THE LOWEST PRICED CAR CAN END UP BEING THE MOST EXPENSIVE

Too often car buyers focus on buying the car that fulfills their preferences of styling, size, and accessories that they can buy for the lowest price. There are other important cost considerations you should look at before buying the cheapest alternative.

Resale value is the number one consideration that is most often overlooked by car buyers. All cars depreciate in value, but some hold their value a lot better than others. You might save a thousand dollars by choosing to buy one used or new car over another more expensive make and model. But if the make and model that cost $1,000 more, held its value by $2,000 more over the 3 years you owned the car before trading it back in, the “lowest priced car” was really $1,000 more expensive.

There are several ways you can check on how much cars will depreciate. A good one is to check the resale value of that same make of car that is 3 or 4 years old. You can also find this information on the Internet. Kelly Blue Book, for example is www.KBB.com. If you are thinking about buying a new 2014 car of a particular model and make, find out what a 2011 model sells for today. Compare other makes and models.

Maintenance and repair cost are the second biggest factors in measuring the true cost of a car. When a car has a relatively higher depreciation, one of the biggest reasons is probably because it is more prone to break down. Check Consumer Reports or surf the Web to find the projected repair histories of the cars you are comparing. Saving $1,000 on a particular make and model is not very significant when you are facing the cost of a blown transmission or engine. Does the manufacturer provide complimentary maintenance? This should be a factor to consider as well.

Big cash rebates and big discounts are not necessarily a good thing. First you have to ask yourself, why is it necessary for this manufacturer to giving me such a big cash rebate (I have seen them advertised as high as $11,000) to sell his car? You will generally find that the manufacturers of higher quality, higher demand cars offer fewer rebates and discounts. These are also the manufacturers of cars that depreciate less and cost less in terms of repairs. Big rebates and discounts also negatively affect a cars resale value. It’s what you could call “vicious cycle”. A car is hard to sell because of its high repair costs and high depreciation so the manufacturer pays a big cash rebate to sell it. The rebate lowers the value of the used car of that make and model because the price of a used car directly tied to the cost of that same new car.

You will be surprised how much the color of the car you buy can affect the resale value. Think about it. The color was very important to you when you bought your last car. It is just as important to the person who will be buying the car you trade in. The most popular colors are white, silver, beige, and black. If you have a “thing” for green, blue, orange, or another unusual color, it can negatively affect the resale value of that car by over $2,000. I’m not suggesting that you always buy a white car, but if you like white, silver, beige, and black you are going to get more money for that trade-in than if you like blue and green. Bright colors can be good for certain models. Red is a popular convertible color for example.

Be sure to check your cost of insurance before you make a final decision. Cars with side air-bags, highly rated in collision and rollover tests, relatively low cost of repair especially for bumpers, and non high-performance cars have much lower insurance rates.

Cars are no different than any product that you buy when it comes to the principal of “the cheapest product is usually not the best value”. You buy a quality pair of shoes, paying more than you would for a cheap, poorly made pair because they will look good and wear many times longer. Shopping for the lowest price is a very good idea, but only after you have chosen a car that has low depreciation, operating costs, and cost of repair.

BUYING TIRES - "CAVEAT EMPTOR"

 

 

In case you’re a little rusty on your Latin, “Caveat Emptor” means “Let the Buyer Beware”.  This is something to keep in mind when you buy anything, but the danger of being ripped off when you buy new tires ranks right up there with buying and servicing your car.

Retailing tires is very important to, not only tire companies like Goodyear, Firestone, and Michelin, but independent retailers like Pep Boys and Tire Kingdom. In recent years car dealers have become very interested in selling tires too. The reason is that car customers too often don’t return for service and service is generally more profitable to car dealers than selling cars. Independent service departments and tire manufacturers’ retail service and tire outlets are taking away car dealers’ service business. Tires are something that you have to buy regularly for your car. Wherever you go to buy one or more new tires, the tire seller will take that opportunity to sell you additional services and products…you can bet your life on it.

Tires have become “loss leaders” for car dealers, tire factory service stores, and independents. When I say loss leaders, I don’t mean that you don’t end up paying the tire seller a profit on the tire transaction. What I mean is that the advertised price would result in a loss to the seller if he really sold it at that price. This is very similar to car advertising. Car dealers go through a great deal of thought and effort to advertise a price which is perceived to be lower than they will really sell you the car and tires sellers do the same thing. You can be sure that you can never buy a tire advertised on the Internet, newspaper, or TV for the price that you see.

To demonstrate this I chose one of the largest tire sellers in the USA, Tire Kingdom. I chose them because, as the leader, they set the pace in how tires are sold and advertised. Buying tires from other sellers, including most car dealers, will be at least as risky and often more so.

I sent in a mystery shopper to two Tire Kingdom retail tire and service outlets in Palm Beach County. My shopper responded to an ad for a special sale which is blanketing TV, newspaper and the Internet. The ad says that from August 1 to August 12 you can buy one tire and get the second one free. I watched the TV ad several times and it is literally impossible to read the fine print disclosure. By going to Tire Kingdom’s website, I was able to read the fine print, but the vast majority of respondents to this sale would come from TV and be clueless to the “gotchas” in the fine print.

The first revelation to my mystery shopper was that only certain makes and types of tires were eligible. No name brands like Michelin or Goodyear were available for this sale. Interestingly there was an inconsistency on this between the two Tire Kingdom stores we shopped. In fact, there were several inconsistencies between the stores on types of tires, prices and other procedures.

To me the biggest deception was that the tire buyer was required to purchase “road hazard insurance” and a wheel alignment.  The prices on the insurance ranged between 14% and 18% of the total price of the tires and the prices of the wheel alignment ranged from $114.99 to $79.99.  The advertisement didn’t say they are advertising a package deal for tires and road hazard insurance and wheel alignments. But the fine print (indecipherable on TV) disclosed this condition. Being required to buy a four wheel alignment is wrong for two reasons. Firstly, buying a wheel alignment should be your decision and not tied to the purchase of tires. Secondly, what if your wheels don’t need an alignment? You may have had your four wheels aligned two hours ago, just now run over a nail in the road, and now have to buy a tire.

BUT WAIT THERE’S MORE! The fine print also tells you that you must pay $1 per tire for the state tire tax. This is a real tax but it should be included in the quoted prices. There’s another fee you are charged which is a “tire disposal fee” which Tire Kingdom can charge you any amount they like. It’s not specified. The truth is that Tire Kingdom actually sells many of their take-off tires to used tire dealers for a nice profit. I do the same thing in my dealership and that profit off-sets my cost of having take-off tires hauled away and disposed of. And the final “gotcha” is the infamous “shop fee” which usually is 10% of the full retail price of the service invoice with a cap of $35. Now remember that there is no legal prohibition or cap on “tire disposal or shop fees”. Tire Kingdom imposes their own caps and prices on these rip offs. Other tires sellers are left to their own chutzpah and imagination to gouge you to limit of your tolerance.

BUT WAIT THERE’S STILL MORE! In the fine print is “No carry-outs”. I’ve seen this in some restaurants, but it’s an unusual term for Tire Kingdom and other tire sellers to tell you that before you can buy their tires at their advertised price, you must pay them whatever they want to charge you for mounting and balancing those tires.

I’ll end this article with constructive suggestions of how you can avoid these sorts of unfair and deceptive advertising and sales practices. Refuse to play the tire sellers games. Demand an “out the door” price for the specific brand and style of tires you want. Make it clear that it must include all federal, state, and local taxes, all fees like shop and tire disposal, all extra services like alignment, all extra products like road hazard insurance, and all services associated with putting the tires on your car like mounting and balancing. Ideally you should do this on the telephone and make it clear that you have only one check left in your checkbook and you will be filling it out at home for the total amount due, an out-the-door price. Of course, you should do this at least three times with three different tire sellers and buy them from the one who gives you the lowest price.

Your Car Insurance Company Hates Earl Stewart Toyota's Body Shop

Now, Let Me Tell You Why

This article was written by Alan Napier, my Body Shop manager. I’ve owned and operated body shops for over four decades…at one time I owned five! I’ve never had a body shop manager as qualified as Alan and never had one that put the customer first 100% of the time the way Alan does.  By putting the customer first, I mean considering the customers needs above those of the insurance company that pays us for repairing the customer’s car. Please read what Alan has to say carefully:

So, you had an accident and called your insurance company to report it and things seemed to be going pretty smoothly….. Then you told them you were taking your car to Earl Stewart and everything started getting weird…. The claims adjusters’ demeanor inexplicably just changed…. And NOT for the better!! Suddenly they’re telling you they that have a perfect shop in mind for you that will get your car in and out in a hurry and the whole process will be effortless for you. Yep, it’ll be such a great experience, you’ll be GLAD you had an accident. You thank them politely and tell them you’re just more comfortable repairing your vehicle at Earl Stewart, where you bought the car and know and trust the people.

 Now it seems like the adjuster is downright angry with you and the real pressure tactics start!! They start making vague yet ominous sounding statements about Earl Stewart Toyota, almost as if they’re letting you in on a dirty little secret….. “We can’t guarantee their work….” “We’ve had problems with that shop….” “They charge more than we allow for repairs and you will have to pay out of pocket…” “If you take it to our shop, you won’t have to wait for an adjuster…” “They ignore our estimates…” The list goes on and on, but, they’re planting their seeds of doubt…. And now you’re concerned and thinking “Earl Stewart Toyota must have done something to cause this hostility by my insurance company…”, after all, your insurance company only has your best interest in mind…..

Well, you’re right, we DID do something to cause your insurance company to hate us and I’d like to tell you what….. We actually had the audacity to tell your insurance company something that they’re not used to hearing…. “NO!!” and they reacted like any spoiled 3 year old would who’s never heard the word before.

But wait, you’re still “in good hands” right? Wrong!! Your insurance company will instruct “their” repair facility to install untested aftermarket crash parts on your vehicle, even knowing that these parts can absorb crash energy differently and affect the timing of your air bag deployment, resulting in possible death and serious injury.

 Here’s the really crazy thing…. The insurance company’s “approved” repair shop will do it!! Do you see what’s going on here? Everybody’s making out like Jesse James!! The insurance company is saving money, the body shop is making money, and you? You’re getting scammed!! Your insurance company has been provided with countless documents, provided by the vehicle manufacturers that state that these “cosmetic crash parts” are actually “designed and tested as part of the overall vehicle and may help send impact energy to the SRS sensors. In addition, some of these parts may help GM, Chrysler, Ford, Toyota,  for Nissan vehicles comply with several Federal Motor Vehicle Safety Standards (FMVSS) including hood intrusion in the passenger cabin, preservation of proper door operation following a collision and proper airbag function.

You may be thinking “Well, if these parts are that bad, surely there’s a law against using them without my permission…” You’re right again!! Florida statute 626.9743 states “An insurer may not require the use of replacement parts in the repair of a motor vehicle which are not at least equivalent in kind and quality to the damaged parts prior to the loss in terms of fit, appearance, and performance.” Sounds like an open and shut case, eh? The law doesn’t say “if the insurance company believes they’re the equivalent”. It doesn’t say anything about “if the insurance company hopes they’re the equivalent”. The insurance companies need to prove these cheap parts are the exact equivalent to the original factory parts to be in compliance with the law or stop mandating their use. Right? I thought so too….

So, I wrote a letter to the Florida Office of Insurance Regulation!! Went right to the top, straight to Commissioner Kevin McCarty (well, his office anyway…. he’s got “people” for that…). After much arm twisting via the Florida CFO’s office, the FL OIR begrudging agreed to “investigate” our concerns. After a couple of months, we received their response “We have concluded our investigation and found no violation of the Florida Insurance Code.”, and my favorite part…. “Generally speaking, the burden of proof that an aftermarket part is not of like kind and quality or as safe as an OEM part rests with the one making that assertion, as opposed to one having to prove that the aftermarket part is of like kind and quality and as safe as OEM.” Huh?? That one left me scratching my head. Why have a consumer protection law at all then? Your insurance company can mandate the usage of any part they desire, so long as it looks the same. Nobody really complains though because, as they say, “dead men tell no tales…”The jury’s still out on this one, but rest assured WE WILL NOT USE AFTERMARKET PARTS TO REPAIR YOUR VEHICLE.! (p.s. Also check out Title 49, Chapter 301 Subchapter II Sec. 30122 "Making Safety Devices and Elements Inoperative" in the Federal Code-you can Google it).

How about used crash parts then?? Your insurance estimator will tell you “they’re factory original parts taken off of a car that’s just like yours”. Really? Was your car damaged so severely that it was deemed a total loss and ended up in a junk yard? The car they want to cannibalize to get your replacement parts was. We won’t even know if the donor car was damaged in an accident, a flood or even a fire and quite frankly, we don’t care-WE’RE NOT GOING TO USE THESE PARTS EITHER!!

Well, what about Earl Stewart overcharging for labor??? THAT sounds pretty shady….. let’s talk about it…. I recently had my lawn mower repaired and it cost me $65 per hour and having an electrician fix my air conditioning at home cost me $75 per hour (plus gas & travel time), plumbers and a/c repairmen are $100+ per hour. If you have mechanical work on your car, it’s liable to cost you anywhere from $100 to $200+ per hour, depending on the repair shop and type of car.

The insurance companies feel that $42 an hour is more than fair to have your collision damaged vehicle repaired and they won’t pay a dime more. If you want to repair your vehicle here, they will tell you that you’ll have to pay the difference out of pocket OR, well….. they know a guy…… Ironically, back in the early 70’s, when Allstate and Sears were all part of the same company, Sears wouldn’t repair your toaster for less than $12 an hour while at the same time Allstate wouldn’t pay more than $7 an hour to have your vehicle repaired. Hilarious, ain’t it? Back in the 60’s, the insurance industry running roughshod over the repair industry was so pervasive and blatant that the Kennedy Administration tackled them before they even got started on the Mafia!!! (see 1963 Consent Decree-Google is your friend) What the insurance industry is doing to the repair industry is a clear violation of antitrust laws and we are part of a class action lawsuit to try to put a stop to it. WE WILL NOT MAKE YOU PAY THE DIFFERENCE IN LABOR RATES!!

Then we get to “charging for supplies and labor operations not customarily charged for in the market area”. This basically means that because they’ve been able to badger, coerce and intimidate some repair shops into not charging for certain supplies and labor operations necessary to return your car to pre-accident condition, they should not have to pay it to anybody whether they ask for it or not. Your insurance company won’t dispute that the materials are being used or the labor operations performed, nor will they dispute the necessity. Their only problem is having to pay for it because at some point, long ago, somebody “cut a deal” to get more business sent their way and it then became the “new norm” for every shop. We will never charge for a labor operation or supplies that cannot be verified. WE WILL NOT MAKE YOU PAY THE DIFFERENCE.

Now you’re probably saying “I never get into accidents so I can’t believe I’m still reading this. Can this guy just get to the point??” and the answer is “YES! Yes I can!!” Please don’t fall victim to your insurance companies scare tactics! The top 5 insurance companies spent over $4,000,000,000 (yep, that’s $4 BILLION) last year to convince you that they’re good guys so that you will buy their product (GEICO alone spent over $1 Billion if that tells you anything). Sometimes, there’s not enough perfume to cover up a smell and not enough lipstick to pretty up a pig and this is one of those times.

 Please go to some consumer websites and check out how these insurance companies perform once you’ve had to turn in a claim (a.k.a. became an expense to them). Also keep in mind, the shops that enter into these unholy alliances with the insurance companies see them as their #1 priority and best customer and they will do whatever they are told to stay in their good graces. The insurance company feeds the shop lots of work and the shop does what they’re told to keep the repair cheap. It’s a marriage made in Hell. The repair shops that participate in this fraud are just as, or maybe even guiltier than the insurance companies. They should know better, but, it’s all about the money (insert photo of pigs at trough HERE) ;)

If you have already had your vehicle repaired at one of these direct repair shops and you’re not exactly sure how your car was repaired, bring it by with the invoice and the final estimate and we’ll be glad to take a look at it for you. If the vehicle has not been repaired properly, we’ll point out the deficiencies so that you can return to the shop for corrective repairs. If they repaired your car with aftermarket or junkyard parts, you may be entitled to higher than normal diminished value compensation. WHAT?? Your insurance company didn’t tell you that your car is worth less now and you’re entitled to additional compensation?? You might want to contact Gordon and Doner, they have a division that can handle that for you. If your insurance company has pressured you to not have your car repaired at Earl Stewart Toyota, please email me the details at alann@estoyota.com or Mr. Stewart at earl@estoyota.com and share the gory details.

Earl Stewart Toyota will repair your vehicle properly, per the manufacturers’ recommendations and only with new OEM crash parts. We will guarantee our paint, our workmanship AND the OEM replacement crash parts, for as long as you own your car. That’s right, I said AND THE PARTS!! The manufacturers’ warranty for replacement parts is 12 months or 12K miles. Earl Stewart Toyota will pick up the warranty after Toyota’s warranty expires, this includes parts, materials and any necessary labor to paint and install the failed part. Everything!! If we are unable to convince your insurance company to pay in full for the properly repaired property damage, with your written permission we will initiate action on your behalf to recover the funds. Ultimately, it is YOU who are responsible for ensuring your vehicle is repaired properly. You already had an accident; don’t let your insurance company force you into making a mistake.

Car Dealers Fear You!

They Believe that “BUYERS ARE LIARS!”

I ran this column about three years ago and I have received more comments from car dealers and car salesman on this one column than almost every other. I ran the same column a year ago and the comments keep coming in from car dealers and car salesmen. I’m running it again at the risk of boring some of you and I apologize in advance, but I think it’s important because I may be onto something.

The more I think about it, the more I’m convinced that the chronic dislike and distrust of car buyers for car dealers might be part and parcel of the same problem that car dealers have with customers. Think about it…maybe one of the reasons that car dealers treat you so badly is that they are afraid you are going to take advantage of them! They might be reasoning that they have to take advantage of you before you have a chance to get them. J OK, this is a bit tongue in cheek, but I honestly believe there may be an element of truth to it. Both sides are afraid to show trust to the other side first. It’s a little bit like the Israel-Palestine conflict. Maybe I can be the Henry Kissinger negotiating peace between the two sides?

I’m always amazed by the way car dealers who use deceptive advertising and unethical sales tactics rationalize their behavior by actually blaming you, their customer. The following is a direct quote from an anonymous car dealer’s email I received this morning in response to one of my recent columns in this newspaper: “I don't think you would make any of these comments if you sold fords in a non-metro market. How do you expect dealers to change when consumers think they should pay less than dealer cost for a car and then walk into any other form of retail store and pay what they are asking?? Your ideas are noble but there are other dealers who have tried 'your' methods who are no longer in business.” This dealer is saying that his customers are so ruthless and cunning that they won’t buy a car unless they can buy it below his cost and his only solution is to trick them into thinking that they are buying it below his cost, like tacking on a “dealer fee” to the price they quoted the customer. He also goes on to say that my“ideas are noble” but I can’t possibly be successful and I will go broke trying. I truly appreciate his concern and I want to assure him, if he is reading this article, that my business is doing very nicely.

This attitude is actually a prevailing part of the culture in many car dealerships. Many dealers, dealer managers, and sales people don’t trust their customers (how paradoxical!). They don’t even like their customers. A very common expression among car dealers and their sales staff is“Buyers are liars”. This means that a prospective customer will not tell you the truth about the condition of his trade-in, he will lie to you about the price he got from your competitor, and he is likely to remove those new tires that were on his trade-in when the dealer appraised it when he comes in to pick up his new car. 

There are also a lot of dealerships where used car buyers and people with bad credit are held in especially low esteem. They have nicknames for people with bad credit like “slugs” and “roaches”. Apparently dehumanizing these unfortunate members of our society with derogatory labels makes it easier to treat them so shabbily. People with bad credit are targeted with direct mail and newspaper ads making absurd promises that convince prospective customers that they can finance a car no matter how bad their credit. In some dealerships applicants are coached on how to falsify credit application and pay records. In some cases the applicant may not even know he is signing a false credit application which is federal offence. In most cases the credit is refused and the applicants are not even given the courtesy of a return phone call to tell them this. 

I don’t claim to be a psychologist (and I don’t even play one on TV), but I have read articles explaining how humans will stereotype other people in a fashion that falsely justifies their negative behavior toward those same people. We see this with racism and even in wars. If you make yourself believe that car buyers are out to take advantage of you, “buyers are liars”, you can’t feel guilty about tricking them into paying a dealer fee. If you trick a “roach” or a “slug” into coming in to buy a car on credit when they probably can’t, why should you feel guilty? After all, roaches and slugs don’t have feelings. 

What these kinds of dealerships don’t understand is that you must trust a person first before you can expect her to trust you. You have to treat a person with respect before you can expect that person to respect you. Somebody has got to go first. My experience over the past 40+ years as a car dealer is that 99.9% of my customers are good people who I can believe and trust. Those are pretty good odds and I just assume that every customer I am dealing with is part of that 99.9%. Once in a great while I get burned, but the loss from that one in a thousand that takes advantage is far out-weighted by the other 999 who respond positively to my trusting them and treating them with respect.

Translating Misleading Car Ads

In previous columns 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 PROBLEMS 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 ACCEPTABLE 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.

Are You Buying an Unsafe Used Car?

This is a quote from an investigative reporting article in today’s (8-04-14) Wall Street Journal: 

"In 2010, U.S. regulators began investigating fires in Jeep Sports-utility vehicles. The probe eventually tied at least 51 deaths to fuel tanks that ignited in rear-end crashes. Chrysler Group LLC said the SUVs were safe but agreed a year ago to recall and repair 1.6 million Jeep Cherokees and Libertys. Almost none of them have been fixed.”

This kind of thing with recalled vehicles is not uncommon. In my 46 years as a car dealer I've observed that recalled vehicles often are either never fixed or, if they are, much later than they should be. There are lots of reasons for this. This WSJ article focused on NHTSA, the National Highway and Traffic Safety Administration. NHTSA is a typical government bureaucratic agency with a chairman who is politically appointed by the President. I've seen some real “idiots” in charge of NHTSA since they came into existence in 1970. The bottom-line is that NHTSA is just plain inefficient and often times politically motivated. This isn't the fault of the rank and file in NHTSA; it’s the fault of the higher ups. The higher up the organizational ladder you climb in any government bureaucracy, the more “political” things get. I've dealt with dedicated NHTSA members at the lower levels who are smart, competent, and genuinely concerned about your safety in the cars you drive. But they will tell you that it’s often very hard to get things done at NHTSA. In the executive suite at NHTSA, it’s not always about safety, but about politics.

The auto manufacturers are also to blame for the inefficiency of safety recalls. Recalls cost auto manufacturers billions of dollars. Look at the current GM recall because of ignitions that accidentally turn off, deactivating the airbags. This is the largest recall in history and the cost is currently at $3.48 billion for 17.3 million vehicles. It’s already been established that GM knew about this dangerous product defect ten years ago and the Justice department says they deliberately covered it up! Now that it’s been made public, what makes you think GM want to rush things?

Auto manufacturers do a very poor job of keeping track of who owns and drives their cars after the dealer sells them. The dealer is supposed to report the contact information on every new car sale, but this information is often incorrect and sometimes purposely falsified. Why would a car dealer falsify information on the buyer? Huge pressure, often financial, is put on car dealers by manufacturers to maintain high customer satisfaction scores. It’s not uncommon for a car dealer to change the contact information so that the car buyer does not receive an email, letter, or phone call surveying his level of customer satisfaction. Also, car dealers will report cars sold to fictitious people to collect cash incentives from the manufacturers. Sometimes they will also title the cars in the names of rental and leasing companies, but the car is actually still on the dealer’s lot. The car is sold later as a used car, “demo” or “executive car”, but the manufacturer has no record of the real owner and driver. Clearly recall notices never reach the real drivers of these vehicles.

The average person trades in her new car between four and five years. But many trade their cars every 3 years or even less. More often than not, they trade one make in for another. A Chevrolet dealer is not familiar with recalls on Hondas or Fords and probably won’t know if there is a recall on those cars unless he checks the NHTSA database on recalled cars. When a car dealer trades in a car, his primary focus is to get that car reconditioned, detailed and on his used car lot for sale. If it is not a used car he wants to retail, he wants to sell it to another dealer or at the wholesale auction ASAP. Dealers have a lot of cash tied up in the used cars they trade in. It’s very important for them to turn them into cash as quickly as possible. What all of this means is that checking the NHTSA database for recalls on every used car a dealer trades in takes time. It not only takes time to do the research, but it takes time to fix, especially when he has to take the car to another dealer to fix. A dealer is not allowed to perform a recall fix on cars other than the make he is franchised to sell. A non-franchised used car dealer has to take every car to another dealer for recall fixes. New York is the only state that I know of that requires dealers to verify that all recalls have been performed on before he sells it. Florida does not have such a law.

Many owners of cars that are recalled just don’t bring them in to be fixed. It’s very common for car dealers not to have the necessary parts available to perform a recall. Manufacturers also often don’t inventory enough parts to supply for a recall. It can take months before there are enough parts. Dealers also don’t always prioritize recalls because they make more money on regular maintenance and repairs. Car owners procrastinate on bringing their car in because they will be without their car for a day or even longer. Twenty-five percent of owners who actually do receive a recall notice never bring in their car. 

Before you buy a used car, or even a new car, be sure that you find out if there was a recall. You can do this yourself with the VIN, vehicle identification number, and going to www.Recalls.gov. Or you can ask the dealer who’s franchised to sell your make of car to do this for you. Of course, if you've already bought a used car, you should also check. It might save your life.

I DARE Car Dealers to Answer Just One Question about their Dealer Fee:

Why don’t you include the profit you make on your dealer fee in the price of the car you quote to your customer? 

If you will answer this question truthfully then I pledge never to raise the issue of the dealer fee again.

The reason that I do hear from car dealers and the Florida Auto Dealers Association, FADA, as to why most car dealers charge a dealer fee is that it’s an “economic necessity”. Dealer margins are so low, the economy is so bad, and the car buyers are so armed with information on dealers’ costs and profit margins via the Internet that dealers need the extra profit they make from their dealer fees. OK, I’ll give you the benefit of the doubt and stipulate that this is a fact. I won’t even argue that I don’t charge a dealer fee and have been profitable for many years and even thrived through the Great Recession years.

Don’t add the dealer fee to the price if the car after the customer commits to buy at a lower price. Don’t hide the amount of your dealer fee in the fine print. Don’t tell the customer that the price is “plus tax, tag, and ‘fees’” fooling her into believing “fees” are state, federal, or local taxes. Don’t tell the customer that “all dealers charge a dealer fee” which you know to be untrue. Don’t tell her that the law requires that you must charge her the dealer fee because you charge others, which you also know to be untrue. Don’t tell the customer that the dealer fee is not a profit but expenses that you must recoup like doc fees, preparing the car for delivery, and administrative costs. When you went to school you should have learned in Economics 101 that the definition of profit is “the difference between the selling price of a cost or service and its total costs”. Besides, you don’t even pay to prepare your new cars for delivery because you are reimbursed by the manufacturer and you are not allowed by law to charge doc fees.

When I ask car dealers or FADA officials this question they always give me the same answer…Hamma, Hamma, Hamma, just like Ralph Kramden of the Honeymooners. You know what I mean…”the deer caught in the headlights” or the politician on “Meet the Press” when the moderator shows the video of something the politician said on camera two weeks ago that directly contradicts something he just said.

OK car dealers and FADA, if I’m wrong about this, here’s your chance to shut me up about the dealer fee forever. All you have to do is give me a truthful answer to this question. Why don’t you include the profit you make on your dealer fee in the price of the car you quote to your customers?

“Come Into my Parlor” Said the Spider to the Fly

Some readers will say, “There Earl goes again, tarnishing the name of car dealers. Why doesn’t he just focus on his own dealership and not run down his competition?” I’ll answer that. I’m 73 years old and have been a car dealer since 1968. I have 3 sons active in the business who will take it over one day. I also have 5 grandchildren who may decide to come into the business. My main purpose in what I do as a consumer advocate (aka “tarnishing the name of car dealers”) is to light a fire that will spread and, one day, raise the (very low) level of respect the public currently has for my lifelong profession. My wife, Nancy, is my teammate in this quest. Our dealership’s stated company purpose is: To make the car buying and servicing experiences pleasurable ones for our customers. In doing so, and leading by example, we will bring integrity and respectability to the image of car dealers everywhere.”

Though some say so, I don’t believe all car dealers are evil or even unethical any more than I believe that all lawyers or all politicians are. These three professions have something in common. They are all ranked at the bottom of the annual Gallup poll on “Honesty and Ethics in Professions.”

I have many friends who are car dealers, lawyers, and politicians that I respect and trust greatly. They feel the same way about their profession as I, and many endeavor, as I, to raise the level of public trust for what they do for a living. The Florida Bar Association regularly fines, suspends, and disbars lawyers who violate their code of ethics or the law. Similarly, the US Congress and Florida Legislature have internal codes of ethics which are enforced. Unfortunately, the National Auto Dealers Association (NADA) has a code of ethics, but with no enforcement. The Florida Auto Dealers Association (FADA) has no code of ethics or internal enforcement of any kind. I’ve been asking and working with the leadership of FADA for years to change this, but they can’t get the approval of their dealers.

I believe time is running out for NADA, FADA, and all car dealers to accept the fact that we have too many rotten apples in our barrel. The consumer of the 21st Century’s intelligence, education, and awareness has exponentially increased in the past 20 years, largely due to the Internet as a source of knowledge and instantaneous, universal communication via the social medial. Tesla has begun to sell cars directly, by-passing the dealer. My sons and I visited the Tesla showroom in Boca Raton on July 2nd and what a refreshing and amazingly satisfying experience! The sales person was very well informed, pleasant, and there was absolutely no pressure to buy a car. We were given bottom-line prices on all the models. If ordered a car there was no deposit required and we could change our mind at any time before we took delivery.

The car dealers and their associations are vigorously fighting against the right of Tesla to sell their cars directly, bypassing the car dealer. The NADA and state dealer associations are very powerful and have been politically successful so far. Only a few states are allowing Tesla to sell directly to the public. But the public is overwhelmingly behind Elon Musk and Tesla and over 95% of Americans would rather buy their cars directly from the manufacturer. You would think that this would send a “message” to car dealers and car manufacturers. I’m not a big advocate of the Tesla product because I don’t think all electric cars will be the answer for long, long time. But I am an advocate of the way Tesla factory stores sell their cars with total courtesy, respect, honesty, and transparency.

I think it’s only a matter of time before GM, Ford, Toyota and all of the auto manufacturers start thinking about doing the same thing that Tesla is trying to do…eliminate the car dealer and go direct. This is what Apple has done so successfully and, in a fashion, so does Amazon. The only thing stopping this from happening today is the lobbying, political power of car dealers and their national and state associations. But this can only buy them time. Ultimately, it’s the American public that runs things in the USA. The politicians need the car dealers’ money to get elected, granted. But ultimately it’s the voters who elect them and allow them to stay in office. The voters are almost all car buyers and almost all of the car buyers would rather buy directly from a manufacturer in the Tesla way of doing business than from their local car dealer.

The car dealers still have time to get their act together…maybe even 10 or 15 years, but they better get started right away. They have a whole lot to change and way too many “rotten apples” in their barrel.

A TRUE, Typical Story of the Fear of Car Buying

A TRUE, TYPICAL STORY

OF THE FEAR OF CAR BUYING

Below, you can read the Facebook exchange between a young widow from Arizona and me. She contacted me to help her buy a car. I chose to write this article about her request, because her fear of car buying is so typical, epidemic in the USA. The annual Gallup poll on Ethics and Honesty in Professions, always lists car dealers last or next to last. Many people would prefer to experience a root canal at their dentist than buy a car from their dealer. Those victimized the most are the very young, elderly, less educated, overly trusting, and the English language impaired.

I chose to make this young woman’s fear of car buying and my proposed solution the subject of this blog because it is so typical of so many, but who are afraid to speak out and ask for help. With her permission, I will follow up later with what actually happened when she followed my advice to use www.TrueCar.com to buy her car.

I’ve advocated this online buying service for several years. In full disclosure, I’m a TrueCar dealer, a member of TrueCar’s national dealer council, and a stockholder in this company. TrueCar is the best, safest way for you to buy a car. When you buy from a TrueCar dealer, he is contractually obligated to follow strict ethical guidelines. The dealer quotes you his best price on the car of your choice, knowing that you are free to shop and compare that price with other dealers. TrueCar also monitors the prices of their dealers. They can accurately do so because a condition of TrueCar membership is that the dealer must allow TrueCar direct access to his financial data via his computer system. TrueCar knows what price he quoted you and what price they actually sold it to you for. TrueCar also knows what prices other dealers are selling cars for and whether these prices are low, average, or high. Not all TrueCar dealers abide by the rules, but, if they don’t, TrueCar will drop them from their dealer network. TrueCar prints their phone number on the price certificate you receive from them, 888 TRUE CAR (888 878-3227). For Spanish, it is 888 256-5461.

This is my Facebook dialog with the young widow from Arizona:

Melinda Nina Wood Nelson:

Can I hire you to help me to lease a car :) I am a widow. My husband died Sept 2001. I bought a brand new Ford Expedition off the show floor and paid over $40,000+..I got taken because I had never bought a new car before. In the 1st week an elderly 82 yr. old man took out the passenger side in a Walmart parking lot. He had no insurance. the 3rd year, a woman ran a red light and completely totaled the truck leaving the Vets office after doing an animal rescue and nearly killed me. Again, she was from Mexico and had no insurance. Doing my homework and research I fought with the insurance company and got a decent value to buy another vehicle but still lost tons of money on the lot value at purchase and went without a car for nearly 4 months (had to rent). In 2008 I bought a used 2003 Navigator from A dealership in Scottsdale, It was mechanically totaled in the 2nd year, after $4000 in repairs I traded it in to the same dealership for $11,000 in 2010 for a 2010 slightly used Chrysler 300 for $17000. The total price I ended up paying for the 300 after my trade deduction was...$29,000 including interest at 14% I still have this car and I am still paying it off at $360.oo a month and still owe almost $11,000. I needed a big SUV because I do animal rescue and have to have large kennels for transport so I bought a 2005 navigator less than a year ago in cash and paid over $250 to have it professionally inspected by a licensed mechanic and test driven. I was given the go ahead to buy the vehicle as 98 out of 100 % mechanically sound. In less than a year I am now looking at a $4300 repair bill to keep it running and with a/c with a very near future repair coming possible transmission. The Fletcher's mechanic recommended I Trade it in while it is still running and filled a/c fluid for cold air. My fear is getting taken at a dealership, yet again. I am all most out of money and sick of dealing with car issues and slimy criminal mechanics who charge too much and do not even do anything but make things worse. I have to date lost nearly $60,000 in car loss. I am a good, honest person who saves animals through my rescue. I need a lil karma from my Karma savings account :) Will you please help. I can pay you $100 an hour for up to 3 hours by phone (if a dealer can even finish a deal in that time...doubtful). What do you say...wanna be my gun for hire. To get a feel for who I am please go to my Facebook pages at, Starbarks Pet Rescue or my personal page, Melinda Nina Wood Nelson. Thank you for taking the time to read my very long message Sir. Have a great day.

Earl Stewart:

Melinda, I won't accept payment but I would be happy to help you lease the car of your choice at a fair price. I suggest you go to www.TrueCar.com. Choose the exact car you want and you will be given 3 dealers with the best prices. Contact the dealer of your choice but don't sign anything until you call me, cell phone 561 358-1474. I will advise you at no charge if it is a good deal and, if not advise you what to do.

Melinda Nina Wood Nelson:

You are wonderful. Thank you, I will do that. It is hard to admit fault but I am honest and can admit my weakness...car buying

Earl Stewart

Good morning, Melinda. You’re very welcome and don’t feel bad about admitting your difficulty buying a car. Most people have the same difficulty, and it’s not your or their fault; it’s the anachronistic, unethical and often illegal way most car dealers sell cars today. I would like to ask a favor of you. I write a weekly blog, advising car buyers just as I am advising you now. May I use our Facebook dialog in my blog, www.EarlStewartOnCars.com this week? If you prefer, I could redact your name. Please let me know this morning, if possible. Because your situation is so typical, I believe your real life story would greatly benefit many others. If you agree, we can follow up next week with how you fared followed my advice. Thanks very much. :)

Melinda Nina Wood Nelson

yes, you may use my name and my message. I appreciate all you do for folks like me. Thank you :)

When I hear back from Melinda as to how her TrueCar purchase experience went, I will relate it to you in an upcoming column.

Unsafe Auto Repair Body Parts Mandated by Your Insurance Company?

I can hardly believe that what I’m writing is true but it really is! If you damage your car in an accident, your insurance company will often specify that the body shop repairing it use crash parts (fenders, bumpers, hoods, etc.) that have never been safety tested and approved by the US government. These are cheap parts, not made by your auto’s manufacturer, usually made in China referred to as “aftermarket parts”. The insurance companies specify these simply to minimize their cost of repairing your car.

I've written other articles on this. I've talked about it on my radio show. I’m participating in a class action suit against insurance companies for this practice. I've contacted Jeff Atwater, the Florida CFO, who presides over the Department of Insurance and reported this practice to them. I've filed a complaint with NHTSA, the National Highway Traffic Safety Association. I've contacted reporters from the newspapers and TV. But so far, I've been unable to get anybody to do anything about it. .

Federal law clearly states that all parts used for body repair of vehicles must be at least as safe as the parts made by the original equipment manufacturer (OEM). The Federal Code actually states that we may not alter or make inoperative a device or element of design that is in compliance with an applicable safety standard. My contention is that using untested, non-OEM parts is altering the design of the vehicle……

Title 49, Chapter 301 Sub-chapter II Sec. 30122 "Making Safety Devices and Elements Inoperative"

a. DEFINITION In this section, "motor vehicle repair business" means a person holding itself out to the public to repair for compensation a motor vehicle or motor vehicle equipment.

b. PROHIBITION A manufacturer, distributor, dealer, or motor vehicle repair business may not knowingly make inoperative any part of a device or element of design installed on or in a motor vehicle or motor vehicle equipment in compliance with an applicable motor vehicle safety standard prescribed under this chapter unless the manufacturer, distributor, dealer, or repair business reasonably believes the vehicle or equipment will not be used (except for testing or a similar purpose during maintenance or repair) when the device or element is inoperative.

A hood, fender, or bumper that has never been subjected to, and passed, federal crash tests is highly likely to make an airbag “inoperative” as one example. This is why I’m so amazed that NHTSA, the Florida Office of Insurance Regulation, the media, or SOMEBODY hasn't taken any action against any insurance company when they consistently, flagrantly are breaking the law!

All I can do is what I’m doing. I’ll continue to write about it, talk about it, tell the media about it, and pursue my lawsuits. I sometimes feel like one of these crazy conspiracy theorists. I don’t think I’m crazy. If I am crazy, I wish someone would address this and take the necessary steps to get me psychological help. If I’m libeling or slandering insurance companies, I invite them to sue me. If you’re reading this article, I would really appreciate hearing your opinion on why no regulators, federal or state, have taken any action against the insurance companies for breaking the law and endangering the lives of millions of Americans. I also implore you to ask your federal and state legislators this question.

If you've been in an auto accident and had your collision repair paid for by an insurance company, there’s a very good probability that crash parts used were not OEM and never safety tested. If you are involved in an accident in the future, I advise you to insist on OEM parts. If your insurance company refuses, ask them to show you documented evidence that the parts they are recommending have passed federal crash test standards.

Beware of Car Dealer Direct Mail Advertising

Of course, you should be careful of all advertising…newspaper, TV, and radio, but direct mail can be especially deceptive. The reason this is so is because direct mail usually “flies beneath the radar” of the regulators. There are so many ads in violation of rules and laws that the regulators are overwhelmed. They focus on the most visible ads, often the ones that they see themselves in the newspaper or on TV. Direct mail represents a very small percent of total advertising. One reason for this is that it is considered by many advertising agencies to be too expensive and relatively ineffective. I believe that the only way to make direct mail effective for many advertisers is to use deception.

I have a couple of direct mail pieces on my desk and will cite some examples of this deception. “We’ll will buy back your present vehicle for up to $5,000 over current Kelly Blue Book Value on trade towards the purchase of a Brand New Toyota or Pre-Owned model.***” The asterisk is for the very fine print disclosure on the back of the letter which reads: On select models. Discounts and rebates will vary from model to model. Of course, with the two words “up to” in front of the $5,000, no disclosure is really necessary. Buying back your present vehicle for $1 over current Kelly Blue Book Value is technically “up to”$5,000.

Attached to the letter is a something that looks like a check made payable to the recipient for $8,207. Here we go again with the “up to”. “You can apply this registered voucher for a discount ‘up to’ $8,207 off MSRP on a new Toyota.” Of course there is another asterisk which states “on select models”.

But there’s more! “Just for attending this event, you will receive 5 “golden” $1 coins as a gift, and you may have won $100, $250, $50, or possibly even $4,500 cash!” We, of course, have another asterisk which says that your odds of winning anything are 1 in 25,000. I often wonder who responds to these ads, not understanding the difference between a “golden coin” and a gold coin. Or, who really think they have a reasonable chance to win anything.

It’s not over yet! “Every application for credit will be immediately submitted and processed for approval and on-the-spot delivery REGARDLESS OF PAST CREDIT HISTORY”. Of course, the operating key word here is “submitted”. There is no guarantee of “approval”. They will simply “submit” you application to the bank and if you have bad credit, the back will reject your application.

“During this weekend event, any new Toyota or used vehicle could be purchase with ZERO cash down!” The key word here is “could” instead of “can”. Of course, there is the old asterisk, which, if you can find and then read the fine print, it says with approved credit. You have to a very high Beacon score to buy a new or used car with zero down payment. Less than 1% of car buyers would have this high a Beacon score. There is also a phrase which says “CASH DOWN IS NOT SUGGESTED”. This dealer might not suggest it but I can almost guarantee the bank will not only suggest it but demand it.

“Due to overwhelming response and customer request, I would like to again offer you a personal invitation to receive 80% of base original MSRP for the car you are currently driving.” This promise doesn’t even have an asterisk. Of course the base MSRP excludes accessories. Sometimes an offer is so ridiculous that you wonder who would ever believe it. Ask yourself how any car dealer could promise to pay 80% of the new base MSRP on a used car that they have never seen. They don’t know how many miles are on the car, whether it has been wrecked, or even if the car will still run.

A customer recently sent me another direct mail scam from a local Honda dealer that I have to admit is pretty ingenious (albeit completely unethical). It is designed to look like an email sent from the dealership’s general manager to one of the sales managers and printed out. The "email" says:

Al,

I wasn’t able to get any pre-owned cars from the auction. Get in touch with and offer them up to $6,006¹ for their 2004 Honda Civic.

I NEED IT!

If you didn’t already, you may just want to print this email and send it to again. I will honor this offer through June 30, 2014.

Thanks,

Casey

The printed “email” has a "handwritten" note on it that says “I tried calling you about this email from my general manager. If you’re interested, call me at 866…). This, of course, is a mass produced direct mail solicitation intended to fool customers into believing the general manager is personally interested in their particular vehicle. As in all direct mail scams, the fine print negates the offer. In this case, the fine print stipulates a $.40 per mileage deduction, a deduction for the cost of reconditioning, among other disqualifying requirements.

click to enlarge

Direct mail claims like those above, unfortunately do work. People actually come in and buy cars. Unfortunately these ads prey on those who are uneducated, have difficulty reading English, or are simply gullible. My advice is to ignore all car dealers’ direct mail solicitations. I’m not saying that 100% are phonies, but 99% are and the odds are so overwhelming, you’re better safe than sorry.

Undercover Car Dealer

You may have seen episodes of the very popular reality TV show, “Undercover Boss”. If not, the premise for this show is that the CEO’s of companies disguise themselves as “just another employee” and infiltrate their own company. Their purpose is to learn what is really going on when their employees think “no one is looking”.

What these bosses find out is often surprising, shocking and always very entertaining. Undercover bosses find, not only very bad employee behavior, but also very good. Of course they fire the bad employees and handsomely reward the good ones. In a recent episode, the CEO of “Menchie’s Frozen Yogurt”, Amit Kleinberger, bought one good employee a new car. He paid for the college education of another. He fired a third employee who was doing “terrible things” which hurt his company’s reputation with their customers. Of course, the CEO’s must disguise themselves so that they aren’t recognized.

I’ve never gone undercover in my own car dealership, but I regularly do the next best thing. I hire people to mystery shop my company. I would do it myself, but I have only 148 employees and they know me too well not to recognize me even in disguise. Going undercover or using others to infiltrate your company is the only surefire way a boss can really know what’s going on within his business. You’ve heard the expressions, “When the cats away, the mice will play” and “Don’t tell me what you think I want to hear; tell me the truth.”

I know that a lot of car dealers, owners and general managers, read this column and my blog. “Mr. Car Dealer...This one is for you.” If you’re the owner or general manager of a car dealership in South Florida, you probably don’t like me very much. For seven years I did a live radio show with my wife, Nancy, which was critical of many car dealers. In fact, I mystery shopped your dealerships and told our radio audience what happened…the good, the bad, and the ugly. I also write about your dealerships in this column and my blog. I wrote a book about your shenanigans, “Confessions of a Recovering Car Dealer.”

I believe in giving anybody the benefit of the doubt. I know that car dealers can be like any businessman and have things go on inside their businesses of which they are unaware. Therefore, I’m suggesting that car dealers that think my allegations are totally unsubstantiated and untrue go find out for themselves. Send in a mystery shopper to find out what really happens when a prospective customer or a current customer comes in to buy a car or have their car serviced. Right now all a car dealer knows is what his managers and reports tell him. Nobody likes to “tell the boss what he doesn’t want to hear”. Customer satisfaction surveys are very easy to manipulate. Most customers are surveyed by email and car dealers will “accidentally” get the wrong email address for an angry customer or reward a customer with a free tank of gas for a good survey.

Some CEO’s of larger dealerships like the Penske Automotive Group, AutoNation, and even the Ed Morse Auto Group could actually go undercover just like in the TV series, Undercover Boss. Roger Penske, Mike Jackson, and Ted Morse could disguise themselves and find out what’s really going on “behind closed doors’. I guarantee Roger, Mike, and Ted that they will be shocked and surprised at how some of their employees are treating their customers. How can I be so sure of that? It’s because I’ve mystery shopped dealerships run by each of these CEO’s. I regularly shop my competition to keep a competitive edge just like I shop my own company to find out what’s really happening. By the way, Roger, Mike, and Ted, once your employees find out that you are mystery shopping them, it has a deterrent effect. That employee who may be inclined to take advantage of a customer will be more reluctant knowing he might be his boss or an agent for his boss.

You Get What You Pay For (Car Dealers & All Companies)

I know you’ve heard the expression, “You get what you pay for.” It’s often used to justify paying more for a quality product or service because the real cheap products can’t measure up. “That steak was tough and tasted terrible!” “Well, what did you expect for $3.99?” I’m thinking of another meaning for “You get what you pay for.”

Virtually all companies, private and public, pay their employees in some form to motivate those employees to maximize the profits of the company. Obviously, all employees are not paid directly on commission in all companies. There are those that are paid set hourly, weekly, or monthly wage. But, indirectly, even those hourly and salaried employees’ compensation is correlated directly to profits. This is because the supervisors’ (the ones that that hire, fire, and set the pay level of hourly and salaried employees) compensation is tied to profits.

General Motors is in the news now and probably will be for quite some time. You can’t avoid the news story of GM’s massive recall of cars with defective ignition systems which deactivated airbags causing at least 15 deaths and thousands of injuries. The amazing thing about this terrible and seemingly obvious defect is that it existed for 11 years without anybody raising the safety issue. Investigations have shown that there were several GM employees that knew about the defect, including high level engineers. Fifteen employees have been terminated and the US Justice Department is conducting a criminal investigation. Logic defies one to believe that only 15 employees are guilty. I believe that hundreds knew about this problem.

I posted the following on Facebook last Saturday:

“I listened to Mary Barra's address last Thursday and was struck by this thought. What if Mary Barra was a car dealer, not the CEO of GM, and she was giving this address to the employees of her dealership. Finally, what if the subject of her address was not "safety", but customer satisfaction? If you take the time to listen to this entire speech and mentally substitute "customer satisfaction" for safety, it sends a very important message that all car dealers should take to heart. Unfair and deceptive advertising and sales practices are as embedded in the culture of most car dealerships, as building unsafe cars was in GM.”

This posting let me to think about what caused this disaster at General Motors and is the subject of this column. The cause in just two words is “Pay Plans”. General Motors and all companies whose purpose is to make profits design their pay plans to maximize just one thing…profit. The cost of auto recalls is very high, in the millions and even billions of dollars. GM has just come out of bankruptcy and it’s not inconceivable that this series of recalls could put them right back into bankruptcy. It’s also not inconceivable that GM managers can end up in prison. As you know, the number one instinct of all animals, including humans, is survival. When a GM engineer or any employee thinks he or she may lose their job if they “blow the whistle” on something, they usually won’t. In fact, the higher-ups in the management ladder have a saying, “I don’t want to know about this”. When it “hits the fan,” upper management wants deniability.

There are few companies that have a higher percentage of commissioned employees than car dealers. You know that virtually all car sales people are on straight commission based on how big a profit they make when they sell you a car. But did you know that he mechanic that fixes your car is also paid on straight commission based on how much you are charged for maintenance or repairs? Of course the service advisor who greets you in the service drive and “advises” you on what you need to have done is also commissioned. The service manager, who is in charge the entire department, is also on commission. The same thing applies to all the other departments of a car dealership…the body shop, parts department, and the Finance department.

You should be beginning to understand that the only protection you have against being overcharged at a car dealership is the inherent moral integrity of the person you are dealing with and his supervisor. That car salesman’s livelihood depends on the size of his weekly or monthly paycheck. That paycheck depends on how big a profit he makes on each car he sells. He probably has a family to support and he has to put food on the table, make monthly mortgage payments, and provide healthcare for his family and an education for his kids. As I stated earlier, survival is our most basic instinct. Given all of this, what are your odds of getting the lowest price on that new or used car you’re trying to buy?

This same principal applies to the car dealer advertisements you see. Survival dictates that every car dealer outsells his competition; it’s what drives bait and switch sales tactics in which dealers try to get you to buy a higher priced car than the advertised car. A lot of these advertisements and sales practices are actually illegal. Oftentimes, the actual sales person doesn’t even know or understand this. The guilt usually lies with the managers who design the advertising and the sales systems. Just as in other companies, the higher up the management ladder you go, the “less anybody knows” about anything illegal or unethical. Usually the owner or General Manager has total “deniability” that he or she had any idea that anything wrong was going on. This is because they don’t want to know.

What can we do about this sad state of affairs? Please understand that I’m a businessman and my dealership makes a profit. I’m a capitalist and I believe making profits is a good thing. I only have a problem with this when making a profit is not in the best interest of our society and when ethics and morals are compromised to make it. Crime can be very profitable but nobody advocates crime except criminals. My solution to change the way businesses treat their customers is to introduce different pay plans than those prevalent today which reward on pure profit. Incentives should be based on employees’ actions that promote customers satisfaction, safety, quality, integrity, courtesy, and ethics. This won’t be easy because they’re not as easy to measure as profits. However, the beauty of this compensation plan will be having most of your employees working hard to accomplish these objectives. The profits will follow because customers will want to do business with your company.

Unfortunately, too many companies out there really don't get it and have pay plans that set up conflicts of interest between their employees and their customers. These conflicts of interest will always tempt employees to cross boundaries of honesty and ethics. So, when looking for companies to do business with, remember to consider attributes of integrity because you will typically get exactly what you paid for.

Google Can Be Your Best Friend If Your Mechanic Can’t Fix Your Car

Most everyone has encountered a problem with their car that baffled the dealer’s service department or your own mechanic. One of the most frustrating things we encounter with car problems is being told “We are unable to reproduce or experience the problem you’ve described.” Another favorite of car dealers' service departments is “That condition is normal for this model car.” With the former, the implication is “you’re imagining this nonexistent problem.” With the latter, they are telling you that just because this manufacturer built a model that’s defective, you had better learn to live with it because they all are defective! In both of these situations, you are often told, we’ve had no complaints like this from anyone else.

Now, this is when you go to Google! If you are one of the few people who has refused to join the “cyber world” and are not computer savvy, just check with a younger friend, your children or grandchildren because they are. Type into Google, in your own words, what the condition is with your car and the exact year make and model. For example, “2014 Mustang rust”. The reason I chose this subject is that an owner of new Mustang called me last Saturday for advice on what do because is car was rusting badly and it had only about 800 miles on it. The dealer told him that all of them rust just like that and offered to paint over the rust. He Googled his problem and found out that lots of Mustang owners were complaining about the same thing. He has contacted Ford directly and they are calling him today about replacing his Mustang with another model that doesn’t rust.

The wonderful thing about the “social media revolution” on the Internet is that everybody now has an amazing and easy way to share their stories of happiness and woe. We can hop on Facebook, Twitter, Instagram, Myspace, or any of dozens of others. Google finds all of your comments and groups them together by subject. In my opinion Google should be recognized as one of the greatest inventions in the history of the World. It rivals the printing press, fire and splitting the atom. Google has become a part of our brains. Today, if you don’t have the answer to something, Google does because Google can instantly recall the answer to every question for which there is an answer. You can open Google on your smartphone and ask (voice recognition) or type, “How old is Brad Pitt or who won the Heat game last night?” But you can also find out if somebody else with a new Mustang is having rust problems.

You will be amazed how many people have experienced the same problem that you have with your car! In some cases you will find out that they found a solution to their problem, either with their mechanic or with the manufacturer. You might find out that the manufacturer even agreed to pay for the repair. In some serious cases you might find out that the manufacturer bought back the car or paid you money so that you could trade your old car back in for another car without losing any money from depreciation.

I’ve written a column about TSB’s which are “Technical Service Bulletins” issued by auto manufacturers to their dealers. These are not made public and there are so many issued that too often, even the dealers don’t know about them. You probably have read the negative publicity about GM cars with the faulty ignition systems. There are millions of these on the roads and if you have too many keys hanging on your key chain, dangling from your ignition, the engine can turn off suddenly right in traffic! With no power, your airbag is deactivated. My point is that GM issued TSB’s on this issue years ago, but very few people outside of GM and some of their dealers knew about them. Why nobody, even GM engineers, understood that airbags won’t deploy with the car’s engine turned off, we may never understand. If more people had “Googled this like the NHTSA, it may have dawned on somebody sooner and a lot of lives might have been saved.

OK, let’s assume that you’ve just Googled your problem with your car that your dealer told you they had never heard of before. Or, they may have told you that they were unable to duplicate your problem (aka, you’re nuts!). And, of course, there’s the absurd explanation that that your car’s problem exists with all cars of that particular year-make-model and this somehow makes it OK. When you contact your mechanic or dealer service department you can show and tell them how many others have experienced the exact same problem with the exact same car you own. You may even be able to give them the number of the TSB that the manufacturer issued telling the dealer how to fix it. You might learn that the manufacturer has paid for these repairs out of warranty (called goodwill). Your chances of winning an argument with the mechanic or dealer are greatly increased and you may even be doing them a favor by telling them something they didn’t know.

If I was the director of the National Highway Traffic Safety Associations, I would have a “Google Division” that would tap all of the social media for comments, complaints, and suggestions from car owners about their cars.