Open Letter to Governor Rick Scott

Dear Rick,

Please excuse this public form of communication, but I chose it because my message is urgent and I believe it will get your attention faster than going through the normal, bureaucratic channels.

Florida has no law requiring car dealers to disclose national safety recalls on used cars sold to their customers. This has always been bad, but in light of the unprecedented Takata air-bag inflator recall (currently affecting 75 million vehicles in the U.S. and rising), it should be mandatory for all licensed Florida automobile dealers to fully disclose to their customers when a defective Takata airbag is installed in the vehicle they are selling.

I’ve communicated my position directly to the Florida Automobile Dealers Association, and they are aware of this serious omission in Florida’s laws. Unfortunately, legislative action, as you well know, is always a slow process if it ever happens at all. What is required in this case is an emergency executive action by you, the governor of the state of Florida.

I can assure you  that very few Florida automobile dealers are voluntarily disclosing safety recalls affecting the used cars they sell.  As I write this letter, there are Floridians unknowingly buying cars with defective Takata airbag inflators that could possibly explode on impact, firing metal shrapnel into their bodies. There have already been several deaths across the country attributed to these faulty inflators.

It is a certainty that nearly all car dealers in our state have vehicles in their current inventories with these defective airbags and other safety recalls. I have identified sixteen in my used vehicle inventory that are affected. It’s a simple matter to identify these vehicles by entering the VIN online at the NHTSA website, http://www.nhtsa.gov/Vehicle+Safety/Recalls+&+Defects.

The sad fact is that most dealers don’t check these vehicles for recalls because it takes time to have the recalls performed and “time is money”. Recalls can only be performed by franchised new car dealers of the make that is recalled. Franchised car dealers prioritize recalls for their inventory cars and for their customers’ cars. They are also dealing with long waiting lists of these cars awaiting the requisite parts. With the Takata airbag inflator recall, the wait time is about about a year because of the lack of availability of parts. No car dealer is going to let a used car sit on his or her lot for a year!

Sadly, another reason safety recalls are not being disclosed to customers is fear of loss of profit. As it should, telling a customer that they are buying a used car with a potentially deadly defective airbag reduces the value of that vehicle - especially when the customer learns he or she must drive that car for a year before a safe airbag can be installed. 

Because disclosure negatively impacts the affected vehicles' values, car dealers are caught between a rock and a hard place. If they retail the cars to customers, they have to slash the selling price and if they sell them at the wholesale auction they have the same problem. Florida consumers will also be adversely affected, as car dealers will not be able to offer as much money for trade-ins under this recall since the dealer knows he or she can’t resell it for as much as they could with a safe airbag.

This presents an entirely new and different problem…an economic liability question. Everyone agrees that Takata is largely responsible for the reduction in value of the 75,000,000 vehicles with dangerous airbags. However, Takata is rumored to be on the verge of bankruptcy and/or selling out. This leaves the auto manufacturers with, potentially, all of the liability. The only parties that clearly have no responsibility in this are the owners of these affected cars and the dealers who disclose the defective airbags. Unfortunately, these are the only two parties that currently bear all of the economic loss.

Adding to the urgency of this crisis is the fact that the failure rate of Takata airbags is higher in Florida than most other states because of our high humidity which increases the risk of the airbag accelerant, ammonium nitrate, exploding. Furthermore, many of the cars recalled are older models, dating back to 2004 that have been on the highways for many years, and age is also a contributing factor to risk.

Rick, if you have any questions or comments about this letter, please call me on my personal cell phone, 561-358-1474. If you would like to meet with me, I will fly to Tallahassee on a moment's notice.

Best,

Earl

Car Salespersons' Six Deadly Sins

The internationally renowned research and polling company, J.D. Power, LLC, conducts annual surveys of U.S. car buyers to learn what motivates them to buy from one particular car dealer rather than another. The surveys reveal six most common reasons that car buyers choose not to buy from a car dealer.

Surprisingly 49% of people who buy cars, buy from the first dealership they visit. This is a shocking statistic to me because it means that a lot of car buyers are not getting competitive prices from several dealers. This means that they overpaid for their vehicles. Of the 51% of those car buyers who shopped more than one car dealership before buying, 21% bought the same make car from another dealer than the first one they visited for six reasons. I’ve labeled these “The Six Deadly Sins of Car Salesmen”.

(1) Thou shalt not be rude to thy customer. In schools for sales people, no matter what you’re selling, you’d think this would be full explained. How could a salesman expect to make a sale after insulting the prospective customer? But, apparently it happens often. One of the most common offenses is male chauvinist car salesmen referring to female customers as “honey”, “sweetie pie” or other demeaning terms, and even telling them to go home and come back with their husbands!

(2) Thou shalt not be dishonest with thy customer. Of course this applies only to the salesmen who are “caught’ being dishonest.

(3) Thou shalt be knowledgeable about thy product. Today’s automobile is a highly complex, very sophisticated computerized machine. Buyers look to the sales person for answers to their questions. Buyers rightfully assume that, if the salesman can’t even show them how the navigation system works or tell them what the city gas mileage is, why they should believe he’s right about anything else he has been telling her.

(4) Thou shalt not pressure thy customer. Can you believe that car salesmen still haven’t figured this one out yet? Who likes to be pressured? I often drive by car dealerships and see a half dozen or more sales people gathered together in a “pack”, often smoking cigarettes waiting for their “prey” to drive onto the lot. I wonder how many prospective car buyers just keep on driving after absorbing that fearful scene. Has a car salesman ever said to you, “This price is good only for today? If you wait until tomorrow, the price will go up”? How about, “I won’t give you my best price until you tell me you will buy the car today”? Or, “Shop around with the other dealers and get their prices, come back and see me, and I guarantee I’ll beat their prices”?

(5) Thou shalt not ignore thy customer. My first reaction to this one is how a salesman could afford to ignore anybody that might be thinking about buying a car. The unfortunate answer is that a lot of car salesmen think they can tell just buy a person’s appearance if they can afford to buy a car. Boy is that stupid! I know many wealthy people who dress down because they like the comfort or because they don’t want to be seen as having a lot of money. That person that walks into a car showroom wearing a Tee shirt, flip flops, and jeans may well be able to buy the whole dealership.

(6) Thou shalt quote thy customer a firm price. You may find this hard to believe, but this is true of 95+% of car sales people. In fact, a lot of car dealerships have a firm rule never to give a prospective customer a firm price unless that customer will buy now. A salesman can be fired for giving a customer a firm price and letting that customer leave the dealership. This is “old school” but still common and it’s very insulting to the customer. When I ask other car dealers why they continue this practice, they ask me “why should I give the customer a firm price so that he can go to my competitor and let him beat it by $100?” What these car dealers don’t understand is that this is what the free marketplace is all about…shopping and comparing products and prices so that you can make the best buying decision. If you deny your customer this inherent right, they will not buy from you. If you do give the customer a firm price, you show your trust and often times that customer will return to give you a 2nd chance to meet a better price.

I recommend that you do your homework before you begin car shopping. NEVER BUY FROM THE FIRST DEALER THAT GIVES YOU A PRICE. The single best source of information about reliability, performance and safety on cars is Consumers Report. I also recommend that you use a company named True Car to find out what a good price is for the car you’ve chosen to buy. Go to www.TrueCar.com. Armed with information on what a good price is, you can begin your car shopping. The certified True Car dealers you will find in your market are required by True Car to give you an out-the-door price plus tax, tag, and title (government fees) only. They are contractually bound to include their dealer fees and dealer installed accessories. You don’t have to buy from a True Car dealer to get their price; you may want to buy from another dealer who will meet or beat that price.

The Dealer Fee is Illegal if Not Included in the Advertised Price

Daniel Bell, Plaintiff, vs MIAMIMOTORSPORTS, LLC and ZGFINANCIALSERVICES,LLC Defendants 

As all of my regular readers know, I’ve been battling the infamous “dealer fee” in Florida for many years. For my new readers, to bring you up to speed, the dealer fee is a generic term for hidden profit secretly added to the price of a car. Florida is, by far, the worst of all 50 states in taking advantage of car buyers with the dealer fee. There is no cap on the dealer fee as there is in all other states. It’s not uncommon to find dealers charging dealer fees over $2,000. There’s no specific name for the dealer fee, allowing dealers to disguise it as an official government tax or fee. “Electronic Filing Fee” and “Tag Agency Fee” are just two examples.

Dana Manner is a highly qualified and experienced consumer advocate attorney in Miami. He has appeared on my weekly radio show [Earl Stewart on Cars Tuesdays 4-6 PM; www.StreamEarlOnCars.com] three times. Last February he won a judgement against Miami Motor Sports, LLC in Miami for a violation of the Florida Deceptive and Unfair Trade Practices Act FDUTPA. This dealer added his dealer fee to the advertised price of a car he sold to Daniel Bell. The case was published in the Florida Law Weekly Supplement and it is the first of its kind reported in Florida. A lawyer reading this will understand why publishing this court decision is so important and historic. “Case law” is looked to by judges in deciding a lawsuit and this is the first case law finding for the car buyer against a car dealer for adding the dealer fee to the advertised price. You can read this case law by clicking on www.DealerFeeillegal.com.

The legal decision, Daniel Bell, Plaintiff, vs MIAMIMOTORSPORTS, LLC and ZGFINANCIALSERVICES,LLC Defendants reads as follows:

Consumer law---Florida Deceptive and Unfair ‘Trade Practices Act---Vehicle sale---Dealer committed per se violation of FDUTPA by adding upcharge to advertised cash price of vehicle sold to plaintiff—Dealer and financial service company that is holder of dealer’s written contract are liable to plaintiff for actual damages and attorney’s fees---Where notice sent by financial service company prior to disposition of collateral failed to satisfy Uniform Commercial Code Article 9, plaintiff is entitled to statutory damages equal to finance charge plus 10% of principal amount.

What this court decision means to you, a Florida resident, is that it makes it much easier for you to demand an out-the-door price which includes all dealer fees. If you respond to any advertisement online, TV, radio, or print, the dealer fee or fees should all be included in that price. Dealers “disclose” their dealer fee in the fine print in different ways and some don’t disclose them at all. Some disclose it by saying “price excludes all fees”. This lumps together government fees (tag-tax-title) with the dealer fees, clearly illegal. Other dealers disclosure says “plus dealer fee”, but it doesn’t tell you the amount of the dealer fee, much less include it…thus it’s not legal. Some dealers disclose the amount of their dealer fee in the fine print, but that does not abide by the law which says it must be included in the price. This is not even to mention that the Federal Trade Commission (FTC) requires that anything that increases the advertised price must be “clearly and conspicuously displayed adjacent to that price”.

Perhaps the most common dealer fee deception is advertising just one car at the price which includes the dealer fees. For example, a Ford dealer might have 50 Ford F150 trucks of the exact same year, model, accessories and identical MSRP’s. He advertises this F150, including this disclosure in the fine print…”#A62932”. No one except the dealer knows what that number means; it’s the “stock number” of one of those identical Ford F150 trucks. He “might” sell you that exact truck at the advertised price, but if you buy any one of the other 49 identical trucks, you will have to pay extra for his dealer fees. Typically, when you ask the salesman to see the advertised vehicle, “it’s just been sold” or he “can’t find it”. But, the salesman says, “Not to worry…we have 49 more F150’s that are identical.” Yes, they are identical, but now the dealer can legally add his dealer fee to the advertised price.

Another common dealer fee deception is the multiple dealer fee charges using different names. Remember that the term “dealer fee” is generic. Many dealers don’t call their extra profit charge a dealer fee and, if they do, they often charge other dealer fees by a different name. Electronic filing fee, e-filing fee, doc fee, Dealer Services fee, documentary fee, processing fee, tag agency fee, administrative fee, notary fee, notary and closing fee, dealer prep fee, freight fee, and document processing fee are just a few. Some dealers will include only one of their dealer fees in the advertised price, the one that they named “dealer fee”. They can claim that they abided by the law because they did include their “dealer fee” in the advertised price. But the truth is that their “electronic filing fee” or “tag agency fee” is added to the price and they are also dealer fees under Florida law.

Remember that the powerful thing about Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA) is that it awards attorney’s fee to you if you win the case. Too many consumers hesitate to sue over a relatively small sum like a $999.95 dealer fee on a $40,000 vehicle. They’re afraid that their legal fees will cost them more than the amount they can recover. But under the FDUTPA, you can recover all of your attorney’s fees plus the $999.95 dealer fee. The dealer you’re suing knows this, and he assesses his downside as many thousands of dollars, not just $999.95…plus his own attorney’s fees. Most smart dealers will refund his dealer fee money, his ill-gotten gains, immediately upon receiving the initial demand letter from your attorney. Most attorneys will conference with you to assess your chances of winning at no charge. With a winning case, you pay him nothing and get back the illegally charged dealer fees. It’s a win-win for you and a lose-lose for the car dealer.

Never Buy A Tire Without Knowing the Date of Manufacture!

My motivation for writing this article was the recent tragic traffic accident death of six people, four of whom were young children. This accident occurred when a tire separated causing a blowout and the loss of control of the vehicle. The tires on the vehicle were very old...


I’ll bet you never buy milk or eggs without checking the expiration date. In fact, you exercise this same caution with all food and certainly your medication. The Food and Drug Administration (FDA) mandates that food and drugs have the expiration date prominently displayed on the labels before a manufacturer or retailer can legally offer food and drugs for sale.

Would you be shocked to learn that the National Highway Traffic Safety Association (NHTSA) does not mandate that tire manufacturers and retailers do the same? Consensus has it that tires manufactured six or more years ago can be unsafe. The reason for this is that the rubber degrades with age from oxidation. Sometimes you can see this condition from cracking on the outside of the tire. But oxidation can also occur on the inside of your tire. In fact, because your tires are inflated under pressure, there is a lot more oxygen (which causes the oxidation) per square inch on the inside.

There are other conditions that affect the speed of oxidation such as temperature, humidity, road conditions, and even your driving habits. You should have your tires inspected, or do it yourself, every thirty days. When the inflation psi is being checked, you should also inspect for uneven wear, road hazard damage, and “cracking”. Most people think that when they buy a set of “brand new” tires, they’re perfectly safe. But, if those brand new tires were manufactured a decade ago, they’re probably unsafe. Most tire retailers will not tell you the date of manufacture of the tires you just bought. They may not know themselves and, if they do know, they’re under no obligation to tell you.

Just like any merchandise, all types and sizes of tires don’t sell at the same rate. “Slow movers” can sit on the shelves of tire stores or in warehouses for years. I don’t know this for a fact, but I’m betting that some tire manufacturers sell older tires to some retailers at greatly discounted prices. This is typical behavior for all manufacturers and retailers. You can buy expensive brands at discounts in outlet stores like Loehmann’s and TJ Max and there are even shopping malls selling only merchandise the manufacturer chooses to divert from their regular retail stores. My recommendation is that you be especially careful when you buy a tire that has a “too good to be true” discount. Look at the Department of Transportation (DOT) date code. A tire with a DOT code of 1109 was made in the 11th week of 2009. Tires with a three-digit code were made prior to 2000 and are trickier to decode. The first two digits still tell you the week, but the third digit tells you the year in the decade that it was created. The hard part is knowing what decade that was!

Dr. Mark R. Rosekind is the director of the NHTSA and I’m addressing him in this paragraph:

Dr. Rosekind, I respectfully submit that your primary duty is to do whatever you can in your power to ensure the safety of American motorists. I suggest that you study the correlation between auto accidents caused by tire blowouts and the age from the date of manufacture of those tires. If you see a correlation, establish a legally enforced time limit on the selling of tires beyond their date of manufacture. Enforce that time limit with heavy fines and/or imprisonment. Furthermore, change the DOT date stamp from its current virtually indecipherable “code” to something like TIRE EXPIRATION DATE 12-11-16. This currently appears on all tires as “5216”. WHAT?

I also suggest that you contact your US Senator and Congressman. This should be a bipartisan issue and the only obstacle I can see to getting this law approved by Congress would be tire manufacturer and retail lobbyists.

The Owner of the Car Dealership is Accountable

Congress passed a law a few years ago that really “shook up” publicly owned companies. It’s called Sarbanes-Oxley, named after the Congressmen who sponsored the bill. Basically this law says that the CEO and other high echelon managers of a public owned company cannot get off the hook from wrong doings because they claim they didn't know what their employees were doing. I believe the same rules should apply to all businesses, even if their stock is not publicly held. The boss should always be held accountable for the actions of his employees and this should apply especially to car dealerships.

Most of the employees that the customer comes into contact with in a car dealership are paid on commission. Those employees get a percentage of the profit that the company makes on the transaction. Car sales people, service sales people (also called service advisors or assistant service managers), parts sales people, and the mechanical technicians who work on your car are mostly all paid on commission. This method of pay tilts the relationship between the customer and employee in somewhat of an adversarial manner. The employee wants the price to be as high as possible but the customer wants it to be low. In a car dealership that has talented, fully engaged, and ethical management, this potentially adversarial relationship is kept in a fair balance. Without the oversight of upper and middle management and careful hiring practices, some employees will exploit a customer to increase his commission.

What brought the subject of this column to mind was a call I received from a 78 year old widow from Ft. Pierce. She called to thank me for writing my column and to tell me that she wished she had read some of my columns before she bought her used Mazda. This was the first car she had bought on her own. Her husband had always taken on this responsibility. She paid the dealership a huge profit on her purchase. She was sold a maintenance package that she believed cost only $25 but it really was $2,500. She was rushed to sign the papers at night because the dealership was closing. In the morning, when she realized the mistake, she drove back to the dealership and asked to back out the sale but was told it was too late. She was told she had signed all the papers and that they had already sold her trade-in even though she had not given them the title. When she asked to speak to the General Manager, three different employees identified themselves as the General Manager. I get a lot of sad calls like this.

The owner of that dealership should know what’s going on. I’m giving him the benefit of the doubt by saying that he doesn’t know because if he does know it’s even worse. The owner should look at the big picture and the long term view of his business. You can take advantage of customers and benefit in the short run, but you eventually “pay the piper” when your bad reputation spreads far enough. Most of the bad things I hear about car dealers from their customers are not illegal things. They are simply unethical and not the way one human being should treat another. Refusing to refund the money of an elderly, widow after she realized that she had been taken advantage of is not illegal, but it sure “stinks”. Jim Press was the top executive for Toyota over all of North America and he was also the only non-Japanese to occupy a place on Toyota’s board of directors. He was quoted in the book, The Toyota Way by Jeffrey Liker, as saying “It’s what you do for a customer when you don’t owe him anything that is the true measure of character. It’s like sticking up for somebody who can’t defend himself”. I really like this quote and I have it engraved on a plaque which I give out each month to the employee who wins the “Above and Beyond Award”. This award goes to our employee who does something for her customer above and beyond what the customer would have expected.

If you have a bad dealing with your car dealership, do your best to contact the owner. This is impossible with publicly held dealerships like AutoNation and United Auto Group, but you should be able to talk to their General Managers. If it’s privately owned dealership, don’t give up until you see the owner.

Caveat Emptor and Car Dealers: You Can Fool Some of the People All of the Time

Almost everyone has read Abraham Lincoln’s popular saying, “You can fool some of the people all of the time, and all of the people some of the time, but you can’t fool all of the people all of the time.” I think Abe meant this to be a positive assertion that government may get away with deceiving us for a while, but in the long run, truth justice and the American way will prevail…and I think he was right.

However, it doesn’t work that way with unethical car dealers and car buyers. It always has been “caveat emptor”, or “buyer beware when it comes to buying or servicing a car. Unfortunately for a buyer to “beware” he must be “aware”…that is to say educated, mature, sophisticated and experienced. This excludes a very large segment of our population including the very young, the very old, the uneducated, those with low I.Q.’s and those not proficient in the English language. Is this one reason why our regulators and elected politicians don’t seem to care or take action with respect to the rampant unfair and deceptive sales practices of a large number of Florida car dealers? Most elected officials and regulators are lawyers and are highly educated and sophisticated. They don’t have a problem buying or servicing a car. In fact, the car dealer that tries to take advantage of a lawyer, regulator, or politician is asking for trouble.

I’ve been writing this column/blog and broadcasting my radio show, Earl Stewart on Cars, for over ten years. I sometimes feel that I’m “preaching to the choir” when it comes to advising people how to avoid getting ripped off by a car dealer. You, my readers and listeners, largely fall into the category of the educated and sophisticated, “aware” buyer. Most of you aren’t taken advantage of when you buy or service your car because you won’t allow it. Unfortunately, there are enough uneducated, naive, and otherwise vulnerable consumers to feed those unethical car dealers who prey on the defenseless among us. All you have to do is read some of the car ads in the Saturday (the biggest selling day for most car dealers) auto classifieds. To the educated, sophisticated buyer, these ads are actually funny, if you can forget the fact that so many fall prey to them and are taken advantage of by the dealers. For example, it’s hard for you or me to believe that anybody would respond to an advertisement without reading the fine print. Many dealers today are advertising prices that, when you read the fine print, are understated by many thousands of dollars. When you or I see a dealer stating that the car price is plus “freight”, we are educated enough to understand that the law requires that the freight cost be already included in the price. A shrewd buyer knows that “dealer list” is not the same thing as MSRP and that a large discount from “dealer list” means absolutely nothing. We know that the “lowest price guarantee’ is worthless if the dealer reserves the right to buy the car from the other dealer that offers a lower price.

There are those who argue that all buyers have the responsibility to guard against unethical sellers, to take care of themselves. In fact, that’s the literal translation of the Latin legal term “caveat emptor”…let the buyer beware. That’s sounds good, but what about the elderly widow whose husband recently died and who never had to make a the decision on a major purchase in her entire life? What about the young person just out of school with no experience in the real world? How about the immigrant who struggles with English? Should we be concerned about our underprivileged classes who often drop out of school because they have to go to work to support themselves or their family? You and I know lots of good people who, for one reason or another, simply can’t cope with a slick car or service salesman.

My bottom line is this, since we can’t rely on our regulators and politicians to protect those who “can be fooled all the time”, maybe we owe it to society to protect these folks. If you know someone who is thinking about buying a car or has a service problem with her car and you feel she may not have the ability to fend for herself with the car dealer, offer your support. If you’re one of the people who needs support, ask someone who can go “toe to toe” with a car dealer to come with you when you are car shopping. By the way, nobody, sophisticated or not, should car shop alone. Two heads are always better than one and it’s always a good idea to have a witness to what was said during a negotiation. And, of course, if you don’t have the time to help a person or you’re that person, you can always call me…I’m always here for you.

What to Do If You’re Treated Badly by Your 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.

TEN BOOBY TRAPS WHEN YOU LEASE A CAR

The percentage of cars being leased, not purchased, is growing at a rapid rate. Currently it is about 25%. The manufacturers and the car dealers are pushing leasing because dealers make a lot more money when the lease a car and the manufacturers and dealers have a much better chance that you will be a repeat customer when you lease. For the careful, sophisticated consumer, leasing can be the best option, but these are ten traps to avoid if you lease your next car.

(1) You owe the bank or leasing company for damage beyond “normal wear and tear” and excess mileage. The danger here is because many people return their car to the dealership after the lease expires without getting signed, written verification of what damage exists on the car and what mileage is on the odometer. Return lease cars commonly sit on the car dealer’s lot for weeks or even months before the bank or leasing company gets around to picking the car up to send it through the auction. Anybody might be driving that lease car in the interim. It could be an employee of the dealership. A returned lease car with a full tank of gas can be a big temptation. In many dealerships the accounting for returned lease cars is very sloppy. Remember, the car does not below to the dealership, but to the bank or leasing company. The dealer doesn’t even have insurance on this car. The insurance may even still be in your name. A return lease car can easily be stolen and no one would even notice. I have heard many horror stories of customers who received bills from their leasing company weeks after returning their lease car for thousands of dollars in damage and excess mileage that they say they were not responsible for. Your only protection is to be sure that a representative of the dealership fills out, with you, a complete return lease inspection form which notes all damage, the estimated cost of repair and the mileage. As an extra precaution, I recommend taking pictures of your lease return car. Be sure that this is signed by the dealership representative and you get a copy.

(2) A lease ad with a large down payment and short term. Most lease ads you see on TV or read in the newspaper have a large down payment hidden in the fine print. A down payment of $4,000 is typical. Ironically one of the biggest reasons people lease cars is to avoid laying out more cash. Dealers do this because a cash down payment on a lease is “leveraged” compared to a down payment on a purchase. A $4,000 down payment on a lease will reduce the monthly payment much more than on a purchase. Also, watch out for shorter lease terms such as 24 months compared to 36 or 48 which are normal. Remember, when buying a car, your monthly payments are paying for the “whole car”. When leasing, you are only paying for a small part of the car…the time you use it. A 24 month lease requires less of a down payment to lower the monthly payment than a 36 month lease or 48 month lease. You can actually lease a car for “zero dollars per month” if you put up a large enough down payment. The banks call this a “one-pay lease”. All you are doing is making all of your lease payment up front and, to a lesser extent; this is what you’re doing when a dealer sneaks in a large lease down payment in the fine print.

(3) Low mileage allowance. Be sure you know exactly how many miles are allowed in your lease contract. By restricting the number of miles you are allowed, the dealer can quote a lower monthly payment. I’ve seen lease ads with as low as a 7,500 annual mileage allowance and a 25 cent per mile penalty. Most people drive a lot more miles than this. If you missed this in the fine print and are a fairly typical driver who puts 15,000 miles a year on your car, you would get a surprise bill from the leasing company of $5,625 at the end of a 36 month lease!

Car Dealers’ Latest Dirty Little Secret The “Electronic Filing Fee” aka Dealer PROFIT

This increased profit to car dealers is generally called the “Electronic Filing Fee or E-Filing Fee”, but there are other names that dealers use, just as they do for the infamous “dealer fee” like “dealer services”. Car dealers used to process the tag and registration required on new and used cars themselves. About 7 years ago they began outsourcing this to companies that can do this work cheaper than they can themselves. The typical cost of this outside service is only $10 or $12. So, not only did the car dealers reduce their expense, they passed along the reduced expense to you, the car buyer! But wait, there’s more! Car dealers are also marking up this reduced expense and passing this along to you too! I’ve seen Electronic Filing Fees marked up to $598…that’s a 5,980% markup!
At my dealership I began using a registration service company named Title Tech in 2009 and they charge me $10 to prepare the tag, registration, and title work for each new customer. This saves me considerable time and money from doing it myself. In the past I always absorbed the higher expense and I don’t pass along the reduced cost to my customers either. It’s adding “insult to injury” to mark up this cost and pass it along to you.

The word “fee” is almost always used by dealers when they are trying to disguise additional profit or to pass along an expense to you (which is the same thing as additional profit). When car buyers are lucky enough to even notice the Electronic Filing Fee, they usually assume it’s a tax or fee charged by the state, federal, or local governments. They do the same thing with the dealer fee under its various other names like documentary fee.

Florida law considers the Electronic Filing Fee to be the same thing as a Dealer Fee and requires that it be disclosed and used by car dealers as such. The language Florida requires for disclosure is “This charge represents costs and profit to the dealer for items such as inspecting, cleaning, and adjusting vehicles and preparing documents related to the sale”. The law also requires that the Electronic Filing Fee be included in all advertised prices. Unfortunately most dealers are ignoring this law just as they do with the additional profit they make with the Dealer Fee.

Dealers almost never include their Dealer Fees or Electronic Filing Fees in their advertised price which is a flagrant violation of Florida law. If they even mention that they have a dealer fee, they will say in the fine print something like “prices plus tax, tag, and fees”. A few dealers will disclose in the fine print, “plus tax, tag, and $999.95 dealer fee”. The Florida Senate says “The law requires that the fee be included rather than “specifically delineated” in the advertised price.” Most car dealers’ advertising is done on TV and the fine print disclosure is literally unreadable.

The other loophole permitted by Florida law is to allow the dealers to offer only one car with the dealer fee included in the price. That would not be so bad if the dealer clearly communicated this to the buyer. But dealers use something I call “the old stock number trick”. Every car in a dealer’s inventory is assigned a stock number for accounting purposes. A typical stock number is something like “A25771”. Dealers will put their stock number for that particular advertised car in the fine print at the bottom of the ad or elsewhere. Even if a customer sees the stock number, they have no way of knowing what it means. When the prospective buyer responds to the advertisement, the salesman tells him that the advertised car was sold but, “not to worry”, he has several more “just like it”. Yes, he does have several more identical cars in terms of model, accessories, and MSRP. But, because they have different stock numbers, the law now permits him to add his extra profit to the advertised prices disguised as Dealer Fee and Electronic Filing Fee.

It’s an affront to the car buyers of Florida that their Attorney General and their legislature allow this to continue. Car dealers have powerful lobbying groups and they clearly communicate to Pam Bondi, the AG, and the legislature that they better not mess with their Dealer Fees and Electronic Filing Fees.

Another reason you don’t hear much about this atrocity on consumers is that the media has assumed their “Hear no evil, see no evil, speak no evil” stance. The TV, newspapers, and radio are deathly afraid of losing car dealers’ advertising. Car dealers are the largest local advertisers. Some of you may know that my wife, Nancy, and I were fired from our weekly consumer advice radio show on Seaview radio which we had done for almost 7 years (We’ve been back on the air for about a year on 900 AM, The Talk of the Palm Beaches). This was because of dealer threats to cancel their advertising. When I reported this attack on free speech to the Palm Beach Post, they refused to run the story or even allow me to purchase an advertisement that states the truth.

What can you and I do about this when we have such powerful institutions as the media, Attorney General, and Florida Legislature siding with the car dealers against you, the consumers? The answer is MAKE SOME NOISE! “We, the people” support, not only the media, but the politicians. Without our viewing, listening and readership the media can’t sell advertising and without our dollars and votes, politicians can’t get elected. Call, write, or email your local newspaper, radio and TV station, and local senator and representative. Tell them you’re tired of them kowtowing to the car dealers and the Florida Automobile Dealers Association. Demand that the laws on the Electronic Filing Fee and the Dealer Fee be enforced. Tell them “We’re mad as hell and we won’t put up with it anymore!”

Why New Car Tires Wear Out So Fast

The tires that came with your last new car were not designed by Michelin, Goodyear, Bridgestone or any other tire manufacturer. They were designed by the manufacturer of your car. If your new car came with a set of Michelins, Michelin made the tire but they made it to the specifications set by your car manufacturer. These tires are referred to as OEM (original equipment manufacturer).

Furthermore, your manufacturer does not warranty the tires on your new car even though he tells you that you have a “bumper to bumper” warranty. The last time I checked, my tires were between my front and rear bumpers. Even though GM designed the tires on your Chevrolet, they have no responsibility if they are defective. The tire manufacturer bears that responsibility.

The OEM tires that came with your car can’t be replaced (which is a good thing) after they’ve worn out. And they will wear out much sooner than they should. This is because virtually all auto manufacturers specify very soft rubber which means they wear out too fast. Why would the manufacturer do that? They want that new car to have the smoothest ride possible, even at your expense of having to buy a new set of tires at half the mileage you should have to. When you test drive that brand new car and it rides very, very smoothly you’re more likely to buy it. You’ll find out how fast the tires wear out much later, and when you do you’ll blame it on the tire maker.

By the way, another way the car makers delude you into thinking your ride is very smooth is by recommending low tire inflation. The number you see on your door jamb or in your car’s owner’s manual is the car manufacturer’s recommended air pressure. The number on your tire is the tire maker’s recommendation. The number on the door jamb is the minimum and the number on the tire is the maximum. There’s typically a 10 pound difference.  I recommend you try the maximum and, if the ride’s too rough, split the difference. You’ll not only get longer tire wear but better gas mileage.

I can’t prove it, but I suspect another reason auto manufacturers design their own tires is to cut costs. By cutting a few corners in the design and specifications, they can increase their profit and/or cut the overall car price. If there purpose was to design a better tire, why wouldn’t they make these OEM tires available for the car owner to buy after the first set wears out? Many car owners “think” they’re replacing their Firestones or Michelins that were on their new car with the same tire, but they’re not. The tire might be the same size and look the same, but it’s a different model number.

One thing you should look for on your first set of replacement tires is the “tread wear index” which is molded into the side of your tires. This number will be 200 to 800. Your OEM tires will have a lower number because their made of softer rubber. If the tires that came on your car had a 200 tread wear index and you replaced them with 400, you should get twice the mileage on your second set of tires. The car might not ride as smoothly, but most people can’t even notice. And to my way of thinking, cutting you tires cost in half is pretty good compensation for a slightly rougher ride.

When replacing your tires, don’t get enamored by a sexy brand name. Brands aren’t always built on quality but also on advertising. Also, a famous brand tire makes all different kinds of tires to many different designs and specifications. Just because it’s a “Michelin” doesn’t necessarily man it’s a good tire. If Michelin made that tire for an auto manufacturer who designed the tire with only two things in mind…low cost and soft ride, you didn’t get a very good tire. My recommendation is to check Consumer Reports for the best tire replacements. You’ll find tire brands recommended that you may never have heard about. The Japanese and Chinese make some very good tires but they have funny sounding names and you don’t see them advertised heavily on TV. 

Hidden Profit Charge on Your Auto Service Invoice

The last time you paid your bill for your car’s maintenance or repair, there was about a 99% chance that there was an extra charge at the bottom of the invoice. This extra charge was not for the parts used or labor performed on your car. If you noticed it at all, it was hidden at the bottom of the invoice near the line for sales tax.


This service charge is the “little brother” of the infamous Dealer Fee, the arbitrary charge which is added to the bottom of the bill of sale when you buy a car. Just like the dealer fee, this service charge is not really a fee at all, rather it's pure profit to the dealership or independent service facility. Just like the dealer fee, it too goes by many different names: "Sundry Supplies Fee", "Miscellaneous Fee", "Hazardous Waste Disposal Fee", "Waste Oil Disposal Fee", etc... Unfortunately, charging any arbitrary extra amount onto the price of auto service is completely legal in Florida! There is also no law requiring consistency in naming this extra charge or even in limiting the amount of that charge.


The size of this bogus fee is calculated as a percentage of the total legitimate parts and service charge you incurred, and varies from as little as 5% to 10% and higher. Typically there is a self-imposed “cap” on this phony charge so that you don’t notice it when you pay your bill at the cashier. Caps also vary from about $25 to $50. Remember that most people service their cars about every 6 months or 5,000 miles and keep their cars 6.5 years. If your average “hidden charge for service” was $15, over the course of ownership you would pay $195 for work that was never performed on your car! The average dealer fee in Florida may be about $800, but a car dealer makes his money on the bogus service charge with volume. A car dealer may sell a few cars each day, but he or she may service dozens. Therefore a car dealer “steals” far more money from his service customer than he does his car buying customers.


Auto service companies and car dealers know that this is wrong and expect some of their customers (those that are alert enough to catch it) to react angrily. A call from one of these customers yesterday is what inspired me to write this column. The caller was a regular reader of my column and called me to ask what the “sundry supply fee” for about $30 at the bottom of his service invoice at Sunrise Ford in Fort Pierce was. I explained it to him. By reacting angrily and threatening to take his service business elsewhere, he was able to have his $30 refunded.


This is my recommendation to you: always inspect the service invoice before you pay. If there is any charge on the invoice that you cannot recognize, ask for a complete explanation. The explanation you are likely to hear is that these are for “miscellaneous” supplies and costs the dealer incurs in repairing the average car, probably not yours. They will talk about nuts and bolts, screws, fasteners, grease solvent, and maybe even “soap to wash the mechanic’s hands”. Of course these are just normal overhead costs of doing business. They might just as well be charging you for their power and water bill or salary to their mechanics. You tell them that their costs of doing business should have been included in the price you were quoted for the labor and parts on your repair order, not sneakily tacked onto the bottom of the invoice when you were paying the cashier.

Dealer Pre-Installed Accessories: Avoid them like the Plague

When I talk about unfair and deceptive sales practices by car dealers, number ONE on the list are pre-installed dealer accessories. Number two on that list is the Dealer Fee. Both of these common practices are the essence of how car dealers “bait and switch” you from the advertised car with the low price to the car they really want to sell you with the high price.

There are a lot of car dealers that represent each make sold, especially in Florida. Dealers advertise more than almost any other retailer because selling cars is intensely competitive. If you live in Florida, the chances are that there are at least 3 car dealers selling the make you want to buy within a short driving distance. If a car dealer advertises a price on a car higher than his competitors, you will probably not buy that car from him. Therefore, most car dealers do everything possible to make their prices appear to be lower. Statistics for all makes prove that the average transaction price on cars purchased is hundreds (and even thousands) of dollars more than the advertised prices. Virtually all advertised car prices are lower than the price that the dealer can profitably sell the car for.

You’ve heard the old saying that “necessity is the mother of invention” and the previous paragraph explains the necessity for the invention of the pre-installed dealer accessories (and the dealer fee). The pre-installed dealer accessories are products that dealers install (or claim to install) on all of their cars in their inventory. These accessories have a very low cost to the dealer and the dealer marks their retail price up to you by several hundred or even a thousand percent. Some examples of dealer installed accessories are nitrogen in the tires, pin stripe decals, paint sealant, fabric protection, emergency road service, glass etch theft protection, LoJack, etc. A “basket” of items like this can cost the car dealer under $100 but he will mark that up to $1,000, $2,000 or higher. When he adds this plus his dealer fee of $800 to $2,000 to the advertised price, the great price you thought you had, disappears into a high price with a large profit to the dealer.

My advice to you is simply to refuse to allow any pre-installed dealer accessory to be added to the advertise price of the car you want to buy. If the dealer won’t comply turn around and walk out. If in fact he has installed all of those overpriced accessories to all of his cars, he can obtain a car without them by trading cars with another dealer or ordering one from the factory. The same thing holds true for his dealer fee. It’s best to make it clear from the get-go that you will not visit a car dealer without an “out-the-door” price plus government fees only. Any “fee” by any name that is added to your out-the-door price must be one paid by the dealer to the state or local government…license place/registration and sales tax.

If you want an accessory that the car dealer can install, it can be installed after the fact and after you’ve had ample opportunity to verify its value and price. The best rule of thumb is to buy only accessories sold and installed by the manufacturer. These are usually high quality with a fair markup, and they are covered by the factory warranty. When you’re considering manufacturer’s accessories, be sure that they are from the manufacturer and not the distributor for that manufacturer. Distributor or port installed accessories usually carry much higher markups than factory installed.

Holdback or Holdup?

Back in 1968 when I first went into the retail car business with my father, I can remember asking him, “What is holdback?” I was learning the business and had been studying the invoices on new Pontiacs that General Motors sent us when they shipped a new car that we had ordered. We had to pay the invoice immediately when it was issued, sometimes even before the car arrived at our dealership. Actually, in most cases, it was our bank or GMAC who paid GM and we borrowed the money from them to pay for the car. 

My father’s answer to my question about holdback was that it was an increase in the amount of the invoice that we paid General Motors which was not really part of the price of the car. It was just an extra amount added to the real price of the car and included in the invoice. At that time it was 2% of the MSRP [suggested retail], so if a new Pontiac Bonneville had an MSRP of $10,000 and a true cost of $9,000, the factory invoice would be $9,200. I asked my father, “When do we get the $200 back?” He said, “At the end of the year”. I asked him if they paid us interest on our money and I can remember him laughing loudly and saying no.

Of course my next question was why they do that. He told me that the reason they gave him was to be help dealers sell their cars for more money so that they didn’t go broke. He said that because they didn’t get their holdback money for such a long period of time, they began to think of their invoice as being the actual cost of the car. General Motors felt that many dealers were such poor businessmen that they might sell their cars so cheaply that they would go out of business. Now, because GM was kind enough to hold back hundreds of thousands of dollars of the dealers’ money [and pay them no interest on it] but return the money to them once a year, they could help the dealers make a bigger profit and maintain adequate working capital.

At that time I thought this was the biggest bunch of boloney I had ever heard and I was sure that this was a scheme by the manufacturers to keep a free float of millions of dollars of their dealers’ money under the guise of helping the dealers. I asked my father why the dealers didn’t strongly object to this and he said that most dealers actually “liked” the idea of holdback. When I heard that, I thought that maybe GM and the manufacturers were right about the dealers not being smart enough to sell their cars for a reasonable profit.

It took me a few more years in the business before I understood what was really going on with holdback. It was a “no brainer” as to why the manufacturers liked it but at last I understood its attraction to us dealers. Because we had to pay an extra amount over the true price of the car and not see that money for up to a year, we began to think of the invoice as the true price, even though it was actually inflated by hundreds of dollars. Because all manufacturers added holdback to all dealers invoices, the net effect was to raise the price of all cars to all buyers by the amount of this holdback. I know this is a dirty word, but it is price fixing on the grandest of scales. This might have been something that Henry Ford, Alfred Sloan, and Walter Chrysler concocted while playing golf at Bloomfield Hills Country Club outside of Detroit.

Another neat thing about holdback for us dealers is being able to tell our customers that we are only charging them “X dollars” over invoice. Or, we can tell them that we will sell them this car at invoice with no profit to us at all! [There’s a sucker born every minute] Dealers often have “invoice sales” with copies of the invoice pasted on the car windows. Who doesn’t believe that an invoice is the cost of the car? The truth is in the semantic skullduggery …”Mr. Customer, I solemnly swear to you that this the exact price that I paid the factory for this car. In fact, here’s a copy of the invoice.” That’s what the dealer “paid” the factory all right, but it’s not what the he paid the factory after he got his holdback check in the mail.

You might be thinking, so we’re talking about $200 more or less on a $10,000 car. Who cares? Don’t forget, that was almost 50 years ago. Holdbacks have expanded considerably and now instead of several hundred dollars we’re talking several thousand. Also, dealers no longer have to wait a year to get their hold back money back. Now they get it back monthly. Manufacturers even changed the names of these monies they hold back. These are innocuous names so that, if you see them on the invoice, you will have no suspicion…names like floorplan assistance, advertising, PDI, Administrative or DAP. Of course there are also cash rebates to dealers that don’t even show on the invoice. I estimate the average car invoice today includes $3,000 to $4,000 in hidden holdbacks to the dealer. Holdbacks are also applied to factory or distributor accessories like “protection packages” [wax, undercoat, window etch, roadside assistance], floor mats, window tint, etc.

The bottom line is that you don’t rely on the dealer’s factory invoice to determine the price you are willing to pay for a car. And be especially suspicions when the dealer quotes you a price of “X dollars over invoice” or actually shows you the invoice. You’ve heard the old joke, “How can you tell when a politician is lying?” Answer: When his lips are moving. “How can you tell when a car dealer is lying?” Answer: When he shows you the invoice.

Open Letter to Auto Manufacturers: Require Your Dealers to Obey the Law

Dear USA auto manufacturer,

My last blog was about the fact that most car dealers’ advertisements violate the Federal Trade Commission’s rule that “advertisers cannot use fine print to contradict other statements in an ad or to clear up misrepresentations the ad would otherwise leave.” The FTC states that any disclaimer regarding a price or a payment must be “CLEARLY AND CONSPICUOUSLY DISPLAYED”. You can read my last blog at http://oncars.blogspot.com/2016/02/the-federal-trade-commission-most-car.html.

I’m not telling you anything that you don’t already know. You see the TV, print and Internet advertisements of your franchised dealers and those of the other US auto manufacturers. In fact, I suspect that the reason you haven’t done anything about this before is because “everybody else does it!”, including YOU. Every auto manufacturer uses fine print in most of their advertising that “contradicts other statements” especially lease and purchase payments and selling prices. Your dealers are simply following your example. Some of your dealers might not even know that they are breaking the law because you are advertising just like them. I’m not a lawyer, but I’m confident that “everybody else does it” is not a very good defense when you break the law.

My opinion as to how we reached this sad state where almost every manufacturer and car dealer is violating the FTC regulations is that everyone felt they had to do so to remain competitive. Each manufacturer and dealer believes that if his competitors advertise prices and payments that are perceived to be lower than his, he will lose sales to his competitors. Each feels like he has no choice even if he feels bad about misleading his customers.

All of this begs the questions “Why doesn’t the Federal Trade Commission” enforce their laws better? I’m not positive about why that is but I’m guessing that it has to do with lots of things like insufficient budget, low priority, heavy lobbying by large corporations like GM, Ford, Chrysler, and Toyota and not enough consumer complaints. By the way, I believe that the reason more consumers don’t complain is that most don’t know that concealing important information in the fine print is illegal. Educating the public and the car dealers might be the first step toward resolving this serious issue. In fact, this blog is my small contribution to that education.

But, the most effective thing that you, the auto manufacturer, can do is set the example for your dealers. After you have begun to follow the law, require the same of your franchised dealers. I would begin by including a clause in your dealers’ franchise agreements that they must “obey all federal, state, and local laws”. If they do not, there should be penalties up to and including the cancelation of their franchise agreement. Furthermore you could include the same language in your advertising covenants, contractual agreements that you dealers must sign regarding ethical and honest advertising. I’ve heard it said that it’s difficult for you to know when you or one of your dealers advertises in a manner that is unfair, deceptive, illegal, and/or unethical. This brings to mind the famous quotation by the former Associate Justice of the US Supreme Court, Potter Stewart, (no relation)…” I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description ["hard-core pornography"], and perhaps I could never succeed in intelligibly doing so. But I know it when I see it…”

Finally, I respectfully suggest that you use the following language in your contracts with your dealers, the advertising covenants and franchise agreements, “Any additional payment required of the customer in order to obtain the advertised payment or price, except government fees or taxes, must be conspicuously displayed immediately adjacent to the price or payment and in the same font size, style, and color.”

When most dealers and manufacturers are abiding by the law, we will have reached the tipping point so that the outliers will be obvious and the FTC can easily enforce the law so that everybody does so. With almost all advertising being honest and transparent, no manufacturer or car dealer will have a competitive advantage based solely on deception. The car buyers will be free to choose the best price by shopping and comparing with different dealers and manufacturers the way the free marketplace is supposed to work. The lowest price or monthly payment they see advertised will really be the lowest. This will raise the image of car manufacturers and car dealers and it will increase their sales and profits.

The Federal Trade Commission: Most Car Ads are ILLEGAL

To read FTC's disclosure regulations click here

Can you remember reading, seeing or hearing a car dealer’s advertisement that had no fine print? The TV advertisements are especially egregious because, even with HD, it’s literally impossible to read the fine print. If the print were large enough, it’s not displayed on the screen long enough for you to completely read it. You’ve all heard the radio “fine print”. The advertisers are experts at making it incomprehensible. One trick is to put the disclosure at the beginning of the ad so that it appears not to be a part of the advertisement. They will use a different voice, which speaks very softly and very fast. I believe that they record the disclosure at normal speed and electronically increase the speed of the recording to an incomprehensible level. The fine print in newspapers and direct mail is the only fine print that is even possible to read and it often takes a magnifying glass to do so. Some tricks to make it even more unreadable are to make the color of the print blend with the background color of the paper (dark blue print on a dark red background), obfuscate the message by mixing in some legitimate, irrelevant disclosures like “Dodge is a copyrighted brand name of Chrysler Corporation, and they usually locate the fine print as far away from their false claims as possible.

Of course fine print deception is not limited to car dealer advertisements. Car manufacturers, pharmaceutical companies, and most other retailers take advantage of their customers in this manner too.

The Federal Trade Commission says that advertisers are not allowed to “contradict other statements in an ad or to clear up the misimpressions the ad would otherwise leave.” The FTC also says that “Accurate information in a footnote or a dense block of text likely will not remedy a deceptive representation conveyed by a headline or other prominent selling message because reasonable consumers may not read the footnote.”

Car dealer leasing ads and car manufacturer leasing ads commonly advertise low lease payments with large down payments, often obfuscated as “capital cost reductions”. You’ll see a new BMW advertised for $399 per month but when you take in consideration the $8,000 down payment which is impossible to read on the TV screen, the payment might actually be $899 per month.

You see a lot of “100% Guaranteed Credit Approval Ads”, but the fine print says that your credit score will affect the terms and down payment. Interpreted, this means if you have bad credit, you will have to make a down payment up to 100% of the price of the car and the financing terms could be as short as one month. The disclaimer in the fine print is a total contradiction of the headline, bold print claim of the ad and a violation of Federal law.

A popular deception by many car dealers is to advertise a very low price in the headline of the ad with the fine print totally contradicting the ad price. This is done by the fine print saying that the “price excludes dealer installed accessories” which can total thousands of dollars. The fine print also often says “customer must qualify for all rebates and incentives”. These are impossible for any one person to qualify for such as military rebate, college rebate, loyalty rebate, and conquest rebate. To qualify for all the rebates one would have to be on active duty in the military, a graduate of a 4 year accredited college within the past 6 months, drive the same make car as is advertised, and drive a specific competitive make car at the same time.

Another fine print scam is “Lowest Price Guaranteed or We Pay You $1,000”. There’s even one dealer who says he’ll give you the car free if he can’t beat his competitor’s price. The fine print says the dealer reserves the right to buy the other car from his competitor at the lower price. Now, what are the odds that your car dealer’s competitor will agree to that? The fine print also says that you must bring him a buyer’s order signed by the other dealer to verify the lower price. Have you ever asked a car dealer to give you a signed copy of a buyer’s order without actually buying the car from him? He won’t give it to you for the simple reason he doesn’t want to allow his competitor to see it and beat his price.

Florida law requires that dealer fees be included in the advertised price of all cars. Most dealers do not to this but instead disclose the dealer fee in the fine print. Often times they do not even disclose the amount of the dealer fee but simply say “plus dealer fee” or “plus fees”. Florida law does not put a cap on dealer fees as many states do. In theory, a dealer could have a $10,000 or higher dealer fee. Many have dealer fees over $1,000 now. This practice is a clear violation of the Federal Trade Commission’s rules.

I read in the newspaper last week that Governor Rick Scott had just signed 8 more bills into law. This week we have 8 more laws than we did last week. What our state and our country need are not more laws, its more enforcement of the laws we already have on the books.

Should I Exercise My Option To Buy My Lease Car?

One of the advantages of leasing is your option to buy the lease car at the end of your lease at the residual price. The residual is what the leasing company “guessed” your car would be worth at the end of your lease. They guessed because nobody has a crystal ball that tells them exactly what a used car will be worth 3 or 4 years in the future. If they guessed low, you have an opportunity. If they guessed high, you have no obligation; it’s the leasing company’s problem and they have to sell the car and take a loss.

The best thing about making this decision is that you are holding the best hand in the card game between you, the leasing company, and the dealer. That is because you know your car better than they do. You probably have been driving it for close to three years, you know how well you have maintained it, how worn the tires are, whether or not it has been wrecked and repaired, and how many dings, dents, or upholstery blemishes there are. You know if it was garaged and how you carefully you drove it. You also know, better than anybody, how well it runs. All of these things determine the value of your car.

Unless you buy a new car, you cannot have as much confidence in any other used car that you may buy than your own used lease car. The only assurance that you have when you buy somebody else’s used car is their word or the dealer’s word about how it was driven and maintained. That means that if you did take very good care of your lease car, drove it carefully, kept it in a garage, waxed and washed it faithfully, and maintained it carefully it is worth more to you than anybody else because you are the only one who knows that. And you can never be sure about that for any other used car you might buy.

Given that you like your lease car and want to keep it, the next step is determine its wholesale market value. The leasing company usually is not in the business of selling cars, just leasing them. Getting rid of off-lease cars is expensive and time consuming for them. You have an advantage here too and you should be able to negotiate a good price. Remember, you know your car much better than they do. They will usually give you a price you can buy the car for without even looking at it. It doesn’t happen often but sometimes they will call you first about buying your lease car before the lease is up. Be careful when this happens because this can mean that they are facing a loss if they have to wholesale your car at the auction. They are calling you to sell you your car for more money than they can get for it at the auction.

That is why you need to establish the current wholesale market value for your car. Car dealers call this ACV, for actual cash value. Check the Internet for information on the value of your car. www.kbb.com, the Web site for Kelly Blue Book is one of the best sources. Consumer Reports can also give you this information. The best check on the wholesale value is to actually drive your car to 3 or 4 car dealerships that are franchised for your make. If you drive a Ford, visit as many Ford dealerships as you can and tell them you want to sell your car. You aren’t misleading them because it’s a lease car. You could exercise your option to buy it from the leasing company and then resell it to the dealer, if the dealer’s offer was higher. If you live near a CarMax store, the largest retailer of used cars anywhere, they buy a lot of used cars over the curb and their prices are often competitive, but always check CarMax’s price too.

Now that you are armed with the true market value for your car, you can negotiate the best price with the leasing company. Even if they won’t sell you the car for the ACV, wholesale value, paying as much as $2,000 over wholesale for a car you have absolute confidence in is a good deal. If you can buy it for wholesale or below, you should celebrate!

Another thing to be on the lookout for with the leasing company is when they offer to extend your lease for the same monthly payment you are currently making. That is not a good deal. They are doing this because they will lose money if they sell this car at the auction at the present time. They want you to keep making payments on the car so that their depreciation rate catches up with the residual value. The residual value is the price they guessed your car would be worth in 3 years. If you had leased the car for longer at the onset of your lease, the payments would be lower than they are now. Why should you pay the leasing company the same as they charged you for a shorter lease?

Leasing is the Dealer’s Choice For Bait and Switch Advertising

Car dealers have always known that consumers’ #1 “Hot Button” is the monthly car payment. Most car buyers finance or lease their vehicles and almost everyone budgets their finances on a monthly basis. Your rent or home mortgage payment, food, insurance payments, and your income are usually paid or budgeted monthly. To most of us, the actual cash price of a car is less important to us than how much we can afford to pay per month.

Car dealers and auto manufacturers prefer leasing you a car to selling you one because it’s more profitable to both of them. It’s more profitable to the manufacturer because they have the control over someone to whom they lease that they don’t with a purchaser. Usually the manufacturer’s financing division owns the car you drive, not you and and you must return their car at the end of the lease. Forcing you to go back to the dealer gives them a much better chance of leasing or selling you another car. Dealers love this but, even more, they love the fact that they make about 50% more profit on a lease than a purchase. They can do this because a lease transaction is far more complex than a purchase. With leasing, the focus is on the monthly payment, not the things that actually determine the profit to the dealer like capitalized cost, residual, term or money factor. Most people who lease cars don’t even understand the meanings of this terminology, much less how their low monthly payment is calculated.

If you read my last blog, “Earl Stewart’s Business Ethical Dilemma”, you know about the trend for manufacturers to mandate a minimum price that their dealers are allowed to advertise. Honda was the first to do this, Mazda followed, and Toyota joined them this month. Honda, Mazda, and Toyota dealers who are inclined toward “lowball bait and switch” advertising may now find it more difficult to do on the majority of the car that they sell. If you don’t already know, bait and switch advertising means advertising a product at a price so low (the “bait”) that potential buyers are compelled to respond. These prices are so low, often below actual cost that the dealer does not want to (or will not) sell you the car at the advertised price. He “switches” you to another car that he can make a profit on or he adds hundreds or thousands of dollars unwanted equipment and fees to the advertised price.

This is the very reason that these manufacturers established a minimum price that car dealers are not permitted to advertise below. Clearly, with the best intentions, the manufacturers are trying to put a stop to bait and switch advertising. But as an unintended consequence, this will compel even more dealers to advertise lease payments. A car dealer can advertise as low a lease payment as he wants and still make a big profit as long as he adjusts the “capitalized cost reduction”, “lease factor” and/or term to his liking. The capitalized cost reduction is “lease-speak” for down payment, the money factor is “lease-speak” for interest rate and the term is the number of months of the lease.

Not only don’t most people who lease understand “cap cost reduction” and “money factor” but this information is concealed in the fine print. The prospective lease customer that comes into the dealership to lease that new Honda for $199 per month could not read the fine print requiring a $5,000 capitalized cost reduction (read “down payment”). Without that large down payment the real payment is $399 per month. The payment can also be manipulated by adjusting the term of the lease and the allowable miles or by not being clear about the total cash out-of-pocket required at signing.

You would think that there are regulations preventing advertisers from hiding material information affecting the true lease payment of a car in the fine print and you’d be right. The Federal Trade Commission has such regulations but they are rarely enforced. State and local regulators almost never enforce such FTC rules. The essence of the FTC law is that anything in an advertisement that materially affects the price or payment must be “clearly and conspicuously” shown.

You can test the FTC’s Clear and Conspicuous Standard with these questions:

• Prominence: Is the fine print big enough for people to notice and read?

• Presentation: Is the wording and format easy for people to understand?

• Placement: Is the fine print where people will look?

• Proximity: Is the fine print near the claim it qualifies?

The next time you see a car dealers TV advertisement, try to read the fine print. It’s flashed on the screen for such a short period of time you might not even realize that there was fine print. Fine print in almost all TV ads is practically impossible to read. The same is true with radio “audible fine print” and most newspaper or Internet fine print.

My advice to you is to be leery of all car dealer ads but be especially leery of leasing ads. If you cannot find the capitalized cost reduction, lease factor, and the term in the advertisement, then the advertised payment is absolutely meaningless and certainly much higher than advertised. If you see an advertisement that violates FTC regulations, click on this website, www.FloridaCarDealerComplaints.com. You can download a complaint form from the Florida State Attorney General’s Office, Florida Department of Motor Vehicles, and the Florida Office of Consumer Affairs.

Earl Stewart’s Business Ethical Dilemma

An ethical dilemma is a complex situation that involves a mental conflict between moral imperatives, in which to obey one would result in transgressing another. One was recently forced upon me by Toyota Motor Sales, TMS, for whom I’m franchised to sell new Toyotas.

Most auto manufacturers have rules preventing their dealers from illegal and unethical advertising; however most manufacturers do not enforce these rules very strictly. When dealers violate them they merely get a slap on the wrist. Honda was the exception to the rule. For many years Honda had a unique rule for their dealers. They were strictly prohibited from advertising a price below dealer invoice. Mazda copied this rule a few years ago. This month, January 2016, Toyota added this rule.

The reason these three manufacturers wanted to restrict their dealers from advertising prices below dealer invoice was to prevent “bait and switch” advertisements. The manufacturers know what their dealers sell their cars for (transaction price) and they can monitor the advertised prices. They learned that the advertised prices were hundreds, even thousands of dollars lower than the prices they were actually selling their cars for. By putting a floor on the price that dealers could advertise, they hoped to bring the transaction prices close to the advertised prices.

You might be wondering why establishing the “invoice” as the minimum, or floor price would make any difference. Many car buyers believe that the dealer invoice is the true cost of the car; it is not. In reality, the invoice a car dealer receives from the manufacturer can include thousands of dollars in profit to the dealer. This extra profit is made up by several rebates or kickbacks that are remitted to the dealer by the manufacturer after the invoice is paid. Some of these "holdbacks" that are refunded to the dealers amount to 2%, 3%, or even 4% of MSRP. Requiring their dealers to raise their advertised price to the car’s invoice substantially raises the average advertised price.

As you know, dealers advertise a lot, probably more than just about any other retailer. A Ford dealer’s biggest competitors are the other Ford dealers in his market. They are all selling the exact same vehicles and the main thing that they have to differentiate themselves to Ford buyers is the lowest price. When a Ford dealer advertises on the Internet, TV, radio, or newspaper, it has to show you its lowest price otherwise you will buy from the Ford dealer that does. This is why the prices that Ford dealers really sell their cars for is much higher than their advertised prices. You probably have personally experienced this phenomenon. Can you recall ever buying a new car for the advertised price? Or did pay a dealer fee, doc fee, and pay for dealer installed accessories that were added to the advertised price? Maybe the car they advertised was “just sold” and they had only one available at that price. Or maybe, you feel like they gave you far less for your trade-in than you felt it was worth.

Because of this you can understand why the auto manufacturers are becoming concerned: the dealers who represent their brands are giving them a bad name! Gallup has published an annual poll entitled “Honest and Ethics in Professions” for over 30 years and car salesmen have ranked at or near the bottom of that poll each and every year. The auto franchise system is “broken” but state franchise laws force the auto manufacturers to use car dealers to sell their vehicles. These laws were lobbied into effect by car dealers and their associations over the last 50 years. Furthermore, even if the state laws could be overturned, GM, Ford, Chrysler, Toyota, Honda and the others are not prepared, equipped, or inclined to sell their cars direct. Tesla is already selling cars directly without a dealer network. Apple and Google are talking about selling cars directly too. These forward-thinking companies are keenly attuned to what consumers want. Additionally, companies like TrueCar are helping to sell cars online by offering honest, low prices with total transparency. With public sentiment so negative against car dealers, the manufacturers are afraid that they may be put in the position of having to sell cars direct whether they like it or not. They believe that the better course of action is to change the unfair and deceptive advertising and sales practices of their dealers.

This brings me to my “ethical dilemma”. I’m one of the very few “one-price” car dealers. This means that I post my lowest price on every new and used car I sell. My car dealership is just like the Apple Store, Amazon, or Publix. We post our lowest prices on all of our products. We post these prices online on our website - our virtual showroom - just like we post prices on the cars in our “brick and mortar” showroom. Unlike most other dealers I don’t advertise prices lower than I will sell the car for. I don’t make my customers negotiate with me before they can get my lowest price any more than Apple would make you haggle with them before you could get their lowest price on a MacBook computer or an iPhone.

Toyota, like Honda and Mazda, is now telling their dealers that they cannot post a price on the cars displayed in their virtual, online showrooms if it is below the car’s invoice. They define it as advertising and I disagree with that. Because approximately one-third of cars that I sell are sold below invoice, this gives me only two choices. I can raise those prices several hundreds of dollars or I can show no price at all. If I raise my prices, I would be charging my customers more than I think is fair. If I don't display a price, I am not fulfilling the promise I made to my customers when I became a one-price dealer - to provide simple, honest up-front pricing.

Toyota, Mazda, and Honda’s rule on “no advertising of prices below dealer invoice” is well intended, but I don’t think they understood the unintended consequences of their actions. This rule is a serious blow to the small but growing number of legitimate one-price dealers like me. Retailers posting prices on their product is standard for nearly every product except for automobiles. The car dealer practice of haggling with customers is a relic and it's reminiscent of horse-trading in the 19th century. This well intended rule will discourage car dealers from moving into the 21st century where retailers tell their customers their lowest prices upfront without the haggle and hassle.

So there you have it. If I refuse to follow Toyota’s rules, I will be subjected to huge financial penalties which could put me out of business. If I obey Toyota’s rules I’m not being honest and transparent in my commitment to my customers about putting my lowest price on every car I sell.

I’m looking for advice and guidance from my customers on my dilemma. You can text or call me on my cell phone at 561 358-1474. You can email me at earl@earloncars.com.