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

During the last Florida legislative elections, Senator Joe Negron lead an effort to roll back about “$12” of the cost of registering a car in Florida. He said this would save Floridians about $230 million a year. It was supposed to bring back the tag registration cost to where it was about 7 years ago, when the legislature raised it because of the bad economy. He was, thankfully, successful in his efforts.

What Sen. Joe Negron and, apparently, the rest of the Florida legislature either didn’t know or care about is that, at about this same time, car dealers began passing along and marking up an expense to car buyers. This is increasing their profits far more than the $230 million a year that reducing tag registration fees will save.

This increased profit to car dealers is generally called the “Electronic Filing Fee”, “E-Filing Fee”, or “Tag Agency Fee, but there are other names that dealers use, just as they do for the infamous “dealer fee” like “dealer services” or “Dealer Prep Fee”. Car dealers used to process the tag and registration required on new and used cars themselves. About 8 years ago they began outsourcing this to data processing companies that can do this work cheaper than dealers 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. I inadvertently (and wrongly) passed this expense along to my customers for a short time until I discovered my mistake, which I immediately corrected. I’m refunding this extra charge to all of my customers that I overcharged. 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 like the Florida Auto Dealers Association (FADA) and the National Dealers Association (NADA) 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 deception upon car buyers is that the media has assumed their “Hear no evil, see no evil, speak no evil” stance. The local 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 2 years ago from our weekly consumer advice radio show on Seaview radio which we had done for almost 7 years. 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. Fortunately, Seaview Radio was purchased by JVC radio over a year ago and the new owners immediately brought us back. And doubled our airtime to 2 hours. You can tune us in every Tuesday afternoon 4-6 at 900 AM The Talk of the Palm Beaches or stream us at www.StreamEarlOnCars.com.

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”.

Should I Exercise My Option to Buy My Leased 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?

Why the First Set of Tires on Your New Car Wear Out 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 their 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 mean 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. 

How to Negotiate to Buy a Car

Buying a new or used car is one of the last bastions of the negotiated price. In some countries, negotiation is fairly commonplace in retail stores, but in America virtually all products are sold at a fixed price. Some of us are simply not comfortable negotiating and most of us are not very good at it. 

As I have said in previous columns, the best way to buy a new or used car in on the Internet. You can do your research on which car is the best to suit your needs, get guidance on what kind of price you can expect to pay, and finally get quotes from several dealerships on that specific car. However, everybody is not “Internet savvy” and if you are not, you may find it necessary to walk into a car dealership and negotiate for the lowest price.

If you are not comfortable with negotiation, the best advice I can give you is to bring someone along with you who is. Car sales people and sales managers are trained experts in negotiation. This is how they make their living. Here are some tips for you if you decide that you want to negotiate the best price on a car. 

• If you have a trade-in, keep that separate from the negotiation. Negotiate the best price on the car you are buying and then negotiate the best price you can get for your trade-in. Don’t fall for the old “over allowance” on your trade-in ruse. This is where the dealer makes up the price of car you are buying higher so that he can make you think you are getting more for your trade-in. 

• Never buy a car on payments alone. Always negotiate the best price you can for the car you are buying and then calculate your best payment when you have negotiated for the best interest rate. 

• Be sure you understand how the dealer arrived at his retail price. Federal law dictates that a Monroney label be affixed to every vehicle with a manufacturer’s suggested retail price. Many dealers mark that up with another label, often referred to as a “Market Adjustment Addendum”. This markup can be several thousands of dollars. 

• Expect the first price you are given to be substantially higher than what you can buy the car for. Sales people and sales managers are trained to “start high because you can always come down”. Don’t be afraid to offer substantially less than the initial asking price. You should look at just like the car salesman does, but the reverse…”start low because you can always go higher”. If the salesman excepts your first offer, you probably offered too much. In fact, shrewd car sales people are trained to always ask for more money, even if the offer is good one. This is because they don’t want to “scare off the customer” by telegraphing to the customer that he “left some money on the table”. 

• If the sales person asks you for a deposit before he will begin negotiating, determine whether the deposit is refundable. Florida law requires a nonrefundable deposit be disclosed in writing on the receipt. If this is printed on your receipt, insist that this be waived in writing on your buyer’s order. If the dealer will not agree to this, be warned that he may be able to keep your deposit if you change your mind about buying the car. 

• Be prepared for a lot of “back and forth” when the salesman takes your offer back to the manager. When you get close to finding a mutually acceptable price, the manager himself will often come to talk to you. Don’t be intimidated stick to your guns even when they tell you this is “positively, absolutely the lowest price”. Even if you think you do have the lowest price, a great strategy is to get up, walk out of the showroom, and get into your car to drive away. This will often precipitate an even better price. When you try this, the worst case scenario is that you really do drive home, but you can always return and buy the car the next day for the last price they quoted you. They may tell you that you have to buy today, but nine times out of ten that is a bluff. The only exception is when there are factory rebates and incentive expiring. 

• The last day of the month really is a good time to buy a car. The salesman’s bonus money is maximized, the factory incentives are in effect, the managers are desperate to make their quotas, and it is the one time of the month when the buyer has the best edge in negotiation. 

Caveat emptor “let the buyer beware” could have been written specifically for what you can expect when you walk into a car dealership to negotiate the best price. You are up against experts who negotiate for living. But, if you will follow my advice above, you should be able to hold your own and maybe even get a great deal.

Beware: The Phony Monroney

This blog/article is a rerun, but it’s important that I run it again because it involves a violation of a FEDERAL LAW…or at the very least its intent. The law is meant to inform car buyers of the official retail price suggested by the car manufacturer. The U.S. Senator who drafted this law, Mike Monroney, said this about his law: “The dealer who is honest about the so called ‘List Price’ cannot compete with the one who packs several hundred dollars extra into it so he can pretend to give you more on the trade-in.” Senator Monroney said this in 1958 and the only thing that has changed is that dishonest dealers are now charging several THOUSAND dollars extra. To add insult to injury, some remove both labels before delivery which is illegal.

The Monroney label is the window sticker that is mandated by federal law to be affixed to every new vehicle sold in the United States up until the time the new owner takes delivery. The name, Monroney, derives from Senator Michael Monroney’s law passed by Congress in 1958. Prior to the proposal of this bill, there was often a large discrepancy between the showroom price and the actual price of a new vehicle. The fact was that existing price tags did not tell the full story. Most customer-quoted prices were for "stripped-down" models and did not include additions for preparation charges, freight charges, federal, state, and local taxes, or optional factory-installed equipment requested by the purchaser. These hidden charges were used by some dealers to increase the selling price while giving the new vehicle buyer an inflated idea of their trade-in allowance. This price confusion led to a slump in auto sales during the early 1950's. Senator Monroney's bill was designed to prevent the abuse of the new vehicle list prices, but would not, however, prevent dealers and buyers from bargaining over vehicle prices.

Well, as you might expect, car dealers have figured out a way to evade this very good law. An alarmingly large number of dealers use a label that is designed to look almost identical to the official Monroney label. It has the same coloring, fonts, type size and layout. This “phony Monroney” is affixed right next to the genuine article. Unless you really look close and read all of the fine print, you will have no idea that you are looking at a counterfeit Monroney label. This phony Monroney includes extra charges to artificially inflate the manufacturer’s suggested list price, MSRP.

One of the most egregious of these charges is an addition of pure markup just for profit which has a variety of names. Some of these are “Market Adjustment”, “Additional Dealer Markup”, “Adjusted Market Value”, “ADM”, “Market Adjustment Addendum” and “Market Value Adjustment”. This is simply an amount that the dealer adds to the manufacturer’s suggested retail price. It is virtually always used in high-demand, low supply cars. I have seen these labels with charges as much as $10,000 added to the MSRP. Additions of $1,500 to $3,995 are common. Dealers also use the counterfeit labels to price dealer-installed accessories, which are OK, as long as the accessories are not marked up higher than the manufacturer marks them up.

When customers confuse the phony Monroney with the real one, this distorts their point of reference for comparing prices between different dealerships. One manufacturer’s Monroney labels are consistent. A 2016 Honda Accord with the same factory accessories will have the same MSRP at every Honda dealership you visit. But if dealers fool you into thinking their label is part of the Monroney, you are not comparing “apples and apples”. This can adversely affect a good buying decision in a number of ways. Some buyers focus mainly on how big a trade-in allowance they can get for their old car. If one dealer has the same car marked up $3,000 more than another dealer, he can offer you $3,000 more for your trade and still make the same profit as the other dealer. Some buyers focus on how big a discount they get from “sticker”. It’s easy to give a higher discount if you have artificially inflated the MSRP by thousands of dollars.

My advice to you is carefully inspect the sticker on the new car you are contemplating buying. Read it completely and especially the fine print. If there is a second label on the car, it is possible that it is fair. This would be for purposes of adding an item, installed by the dealer like floor mats or stripes, priced the same as the manufacturer charges. If that second label includes a markup over MSRP for no reason other than profit for the dealer, make sure that you adjust for that number in your comparisons for discounts and trade-in allowance. Some dealers also add a second markup to these labels and that is the infamous “dealer fee” also sometimes called “doc fee” and “dealer prep”. Some dealers do not put this on the phony Monroney but print it on their buyer’s orders and program it into their computers.

Don't Get "Flipped" to a Lease

One of the most popular weapons in car dealers’ arsenals is the infamous “lease flip”. This is car dealer jargon for switching a customer who originally intended to buy a car to leasing the car.

Of course the motivation to do this is more profit for the dealer and a bigger commission to the salesman. That’s not to say that leasing a car is always more costly than buying one, but it can be if you’re not careful. And not being careful is exactly what happens when a purchase intender becomes a lessee.

Here’s how it happens. You come into the dealership to buy a car. You may have seen the dealer’s advertisement in the newspaper or TV for a particular model. More than likely you are prepared to make a down payment and/or trade in your old vehicle. You have a monthly payment in mind because almost everybody has a budget and we usually translate most purchases into whether or not we can fit them into our monthly budgets. You negotiate the best price you can to buy the car, or maybe the sale price is good enough.

Now the salesman or more often the F&I manager/business manager tells you what your monthly payment will be. Let’s say that you have a trade-in worth $15,000 and aren’t going to put any cash down. The F&I [Finance and Insurance] manager tells you your monthly payment will be $427 per month. But that’s way more than you can afford and you tell him you can’t buy the car because you can’t afford that big a payment. He asks you how much you can afford and you tell him it must be under $350 per month. Now he has you set up perfectly for the “lease flip”.

“Mrs. Smith, I think I have just the right thing for you. What would you say if I told you that you can drive that new car home today for just $349 per month?” You say, “With glee, you say we have a deal!” Guess what? You’ve just been flipped. If you had bought the car at the advertised price or negotiated a very good price, the dealer probably would have made about $1,000 profit, and the salesman would have made about a $200 commission. Not that you’ve let yourself be flipped to lease, the dealer could be making $15,000 and the salesman could be making a $3,000 commission!

I’m not exaggerating. I get calls weekly from victims of lease flips. Many of the callers are elderly and many of them are widows who never bought a car before, but had relied on their husbands. There’s no law that limits the profit that a dealer can make when he sells or leases a car. $10,000, $15,000, and even $20,000 profits are made and usually on leases. The dealers can do this by using the trade-in as a capital cost reduction on the lease but allowing less for the trade than it is actually worth. In the example above, your trade-in may be worth $15,000 but you were allowed only $5,000 to reduce the capitalized costs of the lease. Also, the dealer could have raised the price of the car you negotiated or the sale price to MSRP or even 110% of MSRP which is allowable by the leasing companies.

By manipulating the number of months of the lease and the down payment [capitalized cost reduction], a dealer can give you as low a payment as you ask for and still make an exorbitant profit. Most buyers are so focused on monthly payments that they don’t carefully analyze what they are agreeing to and signing.

The shorter the number of months of a lease, the greater impact the down payment has on the monthly payment. A $5,000 down payment reduces the monthly payment on a 36 month lease by $139 per month, $208 on a 24 month lease, and $417 on 12 month lease.

Incredibly many victims of the lease flip, never thought about the fact that after the 12, 24, or 36 month term of the lease, they own nothing. After 36 months, a car with a good resale value should be worth at least half of what you paid for it. Many people who have never leased before think they can bring their lease car back early if they want. Leasing is not renting and you can bring your car back early only if you make all of the remaining lease payments. If you had bought the car for $30,000 and financed it for 36 months, you would have about $15,000 in equity at the end of 36 months and no monthly payments. You were building equity with every monthly payment in the purchase but you were building zero equity with your 36 lease payments.

As I said before, don’t let this frighten you from ever leasing a car. Leasing can be a good choice and sometimes the best choice. You can find six articles I’ve written for Hometown News: “Lease a New Car before You Buy It”, “Car Leasing Booby Traps”, “Be Very Careful When Leasing a Car”, “The Lease Acquisition Fee…the Bank’s Gotcha”, “Buy or Lease Your Car at the Right Time of Year”, and “Should I Buy or Lease My Next Car?”

Open Letter to Florida Car Dealers

SUBJECT: ELIMINATE THE DEALER FEE 

Dear fellow Florida car dealer,  

I started in the retail auto business in 1968,  48 years ago, and I have seen a lot of changes in the way we dealers sell cars and the expectations of our customers. My remarks in this column are made sincerely and with a positive intent toward you and your customers. I am not trying to tell you how to run your business; I am suggesting a change that will reward both you and your customers.  

Virtually every car dealer in Florida adds a charge to the price of the cars he sells, variously referred to as a “dealer fee”, “documentary fee”, “dealer prep fee”, etc. This extra charge is printed on your buyer’s orders and is programmed into your computers. It has been capped and regulated in most states including California. You charge this fee to every customer and it ranges from a few hundred dollars to over two thousand. Florida law requires that you disclose in writing on the buyer’s order that this charge represents profit to the dealer. Florida law also requires that you include this fee in all advertised prices. You don’t always do this and you get around the law by limiting the number of advertised vehicles (as few as one).  The argument that I hear from most car dealers when I raise this issue is that the dealer fee is fully disclosed to the buyer on his buyer’s order. But, most car buyers are totally unaware that they are paying this. Who reads all of the voluminous paperwork associated with buying a car? The few who notice it assume it is an “official” fee like state sales tax or license and registration fee. Those few astute buyers who do question the fee are told that your dealership must charge this fee on very car, which is simply untrue. These astute buyers are also told that all other car dealers charge similar fees. This is almost true, but, as you know, my dealership does not and neither does CarMax and a few other ethical dealers.  

 The reason you charge this fee is simply to increase the cost of the car and your profit in such a manner that it is not noticed by your customer. This is just plain wrong. Dealers will admit this to me in private conversations and some will admit that they have considered eliminating the fee as I have, but are afraid of the drastic effect to their bottom line. By being able to count on an extra $999 in profit that the customer is not aware of or believes is an “official fee”, you can actually quote a price below cost and end up making a profit. Or, if the price you quote the customer does pay you a nice profit, you can increase that by several hundred dollars. 

 This “extra, unseen” profit is even better for you because you don’t pay your salesmen a commission on it. That’s being unfair to your employees as well as your customers. When the rare, astute buyer objects to the dealer fee, the law permits you to decrease the quoted price of the car by the amount of the dealer fee. This would have the same net effect of removing it. The salesman won’t permit this because he will lose his commission (typically 25%) on the decrease in his commissionable gross profit.  If you don’t know me, I should tell you that I don’t profess to be some “holier than thou” car dealer who was always perfect. Although, I never did anything illegal, when I look at some of my advertising and sales tactics 20+ years ago and more, I am not always proud. But, I have evolved as my customers have evolved. My customers’ expectations, level of education, and sophistication are much higher today. Your customers are no different. As I began treating my customers, and employees, better I discovered that they began treating me better. Yes, I used to charge a dealer fee ($495), and when I stopped charging it a few years ago, it was scary. But I did it because I could no longer, in good conscious, mislead my customers. Just because everybody else was doing the same thing did not make it right.  Now here is the good news. My profit per car did drop by about the amount of the dealer fee when I stopped charging it. But, when my customers realized that I was now giving them a fair shake and quoting the complete out-the-door price with no “surprises” the word spread. My volume began to rise rapidly. Sure, I was making a few hundred dollars less per car, but I was selling a lot more cars! I was, and am, selling a lot of your former customers. My sales volume grew significantly! My bottom line is far better than it was when I was charging a dealer fee. You can do the same!  

Why am I writing this letter? I’m not going to tell you that I think of myself as the new Marshall that has come to “clean up Dodge”. In fact, I am well aware that this letter is to some extent self-serving. Lots of people will read this letter to you and learn why they should buy a car from me, not you. And, I am also aware that most dealers who read this will either get angry and ignore it or not have the courage to follow my lead. But maybe you will be the exception. If you have any interest in following my lead, call me anytime. I don’t have a secretary and I don’t screen any of my phone calls. I would love to chat with you about this. 

My personal cell phone number is 561 358-1474.   

Sincerely, 

Earl Stewart 

Demand an “Out-the-Door” Price Plus GOVERNMENT Fees Only

A car dealership, or any business, is entitled to charge any price for their product they want. This is what the free enterprise system is all about. Prices by the sellers should be decided by what the buyers are willing to pay. All too often, manufacturers endeavor to influence or even control the retail price of their sellers. Sellers that are monopolies or near monopolies like Florida Power & Light and Comcast can also defeat the free enterprise system too. However, the most common threat to the consumers’ right to choose the best price is deceptive advertising by the retailers.

Car dealers lead the charge in the category of deceptive advertising. This is not “just a few car” dealers as their manufacturers and dealer associations want you to believe, but is sadly true for the majority of car dealers. If you doubt I’m right about this, just click on http://www.gallup.com/poll/1654/honesty-ethics-professions.aspx. This is the Gallup annual poll on Honesty and Ethics in Professions. This poll has been conducted for over thirty years and car dealers have been ranked at or near last for every year, including last year.

There is only one surefire way to get an honest and low price from a car dealer. This is by COMPETITIVE SHOPPING. This sounds simple but it’s not. Car dealers will do everything they can to prevent you from comparing their price. Their advertised prices are almost always lower than the actual price. When you ask for a price by phone, email, or in person, they will usually refuse to give you a firm price unless you commit to buy “today”.

You must insist that they give you their best price. I have a recommended “word track” for you that almost always work. “I know you don’t want to give me your best, out-the-door price because you don’t want me to shop your price with your competition. This is understandable. But also please understand that if you refuse to give me your best price, you have ZERO chance of selling me a car. This is because I will leave your dealership and never return. It’s true that, if you give me your best price, I will shop it with your competition and you will have less of a chance to sell me a car. But less of a chance is far better than ‘no chance’. The decision is yours.”

Follow this procedure with three car dealers and be sure to compare the exact same year-make-model with identical accessories. This car will have the identical MSRP on the factory sticker at each dealership you shop. Be forewarned that the car dealers will do everything they can to SWITCH you to a different car. You must remain firm on the exact car you originally chose. You must compare “apples and apples”; otherwise you will be tricked into paying the dealer more profit.

There’s a simple way to communicate to the dealer what you mean by an out-the-door price. Tell him that in addition to the quoted price you will pay extra only for GOVERNMENT fees. These are fees that do not go in the dealer’s pocket but go directly to the state or local government. These are simply sales tax and the actual cost of the license tag and registration. Dealers try to confuse you by adding extra charges, often with the word “fee” included in the same. Examples are dealer fee, doc fee, notary fee, electronic (or “e”) filing fee, tag agency fee, service fee, administration fee, billing and handling fee, and on and on.

If the car dealer tells you that he must charge these fees, explain that if he insists on charging them, you want them included in your out-the-door price. These charges are not really fees, but they are added profit to the dealer or reimbursement to the dealer for non-government expenses (the exact same thing as added profit) that should be included in the price of the car.

The second big trick most car dealers use is DEALER INSTALLED accessories. These cheap, over-priced accessories like (nitrogen in the tires or paint protections) are always excluded from the advertised price and even the verbally quoted price. Sometimes the dealers will tell you that you must buy their installed accessories because they are pre-installed on all of their cars. Tell them that anything they must include in their price you want to know upfront so that you can shop and compare their best price with their competition.

Once you’ve chosen the lowest out-the-door price by shopping at least three car dealerships, be sure to keep the transactions for your trade-in and financing separate from the car purchase. You do this by shopping the value of your trade-in with at least 3 used car lots from dealerships that sell your make car. You shop your financing by checking with your bank and/or credit union. As a final check on the best price of your car click on www.TrueCar.com. At no cost, they will provide you with the lowest price from three dealers in your market for the car of your choice

GO VIRAL!

If you’re like me and can’t understand why our federal and state governments don’t pass a law making it illegal to sell a car with defective airbags that can explode in your face killing and/or maiming you or a loved one, help us make this petition go viral.  

You see in the news every day that millions more vehicles equipped with Takata airbags are being recalled. Auto manufacturers cannot obtain safe airbags fast enough to fix the over 100 million vehicles that are already on our highways, and are actually knowingly building new cars with the very same unsafe airbags.  

Did you know that federal law makes it illegal for a car dealer or other company to rent you a car with a defective airbag, but the very same car dealer or rental company can legally SELL you the same car without disclosing the fact that it has a dangerous airbag? As you know, Hertz, Avis, Enterprise and most rental companies and car dealers retail their rental cars after they stop renting them. Are they taking the cars out of their rental fleets that are illegal to rent, and selling them to the public instead? 

Anna Werner is a well-known reporter for CBS national news, and she recently conducted several undercover mystery shops of car dealerships. The mystery shopper pretended to be interested in buying a used car that had been predetermined to have an unrepaired dangerous Takata airbag. This was aired a few weeks ago on the CBS news and in no case did the salesman disclose this fact. When I saw this on TV, I mystery shopped TWENTY-FOUR car dealerships in South Florida. In four cases I sent mystery shopper physically into the dealerships and in twenty others my mystery shopper called the dealer on the phone. In 23 out 24 mystery shops the sales people denied the truth that the car had an unsafe airbag. The sales people were asked specifically if there was any unfixed safety recall on the car the mystery shopper was buying. Only one car dealer told the truth…Mullinax Ford in North Palm Beach.  

The manufacturers, car dealers, and the National Highway Traffic Safety Association (NHTSA) know that only ONE IN FOUR SAFETY RECALLS IS EVER REPAIRED! Tens of millions of used cars are being sold with unfixed dangerous safety recalls. For every new car sold in the US, there are 2.5 used cars sold. Last year there were over 17 million new cars sold but there were over 40 million used cars sold. Three out of four of those used cars with safety recalls have not been repaired. As I write this column, there are hundreds of unsuspecting used car buyers buying a used car with a dangerous safety recall.  

For all of the above reasons I implore you to, not only sign this petition, www.AirbagRecallPetition.com, but to tell your friends, family, work associates and anybody else who will listen. Please put this on your Facebook page, Twitter, Instagram, Snap Chat, YouTube and email it to everyone you know. If you have access to anyone in Florida’s legislature, especially the governor’s office please let your voice be heard.  

  

Best, 

Earl 

The War between Insurance Companies and Body Shops

(That You Never Knew Was Being Waged)

I’ve written other articles about how insurance companies try to fix your car as cheaply as they can without showing the necessary concern for the quality and safety of the repairs. You can find them on this blog, “Collision Insurance and Your Rights” and “Coping with Body Shops and Insurance Companies”.

This new article was written by Alan Nappier, my body shop manager at Earl Stewart Toyota. Alan is, not only the best body shop manager I’ve employed in my 47 years as a car dealer, but one of the smartest, most articulate people I know. I’ll probably sound like I’m overdoing it but he also has an incredible sense of humor. I say all this so that when you read what he has to say below, please take it as the gospel. Alan is not a “smoke blower” or an exaggerator. He tells it like it is. You can ask Alan a question about repairing your car and your insurance company any Tuesday afternoon between 4 and 6. He appears on my live radio talk show, “Earl Stewart on Cars” on 900 AM, The Talk of the Palm Beaches. You can also stream this show live at www.StreamEarlOnCars.com.

Your body shop is either at war with the insurance companies or they fight on their side. If your body shop is not fighting for you to protect your car from cheap, poor quality, and unsafe repairs you’re in a “heap of trouble”. The chances are that if your body shop is on your insurance company’s “approved repairer list” that its loyalty is not to you but to that insurance company. You should take your car to the body shop that you know and trust will fix your car with your interests paramount in their mind, not one who must “play ball” with your insurance company or lose their membership on the “approved repairer list”. One way to find out whose side your body shop is on is to ask them if they will be asking you to sign two forms. One is called a “Limited Power of Attorney” and the second is called an “Assignment of Proceeds”. Please read on and Alan will explain very clearly why this is so.

By Alan Nappier:

Getting an insurance company to “approve” proper repairs to a collision damaged automobile is the toughest part of the collision repair industry. First of all, in a legal sense, the insurance company really has no right to dictate or blueprint a repair process. Their responsibility to the customer is to pay for property damage, NOT determine HOW the vehicle is to be repaired. The insurance company makes money by taking in premiums and investing these premiums. Any damage claim payouts are EXPENSES and like any company, controlling expenses is a top priority. This creates a conflict of interest when the insurance company is allowed to participate in the repair process. Contrary to popular belief, insurance companies DO NOT look out for YOUR best interests; they look out for their OWN best interest. This scenario leads to an adversarial relationship between insurance companies and HONEST repair facilities. Dishonest or unethical repair facilities view the insurance company as their customer and you as a product. They will repair your vehicle however the insurance company instructs, regardless of quality or the resulting structural integrity of the automobile. They want to keep the insurance company happy so that they may keep getting business referred to them. It’s a great arrangement for everybody EXCEPT the vehicle owner. An ethical body shop will repair your vehicle properly REGARDLESS of the insurance companies’ suggestions otherwise. In the past, we would have to just “absorb” the difference between what the insurance company “allowed” and what it REALLY cost to repair your car.

Enter now a powerful couple of legal documents called the “Limited Power of Attorney” (POA) and the “Assignment of Proceeds” (AOP). The POA is exactly what it says it is. It gives the repair facility the power to initiate legal action or collection efforts on your behalf. No, we can’t steal your house or take over your bank account, the LIMITED POA is specific to the insurance claim[Symbol] Remember, in a legal sense, the shop has NO legal connection with, or obligation to, the insurance company. Our contract (signed repair order) and responsibility is with YOU, the vehicle owner. Therefore, YOU are still financially obligated for the monetary difference between what the company allowed and the true cost of the repair. A POA allows me to repair the car properly, deliver the finished product to you and then begin collection efforts on your behalf. Odds are, you’ll never hear about the claim again.

The AOP is actually a document that “assigns” your contractual arrangement with the insurance company to the repair facility which then gives us legal standing to sue this insurance company directly. This “connection” must be established to allow the shop to sue for “breach of contract”. When an insurance company fails to adequately compensate for property damage, they have breached their contract with YOU. The AOP extends this contractual obligation to the repair facility.

With all of THAT being said, here’s the REALITY of the situation. We are most likely never going to use these documents. The power of these documents is the knowledge that they exist. Reaching an agreed repair dollar figure is a negotiation and a negotiation is a battle of wills. You don’t want to enter any “battle” without the proper weapons and knowledge. The AOP and POA are the most powerful weapons the repair facility has available to it. When confronted by a mugger with a knife, just showing the dirty no-good your gun is enough to deter further aggression and typically end an ugly situation and you walk away the victor, not with any illicit gains, but, just with what was rightfully yours to begin with. This is the EXACT same thing we use the AOP and POA for. Simply by brandishing these powerful weapons, the muggers (insurance companies in this case), recognize a losing battle and retreat. No insurance company wants to have their dirty little secrets exposed in court. They know they can’t win because the facts and truth are on our side. The end result is, these couple of signatures you gave me makes me David to the insurance companies Goliath.

Open Letter to Auto Manufacturers: Accept Your Responsibility for Takata Airbag Debacle

Dear Automobile Manufacturers,

As I write this letter, there are over 100 million vehicles on the road with defective Takata airbags. You selected Takata as the supplier for these airbags and you installed them in your vehicles. You then sold them to your dealers, and they sold them to over 100 million drivers.

Many of these airbags were installed more than a decade ago and many more are being installed today even though you know them to be dangerous. The metal inflator which contains an unstable explosive propellant, ammonium nitrate, can detonate too forcefully, causing the metal casing to explode into shrapnel, striking the car’s driver and/or passenger. There have been 10 deaths and over 100 injuries due to this in the United States, and many more worldwide.

Because Takata cannot manufacture safe airbag replacements fast enough, the drivers of your vehicles with unsafe airbags cannot have them replaced. They are faced with the dilemma of renting or buying a safe car or driving the dangerous one. Unfortunately, most can afford only the latter option. Car dealers are telling their customers that the waiting list for a safe airbag can be as long as one year.

As the manufacturer of these dangerous vehicles, you must immediately accept the responsibility for keeping their owners and drivers safe. Why? Because you should have been absolutely certain that the maker of one of the most important safety components on your vehicles, the airbag, was building a safe and reliable product. Your due diligence was clearly insufficient. Investigations have revealed that Takata has been aware of this safety problem for many years and covered up the fact that they were supplying you with millions of dangerously defective airbags every year.

You can point the finger of blame at Takata, and they certainly are guilty. However, Takata has not taken any meaningful actions whatsoever to protect the drivers of your vehicles and it’s highly unlikely that they will; their liability is so massive that they cannot afford to do so. Most industry observers believe that Takata will declare bankruptcy, or have their assets acquired absence any liability.

You must protect the drivers of your vehicles now, and take legal action against Takata to recover whatever you can!

As I write this letter, unsuspecting customers continue to buy the defective used cars you manufactured more than a decade ago. Virtually none of these have had their dangerous Takata airbags replaced. Car dealers are under no requirement to even disclose the fact that that the used cars they are selling contain a potentially lethal airbag. CBS News recently aired an exposé on this by sending mystery shoppers into several car dealerships in several different states. Their investigation revealed that no disclosure was offered to the customers. I mystery shopped twenty-four car dealerships in South Florida. I sent my mystery shopper into four and contacted twenty more by telephone. Twenty-three car dealers misrepresented the car the shoppers were buying as not having a recalled Takata airbag. I verified that the cars did, in fact, have dangerous airbags on the NHTSA website, http://www-odi.nhtsa.dot.gov/owners/SearchSafetyIssues.

This is what you must do immediately to stop the deaths and injuries in the vehicles you manufactured:

(1) Order your car dealers not to sell, or allow to be driven, any of the vehicles you manufactured with an unsafe airbag: new or used.

(2) Provide free loaner cars to all owners and drivers of the cars you built with defective airbags until safe airbags can be installed. Honda is already doing this and all manufacturers should follow their example.

(3) Compensate your dealers as well as independent used car dealers for the financial loss they experience by being unable to sell your unsafe vehicles.

(4) Immediately stop manufacturing vehicles that you know to have unsafe airbags. Although you may anticipate eventually being able to replace the faulty airbags, many of these vehicles will find their way into the used vehicle market and in the driveways of unsuspecting consumers prior to being fixed. Millions of these vehicles will never be fixed and remain on the road for years. CarFax data shows that only one in four recalls are ever fixed.

(5) Lobby federal and state governments to pass laws making it illegal to sell a used or new car with an unsafe airbag. 

Sincerely,



Earl Stewart