suggest the “source’ of the subsidy. This is deceptive enough, but what really grabbed my attention is that nowhere in the ad does it state the interest rate (Annual Percentage Rate), the number of monthly payments, or the amount of the down payment. Federal law, Truth in Lending, Regulation Z, requires that when an advertiser quotes a monthly payment he must also disclose the interest rate, number of payments, and down payment. Otherwise, how would a prospective buyer have any idea how much she was paying? Here’s some icing on the cake, the ad also increases the advertised price for “freight” but doesn’t say for how much (In past ads it was shown as $750). Of course, Nissan includes the freight cost in the price of the car. When Napleton charges you for the freight, you have paid for the freight twice! This is a violation of the Florida Unfair and Deceptive Trade Practices Act.
I blasted Bill McCollum for not using his office as Attorney General to police and regulate ads like this. His excuse is that he doesn’t have the manpower to do so. OK, Bill, how about making it the responsibility of the media to refuse to print obviously illegal or deceptive advertisements? This reduces the manpower requirement because there are far fewer major media outlets than car dealers.
The media righteously declares that “it’s not their job” to act as a police force. I guess that’s the defense Soldier of Fortune Magazine used too. What gripes me is that the media enjoys special protection, rights, and privileges that other businesses don’t under our Constitution. This is because they are supposed to help protect us by telling the truth about crooked politicians, businessmen, and bad guys in general. Another nonsense excuse I hear from the media is that the advertising department is separate. The guys and gals in the news and editorial departments claim to have no knowledge of what’s going on. Of course they do know that they would be out of job if the advertising department didn’t sell a lot of advertising. How could they be expected to tell Ed Napleton to clean up his act when he’s one of their largest advertisers? Of course, the top management of a newspaper, the publisher, has authority over all departments, news, editorial, and advertising. That’s why I personally met with a recent past publisher of the PB Post and voiced my views. Privately and off the record, he confessed that the survival of the paper via ad revenues “trumped’ doing the right thing.
Do me a favor. Write a letter to the editor of your local newspaper and tell him your views on those illegal and deceptive car ads that he continues to run. Saturday is a good day to find the most ammunition.
Back in the eighties, a magazine titled Soldier of Fortune regularly ran help wanted ads for people looking for “hit men” and assassins. The ads were worded in such a way that no one could miss their implication. “Ex Green Beret, trained to kill, will do anything for $5,000”. Bob Spearman was the friend of a good friend of mine. Bob hired two men to kill his wife, Anita, through a Soldier of Fortune advertisement. They successfully killed his wife Anita, but bungled the job so badly that they were caught and spilled the beans on Bob Spearman. He was convicted and sentenced to life in prison without parole. Should Soldier of Fortune Magazine been charged in this crime? They were sued and have since stopped running “murderer wanted” classified ads.
I’m writing this article on Monday, August 2nd and on page 8E of today’s PB Post is a full page color advertisement for Napleton Nissan VIEW AD HERE Napleton probably spends more money advertising in the PB Post than any other car dealer and may be the paper’s largest advertiser. This ad and many similar do it run over and over, not just in the PB Post, but other newspapers and local TV and radio stations. This ad says you can buy a new Nissan Altima for $99 per month. In the fine print it says that the $99 payment is “subsidized by the dealer for the first 6 months”. It doesn’t say how much it’s subsidized and it doesn’t suggest the “source’ of the subsidy. This is deceptive enough, but what really grabbed my attention is that nowhere in the ad does it state the interest rate (Annual Percentage Rate), the number of monthly payments, or the amount of the down payment. Federal law, Truth in Lending, Regulation Z, requires that when an advertiser quotes a monthly payment he must also disclose the interest rate, number of payments, and down payment. Otherwise, how would a prospective buyer have any idea how much she was paying? Here’s some icing on the cake, the ad also increases the advertised price for “freight” but doesn’t say for how much (In past ads it was shown as $750). Of course, Nissan includes the freight cost in the price of the car. When Napleton charges you for the freight, you have paid for the freight twice! This is a violation of the Florida Unfair and Deceptive Trade Practices Act.
I blasted Bill McCollum for not using his office as Attorney General to police and regulate ads like this. His excuse is that he doesn’t have the manpower to do so. OK, Bill, how about making it the responsibility of the media to refuse to print obviously illegal or deceptive advertisements? This reduces the manpower requirement because there are far fewer major media outlets than car dealers.
The media righteously declares that “it’s not their job” to act as a police force. I guess that’s the defense Soldier of Fortune Magazine used too. What gripes me is that the media enjoys special protection, rights, and privileges that other businesses don’t under our Constitution. This is because they are supposed to help protect us by telling the truth about crooked politicians, businessmen, and bad guys in general. Another nonsense excuse I hear from the media is that the advertising department is separate. The guys and gals in the news and editorial departments claim to have no knowledge of what’s going on. Of course they do know that they would be out of job if the advertising department didn’t sell a lot of advertising. How could they be expected to tell Ed Napleton to clean up his act when he’s one of their largest advertisers? Of course, the top management of a newspaper, the publisher, has authority over all departments, news, editorial, and advertising. That’s why I personally met with a recent past publisher of the PB Post and voiced my views. Privately and off the record, he confessed that the survival of the paper via ad revenues “trumped’ doing the right thing.
Do me a favor. Write a letter to the editor of your local newspaper and tell him your views on those illegal and deceptive car ads that he continues to run. Saturday is a good day to find the most ammunition.
Monday, July 26, 2010
NEGOTIATING TO BUY A CAR
Buying a new or used car is one of the last bastions of the negotiated price. In some countries, negotiation is fairly commonplace in retail stores, but in America virtually all products are sold at a fixed price. Some of us are simply not comfortable negotiating and most of us are not very good at it.
As I have said in previous columns, the best way to buy a new or used car in on the Internet. You can do your research on which car is the best to suit your needs, get guidance on what kind of price you can expect to pay, and finally get quotes from several dealerships on that specific car. However, everybody is not “Internet savvy” and if you are not, you may find it necessary to walk into a car dealership and negotiate for the lowest price.
If you are not comfortable with negotiation, the best advice I can give you is to bring someone along with you who is. Car sales people and sales managers are trained experts in negotiation. This is how they make their living. Here are some tips for you if you decide that you want to negotiate the best price on a car.
(1) If you have a trade-in, keep that separate from the negotiation. Negotiate the best price on the car you are buying and then negotiate the best price you can get for your trade-in. Don’t fall for the old “over allowance” on your trade-in ruse. This is where the dealer makes up the price of car you are buying higher so that he can make you think you are getting more for your trade-in.
(2) Never buy a car on payments alone. Always negotiate the best price you can for the car you are buying and then calculate your best payment when you have negotiated for the best interest rate.
(3) Be sure you understand how the dealer arrived at his retail price. Federal law dictates that a Monroney label be affixed to every vehicle with a manufacturer’s suggested retail price. Many dealers mark that up with another label, often referred to as a “Market Adjustment Addendum”. This markup can be several thousands of dollars.
(4) Expect the first price you are given to be substantially higher than what you can buy the car for. Sales people and sales managers are trained to “start high because you can always come down”. Don’t be afraid to offer substantially less than the initial asking price. You should look at just like the car salesman does, but the reverse…”start low because you can always go higher”. If the salesman excepts your first offer, you probably offered too much. In fact, shrewd car sales people are trained to always ask for more money, even if the offer is good one. This is because they don’t want to “scare off the customer” by telegraphing to the customer that he “left some money on the table”.
(5) If the sales person asks you for a deposit before he will begin negotiating, determine whether the deposit is refundable. Florida law requires a nonrefundable deposit be disclosed in writing on the receipt. If this is printed on your receipt, insist that this be waived in writing on your buyer’s order. If the dealer will not agree to this, be warned that he may be able to keep your deposit if you change your mind about buying the car.
(6) Be prepared for a lot of “back and forth” when the salesman takes your offer back to the manager. When you get close to finding a mutually acceptable price, the manager himself will often come to talk to you. Don’t be intimidated stick to your guns even when they tell you this is “positively, absolutely the lowest price”. Even if you think you do have the lowest price, a great strategy is to get up, walk out of the showroom, and get into your car to drive away. This will often precipitate an even better price. When you try this, the worst case scenario is that you really do drive home, but you can always return and buy the car the next day for the last price they quoted you. They may tell you that you have to buy today, but nine times out of ten that is a bluff. The only exception is when there are factory rebates and incentive expiring.
(7) The last day of the month really is a good time to buy a car. The salesman’s bonus money is maximized, the factory incentives are in effect, the managers are desperate to make their quotas, and it is the one time of the month when the buyer has the best edge in negotiation.
Caveat emptor “let the buyer beware” could have been written specifically for what you can expect when you walk into a car dealership to negotiate the best price. You are up against experts who negotiate for living. But, if you will follow my advice above, you should be able to hold your own and maybe even get a great deal.
As I have said in previous columns, the best way to buy a new or used car in on the Internet. You can do your research on which car is the best to suit your needs, get guidance on what kind of price you can expect to pay, and finally get quotes from several dealerships on that specific car. However, everybody is not “Internet savvy” and if you are not, you may find it necessary to walk into a car dealership and negotiate for the lowest price.
If you are not comfortable with negotiation, the best advice I can give you is to bring someone along with you who is. Car sales people and sales managers are trained experts in negotiation. This is how they make their living. Here are some tips for you if you decide that you want to negotiate the best price on a car.
(1) If you have a trade-in, keep that separate from the negotiation. Negotiate the best price on the car you are buying and then negotiate the best price you can get for your trade-in. Don’t fall for the old “over allowance” on your trade-in ruse. This is where the dealer makes up the price of car you are buying higher so that he can make you think you are getting more for your trade-in.
(2) Never buy a car on payments alone. Always negotiate the best price you can for the car you are buying and then calculate your best payment when you have negotiated for the best interest rate.
(3) Be sure you understand how the dealer arrived at his retail price. Federal law dictates that a Monroney label be affixed to every vehicle with a manufacturer’s suggested retail price. Many dealers mark that up with another label, often referred to as a “Market Adjustment Addendum”. This markup can be several thousands of dollars.
(4) Expect the first price you are given to be substantially higher than what you can buy the car for. Sales people and sales managers are trained to “start high because you can always come down”. Don’t be afraid to offer substantially less than the initial asking price. You should look at just like the car salesman does, but the reverse…”start low because you can always go higher”. If the salesman excepts your first offer, you probably offered too much. In fact, shrewd car sales people are trained to always ask for more money, even if the offer is good one. This is because they don’t want to “scare off the customer” by telegraphing to the customer that he “left some money on the table”.
(5) If the sales person asks you for a deposit before he will begin negotiating, determine whether the deposit is refundable. Florida law requires a nonrefundable deposit be disclosed in writing on the receipt. If this is printed on your receipt, insist that this be waived in writing on your buyer’s order. If the dealer will not agree to this, be warned that he may be able to keep your deposit if you change your mind about buying the car.
(6) Be prepared for a lot of “back and forth” when the salesman takes your offer back to the manager. When you get close to finding a mutually acceptable price, the manager himself will often come to talk to you. Don’t be intimidated stick to your guns even when they tell you this is “positively, absolutely the lowest price”. Even if you think you do have the lowest price, a great strategy is to get up, walk out of the showroom, and get into your car to drive away. This will often precipitate an even better price. When you try this, the worst case scenario is that you really do drive home, but you can always return and buy the car the next day for the last price they quoted you. They may tell you that you have to buy today, but nine times out of ten that is a bluff. The only exception is when there are factory rebates and incentive expiring.
(7) The last day of the month really is a good time to buy a car. The salesman’s bonus money is maximized, the factory incentives are in effect, the managers are desperate to make their quotas, and it is the one time of the month when the buyer has the best edge in negotiation.
Caveat emptor “let the buyer beware” could have been written specifically for what you can expect when you walk into a car dealership to negotiate the best price. You are up against experts who negotiate for living. But, if you will follow my advice above, you should be able to hold your own and maybe even get a great deal.
Tuesday, July 20, 2010
Government Mandated Closing of Dealerships
As you probably already know, our government “strongly encouraged” General Motors and Chrysler Corp. to close over 2,000 car dealerships nationwide. South Florida was severely impacted by this as lots of Chrysler, Jeep, Dodge, Saturn, Pontiac, Hummer, Saab, and other GM and Chrysler stores were shut down or told they must by the end of this year.
Last Sunday, a report was released by the Special Inspector of the Troubled Asset Relief Program (TARP), Neil Barofsky, that said “tens of thousands of jobs were lost” as a result of closing over two thousand car dealerships. The report said, “It is not at all clear that the greatly accelerated pace of the dealership closings during one of the most severe economic downturns in our nation’s history was either necessary for the sake of the companies’ (GM and Chrysler) economic survival or prudent for the sake of the nation’s economic recovery”.
Now, my first question is why was it necessary for our government to conduct a study on whether or not closing over two thousand businesses nationwide would result in greater unemployment? My dealership employees 134 people and there are a lot of satellite businesses that rely on my business like parts suppliers, printing companies, janitorial services, etc. If I closed my dealership it would result in more than 134 people being unemployed. If you multiply that by 2,000 it results in at least 268,000 men and women without jobs. I wouldn’t have to conduct a study after I closed my car dealership to tell me what was going to happen to my employees.
Even now, the consequence of this mandate to close down 2,000+ car dealerships is not obvious to our government. The U.S. Treasury department in response to the results of this study said, they “strongly disagree” with the report’s conclusions. They go on to say that closing over 2,000 car dealerships “not only avoided a potentially catastrophic collapse” but also “saved hundreds of thousands of American jobs”. What I want to understand is how closing over 2,000 retail outlets for any product can help the manufacturer of that product. The more locations that a company can offer their product to the consumer, the more product they will sell. Starbucks is a great example of this. McDonalds is another.
Now remember that virtually all car dealerships are not owned by the manufacturers. They are owed by people like me or large companies like Auto Nation or Penske Automotive Group. Closing a retail outlet has very little short or intermediate term cost savings on the manufacturer, but it does reduce the number of cars it sells. There’s a good argument to be made for the negative long term impact of having too many retail outlets. Too many competitors can make it difficult for individual dealers to sell enough cars to maintain the necessary financial strength to compete effectively. The free marketplace tends to mitigate this negative effect because the stronger dealers will survive and the weaker perish. But in the short and intermediate term there was nothing to be gained by this government mandated closing of so many retail outlets for GM and Chrysler. And, it’s the short term that concerns us in this greatest recession since the Great Depression. In fact, this massive dealership closing is causing fewer GM and Chrysler products to be sold. Don’t you agree that McDonald’s would sell fewer hamburgers if it closed 2,000 franchises?
Now, everybody is talking about falling back into another recession. I can’t figure out how we can fall back into another recession when we haven’t come out of this one yet. Nationwide we’re still looking at 10% unemployment in round numbers. For a while everyone said that unemployment was a “trailing indicator”, meaning that everything was going fine and adding jobs would just happen last. Now the pundits are saying it’s not a lagging indicator but a “leading” indicator. That means that when people don’t have a job they don’t buy much. When the consumer stops spending, retail stores stop selling, and manufacturers stop making things.
The one thing that everybody can agree on is that unemployment is a very bad thing and for our government to have caused “tens thousands” of Americans to lose their jobs is also a very bad thing. The bottom line is that our government doesn’t know the first thing about how to run a private business and should keep its nose out.
Last Sunday, a report was released by the Special Inspector of the Troubled Asset Relief Program (TARP), Neil Barofsky, that said “tens of thousands of jobs were lost” as a result of closing over two thousand car dealerships. The report said, “It is not at all clear that the greatly accelerated pace of the dealership closings during one of the most severe economic downturns in our nation’s history was either necessary for the sake of the companies’ (GM and Chrysler) economic survival or prudent for the sake of the nation’s economic recovery”.
Now, my first question is why was it necessary for our government to conduct a study on whether or not closing over two thousand businesses nationwide would result in greater unemployment? My dealership employees 134 people and there are a lot of satellite businesses that rely on my business like parts suppliers, printing companies, janitorial services, etc. If I closed my dealership it would result in more than 134 people being unemployed. If you multiply that by 2,000 it results in at least 268,000 men and women without jobs. I wouldn’t have to conduct a study after I closed my car dealership to tell me what was going to happen to my employees.
Even now, the consequence of this mandate to close down 2,000+ car dealerships is not obvious to our government. The U.S. Treasury department in response to the results of this study said, they “strongly disagree” with the report’s conclusions. They go on to say that closing over 2,000 car dealerships “not only avoided a potentially catastrophic collapse” but also “saved hundreds of thousands of American jobs”. What I want to understand is how closing over 2,000 retail outlets for any product can help the manufacturer of that product. The more locations that a company can offer their product to the consumer, the more product they will sell. Starbucks is a great example of this. McDonalds is another.
Now remember that virtually all car dealerships are not owned by the manufacturers. They are owed by people like me or large companies like Auto Nation or Penske Automotive Group. Closing a retail outlet has very little short or intermediate term cost savings on the manufacturer, but it does reduce the number of cars it sells. There’s a good argument to be made for the negative long term impact of having too many retail outlets. Too many competitors can make it difficult for individual dealers to sell enough cars to maintain the necessary financial strength to compete effectively. The free marketplace tends to mitigate this negative effect because the stronger dealers will survive and the weaker perish. But in the short and intermediate term there was nothing to be gained by this government mandated closing of so many retail outlets for GM and Chrysler. And, it’s the short term that concerns us in this greatest recession since the Great Depression. In fact, this massive dealership closing is causing fewer GM and Chrysler products to be sold. Don’t you agree that McDonald’s would sell fewer hamburgers if it closed 2,000 franchises?
Now, everybody is talking about falling back into another recession. I can’t figure out how we can fall back into another recession when we haven’t come out of this one yet. Nationwide we’re still looking at 10% unemployment in round numbers. For a while everyone said that unemployment was a “trailing indicator”, meaning that everything was going fine and adding jobs would just happen last. Now the pundits are saying it’s not a lagging indicator but a “leading” indicator. That means that when people don’t have a job they don’t buy much. When the consumer stops spending, retail stores stop selling, and manufacturers stop making things.
The one thing that everybody can agree on is that unemployment is a very bad thing and for our government to have caused “tens thousands” of Americans to lose their jobs is also a very bad thing. The bottom line is that our government doesn’t know the first thing about how to run a private business and should keep its nose out.
Tuesday, July 13, 2010
“General” Bill McCollum; Shame on You!
We elected Bill McCollum to be our Attorney General, the chief law enforcement officer in Florida. Unfortunately, it seems that the only thing he has on his mind is being Governor of Florida. His actions in the AG’s office have suggested that he’s had this on his mind since his first day on the job as Florida’s Attorney General. From the get-go, he chose businesses and individuals to prosecute based on how much publicity it would generate and not on the negative impact on Florida’s citizens. A good example was the large sums of money he spent on, what seemed like thousands of TV commercials paid for by us taxpayers, featuring himself as the “protector” of Florida’s children from child molesters. Our money would have been better spent had he featured pictures of convicted, freed sex offenders than himself.
If there was any question how bad Bill wants to be governor, all you have to do is turn on your TV. Within 2 minutes you’ll see Bill and Rick (Scott) calling each other crooks and liars in political commercials. Rick Scott, a very wealthy businessman, has spent about $15M so far and Bill is catching up fast. In fact, he has caught up so fast that the PB Post wrote an editorial accusing him of using illegal campaign fund raising tactics. Suing the U.S. government over the new Health Care bill passed by the House and Senate and signed into law by President Obama was pure grandstanding. Every legal scholar knows that it has no legal merit and the purpose is to garner votes for governor.
Of course, my axe to grind with Bill McCollum is his politically motivated decision to give car dealers who practice unfair and deceptive advertising and sales tactics a “free pass”. The strong lobbying groups, the Florida Automobile Dealers Association (FADA) and the South Florida Auto Dealers Association (SFADA) have always supported Bill McCollum as have many individual dealers. Do you really think that car dealers give large sums of money to Bill McCollum because they want to protect the citizens of Florida? This is partially true because they do want to protect some citizens…those who are car dealers. And they want to protect those car dealer citizens from having the Florida Attorney General enforce the laws of Florida, specifically the Unfair and Deceptive Trade Practices Act as it specifically pertains to car dealers.
If you live anywhere in Florida, all you have to do is pick up your local newspaper and take a look at the auto classified section. Saturday is the best day to look because almost every car dealer likes to advertise on Saturday. In these ads you will see many ads that are actually illegal. Dealers advertise prices that don’t include their dealer fee which is required by Florida law. They advertise prices that don’t include “freight” which is already included in the price of the car by the manufacturer. They deduct what your down payment must be from the “price” they advertise understating the price by $3,000 or $3,500. They also deduct rebates from the price that you can only qualify for if you are a recent college graduate, an active member of the military, or if you drive the same make of car that they sell. This is all clearly illegal but I know of no dealer who has been charged with any of this.
It’s not like Bill McCollum can’t easily check any newspaper in the state, even from Tallahassee. He can do this online or he has AG representatives in every major community in the state. Also, what I just described to you happens just as blatantly on TV, radio, and in direct mail advertisements. The electronic ads are even more flagrantly deceptive. The fine print on TV is illegible and is flashed on the screen for such short time that you couldn’t read it if it were legible. The verbal disclosure is almost comical. They use a subdued voice and speed up the tape with the obvious intent of making it unintelligible.
Car dealers know that they can run any kind of advertisement and use any kind of deceptive sale tactic they want without fear of prosecution. This encourages the “bad guys” to run even more illegal ads. Another negative consequence is that this “hear no, see no, speak no evil” policy of our Attorney General forces the “good guys” to advertise in ways that they don’t like but feel they must. Imagine for a minute that you are a Nissan dealer. Your closest competing Nissan dealer advertises cars below his cost. If you sell a car for the price he advertises you will lose thousands of dollars. The way he gets away with this is by adding back in $3,000 + $740 + $799 + $500 to the advertised price. The $3,000 is the down payment the customer must pay. The $740 is the freight that the manufacturer has already included in the price once. The dealer fee is required by law to be included in the price. The $500 is only if you are a graduate of a 4 year accredited college within the last 6 months. The price the prospective customer sees in the ad is understated by over $5,000! If the “honest dealer” advertises his car in the newspaper at a price that he can make a profit on, he will drive business to the dealer who knows he can advertise anyway he wants without fear of prosecution. So the “good guy” has no recourse but to become a “bad guy”. He rationalizes this by saying that survival is our strongest instinct.
General McCollum, I would be happy to discuss this with you by phone or in person. If I’m off base, please set me straight. One thing you might want to do is pick up a Saturday copy of the Ft. Lauderdale Sun Sentinel, PB Post, or Miami Herald and read through the auto classified ads. Let’s talk about those ads if you’re not too busy slinging mud at Rick Scott. By the way, I’m not a supporter of Rick Scott.
You might be pleasantly surprised how much you would impress Florida voters if you cleaned up car dealer advertising and sales practices so that Florida car buyers wouldn’t be terrified to enter a showroom, as most are today.
If there was any question how bad Bill wants to be governor, all you have to do is turn on your TV. Within 2 minutes you’ll see Bill and Rick (Scott) calling each other crooks and liars in political commercials. Rick Scott, a very wealthy businessman, has spent about $15M so far and Bill is catching up fast. In fact, he has caught up so fast that the PB Post wrote an editorial accusing him of using illegal campaign fund raising tactics. Suing the U.S. government over the new Health Care bill passed by the House and Senate and signed into law by President Obama was pure grandstanding. Every legal scholar knows that it has no legal merit and the purpose is to garner votes for governor.
Of course, my axe to grind with Bill McCollum is his politically motivated decision to give car dealers who practice unfair and deceptive advertising and sales tactics a “free pass”. The strong lobbying groups, the Florida Automobile Dealers Association (FADA) and the South Florida Auto Dealers Association (SFADA) have always supported Bill McCollum as have many individual dealers. Do you really think that car dealers give large sums of money to Bill McCollum because they want to protect the citizens of Florida? This is partially true because they do want to protect some citizens…those who are car dealers. And they want to protect those car dealer citizens from having the Florida Attorney General enforce the laws of Florida, specifically the Unfair and Deceptive Trade Practices Act as it specifically pertains to car dealers.
If you live anywhere in Florida, all you have to do is pick up your local newspaper and take a look at the auto classified section. Saturday is the best day to look because almost every car dealer likes to advertise on Saturday. In these ads you will see many ads that are actually illegal. Dealers advertise prices that don’t include their dealer fee which is required by Florida law. They advertise prices that don’t include “freight” which is already included in the price of the car by the manufacturer. They deduct what your down payment must be from the “price” they advertise understating the price by $3,000 or $3,500. They also deduct rebates from the price that you can only qualify for if you are a recent college graduate, an active member of the military, or if you drive the same make of car that they sell. This is all clearly illegal but I know of no dealer who has been charged with any of this.
It’s not like Bill McCollum can’t easily check any newspaper in the state, even from Tallahassee. He can do this online or he has AG representatives in every major community in the state. Also, what I just described to you happens just as blatantly on TV, radio, and in direct mail advertisements. The electronic ads are even more flagrantly deceptive. The fine print on TV is illegible and is flashed on the screen for such short time that you couldn’t read it if it were legible. The verbal disclosure is almost comical. They use a subdued voice and speed up the tape with the obvious intent of making it unintelligible.
Car dealers know that they can run any kind of advertisement and use any kind of deceptive sale tactic they want without fear of prosecution. This encourages the “bad guys” to run even more illegal ads. Another negative consequence is that this “hear no, see no, speak no evil” policy of our Attorney General forces the “good guys” to advertise in ways that they don’t like but feel they must. Imagine for a minute that you are a Nissan dealer. Your closest competing Nissan dealer advertises cars below his cost. If you sell a car for the price he advertises you will lose thousands of dollars. The way he gets away with this is by adding back in $3,000 + $740 + $799 + $500 to the advertised price. The $3,000 is the down payment the customer must pay. The $740 is the freight that the manufacturer has already included in the price once. The dealer fee is required by law to be included in the price. The $500 is only if you are a graduate of a 4 year accredited college within the last 6 months. The price the prospective customer sees in the ad is understated by over $5,000! If the “honest dealer” advertises his car in the newspaper at a price that he can make a profit on, he will drive business to the dealer who knows he can advertise anyway he wants without fear of prosecution. So the “good guy” has no recourse but to become a “bad guy”. He rationalizes this by saying that survival is our strongest instinct.
General McCollum, I would be happy to discuss this with you by phone or in person. If I’m off base, please set me straight. One thing you might want to do is pick up a Saturday copy of the Ft. Lauderdale Sun Sentinel, PB Post, or Miami Herald and read through the auto classified ads. Let’s talk about those ads if you’re not too busy slinging mud at Rick Scott. By the way, I’m not a supporter of Rick Scott.
You might be pleasantly surprised how much you would impress Florida voters if you cleaned up car dealer advertising and sales practices so that Florida car buyers wouldn’t be terrified to enter a showroom, as most are today.
Saturday, July 03, 2010
BUYING A CAR WHEN YOU HAVE A CREDIT PROBLEM
There are fewer things more sensitive or embarrassing than having to share your personal credit problems with a stranger. Having credit problems can also put many buyers in a weakened and defensive position when buying a car. Many people with bad, or too little, credit feel like the car dealer is somehow “doing them a favor” by selling them a car and getting them financed. Make no mistake about it. A car dealer is probably making more money selling a person with bad credit a car than one with good credit. If you have a credit problem, go about buying a car with the same care and due diligence as if you had the very best credit. Shop and compare your financing, your interest rate, and your trade-in allowance. Get at least three quotes on each of these.
Lenders who specialize in lending to those with bad credit are known as “special finance” lenders. Many of these lenders charge the dealer a large upfront fee, as much as $2,500. Legally, the dealer is not supposed to add this fee to the price of the car you buy but, in the real world, the price of the car is usually higher as the result of this fee. In addition to an upfront fee, the interest rates are very high from special finance lenders. Because they anticipate a much higher amount of repossession losses, they must make more on each transaction. Don’t automatically accept a dealer’s opinion that you must finance through such a lender. There are many conventional banks these days that loan to people with bad credit. Their interest rates are lower and they don’t charge large upfront fees.
There is much fraud in special finance lending. Credit applications are falsified to show more time on the job, higher incomes, etc. W-2 forms and check stubs are counterfeited. Buyer’s orders show accessories and equipment that do not really exist on the car. Hold checks or promissory notes are misrepresented as cash down payment. Co-signers signatures are forged. Confederates pose as employers, answering pay phones to verify employment. These falsifications are performed by finance managers, salesmen, brokers for special finance lenders (who are paid on commission) and the customers themselves. If you sign a credit application, be sure that you know all of the information on that application is accurate. Be sure that you understand and agree to all parts of the transaction including down payments, accessories on the car, etc. Never be a party to falsifying information to a lender to obtain a loan. This is a criminal offense.
Advertisements aimed at people with bad credit usually exaggerate with claims like, “We finance everyone”, “Wanted, good people with bad credit”, “No credit, no problem”, and, my favorite, “No credit application refused” (it doesn’t say your loan won’t be refused, just your application). My advice is to ignore these kinds of ads and these kinds of dealers. Their strategy is to take advantage of people with bad credit who they believe will buy any car, pay any amount of interest, and any profit to the dealers as long as the dealer can get them a loan.
It is common practice in Florida to encourage the car buyer to drive the car home immediately upon signing all of the papers. In some states like New York this is not permitted until all the car has been registered with the state in the new owner’s name. The reason for this immediate delivery (commonly referred to as the “spot delivery”) is to discourage and possibly even prevent the buyer from changing his mind. Taking possession of the car is a legal consideration making the purchase more binding. I recommend that you not rush the purchase or the delivery. For one thing you want to be sure that the car is exactly the way you want it…clean inside and out, all the accessories properly installed, no dings, dents or scratches, and that you have a complete understanding of how to operate all of the features of the vehicle.
I mention the risk of the “spot delivery” in this column on buying a car with bad credit because it can be especially harmful to someone whose credit is denied after the car has been delivered. You will most likely be required to sign a “Rescission Agreement” before you drive the car home. This is a legal document which requires you to return the car if your credit is denied. You will probably be told that your credit will be approved, but sometimes the dealer is wrong. The rescission agreement will have a charge for time and mileage that you have put on the car you are driving. Usually this is a very high charge from 25 cents per mile plus $50 per day and higher. It can take weeks for a special finance lender to rule on a credit application. If your credit is denied you could owe the dealer thousands of dollars which the down payment you made might not even cover.
As frightening as all of the above may sound, the one single thing you can do to prevent bad things from happening when you purchase a car is to choose your car dealer very carefully. How long has he been in business? What is his track record with the Better Business Bureau, the County Office for Consumer Affairs, and the Florida Attorney General’s Office? Ask friends, neighbors, or relatives who have dealt with this car dealer what their experiences have been like. Choosing a good dealer with integrity will resolve 95% of all your concerns.
Monday, June 28, 2010
Your Auto Insurer and Gray Market Parts
I wrote an article recently for Hometown News and my blog entitled Your Car’s Collision Insurance; Do You Know Your Rights? The most important thing that you must remember if you ever incur body damage to your car (as most of us do at one time or another) is that Florida law gives you the right to have your car repaired by the body shop of your choice.
I have recently been made aware of yet another shady practice by insurance companies, including the two largest, All State and State Farm and that is the reason for this follow-up article to my original column.
You may not even know what a “gray market” auto part is. These are parts, both body and mechanical, that are manufactured outside of the United States and imported by a distributor not authorized by your car’s manufacturer. All auto manufacturers strongly discourage the use of these gray market parts by body shops and mechanical repair service departments. In fact, all manufacturers that I know of will not warranty the part if it is defective and fails.
The question you must be asking yourself is why would a body shop use a part that was not warrantable by the manufacturer and that the manufacturer recommended not be used in repairing your car? The answer is simply that your insurance company may insist that this much cheaper part be used to repair your car. In my previous article I mentioned several other ways that your insurance company may save themselves money at your expense like insisting on used parts or after-market (counterfeit) parts instead of new parts manufactured by your car’s manufacturer (OEM).
State Farm, All State, and most other insurance companies wrongly label the gray market parts on your insurance estimate as “used” parts. I’m not entirely sure about the reason for this deception but I have a good idea. If they listed the parts for what they really are, new parts not authorized or warranted by your car’s manufacturer, they would have to disclose this. If they mislabel them as used parts, they aren’t required to explain anything. Most people don’t read their estimates carefully anyway and are mainly concerned that their car is repaired ASAP before their rental reimbursement expires. They trust that their body shop and their insurance company are primarily committed to your car getting the safest and highest quality repair.
This is not always the case and the biggest reason for this is that you aren’t really looked upon as their “customer” by many body shops. Many body shops look upon the insurance company as their “real customers”. This is because 95%+ of their business is steered to them by insurance companies. The insurance company pays the body shop, not you. An insurance company won’t steer business to a body shop unless the body shop “plays ball”. This means backing up the insurance company with their insured when the insurance company insists on using cheap, unwarrantable parts or used parts to repair your car. If a body shop won’t “play ball” because they truly care about you having a safe, quality repair, the body shop will no longer steer their insured’s to that body shop. If 95%+ of a body shops work comes from insurance companies, this threat can be very convincing.
At the risk of repeating myself, this is why it’s very important that you exercise your right to have your car taken to a body shop that you know and trust. Beware the towing service that insists your car be towed to their storage yard or to another body shop than you desire. Towing companies want to keep your car in their storage yard as long as possible so they can collect a large storage bill. Some towing companies get cash kick-backs from body shops. Above all else, don’t allow your insurance company to tell you where to have your car repaired. They have a bag of tricks to frighten you such as “we won’t warranty the work if it’s not done by our “approved” body shop. The fact is that a good body shop will warranty your work for at least as long as the insurance company. Some insurance companies will go even further and tell you “off the record” why the body shop you prefer won’t do as good a job on your car. This is simply illegal as well as slanderous. If you ask them to put this in writing, they will decline.
I have recently been made aware of yet another shady practice by insurance companies, including the two largest, All State and State Farm and that is the reason for this follow-up article to my original column.
You may not even know what a “gray market” auto part is. These are parts, both body and mechanical, that are manufactured outside of the United States and imported by a distributor not authorized by your car’s manufacturer. All auto manufacturers strongly discourage the use of these gray market parts by body shops and mechanical repair service departments. In fact, all manufacturers that I know of will not warranty the part if it is defective and fails.
The question you must be asking yourself is why would a body shop use a part that was not warrantable by the manufacturer and that the manufacturer recommended not be used in repairing your car? The answer is simply that your insurance company may insist that this much cheaper part be used to repair your car. In my previous article I mentioned several other ways that your insurance company may save themselves money at your expense like insisting on used parts or after-market (counterfeit) parts instead of new parts manufactured by your car’s manufacturer (OEM).
State Farm, All State, and most other insurance companies wrongly label the gray market parts on your insurance estimate as “used” parts. I’m not entirely sure about the reason for this deception but I have a good idea. If they listed the parts for what they really are, new parts not authorized or warranted by your car’s manufacturer, they would have to disclose this. If they mislabel them as used parts, they aren’t required to explain anything. Most people don’t read their estimates carefully anyway and are mainly concerned that their car is repaired ASAP before their rental reimbursement expires. They trust that their body shop and their insurance company are primarily committed to your car getting the safest and highest quality repair.
This is not always the case and the biggest reason for this is that you aren’t really looked upon as their “customer” by many body shops. Many body shops look upon the insurance company as their “real customers”. This is because 95%+ of their business is steered to them by insurance companies. The insurance company pays the body shop, not you. An insurance company won’t steer business to a body shop unless the body shop “plays ball”. This means backing up the insurance company with their insured when the insurance company insists on using cheap, unwarrantable parts or used parts to repair your car. If a body shop won’t “play ball” because they truly care about you having a safe, quality repair, the body shop will no longer steer their insured’s to that body shop. If 95%+ of a body shops work comes from insurance companies, this threat can be very convincing.
At the risk of repeating myself, this is why it’s very important that you exercise your right to have your car taken to a body shop that you know and trust. Beware the towing service that insists your car be towed to their storage yard or to another body shop than you desire. Towing companies want to keep your car in their storage yard as long as possible so they can collect a large storage bill. Some towing companies get cash kick-backs from body shops. Above all else, don’t allow your insurance company to tell you where to have your car repaired. They have a bag of tricks to frighten you such as “we won’t warranty the work if it’s not done by our “approved” body shop. The fact is that a good body shop will warranty your work for at least as long as the insurance company. Some insurance companies will go even further and tell you “off the record” why the body shop you prefer won’t do as good a job on your car. This is simply illegal as well as slanderous. If you ask them to put this in writing, they will decline.
Monday, June 21, 2010
Financial Reform and Car Dealers
As you know, there is a concerted effort in progress by the Obama administration and Congress to present a bill to our President to sign into law which would protect us from another collapse of our financial system. This bill is aimed mainly at banks, but also includes other companies that loan money or are involved in that process.
Many feel that car dealers should be included as part of the Financial Reform Bill. Currently the Senate bill includes car dealers but the House bill does not. There has been a monstrous effort on the part of car dealers and their lobbyists like NADA and the National Automobile Dealers Association to exempt car dealers from financial reform. Currently the House Ethics Committee is investigating eight House representatives who took large sums of money from car dealers just before they voted on the bill for financial reform. There is not a day that goes by that I don’t get an email or a fax from NADA or FADA (Florida Automobile Dealers Association) imploring me to give money to their political action committees or call my Senator to exempt car dealers from financial reform.
One might ask why a car dealer should be excluded. After all, a car is the second largest purchase that most of us make next to our homes and we almost always borrow money to finance this purchase. Car dealers argue that most of them don’t “really” loan money to customers who buy their cars because in most cases they sell the finance contract that the buyer signs to a bank or other lending institution. This is technically true, but is totally misleading and not at all a good reason to be excluded from the Financial Reform Bill.
Even though most car dealers don’t hold the loan for the cars they sell, they do everything else that a bank does in making a loan. The car dealer largely determines the credit worthiness of the borrower. He also largely determines the interest rate charged, the down payment, the length of the loan, and the collateral for the loan. The bank that the dealer sells the finance contract to certainly has a voice in all of this, but it relies largely on the dealer. The bank never sees or even speaks with their borrower. The car dealer interviews the customer for credit information, runs the credit bureau reports, and fills out the finance contract that the customer signs.
One of the biggest causes for the collapse of our financial system was from bad and fraudulent loans made in the housing market. Mortgage brokers, home buyers, and some banks knowingly falsified credit applications and made loans to people who obviously would not repair their loans. This same thing happened and is continuing to happen with car loans. The car dealer is often to blame when a credit application is falsified, a down payment is exaggerated, or the true value of the car is falsely enhanced.
Many car dealers make more money from financing the car then they do from the markup on the car. Dealer financing profits range between an average of $500 and $2,000 for every car sold. Financing a car also affords the car dealer the opportunity to include a large menu of “products” in the amount financed, which the dealer is immediately paid for. Some examples are GAP insurance, extended warranties, theft insurance, prepaid car maintenance, and road hazard insurance. They also receive a large kick-back from the bank they sell the finance contract to. The dealer “buys” a low interest rate from the bank, like 2.5% and marks it up to the customer to say 5.5%. There are limits on the amount of markup based on the customer’s credit worthiness, the banks rules, and state law. But a dealer can, within these limits, make many thousands of dollars in interest kick-back on a single transaction.
For those of you who are regular listeners to my radio show every Saturday morning, 9-10 on Seaview Radio 95.9 FM or 960 AM, you may have heard a recent caller named Norma. I’m trying to help her 79 year old brother, Herman, for whom Norma is the primary caretaker. Earlier this month, without Norma’ knowlege, Herman bought a 2008 used Kia SUV on credit from Delray Kia for a total sale price of $23,599.26. His monthly payments are for $312.11 for the next 66 months, 5 ½ years, and the interest rate is 14.99%. Herman’s only source of income is social security and he resorts to food stamps and “meals on wheels” to eat. Furthermore he is physically and mentally disabled with steel rods in both legs from a terrible auto accident. Herman does not have a copy of the credit application which he should have filled out and signed and has no recollection of receiving or signing one. Herman also had GAP insurance and Etch insurance “included” in his finance contract for a total of $898.
This sort of thing happens thousands of time every day and it may even be perfectly legal under today’s laws. What prompted having car dealers added to the Financial Reform legislation in the first place was a letter written to the chairman of the Senate Banking Committee, Chris Dodd, by the Secretary of the Army, John M. McHugh. He said that soldiers need to be protected from “unprincipled auto lending” so they can concentrate on their primary mission: “protecting our great nation”. Soldiers who are distracted by financial issues at home are not fully focused on fighting the enemy, thereby decreasing mission readiness”.
If we should protect our soldiers from “unprincipled auto lending” why not also protect our civilians, especially the elderly, poor, and disabled like Herman?
Many feel that car dealers should be included as part of the Financial Reform Bill. Currently the Senate bill includes car dealers but the House bill does not. There has been a monstrous effort on the part of car dealers and their lobbyists like NADA and the National Automobile Dealers Association to exempt car dealers from financial reform. Currently the House Ethics Committee is investigating eight House representatives who took large sums of money from car dealers just before they voted on the bill for financial reform. There is not a day that goes by that I don’t get an email or a fax from NADA or FADA (Florida Automobile Dealers Association) imploring me to give money to their political action committees or call my Senator to exempt car dealers from financial reform.
One might ask why a car dealer should be excluded. After all, a car is the second largest purchase that most of us make next to our homes and we almost always borrow money to finance this purchase. Car dealers argue that most of them don’t “really” loan money to customers who buy their cars because in most cases they sell the finance contract that the buyer signs to a bank or other lending institution. This is technically true, but is totally misleading and not at all a good reason to be excluded from the Financial Reform Bill.
Even though most car dealers don’t hold the loan for the cars they sell, they do everything else that a bank does in making a loan. The car dealer largely determines the credit worthiness of the borrower. He also largely determines the interest rate charged, the down payment, the length of the loan, and the collateral for the loan. The bank that the dealer sells the finance contract to certainly has a voice in all of this, but it relies largely on the dealer. The bank never sees or even speaks with their borrower. The car dealer interviews the customer for credit information, runs the credit bureau reports, and fills out the finance contract that the customer signs.
One of the biggest causes for the collapse of our financial system was from bad and fraudulent loans made in the housing market. Mortgage brokers, home buyers, and some banks knowingly falsified credit applications and made loans to people who obviously would not repair their loans. This same thing happened and is continuing to happen with car loans. The car dealer is often to blame when a credit application is falsified, a down payment is exaggerated, or the true value of the car is falsely enhanced.
Many car dealers make more money from financing the car then they do from the markup on the car. Dealer financing profits range between an average of $500 and $2,000 for every car sold. Financing a car also affords the car dealer the opportunity to include a large menu of “products” in the amount financed, which the dealer is immediately paid for. Some examples are GAP insurance, extended warranties, theft insurance, prepaid car maintenance, and road hazard insurance. They also receive a large kick-back from the bank they sell the finance contract to. The dealer “buys” a low interest rate from the bank, like 2.5% and marks it up to the customer to say 5.5%. There are limits on the amount of markup based on the customer’s credit worthiness, the banks rules, and state law. But a dealer can, within these limits, make many thousands of dollars in interest kick-back on a single transaction.
For those of you who are regular listeners to my radio show every Saturday morning, 9-10 on Seaview Radio 95.9 FM or 960 AM, you may have heard a recent caller named Norma. I’m trying to help her 79 year old brother, Herman, for whom Norma is the primary caretaker. Earlier this month, without Norma’ knowlege, Herman bought a 2008 used Kia SUV on credit from Delray Kia for a total sale price of $23,599.26. His monthly payments are for $312.11 for the next 66 months, 5 ½ years, and the interest rate is 14.99%. Herman’s only source of income is social security and he resorts to food stamps and “meals on wheels” to eat. Furthermore he is physically and mentally disabled with steel rods in both legs from a terrible auto accident. Herman does not have a copy of the credit application which he should have filled out and signed and has no recollection of receiving or signing one. Herman also had GAP insurance and Etch insurance “included” in his finance contract for a total of $898.
This sort of thing happens thousands of time every day and it may even be perfectly legal under today’s laws. What prompted having car dealers added to the Financial Reform legislation in the first place was a letter written to the chairman of the Senate Banking Committee, Chris Dodd, by the Secretary of the Army, John M. McHugh. He said that soldiers need to be protected from “unprincipled auto lending” so they can concentrate on their primary mission: “protecting our great nation”. Soldiers who are distracted by financial issues at home are not fully focused on fighting the enemy, thereby decreasing mission readiness”.
If we should protect our soldiers from “unprincipled auto lending” why not also protect our civilians, especially the elderly, poor, and disabled like Herman?
Saturday, June 19, 2010
Translating Misleading Car Ads
In previous posts I have recommended that you avoid reading most cars ads in the newspaper and in direct mail. Most TV and radio car ads are similarly misleading. My suggestion is that you carefully choose the precise year, make, and model you want with the precise accessories and get at least 3 legitimate bids from car dealers on the Internet or, next best, at the dealerships. However, if you do find yourself perusing the large number of car ads in the local paper, here are some translations of common misleading ads. I took these straight from a local paper.
20% to 40% OFF MSRP: Never buy a car based on how big a discount you are quoted. Always calculate the price you are willing to pay based on an accurate understanding of the cost of that vehicle. Different makes and models have different markups and factory incentives can cause the true markup to vary widely. What sounds like a big discount may also pay the dealer too big a profit.
LIQUIDATION SALE: Most of the time you pay just as much for a car during a “sale” as you do without a sale. The only exceptions are factory incentives which do have an expiration date. A “sale” is what advertisers refer to as a “call to action”. They are looking for something that will motivate you to come in today, rather than procrastinate. It doesn’t seem to matter if the motivation is untrue.
UP TO $15,000 OFF: Many dealers have an additional markup on top of the manufacturer’s suggested retail price, MSRP. They commonly label this a “Market Adjustment Addendum”. This can be thousands of dollars. Discounting a car thousands of dollars means nothing if the dealer just added a “Market Adjustment Addendum” for an amount equaling or exceeding the discount.
STK#62029A: When you see a number like this next to the price of a new car, it means that that is the only car you can buy for that price. The number is the stock number for that specific car which is supposed to tell you that this is the only car at this price. Many of these ad cars are of undesirable colors and accessories. They are advertised below cost and the loss is charged to advertising if they have to sell one. You chances of buying one of these are slim and none.
CREDIT PROLEMS ARE NO PROBLEM: This type of ad is particularly insensitive and distasteful. It is meant to attract people who have such bad credit that they think they cannot obtain financing. Unfortunately, there are people whose credit is so bad that no lender will offer them financing. These people are disappointed and embarrassed when they learn the truth that “credit problems can be, in fact, big problems”.
MINIMUM $10,000 TRADE-IN ALLOWANCE: This is just like the huge discounts. A trade in allowance means nothing if the car has been marked up high enough to offset the extra trade-in allowance.
WITH APPROVED CREDIT: This allows dealers to add a fine print disqualifier which is an extremely high Beacon score that disqualifies 99% of the car buying population. It is used in conjunction with very low lease payments or purchase payments. It is a “bait and switch” which affords the dealer the opportunity to raise your payments (and his profits) because your credit is “not acceptable”…to him.
PRICE GOOD ON DATE OF PUBLICATION ONLY: You will find this only in the fine print at the bottom of the page. This is added protection to the dealer, in addition to the stock # mentioned above, that he won’t have to sell you the car at the advertised price.
AS LOW AS or FROM: You will see this in smaller print next to a very big price and a big, pretty picture of the car. This is a further “C.Y.A.” for the dealer so that he doesn’t have to sell that car at that price.
WE’LL BEAT ANY OTHER DEALER’S PRICE OR THE CAR IS FREE: Some claims are so outlandish that I hesitate to bother warning you about them. Applying the old saying “if it sounds too good to be true, it probably isn’t” should protect most people from this kind of ad.
I could go on and on, but I hope I have already made my point. Car dealers’ ads are the absolutely worst way to decide which car you should buy and what price you should pay. When you respond to most car dealers’ ads, they are in control. You must take control and let the dealer respond to your carefully thought out and researched choice of year, make, model, accessories, and what price you offer to pay him.
20% to 40% OFF MSRP: Never buy a car based on how big a discount you are quoted. Always calculate the price you are willing to pay based on an accurate understanding of the cost of that vehicle. Different makes and models have different markups and factory incentives can cause the true markup to vary widely. What sounds like a big discount may also pay the dealer too big a profit.
LIQUIDATION SALE: Most of the time you pay just as much for a car during a “sale” as you do without a sale. The only exceptions are factory incentives which do have an expiration date. A “sale” is what advertisers refer to as a “call to action”. They are looking for something that will motivate you to come in today, rather than procrastinate. It doesn’t seem to matter if the motivation is untrue.
UP TO $15,000 OFF: Many dealers have an additional markup on top of the manufacturer’s suggested retail price, MSRP. They commonly label this a “Market Adjustment Addendum”. This can be thousands of dollars. Discounting a car thousands of dollars means nothing if the dealer just added a “Market Adjustment Addendum” for an amount equaling or exceeding the discount.
STK#62029A: When you see a number like this next to the price of a new car, it means that that is the only car you can buy for that price. The number is the stock number for that specific car which is supposed to tell you that this is the only car at this price. Many of these ad cars are of undesirable colors and accessories. They are advertised below cost and the loss is charged to advertising if they have to sell one. You chances of buying one of these are slim and none.
CREDIT PROLEMS ARE NO PROBLEM: This type of ad is particularly insensitive and distasteful. It is meant to attract people who have such bad credit that they think they cannot obtain financing. Unfortunately, there are people whose credit is so bad that no lender will offer them financing. These people are disappointed and embarrassed when they learn the truth that “credit problems can be, in fact, big problems”.
MINIMUM $10,000 TRADE-IN ALLOWANCE: This is just like the huge discounts. A trade in allowance means nothing if the car has been marked up high enough to offset the extra trade-in allowance.
WITH APPROVED CREDIT: This allows dealers to add a fine print disqualifier which is an extremely high Beacon score that disqualifies 99% of the car buying population. It is used in conjunction with very low lease payments or purchase payments. It is a “bait and switch” which affords the dealer the opportunity to raise your payments (and his profits) because your credit is “not acceptable”…to him.
PRICE GOOD ON DATE OF PUBLICATION ONLY: You will find this only in the fine print at the bottom of the page. This is added protection to the dealer, in addition to the stock # mentioned above, that he won’t have to sell you the car at the advertised price.
AS LOW AS or FROM: You will see this in smaller print next to a very big price and a big, pretty picture of the car. This is a further “C.Y.A.” for the dealer so that he doesn’t have to sell that car at that price.
WE’LL BEAT ANY OTHER DEALER’S PRICE OR THE CAR IS FREE: Some claims are so outlandish that I hesitate to bother warning you about them. Applying the old saying “if it sounds too good to be true, it probably isn’t” should protect most people from this kind of ad.
I could go on and on, but I hope I have already made my point. Car dealers’ ads are the absolutely worst way to decide which car you should buy and what price you should pay. When you respond to most car dealers’ ads, they are in control. You must take control and let the dealer respond to your carefully thought out and researched choice of year, make, model, accessories, and what price you offer to pay him.
Monday, June 07, 2010
The Dealer Fee… "Just Following Orders"
For the benefit of new readers, the “dealer fee” is the dirty little secret of most Florida car dealers. It’s an extra charge ranging from about $400 to over $1,500 and averaging about $800 that the dealers surprise you with after you’ve been quoted a lower price. If you want to learn more about this rip off to the car-buyer, just Google “dealer fee” and “Earl Stewart”.
Battling the dealer fee for years, I’ve often wondered why so many car dealers, sales managers, and sales people could go along with this unfair and deceptive sales practice. I truly believe that most people (including lawyers, politicians, and car dealers) are inherently good, honest people. I have to ask myself why would an honest person quote a price that he knows is a lot lower than the real one to a customer.
Last week I was watching CNBC and there was a discussion about the “Milgram Experiment”. This psychological experiment was conducted at Yale University by Professor Stanley Milgram. What motivated him to perform the experiment was to discover why millions of good Germans followed the orders of evil Nazi’s like Adolph Eichman while conducting the Holocaust during WWII.
The experiment involved volunteers called “teachers” who questioned other people called “learners”. The teacher asked the learner to correctly match certain pairs of words. The teacher and learner could not see each other, separated by a partition. The experimenter instructed the teacher to push a button sending an electrical shock through the leaner for each incorrect answer. The initial voltage was very low and not enough to cause any discomfort. However, the experimenter told the teacher to increase the voltage with each successive wrong answer. The learner and the experimenter were in on the ruse, which was that no electricity was actually flowing. The machine was connected to an audio device which emitted recorded shouts of pain when the fake voltage reached higher levels…all the way to 450 volts.
The amazing results were that 65% of the “teachers” went all the way to 450 volts, hearing screams of pain. They did this even though they believed their actions were causing intense pain and may also cause permanent bodily damage.
Psychologists ascertained that there were two reasons for this. The first is called “the Agentic State Theory”. This is the “I was just following orders” reason as repeated often in the Nuremburg Trials. The essence of obedience consists in the fact that a person comes to view himself as the instrument for carrying out another person’s wishes, and he therefore no longer sees himself as responsible for his actions.
The second reason psychologists believe accounted for this behavior is the “Theory of Conformism”. A person who has neither ability nor expertise to make decisions, especially in a crisis, will leave decision making to the group and its hierarchy.
So there you have it. Car sales people follow the orders of their sales managers, who follow the orders of their general manager who follows the orders of the owner of the dealership. But why do the owners, the dealers, trick customers with the dealer fee? They aren’t following anybody’s orders. The car dealers fall under the “Theory of Conformism”. They feel that as long as everybody else is doing it, it must be OK for me to follow suit.
A great local example of this started last year when Ft. Pierce Nissan began charging a $799 dealer fee plus a $750 freight fee, totaling $1,549. Napleton Nissan in Riviera Beach picked up on this and matched Ft. Pierce by adding $750 freight to their current $795 dealer fee. Next, Royal Palm Nissan in Wellington followed suit. Now most Nissan dealers from Ft. Pierce to Riviera Beach add over $1,500 to the price you are quoted on a Nissan.
Now you can understand why that smiling salesman can so guiltlessly throw the lever causing 450 volts of electricity to course through your body which is about the way most car buyers feel when they realized that they’ve been deceived. The salesman was “just following orders”.
Battling the dealer fee for years, I’ve often wondered why so many car dealers, sales managers, and sales people could go along with this unfair and deceptive sales practice. I truly believe that most people (including lawyers, politicians, and car dealers) are inherently good, honest people. I have to ask myself why would an honest person quote a price that he knows is a lot lower than the real one to a customer.
Last week I was watching CNBC and there was a discussion about the “Milgram Experiment”. This psychological experiment was conducted at Yale University by Professor Stanley Milgram. What motivated him to perform the experiment was to discover why millions of good Germans followed the orders of evil Nazi’s like Adolph Eichman while conducting the Holocaust during WWII.
The experiment involved volunteers called “teachers” who questioned other people called “learners”. The teacher asked the learner to correctly match certain pairs of words. The teacher and learner could not see each other, separated by a partition. The experimenter instructed the teacher to push a button sending an electrical shock through the leaner for each incorrect answer. The initial voltage was very low and not enough to cause any discomfort. However, the experimenter told the teacher to increase the voltage with each successive wrong answer. The learner and the experimenter were in on the ruse, which was that no electricity was actually flowing. The machine was connected to an audio device which emitted recorded shouts of pain when the fake voltage reached higher levels…all the way to 450 volts.
The amazing results were that 65% of the “teachers” went all the way to 450 volts, hearing screams of pain. They did this even though they believed their actions were causing intense pain and may also cause permanent bodily damage.
Psychologists ascertained that there were two reasons for this. The first is called “the Agentic State Theory”. This is the “I was just following orders” reason as repeated often in the Nuremburg Trials. The essence of obedience consists in the fact that a person comes to view himself as the instrument for carrying out another person’s wishes, and he therefore no longer sees himself as responsible for his actions.
The second reason psychologists believe accounted for this behavior is the “Theory of Conformism”. A person who has neither ability nor expertise to make decisions, especially in a crisis, will leave decision making to the group and its hierarchy.
So there you have it. Car sales people follow the orders of their sales managers, who follow the orders of their general manager who follows the orders of the owner of the dealership. But why do the owners, the dealers, trick customers with the dealer fee? They aren’t following anybody’s orders. The car dealers fall under the “Theory of Conformism”. They feel that as long as everybody else is doing it, it must be OK for me to follow suit.
A great local example of this started last year when Ft. Pierce Nissan began charging a $799 dealer fee plus a $750 freight fee, totaling $1,549. Napleton Nissan in Riviera Beach picked up on this and matched Ft. Pierce by adding $750 freight to their current $795 dealer fee. Next, Royal Palm Nissan in Wellington followed suit. Now most Nissan dealers from Ft. Pierce to Riviera Beach add over $1,500 to the price you are quoted on a Nissan.
Now you can understand why that smiling salesman can so guiltlessly throw the lever causing 450 volts of electricity to course through your body which is about the way most car buyers feel when they realized that they’ve been deceived. The salesman was “just following orders”.
Thursday, May 27, 2010
SHOP YOUR FINANCING AND TRADE-IN WHEN BUYING A CAR
If you have read my earlier columns you know how important it is to get several competitive prices from different car dealers on the car you are buying. Equally important is to get at least 3 prices/bids on your financing and the true value of your trade-in.
The absolute worst thing you can do is to tell the dealer “all I care about is keeping my payments under “$X per month” and not know what the interest rate, terms, or products are included in the payments. Part of the profit a dealer makes on his cars is called “F&I income” and averages from $500 to as much as $2,000 per car sold. You can do your homework and buy your car at a very good price, but by not shopping your financing you can pay the dealer thousands of dollars in finance profits.
Credit unions are often the best source of funds for buying a car. Because they get special tax breaks from the government not available to banks, they usually have the lowest finance rates. Even if you don’t belong to a credit union, there are several you can join for a nominal fee. You should also get a financing quote from the bank you do business with. Also, give the dealer that you are buying from an opportunity to beat the rates you were quoted. Sometimes he can.
When you are taking delivery of your car, you will be asked to consider buying products like extended warranties, maintenance plans, road hazard insurance, GAP insurance, roadside assistance, credit life insurance, etc. My suggestion is that you do not make a snap decision on these products at the last minute. You should get complete information on each product and determine if it has value for you. You may already have coverage for some insurance products in policies you already own. With extended warranties and maintenance be sure you understand what is covered and what is not covered and what the deductibles are.
You should get at least 3 bids on the value of your trade-in. You can get some pretty good guidance from Kelly Bluebook, www.kbb.com and www.edmunds.com. Make an appointment to drive your trade-in to show the used car manager at a dealer who is franchised to sell the make you own. A Chevrolet dealer will likely pay you more for a Chevrolet trade-in than a Ford dealer would. That’s because people generally will shop for a used Chevy from a Chevrolet dealer. Get one or two more bids from other dealers in the same make. If you are near a CarMax store, you should take your car there too. They regularly buy cars like this for their inventory. The price you will be quoted is referred to as the ACV which stands for “actual cash value”. This is the wholesale value of your trade in.
Don’t confuse the ACV with the trade-in allowance that the dealer you are buying from gives you. The trade-in allowance includes part of the markup on the vehicle you are purchasing. You have probably read ads saying “MIMIMUM $4,000 ALLOWANCE ON ALL TRADES”. It’s not hard to offer thousands more on a trade-in than its ACV (true wholesale value) when you mark up the new car several thousand dollars more. Be sure that you explain that want to compare the ACV of your trade-in. Tell them you want the markup on the price of the car you are buying discounted, not added on to the ACV of your trade. Remember, however, that if you sell your trade-in to another party, you lose the advantage of deducing the trade-in from the price your sales tax in calculated on. At 6%, you would pay an extra $600 in sales tax for a trade-in with a $10,000 ACV.
With competitive bids on the car you are buying, the interest rate on your financing, and your trade-in ACV you are sure to minimize the total cost of that new or used car.
The absolute worst thing you can do is to tell the dealer “all I care about is keeping my payments under “$X per month” and not know what the interest rate, terms, or products are included in the payments. Part of the profit a dealer makes on his cars is called “F&I income” and averages from $500 to as much as $2,000 per car sold. You can do your homework and buy your car at a very good price, but by not shopping your financing you can pay the dealer thousands of dollars in finance profits.
Credit unions are often the best source of funds for buying a car. Because they get special tax breaks from the government not available to banks, they usually have the lowest finance rates. Even if you don’t belong to a credit union, there are several you can join for a nominal fee. You should also get a financing quote from the bank you do business with. Also, give the dealer that you are buying from an opportunity to beat the rates you were quoted. Sometimes he can.
When you are taking delivery of your car, you will be asked to consider buying products like extended warranties, maintenance plans, road hazard insurance, GAP insurance, roadside assistance, credit life insurance, etc. My suggestion is that you do not make a snap decision on these products at the last minute. You should get complete information on each product and determine if it has value for you. You may already have coverage for some insurance products in policies you already own. With extended warranties and maintenance be sure you understand what is covered and what is not covered and what the deductibles are.
You should get at least 3 bids on the value of your trade-in. You can get some pretty good guidance from Kelly Bluebook, www.kbb.com and www.edmunds.com. Make an appointment to drive your trade-in to show the used car manager at a dealer who is franchised to sell the make you own. A Chevrolet dealer will likely pay you more for a Chevrolet trade-in than a Ford dealer would. That’s because people generally will shop for a used Chevy from a Chevrolet dealer. Get one or two more bids from other dealers in the same make. If you are near a CarMax store, you should take your car there too. They regularly buy cars like this for their inventory. The price you will be quoted is referred to as the ACV which stands for “actual cash value”. This is the wholesale value of your trade in.
Don’t confuse the ACV with the trade-in allowance that the dealer you are buying from gives you. The trade-in allowance includes part of the markup on the vehicle you are purchasing. You have probably read ads saying “MIMIMUM $4,000 ALLOWANCE ON ALL TRADES”. It’s not hard to offer thousands more on a trade-in than its ACV (true wholesale value) when you mark up the new car several thousand dollars more. Be sure that you explain that want to compare the ACV of your trade-in. Tell them you want the markup on the price of the car you are buying discounted, not added on to the ACV of your trade. Remember, however, that if you sell your trade-in to another party, you lose the advantage of deducing the trade-in from the price your sales tax in calculated on. At 6%, you would pay an extra $600 in sales tax for a trade-in with a $10,000 ACV.
With competitive bids on the car you are buying, the interest rate on your financing, and your trade-in ACV you are sure to minimize the total cost of that new or used car.
Monday, May 24, 2010
YOUR CAR’S COLLISION INSURANCE - DO YOU KNOW YOUR RIGHTS?
If you don’t read one other sentence of this article, please read this one: YOU HAVE THE RIGHT TO HAVE YOUR DAMAGED CAR REPAIRED BY THE BODY SHOP OF YOUR CHOICE.
You’ve probably read, seen, and heard a lot about insurance companies over the past 3 years. They ranked right up their with our nation’s big banks in dragging our country into the biggest recession since the Great Depression. AIG who was bailed out by our tax dollars is the largest insurance company in the world and were considered “too big to fail”.
Insurance is a great business if you happen to own an insurance company. Just ask Warren Buffet, the richest man in America and one of the richest in the world. You might think of Buffet as owning lots of different kinds of companies besides insurance and he does. But he will be the first to tell you that he got (and gets) most of the money to buy all of these other companies like Coca Cola, Wells Fargo, NetJets, American Express, Proctor and Gamble, etc. from tax deferred dollars that he raked in from his insurance companies like General Re, GEICO, Travelers, and United States Liability Group.
I laughed at a joke that David Letterman made about Oprah Winfrey….he said “Oprah got ALL the money!” and she is the richest self-made woman in America. Not as funny, but a truer statement, would be “the insurance companies got all the money!” Here’s why. One of the biggest reasons is that they don’t have to pay income tax like you and me or most all other companies in America. Now, to be fair, they do eventually pay income tax, but not until they’ve had a chance to double their money on our insurance premiums by investing them. How did they get this unfair advantage over you and me? Can you say LOBBYISTS? Our nation’s insurance companies own our politicians. When AIG says “jump”, most of our Congressmen say how high? Those few that don’t play ball don’t get reelected because their opponent is getting huge political contributions from the insurance companies.
Think about this for a minute. Did you know that when you mail your premium check to State Farm, All State, or GEICO that they don’t pay a nickel in taxes until years afterward? But you paid income tax on the money that you earned to pay the premium in the same year you earned it. These insurance companies can invest your premium dollars which are tax free to them and earn interest, dividends, and capital gains which are also not taxable for years. That’s simply not fair but “that’s the way it is” as Walter Cronkite used to say. I used to love watching Walter’s documentary, “The 20th Century” sponsored by the “Prudential Insurance Company”.
You would think that our auto insurance companies would have enough money without taking advantage of their insureds, wouldn’t you? Well if this is true why do they:
(1) Drastically underpay body shops that repair their insureds’ cars? In South Florida the average labor rate charged by dealerships’ service departments which does mechanical repair on your car is about $100 per hour. Dealer body shops are paid less than half of that. Now you might not be concerned that a car dealer’s body shop is being underpaid, but you should be concerned that the body repair technician that works on your car is being underpaid. The skill and training level of a body repair tech is at least equal to that of a mechanical repair tech. Why should the body repair tech be paid half as much? Because insurance companies control the payment of 95%+ of all collision repairs, they dictate which body shop gets to repair your car. If the body shop says they can’t do a safe quality repair for the price offered by the insurance company, the insurance company gives the repair to the body shop that will “play ball”.
(2) Often insist on the use of used and non-factory parts. Insurance companies don’t like to call the parts that are bought from junk yards to repair your car “used”. They prefer the euphemism, “recycled”, just like car dealers prefer to call used cars “pre-owned”. In many cases, the car’s manufacturer recommends or requires that new factory built parts be used to repair their cars. This doesn’t prevent many insurance companies from insisting that cheap used or Chinese made parts be substituted for new parts made by the car’s manufacturer. The insurance companies keep precise records on the body shops that they will recommend as to the percent of used or non factory parts they use. If one of their approved shops falls short of their average, they drop them and do not recommend any of their insureds to that body shop.
(3) Mislead their insureds into not filing a claim by underestimating the total damage. In 90%+ of collision repairs there is hidden damage. This unseen damage is only revealed when your car is disassembled after the repair process has begun. Often this hidden damage represents thousand of dollars in repairs. Many people carry large deductibles today to soften the cost of higher insurance premiums. If you have a $1,000 deductible and the insurance company’s estimate repair is around $1,000 you might think it’s not worth it to file a claim. We all know that filing a claim will cause your premiums to go up when you renew your insurance. Some people decide to pay for the repair out of their own pocket. If the car is drivable, many decide not to have the repair done at all.
OK, you’ve been warned, but if you’re a Florida resident you’re very lucky. You can choose the body shop that does your collision repair. Your insurance company will pressure you by telling you that they can’t guarantee the work if it’s not performed by their cut-rate body shop. If this is of concern, simply ask the body shop you choose to match the insurance company’s guarantee. Most do anyway. I also highly recommend that you choose a body shop operated by a dealer for the make of car you drive. They have better trained technicians and they have direct access to new factory parts. Also, be sure to check out the body shop with the BBB and the County Office of Consumer Affairs. If your insurance company gives you a hard time, just call 800 342-2762, the Florida Office of Insurance Regulation toll free line for consumer complaints. They will “explain the law” to your insurance company.
You’ve probably read, seen, and heard a lot about insurance companies over the past 3 years. They ranked right up their with our nation’s big banks in dragging our country into the biggest recession since the Great Depression. AIG who was bailed out by our tax dollars is the largest insurance company in the world and were considered “too big to fail”.
Insurance is a great business if you happen to own an insurance company. Just ask Warren Buffet, the richest man in America and one of the richest in the world. You might think of Buffet as owning lots of different kinds of companies besides insurance and he does. But he will be the first to tell you that he got (and gets) most of the money to buy all of these other companies like Coca Cola, Wells Fargo, NetJets, American Express, Proctor and Gamble, etc. from tax deferred dollars that he raked in from his insurance companies like General Re, GEICO, Travelers, and United States Liability Group.
I laughed at a joke that David Letterman made about Oprah Winfrey….he said “Oprah got ALL the money!” and she is the richest self-made woman in America. Not as funny, but a truer statement, would be “the insurance companies got all the money!” Here’s why. One of the biggest reasons is that they don’t have to pay income tax like you and me or most all other companies in America. Now, to be fair, they do eventually pay income tax, but not until they’ve had a chance to double their money on our insurance premiums by investing them. How did they get this unfair advantage over you and me? Can you say LOBBYISTS? Our nation’s insurance companies own our politicians. When AIG says “jump”, most of our Congressmen say how high? Those few that don’t play ball don’t get reelected because their opponent is getting huge political contributions from the insurance companies.
Think about this for a minute. Did you know that when you mail your premium check to State Farm, All State, or GEICO that they don’t pay a nickel in taxes until years afterward? But you paid income tax on the money that you earned to pay the premium in the same year you earned it. These insurance companies can invest your premium dollars which are tax free to them and earn interest, dividends, and capital gains which are also not taxable for years. That’s simply not fair but “that’s the way it is” as Walter Cronkite used to say. I used to love watching Walter’s documentary, “The 20th Century” sponsored by the “Prudential Insurance Company”.
You would think that our auto insurance companies would have enough money without taking advantage of their insureds, wouldn’t you? Well if this is true why do they:
(1) Drastically underpay body shops that repair their insureds’ cars? In South Florida the average labor rate charged by dealerships’ service departments which does mechanical repair on your car is about $100 per hour. Dealer body shops are paid less than half of that. Now you might not be concerned that a car dealer’s body shop is being underpaid, but you should be concerned that the body repair technician that works on your car is being underpaid. The skill and training level of a body repair tech is at least equal to that of a mechanical repair tech. Why should the body repair tech be paid half as much? Because insurance companies control the payment of 95%+ of all collision repairs, they dictate which body shop gets to repair your car. If the body shop says they can’t do a safe quality repair for the price offered by the insurance company, the insurance company gives the repair to the body shop that will “play ball”.
(2) Often insist on the use of used and non-factory parts. Insurance companies don’t like to call the parts that are bought from junk yards to repair your car “used”. They prefer the euphemism, “recycled”, just like car dealers prefer to call used cars “pre-owned”. In many cases, the car’s manufacturer recommends or requires that new factory built parts be used to repair their cars. This doesn’t prevent many insurance companies from insisting that cheap used or Chinese made parts be substituted for new parts made by the car’s manufacturer. The insurance companies keep precise records on the body shops that they will recommend as to the percent of used or non factory parts they use. If one of their approved shops falls short of their average, they drop them and do not recommend any of their insureds to that body shop.
(3) Mislead their insureds into not filing a claim by underestimating the total damage. In 90%+ of collision repairs there is hidden damage. This unseen damage is only revealed when your car is disassembled after the repair process has begun. Often this hidden damage represents thousand of dollars in repairs. Many people carry large deductibles today to soften the cost of higher insurance premiums. If you have a $1,000 deductible and the insurance company’s estimate repair is around $1,000 you might think it’s not worth it to file a claim. We all know that filing a claim will cause your premiums to go up when you renew your insurance. Some people decide to pay for the repair out of their own pocket. If the car is drivable, many decide not to have the repair done at all.
OK, you’ve been warned, but if you’re a Florida resident you’re very lucky. You can choose the body shop that does your collision repair. Your insurance company will pressure you by telling you that they can’t guarantee the work if it’s not performed by their cut-rate body shop. If this is of concern, simply ask the body shop you choose to match the insurance company’s guarantee. Most do anyway. I also highly recommend that you choose a body shop operated by a dealer for the make of car you drive. They have better trained technicians and they have direct access to new factory parts. Also, be sure to check out the body shop with the BBB and the County Office of Consumer Affairs. If your insurance company gives you a hard time, just call 800 342-2762, the Florida Office of Insurance Regulation toll free line for consumer complaints. They will “explain the law” to your insurance company.
Monday, May 17, 2010
BUY OR LEASE YOUR NEW CAR AT THE RIGHT TIME OF THE YEAR
The total cost of a new car consists of many factors including initial purchase price, maintenance and repairs, and insurance. One of the most often overlooked and biggest costs of owing a car is depreciation. Some makes and models of cars depreciate more than others. By choosing the right make and model you can minimize depreciation. You can also minimize depreciation by properly maintaining your car, protecting it from the elements, and selecting the best color. One important factor in depreciation that is most often overlooked is the time of year that you buy or lease your car.You should always buy your new car as soon as possible after that year model is introduced. Some would disagree, arguing that you can buy a car for less at the end of the model year. Even if this were so (and I don’t agree with this), the savings would not offset the increased cost of depreciation that you inherit by buying a new car that is a year old. If you follow the advice I have given in my previous columns on the smartest way to buy a new car, you can usually buy a new car for close to the same price at the beginning of the model year as at the end.There was a time when virtually all makes of cars were introduced in the last quarter of the calendar year preceding the model year. If you bought a new model in September, you could be assured that you got it at the right time to minimize your depreciation. Nowadays, new models are introduced at almost any time and the introductions are nearly unpredictable. It’s not unheard of for a manufacturer to actually skip a model year entirely, selling last year’s model for another year. Or, sometimes a manufacturer will introduce a new model as much as two years before the calendar date of that model year. You should be sure you know exactly when that model year you are contemplating buying was introduced. You don’t want to buy a model year that was introduced 6 or 8 months agoIf you are leasing your car, you should also try to lease it as soon as possible after that year model is introduced. Also, when deciding on the length of the lease, your lease should end when the new model that you will lease or buy next is introduced. You don’t have to lease a car for a full one, two, three, or four years. You can lease a car for 39 months, for example, which may assist you in having your lease terminate at just the right time to buy or lease your next car.Be sure you know how many more years the make and model you select will remain before it is replaced by a major model change. The life cycle of a particular model varies between manufacturers from as short as 3 years to as long as 6 or 7 years. Your car will retain its value considerably more if it is still within its current product cycle when you trade it in. You need to be especially wary when a specific model is discontinued entirely. Research this carefully and time your purchase or lease as early in the product cycle as possible.If you are buying a brand new model at the beginning of its product cycle, be sure that you are buying from a manufacturer that has a very good reputation for quality. You can get a pretty good idea of the quality of the new model by researching the reliability of the previous year model. It is true that a brand new model can experience some bugs during the early months of its first year. If you are nervous about this, it might pay to wait for 3 or 4 months after a brand new model is introduced to see if problems in the form of recall campaigns or otherwise do occur.
Monday, May 10, 2010
Ed “P.T. Barnum” Whitacre, GM Chairman and CEO
Have you heard the rumor that General Motors is changing their slogan from “Mark of Excellence” to “There’s a sucker born every minute”?
Two weeks ago, I wrote a column about Ed Whitacre, the CEO and chairman of General Motors and his saturation TV commercials about how GM had repaid us taxpayers all of the money we loaned GM. If you missed that column, you can read it on my blog, www.EarlStewartOnCars. The bottom line is that Ed was “speaking with forked tongue” and GM did not do what he said. Taxpayers have not received one dime back from the TARP money our Congress voted to give GM. His whole claim was a “smoke and mirrors” effort to mislead the American taxpayer in an attempt to hype the value of GM stock when their IPO comes to market soon.
Following further along the lines of the famous huckster, PT Barnum, last week Ed fired his marketing manager who had been hired only a few months ago. Ed replaced her with the marketing manager from Hyundai. He chose this guy because of the way he had increased Hyundai’s sales during the recession. That seems like a good reason, but there’s more. He specifically chose the Hyundai marketing manager because of his advertising campaign claiming that Hyundai would allow a customer to stop making her car payments and return the car if she lost her job. I exposed this scam on my radio show. There are so many conditions in the fine print of this offer that virtually nobody can qualify. It’s “get ‘em in the door”, bait and switch advertising. Is this the kind of advertising we will be seeing from General Motors from now on?
Actually Ed “P.T. Barnum” Whitacre has already started with his bait and switch adverting. General Motors was exposed in last Monday’s (May 10, 2010) Wall Street Journal of being guilty of paying Consumers Digest to give their cars “Best Buy” ratings. Please don’t confuse Consumer’s Digest with Consumer Reports, an honest, accurate and non-profit organization. Of course, Consumers Digest is intended to be confused with Consumer Reports which has earned the trust of millions of car-buyers. Consumer’s Digest charges car manufacturers $35,000 for the first “Best Buy” rating and $25,000 for each subsequent one. General Motors paid for fifteen of their models to be rated a Consumers Digest “Best Buy”. That totals $350,000 to fool you and me into believing that GM makes good cars. Oh, I forgot to mention that Consumers Digest has no subscribers and sells no advertising! I guess we know how they make their money, don’t we?
I wrote an article for Hometown News about 3 years ago entitled “Consumer Reports is your best friend in choosing a car”. You can read that article on my blog by clicking on www.EarlStewartOnCars.com. In that article I warned car buyers not to be fooled by other publications that were “on the take” to give high quality ratings to car manufacturers. Consumer Reports is a non-profit and will not accept any payment from any product manufacturer. In fact, when they test a car, they buy the car from the manufacturer and will not even accept a car on loan. Furthermore, they do not allow any manufacturer to use their name in any advertising about the test results.
As most of my readers and listeners to my radio show know, I continually fight unfair and deceptive and illegal advertising by car dealers. Generally, I don’t have a problem with deceptive advertising by manufacturers. In fact, up until our government became the majority owner of General Motors, their advertising was basically OK. One of the big reasons Florida car dealers get away with so much is that our Attorney General, Bill McCollum, doesn’t enforce the “Unfair and Deceptive Trade Practices Act”. Florida car dealers may advertise any way they like, even illegally, without fear of reprisal. The Attorney General of the United States is Eric Holder, an Obama appointee. I can only speculate on why he hasn’t done anything about General Motors unfair and deceptive advertising. I’ll leave the speculation up to you.
Two weeks ago, I wrote a column about Ed Whitacre, the CEO and chairman of General Motors and his saturation TV commercials about how GM had repaid us taxpayers all of the money we loaned GM. If you missed that column, you can read it on my blog, www.EarlStewartOnCars. The bottom line is that Ed was “speaking with forked tongue” and GM did not do what he said. Taxpayers have not received one dime back from the TARP money our Congress voted to give GM. His whole claim was a “smoke and mirrors” effort to mislead the American taxpayer in an attempt to hype the value of GM stock when their IPO comes to market soon.
Following further along the lines of the famous huckster, PT Barnum, last week Ed fired his marketing manager who had been hired only a few months ago. Ed replaced her with the marketing manager from Hyundai. He chose this guy because of the way he had increased Hyundai’s sales during the recession. That seems like a good reason, but there’s more. He specifically chose the Hyundai marketing manager because of his advertising campaign claiming that Hyundai would allow a customer to stop making her car payments and return the car if she lost her job. I exposed this scam on my radio show. There are so many conditions in the fine print of this offer that virtually nobody can qualify. It’s “get ‘em in the door”, bait and switch advertising. Is this the kind of advertising we will be seeing from General Motors from now on?
Actually Ed “P.T. Barnum” Whitacre has already started with his bait and switch adverting. General Motors was exposed in last Monday’s (May 10, 2010) Wall Street Journal of being guilty of paying Consumers Digest to give their cars “Best Buy” ratings. Please don’t confuse Consumer’s Digest with Consumer Reports, an honest, accurate and non-profit organization. Of course, Consumers Digest is intended to be confused with Consumer Reports which has earned the trust of millions of car-buyers. Consumer’s Digest charges car manufacturers $35,000 for the first “Best Buy” rating and $25,000 for each subsequent one. General Motors paid for fifteen of their models to be rated a Consumers Digest “Best Buy”. That totals $350,000 to fool you and me into believing that GM makes good cars. Oh, I forgot to mention that Consumers Digest has no subscribers and sells no advertising! I guess we know how they make their money, don’t we?
I wrote an article for Hometown News about 3 years ago entitled “Consumer Reports is your best friend in choosing a car”. You can read that article on my blog by clicking on www.EarlStewartOnCars.com. In that article I warned car buyers not to be fooled by other publications that were “on the take” to give high quality ratings to car manufacturers. Consumer Reports is a non-profit and will not accept any payment from any product manufacturer. In fact, when they test a car, they buy the car from the manufacturer and will not even accept a car on loan. Furthermore, they do not allow any manufacturer to use their name in any advertising about the test results.
As most of my readers and listeners to my radio show know, I continually fight unfair and deceptive and illegal advertising by car dealers. Generally, I don’t have a problem with deceptive advertising by manufacturers. In fact, up until our government became the majority owner of General Motors, their advertising was basically OK. One of the big reasons Florida car dealers get away with so much is that our Attorney General, Bill McCollum, doesn’t enforce the “Unfair and Deceptive Trade Practices Act”. Florida car dealers may advertise any way they like, even illegally, without fear of reprisal. The Attorney General of the United States is Eric Holder, an Obama appointee. I can only speculate on why he hasn’t done anything about General Motors unfair and deceptive advertising. I’ll leave the speculation up to you.
Monday, May 03, 2010
Car Dealers Exploiting the Elderly
I don’t like to run old columns, but some things bear repeating. This column originally ran in Hometown News and my blog on March 9, 2007. I’m writing this on Monday May 2 and I received a call yesterday from an 83 year old woman victimized by a car dealer. She called me because she is a regular reader of my column in Hometown News (apparently she missed this one from over 3 year ago). This is why I’m rerunning this column. He son-in-law called me after she did yesterday. I asked him to send me an email, which he did, with all of the information about how she was exploited in the purchase of her car. I promised that I would call the owner of the dealership and ask him to intervene. As is usually the case in the exploitation of the elderly, it cannot be proven that any law was broken. I believe that when an 83 year old widow pays thousands of dollars more than others pay for the same car, that’s prima facie evidence that a she was, at the very least, deceived.
I use the term “car dealer” often in my columns and I want to make it clear that I am not trying to get personal. I could use the terms “car salesman” or “car sales manager”, but the dealer is the boss and I firmly believe the placard Harry Truman had on his desk, “The buck stops here”. The guy that owns the place is responsible for the actions of his employees. Just because he doesn’t know that there are some salesmen or managers taking advantage of his customers, is no excuse.
When I became a senior citizen I truly began to see the world in a different light. I have been a car dealer for over 40 years, but I have seen my own business through the eyes of a senior citizen for only the last few. One thing that has helped this awareness has been my relative new public persona, brought on by my TV commercials. Seeing me on TV (and also reading this column) precipitates a lot of phone calls, emails, and letters from seniors in Palm Beach, Martin, and St. Lucie counties. Some of these are very complimentary. Many of them are also calls for help or advice from those who were taken advantage of when they bought their car.
I get more calls from widows than any other single category. In my dealership last Friday, I was introduced to a widow in her seventies who had come in to buy a car with her nephew. She had never bought a car before. Her husband had always handled this responsibility. He passed away 2 years ago. She was very wise to bring along her nephew to assist her in her first car purchase.
I am learning as I approach 70 that I’m not quite as sharp in some areas as I once was. My memory is not as good and I am not as fast as I used to be. This is not to say that I am not as smart as I was when I was younger. In fact, I’m a lot smarter. There was a great article in the February 16 Wall Street Journal entitled “The Upside of Aging”. It explained how recent scientific studies have proven that even though certain mental abilities like memory and reaction times regress as we age, other more important mental abilities like judgment, empathy, vocabulary, and semantic memory more than offset the negatives. Semantic memory is the recollection of facts and figures from your field of endeavor or hobby and is most robust in seniors. If you would like to read this article, send me your email address or fax number and I will send it to you.
Buying the right car at the right price is no easy task. There are a lot of variables like trade-in allowances, monthly payments, discounts, interest rates, lease or buy, finance or pay cash, and all that I just mentioned has to do only with the cost of the car. What about which is the best make and model for you? This process should take lots of time in the study and preparation but too often purchases are made in just a few hours with little or no preparation.
The reasons why the elderly are so often targeted and exploited by car dealers (and other businesses) are many and complex. For one thing, there are just a lot of elderly people living in Palm Beach, Martin, and St. Lucie Counties. When a reporter asked John Dillinger why he robbed banks, Dillinger replied, “Because that’s where the money is”. Even though most senior citizens are smarter than ever, I believe that we are perceived by many as not being so smart. We are looked upon as easy prey. Also, I think that we pre-baby boomers grew up in a more trusting, family oriented time and we sometimes trust others more than we should.
In summary, if you are a pre-baby boomer like me, take extra precautions before you enter a car dealership. Do your homework carefully. Never, never make a rush decision. Do not buy that car on the same day you come into the dealership. Go home, discuss it with friends and family, and sleep on it. And if you call me, please call me before you buy the car, not after it’s too late.
I use the term “car dealer” often in my columns and I want to make it clear that I am not trying to get personal. I could use the terms “car salesman” or “car sales manager”, but the dealer is the boss and I firmly believe the placard Harry Truman had on his desk, “The buck stops here”. The guy that owns the place is responsible for the actions of his employees. Just because he doesn’t know that there are some salesmen or managers taking advantage of his customers, is no excuse.
When I became a senior citizen I truly began to see the world in a different light. I have been a car dealer for over 40 years, but I have seen my own business through the eyes of a senior citizen for only the last few. One thing that has helped this awareness has been my relative new public persona, brought on by my TV commercials. Seeing me on TV (and also reading this column) precipitates a lot of phone calls, emails, and letters from seniors in Palm Beach, Martin, and St. Lucie counties. Some of these are very complimentary. Many of them are also calls for help or advice from those who were taken advantage of when they bought their car.
I get more calls from widows than any other single category. In my dealership last Friday, I was introduced to a widow in her seventies who had come in to buy a car with her nephew. She had never bought a car before. Her husband had always handled this responsibility. He passed away 2 years ago. She was very wise to bring along her nephew to assist her in her first car purchase.
I am learning as I approach 70 that I’m not quite as sharp in some areas as I once was. My memory is not as good and I am not as fast as I used to be. This is not to say that I am not as smart as I was when I was younger. In fact, I’m a lot smarter. There was a great article in the February 16 Wall Street Journal entitled “The Upside of Aging”. It explained how recent scientific studies have proven that even though certain mental abilities like memory and reaction times regress as we age, other more important mental abilities like judgment, empathy, vocabulary, and semantic memory more than offset the negatives. Semantic memory is the recollection of facts and figures from your field of endeavor or hobby and is most robust in seniors. If you would like to read this article, send me your email address or fax number and I will send it to you.
Buying the right car at the right price is no easy task. There are a lot of variables like trade-in allowances, monthly payments, discounts, interest rates, lease or buy, finance or pay cash, and all that I just mentioned has to do only with the cost of the car. What about which is the best make and model for you? This process should take lots of time in the study and preparation but too often purchases are made in just a few hours with little or no preparation.
The reasons why the elderly are so often targeted and exploited by car dealers (and other businesses) are many and complex. For one thing, there are just a lot of elderly people living in Palm Beach, Martin, and St. Lucie Counties. When a reporter asked John Dillinger why he robbed banks, Dillinger replied, “Because that’s where the money is”. Even though most senior citizens are smarter than ever, I believe that we are perceived by many as not being so smart. We are looked upon as easy prey. Also, I think that we pre-baby boomers grew up in a more trusting, family oriented time and we sometimes trust others more than we should.
In summary, if you are a pre-baby boomer like me, take extra precautions before you enter a car dealership. Do your homework carefully. Never, never make a rush decision. Do not buy that car on the same day you come into the dealership. Go home, discuss it with friends and family, and sleep on it. And if you call me, please call me before you buy the car, not after it’s too late.
Monday, April 26, 2010
“Pump and Dump” by Government on GM Stock?
For those not familiar with the stock market, “pump and dump” is the illegal activity of overstating the value of a stock to encourage unsuspecting buyers to buy the stock and thereby drive up the price. Those giving out the misinformation on the stock (pumping) then suddenly sell (dump) all of their stock which they had previously acquired at much lower prices and make a large albeit illegal profit.
You must not own a TV set if you haven’t seen the recent new commercial by General Motors starring Ed Whitacre, the CEO and Chairman of the Board. He is strutting through a GM plant and bragging about how GM just repaid a $5 billion government loan 5 years early. This advertisement began the very day the “repayment” was made and the press release was issued. This was no coincidence and it was very well coordinated.
All of the media, TV cable and network, and print jumped on this and spread the word that General Motors was doing a lot better than expected and the taxpayers’ $50B investment in GM would not only be repaid soon but with a big profit.
The fact is that we taxpayers got back none of the money we gave GM. The $5 Billion that Ed Whitacre said GM paid back early was already in the U.S. Treasury’s possession in an escrow account. It was simply moved from one column on the Treasury’s books to another. At best, one could say that GM used one source of TARP funds to repay another. This was reported to Congress last week in a TARP audit by its inspector general, Neil Barofsky. Strangely enough, the conventional media has ignored this. The way I found out about it was from an article in my trade journal, Automotive News. This article cited a letter written to Treasury Secretary Tim Geithner, from Senator Charles Grassley of the finance committee.
Also, remember that our government loaned GM $50B, not $5B. When GM went bankrupt and could not repay anything, the government took majority ownership (61%) and converted the loan into worthless stock. You probably know that debt holders (bond holders) are in a much safer position than equity owners (stockholders). For Ed Whitacre to brag about repaying a $5B loan 5 years early that was really a $50B loan is patently absurd. But wait, there’s even more.
Now here’s the “smoking gun” for “pump and dump”. General Motors will be coming out very shortly with a stock offering to the public, an IPO. The only way that the taxpayers can really be paid back is if our government sells their stock in GM for a lot more than they paid for it. The only way they can sell stock is if the stock buyers believe GM can recover and begin to make a profit. Now do you get it? Using “smoke and mirrors”, Ed Whitacre and our politicians whose reelection depends on the survival of GM are trying to raise public opinion about the viability of GM so that they can drive up the price of the stock offered.
I hope the government doesn’t sic the SEC on me like they did Goldman Sachs because I’m going to short GM stock if the government sells it for, or above, the IPO price. In my opinion GM has little chance of being profitable in its present form anytime soon. Almost all of their improvements have come from laying off workers, closing plants, and other radical cost cuts, not from car profits. They have shown sales increases but most of those are to large rental and leasing fleets like Hertz and Avis that buy cars dirt cheap. GM does this even though they don’t make a profit so that they don’t have to close more plants and to make their numbers look better. The fleets then dump the cars back on the used car market which drives down the resale value of GM cars and trucks. This has the net effect of raising the cost of GM cars and trucks to GM owners because their trade-ins are worth much less.
It’s bad enough that Ford, Honda, Toyota and other manufacturers have to compete with the US government, but now the government isn’t even playing fair. The bottom line is that it’s the marketplace that decides which manufacturers will succeed, not the government. The American buyer will buy those products that have the best value, the ratio of price to quality. If GM, Chrysler, and our politicians don’t like those rules, they should get out of the car business.
You must not own a TV set if you haven’t seen the recent new commercial by General Motors starring Ed Whitacre, the CEO and Chairman of the Board. He is strutting through a GM plant and bragging about how GM just repaid a $5 billion government loan 5 years early. This advertisement began the very day the “repayment” was made and the press release was issued. This was no coincidence and it was very well coordinated.
All of the media, TV cable and network, and print jumped on this and spread the word that General Motors was doing a lot better than expected and the taxpayers’ $50B investment in GM would not only be repaid soon but with a big profit.
The fact is that we taxpayers got back none of the money we gave GM. The $5 Billion that Ed Whitacre said GM paid back early was already in the U.S. Treasury’s possession in an escrow account. It was simply moved from one column on the Treasury’s books to another. At best, one could say that GM used one source of TARP funds to repay another. This was reported to Congress last week in a TARP audit by its inspector general, Neil Barofsky. Strangely enough, the conventional media has ignored this. The way I found out about it was from an article in my trade journal, Automotive News. This article cited a letter written to Treasury Secretary Tim Geithner, from Senator Charles Grassley of the finance committee.
Also, remember that our government loaned GM $50B, not $5B. When GM went bankrupt and could not repay anything, the government took majority ownership (61%) and converted the loan into worthless stock. You probably know that debt holders (bond holders) are in a much safer position than equity owners (stockholders). For Ed Whitacre to brag about repaying a $5B loan 5 years early that was really a $50B loan is patently absurd. But wait, there’s even more.
Now here’s the “smoking gun” for “pump and dump”. General Motors will be coming out very shortly with a stock offering to the public, an IPO. The only way that the taxpayers can really be paid back is if our government sells their stock in GM for a lot more than they paid for it. The only way they can sell stock is if the stock buyers believe GM can recover and begin to make a profit. Now do you get it? Using “smoke and mirrors”, Ed Whitacre and our politicians whose reelection depends on the survival of GM are trying to raise public opinion about the viability of GM so that they can drive up the price of the stock offered.
I hope the government doesn’t sic the SEC on me like they did Goldman Sachs because I’m going to short GM stock if the government sells it for, or above, the IPO price. In my opinion GM has little chance of being profitable in its present form anytime soon. Almost all of their improvements have come from laying off workers, closing plants, and other radical cost cuts, not from car profits. They have shown sales increases but most of those are to large rental and leasing fleets like Hertz and Avis that buy cars dirt cheap. GM does this even though they don’t make a profit so that they don’t have to close more plants and to make their numbers look better. The fleets then dump the cars back on the used car market which drives down the resale value of GM cars and trucks. This has the net effect of raising the cost of GM cars and trucks to GM owners because their trade-ins are worth much less.
It’s bad enough that Ford, Honda, Toyota and other manufacturers have to compete with the US government, but now the government isn’t even playing fair. The bottom line is that it’s the marketplace that decides which manufacturers will succeed, not the government. The American buyer will buy those products that have the best value, the ratio of price to quality. If GM, Chrysler, and our politicians don’t like those rules, they should get out of the car business.
Monday, April 19, 2010
The Ethical Collapse of a Car Dealer?
Over three weeks ago it was reported in the media that John Pierson, had sold his ownership in John Pierson’s Toyota of Stuart to Southeast Toyota, LLC, the independent distributor for Toyota in the Southeast USA. John Pierson said that this was something that he had been contemplating for several months and his decision was motivated by personal reasons, particularly his pending divorce and child custody issues.
But, but soon after it was reported by Eve Samples, a reporter for Scripps Treasure Coast Newspapers that Southeast Toyota, LLC had, in fact, fired John Pierson and forcibly bought him out because “he (John Pierson) engaged in self-dealing and illegally diverted dealership money for his personal use.” You can read her article by clicking on www.TCPalm.com/Samples. It’s entitled “Philanthropist, Former Owner Pierson Denies Diverting Business money for Personal Use”. Subsequently Eve Samples reported that John Pierson has counter sued Southeast Toyota for defamation of character.
Now, I know have no first hand knowledge of any illegal activities by John Pierson with respect to Southeast Toyota. But I have been aware for a long time of many car buyers from the Treasure Coast who complained about being taken advantage of at John Pierson’s dealership. A lot of Toyota buyers drive all the way from Stuart and Hobe Sound down to North Palm Beach and buy their cars and have them serviced at my dealership. And they tell me why they drive so far.
If you read Eve Sample’s article in the Scripps Treasure Coast Newspaper you will read that John Pierson began his huge philanthropic efforts (over $1 million per year) “after his dealership was sued by more than a dozen elderly customers who believe they were duped into overpaying for vehicles.” The attorney representing these customers called me several times to consult about the alleged illegal and deceptive sales practices. He asked if I would testify against John Pierson but I had to respectfully decline to voluntarily testify against a fellow Toyota dealer, especially my closest competitor to the north. According to the attorney, many customers said they came in to buy a car for cash but were tricked into leasing. Some said they thought they were trading in their car but received no credit for it against their lease. Others said that they were told that if they didn’t like their lease car they could return it at anytime and not have to make any more lease payment.
I’ve also received dozens of calls, email, and letters directly from frightened and angry former customers of John Pierson’s, most of whom were elderly and many of those were recent widows, who were buying or leasing their first car. In most cases, there was nothing they could do. They signed the contracts without reading them and the alleged verbal assurances made to them by the salesmen and managers were later denied.
You may know that I spoke before the Workforce Alliance (a non profit organization) in January when I sponsored their speaker, Marianne Jennings, at the West Palm Beach Kravis Center. She’s authored about a dozen books including The Seven Signs of Ethical Collapse. Marianne Jennings was also a guest caller on my weekly radio show, Earl Stewart on Cars. She has spent a lifetime studying business ethics and is professor at Arizona State University where she teaches ethics. In fact, you really should read this the book. I gave away twelve copies, one to each of my senior managers.
Chapter 8 of this book is entitled “Sign #7; Goodness in Some Areas Atones for Evil in Others”. This chapter warns readers to beware of businesses and business executives whose “philanthropic and social goodness became the salve for a conscience grappling with cooked books, fraud, insider training—all the usual activities of ethical collapse.”
What do Ken Lay of Enron, Bernard Ebbers of World Com, Dennis Kozlowski of Tyco, John Rigas of Adelphia, Richard Scrushy of HealthSouth all have in common with John Pierson of Toyota of Stuart? There are two things that jump right out…they all gave very large sums of money to charities and were later accused of unethical and illegal activities. Let me make it perfectly clear than John Pierson has not been found guilty of anything and may be totally exonerated. In fact, he has sued Southeast Toyota for defamation of character and may win his suit. But John Pierson did admit that he began giving millions dollars to local charities to overcome the negative image he gained when accused by more than a dozen local elderly customers of being defrauded by his dealership.
John F Kennedy said “The great enemy of the truth is very often not the lie—deliberate, contrived and dishonest—but the myth—persistent, persuasive, and unrealistic”. Ken Lay, Bernie Ebbers, Dennis Kozlowski, John Rigas, Richard Scrushy, and John Pierson were held in high regard by their customers and stockholders by a myth. By his own admission, John Pierson said that he began the millions of dollars of charitable contributions to change his negative image in the community.
If you haven’t read Marianne Jennings’s book, I highly recommend that you do. Had Southeast Toyota, the local media and authorities read chapter 8, they may have seen this coming five years ago.
But, but soon after it was reported by Eve Samples, a reporter for Scripps Treasure Coast Newspapers that Southeast Toyota, LLC had, in fact, fired John Pierson and forcibly bought him out because “he (John Pierson) engaged in self-dealing and illegally diverted dealership money for his personal use.” You can read her article by clicking on www.TCPalm.com/Samples. It’s entitled “Philanthropist, Former Owner Pierson Denies Diverting Business money for Personal Use”. Subsequently Eve Samples reported that John Pierson has counter sued Southeast Toyota for defamation of character.
Now, I know have no first hand knowledge of any illegal activities by John Pierson with respect to Southeast Toyota. But I have been aware for a long time of many car buyers from the Treasure Coast who complained about being taken advantage of at John Pierson’s dealership. A lot of Toyota buyers drive all the way from Stuart and Hobe Sound down to North Palm Beach and buy their cars and have them serviced at my dealership. And they tell me why they drive so far.
If you read Eve Sample’s article in the Scripps Treasure Coast Newspaper you will read that John Pierson began his huge philanthropic efforts (over $1 million per year) “after his dealership was sued by more than a dozen elderly customers who believe they were duped into overpaying for vehicles.” The attorney representing these customers called me several times to consult about the alleged illegal and deceptive sales practices. He asked if I would testify against John Pierson but I had to respectfully decline to voluntarily testify against a fellow Toyota dealer, especially my closest competitor to the north. According to the attorney, many customers said they came in to buy a car for cash but were tricked into leasing. Some said they thought they were trading in their car but received no credit for it against their lease. Others said that they were told that if they didn’t like their lease car they could return it at anytime and not have to make any more lease payment.
I’ve also received dozens of calls, email, and letters directly from frightened and angry former customers of John Pierson’s, most of whom were elderly and many of those were recent widows, who were buying or leasing their first car. In most cases, there was nothing they could do. They signed the contracts without reading them and the alleged verbal assurances made to them by the salesmen and managers were later denied.
You may know that I spoke before the Workforce Alliance (a non profit organization) in January when I sponsored their speaker, Marianne Jennings, at the West Palm Beach Kravis Center. She’s authored about a dozen books including The Seven Signs of Ethical Collapse. Marianne Jennings was also a guest caller on my weekly radio show, Earl Stewart on Cars. She has spent a lifetime studying business ethics and is professor at Arizona State University where she teaches ethics. In fact, you really should read this the book. I gave away twelve copies, one to each of my senior managers.
Chapter 8 of this book is entitled “Sign #7; Goodness in Some Areas Atones for Evil in Others”. This chapter warns readers to beware of businesses and business executives whose “philanthropic and social goodness became the salve for a conscience grappling with cooked books, fraud, insider training—all the usual activities of ethical collapse.”
What do Ken Lay of Enron, Bernard Ebbers of World Com, Dennis Kozlowski of Tyco, John Rigas of Adelphia, Richard Scrushy of HealthSouth all have in common with John Pierson of Toyota of Stuart? There are two things that jump right out…they all gave very large sums of money to charities and were later accused of unethical and illegal activities. Let me make it perfectly clear than John Pierson has not been found guilty of anything and may be totally exonerated. In fact, he has sued Southeast Toyota for defamation of character and may win his suit. But John Pierson did admit that he began giving millions dollars to local charities to overcome the negative image he gained when accused by more than a dozen local elderly customers of being defrauded by his dealership.
John F Kennedy said “The great enemy of the truth is very often not the lie—deliberate, contrived and dishonest—but the myth—persistent, persuasive, and unrealistic”. Ken Lay, Bernie Ebbers, Dennis Kozlowski, John Rigas, Richard Scrushy, and John Pierson were held in high regard by their customers and stockholders by a myth. By his own admission, John Pierson said that he began the millions of dollars of charitable contributions to change his negative image in the community.
If you haven’t read Marianne Jennings’s book, I highly recommend that you do. Had Southeast Toyota, the local media and authorities read chapter 8, they may have seen this coming five years ago.
Monday, April 05, 2010
Has Bogus Attack on Toyota Awakened a Sleeping Giant?
Almost one month ago, I wrote an article entitled “Toyota Recall a Hoax?” for my blog and Hometown News. You can read it by clicking on http://oncars.blogspot.com/2010/03/toyota-recalls-hoax.html.
I believe my column was prophetic. The only people still throwing rocks at Toyota are the hard core of the motley crew comprised of the Detroit Big 3 establishment voiced by the Detroit Free Press. The former members of the motley crew, the media and the US Congress have deserted Detroit to focus their attention other “important” issues.
The inbred Detroit-UAW-Bloomfield Hills Country Club- “Big 3” cultures just don’t get it. Fortunately for them, our government bought control of GM and Chrysler, so the US Congress drank the Detroit cool aide too. Of course the media hopped on the bandwagon like they did Tiger Woods’ sex life or an alleged gang-rape of a prostitute by a hockey team.
This motley crew with their former members, the media and the Congress, piled on Toyota with more nonsense and false allegations than most could even imagine. After this nonsense became boring and the public didn’t care or believe it anymore, Toyota added some price incentives last month and out-retailed EVERYBODY by at least 40,000 units and 40% of those sales were to owners of other make cars. The bottom line is the American consumer didn’t drink the Detroit cool aide.
There was a headline in the Saturday, April 3 Detroit Free Press, “Toyota must decide how badly it wants to land sales”. The gist of the article is that Toyota “bought the business” last month by bribing people to buy unsafe cars. Now, would you buy a car that you feared would kill you or a family member just because you could get 0% financing for 60 months? I don’t think so! The Detroit motley crew has awakened a sleeping giant. You see, people buy Toyotas instead of Pontiacs because Toyota builds better cars. Now that the false pundits have threatened and angered Toyota, Toyota has decided that they will also give “Big 3” owners a price incentive too. Check out Toyota’s balance sheet. They have “cash coming out of their ears!” GM and Chrysler are “hanging by a thread” and a prolonged price-war with Toyota will sever that thread.
My opinion is that of a former GM dealer (Pontiac) for 30 years who was lucky enough to buy a Toyota dealership in 1975. I’ve played on both teams, General Motors and Toyota, and I’ve lived both sides of the story.
I recommend that you read “Crash Course” by Paul Ingrassia. There’s a great review of the book in Barron’s, Monday, April 5 issue. The article on page 40 is entitled “How Detroit Ended Up in a Ditch”. 40. As a Pontiac dealer for 30 years while owning a Toyota dealership for 23 of those, I can vouch for the accuracy and objectivity of this book.
You think March sales were a fluke for Toyota? Anybody want to bet that Toyota out-retails every other manufacturer again in April?
I believe my column was prophetic. The only people still throwing rocks at Toyota are the hard core of the motley crew comprised of the Detroit Big 3 establishment voiced by the Detroit Free Press. The former members of the motley crew, the media and the US Congress have deserted Detroit to focus their attention other “important” issues.
The inbred Detroit-UAW-Bloomfield Hills Country Club- “Big 3” cultures just don’t get it. Fortunately for them, our government bought control of GM and Chrysler, so the US Congress drank the Detroit cool aide too. Of course the media hopped on the bandwagon like they did Tiger Woods’ sex life or an alleged gang-rape of a prostitute by a hockey team.
This motley crew with their former members, the media and the Congress, piled on Toyota with more nonsense and false allegations than most could even imagine. After this nonsense became boring and the public didn’t care or believe it anymore, Toyota added some price incentives last month and out-retailed EVERYBODY by at least 40,000 units and 40% of those sales were to owners of other make cars. The bottom line is the American consumer didn’t drink the Detroit cool aide.
There was a headline in the Saturday, April 3 Detroit Free Press, “Toyota must decide how badly it wants to land sales”. The gist of the article is that Toyota “bought the business” last month by bribing people to buy unsafe cars. Now, would you buy a car that you feared would kill you or a family member just because you could get 0% financing for 60 months? I don’t think so! The Detroit motley crew has awakened a sleeping giant. You see, people buy Toyotas instead of Pontiacs because Toyota builds better cars. Now that the false pundits have threatened and angered Toyota, Toyota has decided that they will also give “Big 3” owners a price incentive too. Check out Toyota’s balance sheet. They have “cash coming out of their ears!” GM and Chrysler are “hanging by a thread” and a prolonged price-war with Toyota will sever that thread.
My opinion is that of a former GM dealer (Pontiac) for 30 years who was lucky enough to buy a Toyota dealership in 1975. I’ve played on both teams, General Motors and Toyota, and I’ve lived both sides of the story.
I recommend that you read “Crash Course” by Paul Ingrassia. There’s a great review of the book in Barron’s, Monday, April 5 issue. The article on page 40 is entitled “How Detroit Ended Up in a Ditch”. 40. As a Pontiac dealer for 30 years while owning a Toyota dealership for 23 of those, I can vouch for the accuracy and objectivity of this book.
You think March sales were a fluke for Toyota? Anybody want to bet that Toyota out-retails every other manufacturer again in April?
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