For those not familiar with the stock market, “pump and dump” is the illegal activity of overstating the value of a stock to encourage unsuspecting buyers to buy the stock and thereby drive up the price. Those giving out the misinformation on the stock (pumping) then suddenly sell (dump) all of their stock which they had previously acquired at much lower prices and make a large albeit illegal profit.
You must not own a TV set if you haven’t seen the recent new commercial by General Motors starring Ed Whitacre, the CEO and Chairman of the Board. He is strutting through a GM plant and bragging about how GM just repaid a $5 billion government loan 5 years early. This advertisement began the very day the “repayment” was made and the press release was issued. This was no coincidence and it was very well coordinated.
All of the media, TV cable and network, and print jumped on this and spread the word that General Motors was doing a lot better than expected and the taxpayers’ $50B investment in GM would not only be repaid soon but with a big profit.
The fact is that we taxpayers got back none of the money we gave GM. The $5 Billion that Ed Whitacre said GM paid back early was already in the U.S. Treasury’s possession in an escrow account. It was simply moved from one column on the Treasury’s books to another. At best, one could say that GM used one source of TARP funds to repay another. This was reported to Congress last week in a TARP audit by its inspector general, Neil Barofsky. Strangely enough, the conventional media has ignored this. The way I found out about it was from an article in my trade journal, Automotive News. This article cited a letter written to Treasury Secretary Tim Geithner, from Senator Charles Grassley of the finance committee.
Also, remember that our government loaned GM $50B, not $5B. When GM went bankrupt and could not repay anything, the government took majority ownership (61%) and converted the loan into worthless stock. You probably know that debt holders (bond holders) are in a much safer position than equity owners (stockholders). For Ed Whitacre to brag about repaying a $5B loan 5 years early that was really a $50B loan is patently absurd. But wait, there’s even more.
Now here’s the “smoking gun” for “pump and dump”. General Motors will be coming out very shortly with a stock offering to the public, an IPO. The only way that the taxpayers can really be paid back is if our government sells their stock in GM for a lot more than they paid for it. The only way they can sell stock is if the stock buyers believe GM can recover and begin to make a profit. Now do you get it? Using “smoke and mirrors”, Ed Whitacre and our politicians whose reelection depends on the survival of GM are trying to raise public opinion about the viability of GM so that they can drive up the price of the stock offered.
I hope the government doesn’t sic the SEC on me like they did Goldman Sachs because I’m going to short GM stock if the government sells it for, or above, the IPO price. In my opinion GM has little chance of being profitable in its present form anytime soon. Almost all of their improvements have come from laying off workers, closing plants, and other radical cost cuts, not from car profits. They have shown sales increases but most of those are to large rental and leasing fleets like Hertz and Avis that buy cars dirt cheap. GM does this even though they don’t make a profit so that they don’t have to close more plants and to make their numbers look better. The fleets then dump the cars back on the used car market which drives down the resale value of GM cars and trucks. This has the net effect of raising the cost of GM cars and trucks to GM owners because their trade-ins are worth much less.
It’s bad enough that Ford, Honda, Toyota and other manufacturers have to compete with the US government, but now the government isn’t even playing fair. The bottom line is that it’s the marketplace that decides which manufacturers will succeed, not the government. The American buyer will buy those products that have the best value, the ratio of price to quality. If GM, Chrysler, and our politicians don’t like those rules, they should get out of the car business.
Monday, April 26, 2010
Monday, April 19, 2010
The Ethical Collapse of a Car Dealer?
Over three weeks ago it was reported in the media that John Pierson, had sold his ownership in John Pierson’s Toyota of Stuart to Southeast Toyota, LLC, the independent distributor for Toyota in the Southeast USA. John Pierson said that this was something that he had been contemplating for several months and his decision was motivated by personal reasons, particularly his pending divorce and child custody issues.
But, but soon after it was reported by Eve Samples, a reporter for Scripps Treasure Coast Newspapers that Southeast Toyota, LLC had, in fact, fired John Pierson and forcibly bought him out because “he (John Pierson) engaged in self-dealing and illegally diverted dealership money for his personal use.” You can read her article by clicking on www.TCPalm.com/Samples. It’s entitled “Philanthropist, Former Owner Pierson Denies Diverting Business money for Personal Use”. Subsequently Eve Samples reported that John Pierson has counter sued Southeast Toyota for defamation of character.
Now, I know have no first hand knowledge of any illegal activities by John Pierson with respect to Southeast Toyota. But I have been aware for a long time of many car buyers from the Treasure Coast who complained about being taken advantage of at John Pierson’s dealership. A lot of Toyota buyers drive all the way from Stuart and Hobe Sound down to North Palm Beach and buy their cars and have them serviced at my dealership. And they tell me why they drive so far.
If you read Eve Sample’s article in the Scripps Treasure Coast Newspaper you will read that John Pierson began his huge philanthropic efforts (over $1 million per year) “after his dealership was sued by more than a dozen elderly customers who believe they were duped into overpaying for vehicles.” The attorney representing these customers called me several times to consult about the alleged illegal and deceptive sales practices. He asked if I would testify against John Pierson but I had to respectfully decline to voluntarily testify against a fellow Toyota dealer, especially my closest competitor to the north. According to the attorney, many customers said they came in to buy a car for cash but were tricked into leasing. Some said they thought they were trading in their car but received no credit for it against their lease. Others said that they were told that if they didn’t like their lease car they could return it at anytime and not have to make any more lease payment.
I’ve also received dozens of calls, email, and letters directly from frightened and angry former customers of John Pierson’s, most of whom were elderly and many of those were recent widows, who were buying or leasing their first car. In most cases, there was nothing they could do. They signed the contracts without reading them and the alleged verbal assurances made to them by the salesmen and managers were later denied.
You may know that I spoke before the Workforce Alliance (a non profit organization) in January when I sponsored their speaker, Marianne Jennings, at the West Palm Beach Kravis Center. She’s authored about a dozen books including The Seven Signs of Ethical Collapse. Marianne Jennings was also a guest caller on my weekly radio show, Earl Stewart on Cars. She has spent a lifetime studying business ethics and is professor at Arizona State University where she teaches ethics. In fact, you really should read this the book. I gave away twelve copies, one to each of my senior managers.
Chapter 8 of this book is entitled “Sign #7; Goodness in Some Areas Atones for Evil in Others”. This chapter warns readers to beware of businesses and business executives whose “philanthropic and social goodness became the salve for a conscience grappling with cooked books, fraud, insider training—all the usual activities of ethical collapse.”
What do Ken Lay of Enron, Bernard Ebbers of World Com, Dennis Kozlowski of Tyco, John Rigas of Adelphia, Richard Scrushy of HealthSouth all have in common with John Pierson of Toyota of Stuart? There are two things that jump right out…they all gave very large sums of money to charities and were later accused of unethical and illegal activities. Let me make it perfectly clear than John Pierson has not been found guilty of anything and may be totally exonerated. In fact, he has sued Southeast Toyota for defamation of character and may win his suit. But John Pierson did admit that he began giving millions dollars to local charities to overcome the negative image he gained when accused by more than a dozen local elderly customers of being defrauded by his dealership.
John F Kennedy said “The great enemy of the truth is very often not the lie—deliberate, contrived and dishonest—but the myth—persistent, persuasive, and unrealistic”. Ken Lay, Bernie Ebbers, Dennis Kozlowski, John Rigas, Richard Scrushy, and John Pierson were held in high regard by their customers and stockholders by a myth. By his own admission, John Pierson said that he began the millions of dollars of charitable contributions to change his negative image in the community.
If you haven’t read Marianne Jennings’s book, I highly recommend that you do. Had Southeast Toyota, the local media and authorities read chapter 8, they may have seen this coming five years ago.
But, but soon after it was reported by Eve Samples, a reporter for Scripps Treasure Coast Newspapers that Southeast Toyota, LLC had, in fact, fired John Pierson and forcibly bought him out because “he (John Pierson) engaged in self-dealing and illegally diverted dealership money for his personal use.” You can read her article by clicking on www.TCPalm.com/Samples. It’s entitled “Philanthropist, Former Owner Pierson Denies Diverting Business money for Personal Use”. Subsequently Eve Samples reported that John Pierson has counter sued Southeast Toyota for defamation of character.
Now, I know have no first hand knowledge of any illegal activities by John Pierson with respect to Southeast Toyota. But I have been aware for a long time of many car buyers from the Treasure Coast who complained about being taken advantage of at John Pierson’s dealership. A lot of Toyota buyers drive all the way from Stuart and Hobe Sound down to North Palm Beach and buy their cars and have them serviced at my dealership. And they tell me why they drive so far.
If you read Eve Sample’s article in the Scripps Treasure Coast Newspaper you will read that John Pierson began his huge philanthropic efforts (over $1 million per year) “after his dealership was sued by more than a dozen elderly customers who believe they were duped into overpaying for vehicles.” The attorney representing these customers called me several times to consult about the alleged illegal and deceptive sales practices. He asked if I would testify against John Pierson but I had to respectfully decline to voluntarily testify against a fellow Toyota dealer, especially my closest competitor to the north. According to the attorney, many customers said they came in to buy a car for cash but were tricked into leasing. Some said they thought they were trading in their car but received no credit for it against their lease. Others said that they were told that if they didn’t like their lease car they could return it at anytime and not have to make any more lease payment.
I’ve also received dozens of calls, email, and letters directly from frightened and angry former customers of John Pierson’s, most of whom were elderly and many of those were recent widows, who were buying or leasing their first car. In most cases, there was nothing they could do. They signed the contracts without reading them and the alleged verbal assurances made to them by the salesmen and managers were later denied.
You may know that I spoke before the Workforce Alliance (a non profit organization) in January when I sponsored their speaker, Marianne Jennings, at the West Palm Beach Kravis Center. She’s authored about a dozen books including The Seven Signs of Ethical Collapse. Marianne Jennings was also a guest caller on my weekly radio show, Earl Stewart on Cars. She has spent a lifetime studying business ethics and is professor at Arizona State University where she teaches ethics. In fact, you really should read this the book. I gave away twelve copies, one to each of my senior managers.
Chapter 8 of this book is entitled “Sign #7; Goodness in Some Areas Atones for Evil in Others”. This chapter warns readers to beware of businesses and business executives whose “philanthropic and social goodness became the salve for a conscience grappling with cooked books, fraud, insider training—all the usual activities of ethical collapse.”
What do Ken Lay of Enron, Bernard Ebbers of World Com, Dennis Kozlowski of Tyco, John Rigas of Adelphia, Richard Scrushy of HealthSouth all have in common with John Pierson of Toyota of Stuart? There are two things that jump right out…they all gave very large sums of money to charities and were later accused of unethical and illegal activities. Let me make it perfectly clear than John Pierson has not been found guilty of anything and may be totally exonerated. In fact, he has sued Southeast Toyota for defamation of character and may win his suit. But John Pierson did admit that he began giving millions dollars to local charities to overcome the negative image he gained when accused by more than a dozen local elderly customers of being defrauded by his dealership.
John F Kennedy said “The great enemy of the truth is very often not the lie—deliberate, contrived and dishonest—but the myth—persistent, persuasive, and unrealistic”. Ken Lay, Bernie Ebbers, Dennis Kozlowski, John Rigas, Richard Scrushy, and John Pierson were held in high regard by their customers and stockholders by a myth. By his own admission, John Pierson said that he began the millions of dollars of charitable contributions to change his negative image in the community.
If you haven’t read Marianne Jennings’s book, I highly recommend that you do. Had Southeast Toyota, the local media and authorities read chapter 8, they may have seen this coming five years ago.
Monday, April 05, 2010
Has Bogus Attack on Toyota Awakened a Sleeping Giant?
Almost one month ago, I wrote an article entitled “Toyota Recall a Hoax?” for my blog and Hometown News. You can read it by clicking on http://oncars.blogspot.com/2010/03/toyota-recalls-hoax.html.
I believe my column was prophetic. The only people still throwing rocks at Toyota are the hard core of the motley crew comprised of the Detroit Big 3 establishment voiced by the Detroit Free Press. The former members of the motley crew, the media and the US Congress have deserted Detroit to focus their attention other “important” issues.
The inbred Detroit-UAW-Bloomfield Hills Country Club- “Big 3” cultures just don’t get it. Fortunately for them, our government bought control of GM and Chrysler, so the US Congress drank the Detroit cool aide too. Of course the media hopped on the bandwagon like they did Tiger Woods’ sex life or an alleged gang-rape of a prostitute by a hockey team.
This motley crew with their former members, the media and the Congress, piled on Toyota with more nonsense and false allegations than most could even imagine. After this nonsense became boring and the public didn’t care or believe it anymore, Toyota added some price incentives last month and out-retailed EVERYBODY by at least 40,000 units and 40% of those sales were to owners of other make cars. The bottom line is the American consumer didn’t drink the Detroit cool aide.
There was a headline in the Saturday, April 3 Detroit Free Press, “Toyota must decide how badly it wants to land sales”. The gist of the article is that Toyota “bought the business” last month by bribing people to buy unsafe cars. Now, would you buy a car that you feared would kill you or a family member just because you could get 0% financing for 60 months? I don’t think so! The Detroit motley crew has awakened a sleeping giant. You see, people buy Toyotas instead of Pontiacs because Toyota builds better cars. Now that the false pundits have threatened and angered Toyota, Toyota has decided that they will also give “Big 3” owners a price incentive too. Check out Toyota’s balance sheet. They have “cash coming out of their ears!” GM and Chrysler are “hanging by a thread” and a prolonged price-war with Toyota will sever that thread.
My opinion is that of a former GM dealer (Pontiac) for 30 years who was lucky enough to buy a Toyota dealership in 1975. I’ve played on both teams, General Motors and Toyota, and I’ve lived both sides of the story.
I recommend that you read “Crash Course” by Paul Ingrassia. There’s a great review of the book in Barron’s, Monday, April 5 issue. The article on page 40 is entitled “How Detroit Ended Up in a Ditch”. 40. As a Pontiac dealer for 30 years while owning a Toyota dealership for 23 of those, I can vouch for the accuracy and objectivity of this book.
You think March sales were a fluke for Toyota? Anybody want to bet that Toyota out-retails every other manufacturer again in April?
I believe my column was prophetic. The only people still throwing rocks at Toyota are the hard core of the motley crew comprised of the Detroit Big 3 establishment voiced by the Detroit Free Press. The former members of the motley crew, the media and the US Congress have deserted Detroit to focus their attention other “important” issues.
The inbred Detroit-UAW-Bloomfield Hills Country Club- “Big 3” cultures just don’t get it. Fortunately for them, our government bought control of GM and Chrysler, so the US Congress drank the Detroit cool aide too. Of course the media hopped on the bandwagon like they did Tiger Woods’ sex life or an alleged gang-rape of a prostitute by a hockey team.
This motley crew with their former members, the media and the Congress, piled on Toyota with more nonsense and false allegations than most could even imagine. After this nonsense became boring and the public didn’t care or believe it anymore, Toyota added some price incentives last month and out-retailed EVERYBODY by at least 40,000 units and 40% of those sales were to owners of other make cars. The bottom line is the American consumer didn’t drink the Detroit cool aide.
There was a headline in the Saturday, April 3 Detroit Free Press, “Toyota must decide how badly it wants to land sales”. The gist of the article is that Toyota “bought the business” last month by bribing people to buy unsafe cars. Now, would you buy a car that you feared would kill you or a family member just because you could get 0% financing for 60 months? I don’t think so! The Detroit motley crew has awakened a sleeping giant. You see, people buy Toyotas instead of Pontiacs because Toyota builds better cars. Now that the false pundits have threatened and angered Toyota, Toyota has decided that they will also give “Big 3” owners a price incentive too. Check out Toyota’s balance sheet. They have “cash coming out of their ears!” GM and Chrysler are “hanging by a thread” and a prolonged price-war with Toyota will sever that thread.
My opinion is that of a former GM dealer (Pontiac) for 30 years who was lucky enough to buy a Toyota dealership in 1975. I’ve played on both teams, General Motors and Toyota, and I’ve lived both sides of the story.
I recommend that you read “Crash Course” by Paul Ingrassia. There’s a great review of the book in Barron’s, Monday, April 5 issue. The article on page 40 is entitled “How Detroit Ended Up in a Ditch”. 40. As a Pontiac dealer for 30 years while owning a Toyota dealership for 23 of those, I can vouch for the accuracy and objectivity of this book.
You think March sales were a fluke for Toyota? Anybody want to bet that Toyota out-retails every other manufacturer again in April?
Monday, March 29, 2010
THE NEW CAR “INVOICE” IS NOT THE INVOICE
I was very pleased to see a news article in this week’s Automotive News entitled “Dealer is a lone voice on invoice prices in ads”. At first, I thought “Oh Boy! We have another dealer - Jack Fitzgerald, a Maryland car dealer - who is willing to stand up and be counted when it comes to unfair and deceptive advertising by car dealers.
But, after I read the Automotive News article, I realized that the only thing Jack Fitzgerald was concerned about was losing his right to advertise cars at invoice. Fitzgerald is sponsoring a bill in the Maryland legislature to prevent manufacturers from withholding benefits such as advertising co-op funds if a dealer advertises invoice prices.
For those of you who read my blog, my column in the Hometown News, or my Saturday morning radio show on Seaview you know that I consider advertising a car at or below dealer invoice unfair and deceptive advertising. This is because many consumers think of the invoice of a product as being what the store pays the manufacturer or distributor. They think its true cost, but the invoice of a new car actually includes a relative large profit to the dealer with thousands of dollars of holdbacks, advertising costs, floor plan costs, and rebates included.
Some manufacturers do discourage dealers from advertising at or below invoice prices by financially penalizing them. Most manufacturers do not. Honda does and Toyota has restrictions on language used that refers to the cost of the vehicle. Honda’s motivation is clearly to support the retail selling price of Hondas. I quote from the article, Chris Martin a spokesman for American Honda Motor Co., “Encouraging shoppers to focus on the cheapest price could undermine a vehicle’s resale value and hurt the brand image.” I believe that the manufacturer has no business meddling with what their dealers can sell their cars for. In fact, I question the legality of this. However, I do believe that the manufacturers should “meddle” with unfair and deceptive advertising by its dealers and this is what Jack Fitzgerald and lots of dealers who like to advertise at or below invoice are guilty of.
In this Automotive News article, Jack says “The Federal Trade Commission tells consumers to determine the factory invoice price when they are shopping for a car to protect themselves against overpaying.” He says “That’s why I put the factory invoice price on my Web site.” I would love to see that document from the FTC that tells potential car buyers that a dealer invoice is an accurate representation of the true cost of the vehicle to the dealer. I don’t believe that such a document exists but, if it does it should be immediately rescinded. The real reason that Jack likes to show his customers the invoice on his cars is because he knows that the customer thinks it is his true cost. His customers don’t know that the typical car invoice includes thousands of dollars in profit to the dealer.
I’m writing this column on Monday, March 29, and I’m looking at an ad in today’s Palm Beach Post by Arrigo-Dodge-Chrysler-Jeep. The headline is “BELOW INVOICE PRICING”. Unfortunately there are still lots of people who will read this ad and believe that they are getting the “buy of lifetime”. Sadly they may be almost right. It will be the “sale of a lifetime” for the salesman and the dealer if you pay their asking “below invoice” price.
But, after I read the Automotive News article, I realized that the only thing Jack Fitzgerald was concerned about was losing his right to advertise cars at invoice. Fitzgerald is sponsoring a bill in the Maryland legislature to prevent manufacturers from withholding benefits such as advertising co-op funds if a dealer advertises invoice prices.
For those of you who read my blog, my column in the Hometown News, or my Saturday morning radio show on Seaview you know that I consider advertising a car at or below dealer invoice unfair and deceptive advertising. This is because many consumers think of the invoice of a product as being what the store pays the manufacturer or distributor. They think its true cost, but the invoice of a new car actually includes a relative large profit to the dealer with thousands of dollars of holdbacks, advertising costs, floor plan costs, and rebates included.
Some manufacturers do discourage dealers from advertising at or below invoice prices by financially penalizing them. Most manufacturers do not. Honda does and Toyota has restrictions on language used that refers to the cost of the vehicle. Honda’s motivation is clearly to support the retail selling price of Hondas. I quote from the article, Chris Martin a spokesman for American Honda Motor Co., “Encouraging shoppers to focus on the cheapest price could undermine a vehicle’s resale value and hurt the brand image.” I believe that the manufacturer has no business meddling with what their dealers can sell their cars for. In fact, I question the legality of this. However, I do believe that the manufacturers should “meddle” with unfair and deceptive advertising by its dealers and this is what Jack Fitzgerald and lots of dealers who like to advertise at or below invoice are guilty of.
In this Automotive News article, Jack says “The Federal Trade Commission tells consumers to determine the factory invoice price when they are shopping for a car to protect themselves against overpaying.” He says “That’s why I put the factory invoice price on my Web site.” I would love to see that document from the FTC that tells potential car buyers that a dealer invoice is an accurate representation of the true cost of the vehicle to the dealer. I don’t believe that such a document exists but, if it does it should be immediately rescinded. The real reason that Jack likes to show his customers the invoice on his cars is because he knows that the customer thinks it is his true cost. His customers don’t know that the typical car invoice includes thousands of dollars in profit to the dealer.
I’m writing this column on Monday, March 29, and I’m looking at an ad in today’s Palm Beach Post by Arrigo-Dodge-Chrysler-Jeep. The headline is “BELOW INVOICE PRICING”. Unfortunately there are still lots of people who will read this ad and believe that they are getting the “buy of lifetime”. Sadly they may be almost right. It will be the “sale of a lifetime” for the salesman and the dealer if you pay their asking “below invoice” price.
Monday, March 22, 2010
DEALER FEE FRAUD HOTLINE
(866) 9- NO- SCAM; (866) 966-7226
About three years ago I testified before the Florida state Senate Commerce Commission about making the dealer fee illegal. As you probably know I was not successful but have carried on my efforts through TV, radio and newspaper ads, this column, my Saturday morning show on Seaview 95.9 FM, and numerous public speaking engagements. My efforts have been somewhat successful in that my two closest Toyota competitors dropped their dealer fee last June because they were losing their customer to me.
The Florida Attorney General, Bill McCollum, had a representative at the Senate Commerce Committee testifying at the same time I did. The committee asked the assistant AG why they did not prosecute those car dealers who violated the Florida Unfair and Deceptive Trade Practices Act with respect to dealer fees. He responded that they were understaffed and also that they did not receive a lot of complaints about this. Now, I personally believe that the AG’s office receives a lot more complaints on the dealer fee than they know about. Why do I say this? The assistant AG admitted that they did not file consumer complaints against car dealers by “type”. In other words they have a virtually useless database which makes it impossible to figure out who is complaining about what.
This recollection is what inspired this column. What if I could spread the word to call the AG’s own Fraud Hotline such that they received so many complaints on the dealer fee that they can’t ignore it even with a lousy filing system?
OK, now here’s the law taken right from the Florida Unfair and Deceptive Trade Practice Act: “The advertised price must include all fees or charges that the customer must pay, including freight or destination charges, dealer preparation charge, and charges for undercoating or rust proofing. State and local fees, and title fees, unless otherwise required by local law or standard, need not be disclosed.” Simply stated, if you responded to an advertisement by a car dealer, bought the advertised car, and he charged you more than the advertised price (plus tax and tag only), he broke the law and owes you the extra charges. The dealer is also subject to very large fines from the AG and possible suspension or revocation of his license to sell cars by the Florida Department of Motor Vehicles…not to mention class action suits to recoup overcharges to thousands of his customers. If you would like to read the official Senate summary of the Unfair and Deceptive Trade Practices Act pertaining to car dealers you can click on this link, www.DealerFeeFraud.com.
In last Saturday’s Palm Beach Post I saw several car dealers’ advertisements on cars with fine print saying that the prices were “plus dealer fee”. Some dealers are also advertising that the prices are plus dealer fee and freight or destination fee. Delay Mazda, Napleton Nissan (Riviera Beach) and Ft. Pierce Nissan are three dealerships that are charging twice for freight. Freight is already included by the manufacturer in the invoice you pay. The amount added to advertised price is about $1,500! There are some dealers who don’t even mention the dealer fee in the fine print but just add it onto the price when you come in.
If you bought an advertised car in Florida you probably paid more than the ad price plus tax and tag. If you did, you have a legitimate beef with the dealer. The dealer should refund you the overcharge plus interest. If not, you should report him to Bill McCollum, our Attorney General, by calling 866 966-7226.
About three years ago I testified before the Florida state Senate Commerce Commission about making the dealer fee illegal. As you probably know I was not successful but have carried on my efforts through TV, radio and newspaper ads, this column, my Saturday morning show on Seaview 95.9 FM, and numerous public speaking engagements. My efforts have been somewhat successful in that my two closest Toyota competitors dropped their dealer fee last June because they were losing their customer to me.
The Florida Attorney General, Bill McCollum, had a representative at the Senate Commerce Committee testifying at the same time I did. The committee asked the assistant AG why they did not prosecute those car dealers who violated the Florida Unfair and Deceptive Trade Practices Act with respect to dealer fees. He responded that they were understaffed and also that they did not receive a lot of complaints about this. Now, I personally believe that the AG’s office receives a lot more complaints on the dealer fee than they know about. Why do I say this? The assistant AG admitted that they did not file consumer complaints against car dealers by “type”. In other words they have a virtually useless database which makes it impossible to figure out who is complaining about what.
This recollection is what inspired this column. What if I could spread the word to call the AG’s own Fraud Hotline such that they received so many complaints on the dealer fee that they can’t ignore it even with a lousy filing system?
OK, now here’s the law taken right from the Florida Unfair and Deceptive Trade Practice Act: “The advertised price must include all fees or charges that the customer must pay, including freight or destination charges, dealer preparation charge, and charges for undercoating or rust proofing. State and local fees, and title fees, unless otherwise required by local law or standard, need not be disclosed.” Simply stated, if you responded to an advertisement by a car dealer, bought the advertised car, and he charged you more than the advertised price (plus tax and tag only), he broke the law and owes you the extra charges. The dealer is also subject to very large fines from the AG and possible suspension or revocation of his license to sell cars by the Florida Department of Motor Vehicles…not to mention class action suits to recoup overcharges to thousands of his customers. If you would like to read the official Senate summary of the Unfair and Deceptive Trade Practices Act pertaining to car dealers you can click on this link, www.DealerFeeFraud.com.
In last Saturday’s Palm Beach Post I saw several car dealers’ advertisements on cars with fine print saying that the prices were “plus dealer fee”. Some dealers are also advertising that the prices are plus dealer fee and freight or destination fee. Delay Mazda, Napleton Nissan (Riviera Beach) and Ft. Pierce Nissan are three dealerships that are charging twice for freight. Freight is already included by the manufacturer in the invoice you pay. The amount added to advertised price is about $1,500! There are some dealers who don’t even mention the dealer fee in the fine print but just add it onto the price when you come in.
If you bought an advertised car in Florida you probably paid more than the ad price plus tax and tag. If you did, you have a legitimate beef with the dealer. The dealer should refund you the overcharge plus interest. If not, you should report him to Bill McCollum, our Attorney General, by calling 866 966-7226.
Monday, March 08, 2010
TOYOTA RECALLS A HOAX?
Wouldn’t it be something if it came to pass that Toyotas don’t have a safety problem at all? I don’t know that to be a fact, but I also don’t know it not to be. Logic 101 teaches us that it’s impossible to prove a negative.
Try to follow me on this. To clarify my first sentence, what I should say is maybe Toyotas don’t have any greater safety problem than any other car (and probably fewer than most). There are no perfectly safe cars, just as there are no perfectly safe ladders or baby cribs. There are only safer and less safe. One reason I say that is because there has not been one proven incident of an injury from a sudden acceleration because of a defective Toyota. In fact, there has not been one proven incidence of a sudden acceleration even without an injury. The last I heard, in America, we are innocent until proven guilty. Why doesn’t this apply to Toyota? There have been plenty of lawsuits filed, but not a single lawsuit won on this issue.
Now that the media feeding frenzy has begun to subside because there are more interesting issues like Tiger Woods’ apology, a whale eating her trainer, and the Oscar Awards, some of the truth is beginning to surface on the back pages. Did you read that in the ABC TV exposé (the driving engine behind much of the media assault) that they faked the tachometer which was shown to be revving to scarily high rpm’s? When ABC got caught on this they said that the real tachometer was “shaking” too much so they just filmed one that was in a stopped car while somebody stood on the accelerator.
Or have you read the reports by testing labs who examined Dr. Gilbert’s Congressional testimony about how he had caused a Toyota to suddenly accelerate by simulating certain conditions with the electronic throttle control? If you would like to see one of these, click on my website, http://www.earlstewarttoyota.com/. Then click on “Toyota Recall Info” in the top left of your screen. Once you view this video, you will fully understand why this allegation that defective electronic throttle controls are defective is a hoax.
There is no real evidence that Toyota has built unsafe cars, only anecdotal allegations by people with a variety of reasons for what they say. People accidentally step on the accelerator and the brake at the same time. They even accidentally step on the accelerator instead of the brake sometimes. How often do we read or see on the news how somebody drove their Lincoln, Cadillac, or Buick through the plate glass window at the 7-Eleven or Hair Salon? Did you ever hear one of the drivers admit that they were stepping on the brake and the accelerator at the same time?
The horrible case of the Texas Highway Patrol trooper and his family who were killed in a Lexus is what brought the first attention to Toyota on sudden acceleration. The trooper further dramatized this tragedy by describing the entire event on his cell phone to a 911 operator. How can Toyota be blamed for this when NHTSA’s findings was that the Lexus dealer had used an oversized, recalled floor mat not made for that car and placed it in the vehicle “upside down”?
You want another motive for anecdotal allegations? How about greed and money? Toyota is the largest and wealthiest auto manufacturer on the planet…very deep pockets. Every tort lawyer in the USA is salivating over this opportunity. You can’t look at TV for 10 minutes these days without seeing some unscrupulous attorney soliciting someone who slipped and fell, was in an auto accident, owes the IRS money, or wants to blame somebody else because they have cancer. Auto liability insurance is much higher in some areas like South Florida, because of the great scam of people slamming on their brakes in front of the car behind them causing a rear end collision…a slam dunk for a PI lawyer.
It wasn’t until the late eighties that science was able to match DNA from crime scenes to the perpetrators. It makes me shudder to think how many innocent people were executed and imprisoned before. Even now, there are men and women in prison who hopefully will be released when the DNA evidence is reviewed. Most of these wrongfully executed and imprisoned victims were convicted on the basis of “eye witness” testimony. Judges and prosecutors now know that eye witness testimony is one of the least reliable forms of evidence. I’m absolutely sure that when Mrs. Smith testified before Congress that her Toyota accelerator stuck, caused her car to suddenly accelerate, and that only when God intervened did it slow down that she firmly believed she was telling the truth.
There is also the “fifteen minutes of fame” motivation. Right now, if you want to be on TV, all you have to do is call your local TV station and tell them that you almost killed yourself and dozens of school children when your Toyota suddenly accelerated while driving though a school zone. Lots of people actually confess to horrible crimes to get attention. You probably know that police won’t even arrest a person and prosecutors won’t prosecute a person who confesses to a crime without corroborating hard evidence.
I’ve been a Toyota dealer at the same location for 35 years. I’ve sold over 10,000 of the recalled cars and have not had one single incident of a sudden acceleration, accident, or injury from a recalled Toyota. I know hundreds of Toyota dealers from all over the country and we communicate all of the time, especially these days. I don’t know of another Toyota dealer who has had a case of sudden acceleration. What’s wrong with this picture?
Try to follow me on this. To clarify my first sentence, what I should say is maybe Toyotas don’t have any greater safety problem than any other car (and probably fewer than most). There are no perfectly safe cars, just as there are no perfectly safe ladders or baby cribs. There are only safer and less safe. One reason I say that is because there has not been one proven incident of an injury from a sudden acceleration because of a defective Toyota. In fact, there has not been one proven incidence of a sudden acceleration even without an injury. The last I heard, in America, we are innocent until proven guilty. Why doesn’t this apply to Toyota? There have been plenty of lawsuits filed, but not a single lawsuit won on this issue.
Now that the media feeding frenzy has begun to subside because there are more interesting issues like Tiger Woods’ apology, a whale eating her trainer, and the Oscar Awards, some of the truth is beginning to surface on the back pages. Did you read that in the ABC TV exposé (the driving engine behind much of the media assault) that they faked the tachometer which was shown to be revving to scarily high rpm’s? When ABC got caught on this they said that the real tachometer was “shaking” too much so they just filmed one that was in a stopped car while somebody stood on the accelerator.
Or have you read the reports by testing labs who examined Dr. Gilbert’s Congressional testimony about how he had caused a Toyota to suddenly accelerate by simulating certain conditions with the electronic throttle control? If you would like to see one of these, click on my website, http://www.earlstewarttoyota.com/. Then click on “Toyota Recall Info” in the top left of your screen. Once you view this video, you will fully understand why this allegation that defective electronic throttle controls are defective is a hoax.
There is no real evidence that Toyota has built unsafe cars, only anecdotal allegations by people with a variety of reasons for what they say. People accidentally step on the accelerator and the brake at the same time. They even accidentally step on the accelerator instead of the brake sometimes. How often do we read or see on the news how somebody drove their Lincoln, Cadillac, or Buick through the plate glass window at the 7-Eleven or Hair Salon? Did you ever hear one of the drivers admit that they were stepping on the brake and the accelerator at the same time?
The horrible case of the Texas Highway Patrol trooper and his family who were killed in a Lexus is what brought the first attention to Toyota on sudden acceleration. The trooper further dramatized this tragedy by describing the entire event on his cell phone to a 911 operator. How can Toyota be blamed for this when NHTSA’s findings was that the Lexus dealer had used an oversized, recalled floor mat not made for that car and placed it in the vehicle “upside down”?
You want another motive for anecdotal allegations? How about greed and money? Toyota is the largest and wealthiest auto manufacturer on the planet…very deep pockets. Every tort lawyer in the USA is salivating over this opportunity. You can’t look at TV for 10 minutes these days without seeing some unscrupulous attorney soliciting someone who slipped and fell, was in an auto accident, owes the IRS money, or wants to blame somebody else because they have cancer. Auto liability insurance is much higher in some areas like South Florida, because of the great scam of people slamming on their brakes in front of the car behind them causing a rear end collision…a slam dunk for a PI lawyer.
It wasn’t until the late eighties that science was able to match DNA from crime scenes to the perpetrators. It makes me shudder to think how many innocent people were executed and imprisoned before. Even now, there are men and women in prison who hopefully will be released when the DNA evidence is reviewed. Most of these wrongfully executed and imprisoned victims were convicted on the basis of “eye witness” testimony. Judges and prosecutors now know that eye witness testimony is one of the least reliable forms of evidence. I’m absolutely sure that when Mrs. Smith testified before Congress that her Toyota accelerator stuck, caused her car to suddenly accelerate, and that only when God intervened did it slow down that she firmly believed she was telling the truth.
There is also the “fifteen minutes of fame” motivation. Right now, if you want to be on TV, all you have to do is call your local TV station and tell them that you almost killed yourself and dozens of school children when your Toyota suddenly accelerated while driving though a school zone. Lots of people actually confess to horrible crimes to get attention. You probably know that police won’t even arrest a person and prosecutors won’t prosecute a person who confesses to a crime without corroborating hard evidence.
I’ve been a Toyota dealer at the same location for 35 years. I’ve sold over 10,000 of the recalled cars and have not had one single incident of a sudden acceleration, accident, or injury from a recalled Toyota. I know hundreds of Toyota dealers from all over the country and we communicate all of the time, especially these days. I don’t know of another Toyota dealer who has had a case of sudden acceleration. What’s wrong with this picture?
Thursday, February 18, 2010
The Dealer Fee... “Whatever?”
My column this week is a reaction to an article that appeared in this week’s edition of The Automotive News. For those of you “not in the business”, The Automotive News is the premier trade publication for the automobile industry. It is read by manufacturers, distributors, dealers, and everyone else associated with the car business.
The headline of the article, “Document Fee Began with a Lie, ‘Inventor’ Says,” grabbed my attention (to say the least). However, the neutral stance toward the nefarious “doc fee” that the publication seemed to take is what prompted my reply.
Below is the text of my email to the author, Edward Lapham, followed by the original article printed in the Automotive News.
Good morning, Ed. J
I was very surprised to read your commentary in this morning’s Automotive News, but I enjoyed it very much.
You may have heard of me. I’m the dealer in Florida who is championing making the doc fee (aka dealer fee, prep fee, etc.) illegal. I’m one of the few dealers who don’t charge such a fee which has grown enormously since Mr. Fashjian “invented” this concept in 1967. There’s a Mazda dealer in Delray, FL and a Nissan dealer in Ft. Pierce who charge $1,549 for dealer fees. The average fee in my market is over $750.
You can check me out on my website, www.earlstewarttoyota.com or my blog www.EarlStewartOnCars.com.
In your article, you say:
“We know that consumer advocates, assistant attorneys general and investigative reporters from TV networks consider the "doc fee" to be a consummate evil that some dealers use to gouge a little more profit out of poor, defenseless, unsuspecting customers. Dealers, who have had their gross margins eroded by factory pricing and Internet-savvy consumers, consider the doc fee to be manna from heaven that lets them squeeze a little more profit out of every deal. Whatever. “
I guess “whatever” means that Automotive News takes no editorial position on this. I can certainly understand why since most car dealers, the vast majority of your subscribers and advertisers, engage in this “questionable” practice.
I’m guessing that you consider this a “whatever” because there’s a split on opinion between consumer advocates, assistant attorneys general and investigative reporters from TV networks and car dealers. Have you wondered how car buyers feel about it? Why doesn’t Automotive News engage a pollster to measure the sentiments of car owners and prospective car buyers about doc fees/dealer fees?
Since you consider the current status this a draw (whatever), maybe the customer can be the tie breaker.
Sincerely,
Earl Stewart
EDWARD LAPHAM
Document fee began with a lie, 'inventor' says
Edward Lapham Automotive News -- February 15, 2010 - 12:01 am ET
COMMENTARY
Edward Lapham is executive editor of Automotive News.
I had an intriguing conversation with John Fashjian last week. He told me that three years ago, he sold his Framingham Chrysler dealership in Framingham, Mass., and moved to Florida.
More significantly, Fashjian matter-of-factly said he's the guy who invented the document fee.Of course, there is a difference of opinion about the add-on charge.We know that consumer advocates, assistant attorneys general and investigative reporters from TV networks consider the "doc fee" to be a consummate evil that some dealers use to gouge a little more profit out of poor, defenseless, unsuspecting customers.
Dealers, who have had their gross margins eroded by factory pricing and Internet-savvy consumers, consider the doc fee to be manna from heaven that lets them squeeze a little more profit out of every deal.
Whatever.
Here's how Fashjian said it started. In 1967 he was sales manager at Bancroft Motors in Worcester, Mass., selling Datsuns for next to no profit. For example, he remembers that the Datsun B1200 stickered at $1,962.50, and customers tried to get him down to $1,900. The way Fashjian told it, he decided that bumping the price up to a rounder number would help with negotiations and -- since he wasn't a math major -- would make figuring the 3 percent Massachusetts sales tax easier because there were no personal computers or pocket calculators back then. So he arbitrarily added $12.50 to every sticker, which bumped the price to $1,975. Then Fashjian told customers that since Datsuns are imported, the fee was to cover the cost of going to the port and taking care of the documentation.
And they bought it!
That $12.50 seems anemic by today's doc fees, which Fashjian said net some dealers up to $1,000 or more. It's a great tale. And, you know, I thought about running Fashjian's picture with this column. But the next thing you know, somebody might put it up in the post office. Or the Automotive Hall of Fame.
The headline of the article, “Document Fee Began with a Lie, ‘Inventor’ Says,” grabbed my attention (to say the least). However, the neutral stance toward the nefarious “doc fee” that the publication seemed to take is what prompted my reply.
Below is the text of my email to the author, Edward Lapham, followed by the original article printed in the Automotive News.
Good morning, Ed. J
I was very surprised to read your commentary in this morning’s Automotive News, but I enjoyed it very much.
You may have heard of me. I’m the dealer in Florida who is championing making the doc fee (aka dealer fee, prep fee, etc.) illegal. I’m one of the few dealers who don’t charge such a fee which has grown enormously since Mr. Fashjian “invented” this concept in 1967. There’s a Mazda dealer in Delray, FL and a Nissan dealer in Ft. Pierce who charge $1,549 for dealer fees. The average fee in my market is over $750.
You can check me out on my website, www.earlstewarttoyota.com or my blog www.EarlStewartOnCars.com.
In your article, you say:
“We know that consumer advocates, assistant attorneys general and investigative reporters from TV networks consider the "doc fee" to be a consummate evil that some dealers use to gouge a little more profit out of poor, defenseless, unsuspecting customers. Dealers, who have had their gross margins eroded by factory pricing and Internet-savvy consumers, consider the doc fee to be manna from heaven that lets them squeeze a little more profit out of every deal. Whatever. “
I guess “whatever” means that Automotive News takes no editorial position on this. I can certainly understand why since most car dealers, the vast majority of your subscribers and advertisers, engage in this “questionable” practice.
I’m guessing that you consider this a “whatever” because there’s a split on opinion between consumer advocates, assistant attorneys general and investigative reporters from TV networks and car dealers. Have you wondered how car buyers feel about it? Why doesn’t Automotive News engage a pollster to measure the sentiments of car owners and prospective car buyers about doc fees/dealer fees?
Since you consider the current status this a draw (whatever), maybe the customer can be the tie breaker.
Sincerely,
Earl Stewart
EDWARD LAPHAM
Document fee began with a lie, 'inventor' says
Edward Lapham Automotive News -- February 15, 2010 - 12:01 am ET
COMMENTARY
Edward Lapham is executive editor of Automotive News.
I had an intriguing conversation with John Fashjian last week. He told me that three years ago, he sold his Framingham Chrysler dealership in Framingham, Mass., and moved to Florida.
More significantly, Fashjian matter-of-factly said he's the guy who invented the document fee.Of course, there is a difference of opinion about the add-on charge.We know that consumer advocates, assistant attorneys general and investigative reporters from TV networks consider the "doc fee" to be a consummate evil that some dealers use to gouge a little more profit out of poor, defenseless, unsuspecting customers.
Dealers, who have had their gross margins eroded by factory pricing and Internet-savvy consumers, consider the doc fee to be manna from heaven that lets them squeeze a little more profit out of every deal.
Whatever.
Here's how Fashjian said it started. In 1967 he was sales manager at Bancroft Motors in Worcester, Mass., selling Datsuns for next to no profit. For example, he remembers that the Datsun B1200 stickered at $1,962.50, and customers tried to get him down to $1,900. The way Fashjian told it, he decided that bumping the price up to a rounder number would help with negotiations and -- since he wasn't a math major -- would make figuring the 3 percent Massachusetts sales tax easier because there were no personal computers or pocket calculators back then. So he arbitrarily added $12.50 to every sticker, which bumped the price to $1,975. Then Fashjian told customers that since Datsuns are imported, the fee was to cover the cost of going to the port and taking care of the documentation.
And they bought it!
That $12.50 seems anemic by today's doc fees, which Fashjian said net some dealers up to $1,000 or more. It's a great tale. And, you know, I thought about running Fashjian's picture with this column. But the next thing you know, somebody might put it up in the post office. Or the Automotive Hall of Fame.
Wednesday, February 17, 2010
Sleazy Tactics
In a free market, competition is the name of the game. When you stumble, your competitors are always ready to jump in and take advantage. That's the way it is.
Toyota has stumbled, and it is the right - the responsibility - of the other car manufacturers and dealers to do their best to gain from the situation.
However, this week we have witnessed a new low when one of my competitors crossed the line and boldly lied to the consumers in our community. Napleton Nissan in Riviera Beach sent out a mass mailing of phony "Toyota Recall Notices" to thousands of people in our area.
This sales solicitation came in an official looking envelope, complete with the red Toyota logo and typeset. The return address said it was from "Notification Headquarters."
Inside the envelope there is more false information about the recall and Toyota vehicles that were not even affected are listed.
It goes on with even more deceptive offers. They say they will buy back your Toyota for "Original Base MSRP." They neglect to mention that "Original Base MSRP" does not include the price of any options added, manufacturer's delivery fee ($775), or the dealer fee added by most dealers. They go on to explain that this value will be further lowered by the mileage of the vehicle and incentives you received when you bought it. In other words, it's business as usual.
The letter is signed by Napleton Nissan's general sales manager, Bret Macy.
Napleton Nissan should be ashamed of themselves for sending out such a deceptive and misleading solicitation. I cannot say I'm surprised; their newspaper ads typically assume the same style, but, as I said, they have reached a new low.
You can view the actual mail piece by clicking here.
Toyota has stumbled, and it is the right - the responsibility - of the other car manufacturers and dealers to do their best to gain from the situation.
However, this week we have witnessed a new low when one of my competitors crossed the line and boldly lied to the consumers in our community. Napleton Nissan in Riviera Beach sent out a mass mailing of phony "Toyota Recall Notices" to thousands of people in our area.
This sales solicitation came in an official looking envelope, complete with the red Toyota logo and typeset. The return address said it was from "Notification Headquarters."
Inside the envelope there is more false information about the recall and Toyota vehicles that were not even affected are listed.
It goes on with even more deceptive offers. They say they will buy back your Toyota for "Original Base MSRP." They neglect to mention that "Original Base MSRP" does not include the price of any options added, manufacturer's delivery fee ($775), or the dealer fee added by most dealers. They go on to explain that this value will be further lowered by the mileage of the vehicle and incentives you received when you bought it. In other words, it's business as usual.
The letter is signed by Napleton Nissan's general sales manager, Bret Macy.
Napleton Nissan should be ashamed of themselves for sending out such a deceptive and misleading solicitation. I cannot say I'm surprised; their newspaper ads typically assume the same style, but, as I said, they have reached a new low.
You can view the actual mail piece by clicking here.
Monday, February 08, 2010
“Piling on” Toyota?
Regular readers of this column, my blog (EarlStewartOnCars.com), and my Saturday morning radio talk show know that, even though I’m a Toyota dealer, I’m not “in the tank for Toyota. I tell it like it is and when I think Toyota is doing something wrong, I’m not afraid or timid about speaking out.
So, first I’ll say that Toyota brought a lot of this on itself. Last October 2nd, Akio Toyoda, the current CEO and grandson of Toyota’s founder, said “We have to listen to our customers and make better cars”. Mr. Toyoda also said that that his company has gone through 4 of the 5 stages leading to failure, of “hubris born of success, undisciplined pursuit of more, and denial of risk and peril,” Toyoda was citing Jim Collins, the author of How the Mighty Fail. He said that leaves his company in the 4th stage which is “grasping for salvation”. Looking back on the past few weeks, this seems almost prophetic. After hearing Akio Toyoda’s remarks, I immediately read How the Mighty Fail. I did so out of respect for Akio Toyota’s courage to “tell it like it is” and was heartened about Toyota’s future because the first step to improvement [the Japanese word for continuous improvement is “kaizen”] is recognizing and admitting your mistakes. I also read the book because I wanted to be sure my company would never experience similar problems.
Now, let’s talk about “piling on” Toyota. Akio Toyoda has been strongly criticized in recent weeks by virtually all of the media, especially the Wall Street Journal and Automotive News for going into hiding and refusing to address the recall issues. I have to ask myself “why?” given the astonishingly candid remarks he made to the world on October 2nd. Have you ever heard a CEO of GM, Chrysler, Ford, or Honda make such a statement? His comments that Toyota needed to “listen to its customers and make better cars” and that his company was “grasping for salvation” are unprecedented by any CEO of any company, auto or other, that I can recall. They were made in response to the sudden acceleration problem which, at that time was being addressed as a floor mat issue. What is it exactly that the media wanted the man to do... fall on his Samurai sword?
Toyota is the biggest and best auto manufacturer on the Planet. They build the highest quality cars on the Planet. Consumer Reports, in my opinion the most accurate, objective judge of consumer products anywhere, recommends more models made by Toyota than any other manufacturer. They have temporarily taken the eight Toyota models recalled off their recommended lists, but are putting them back on as soon as the pedals are fixed. As of February 8 all of these new models have the new accelerator pedal and are recommended. Dealers are in the process of fixing all of the ones that have already been sold.
A problem with the brakes of the 2010 Prius was announced and may result in a recall by the time you read this. Consumer Reports has gone on record as saying that the 2010 Prius’ brakes are safe and the vehicle is perfectly safe to drive. They also rank the Prius as the most reliable car on the Planet, including not only other hybrids but all gasoline powered cars too.
Guess what? Now the Washington Post is attacking Consumer Reports for saying good things about Toyota! The Washington Post also attacked NHTSA, the National Highway and Traffic Administration, NHTSA, for not being tough enough on Toyota. I wonder if they thought they were being tough enough when Ray LaHood, the U.S Secretary of Transportation, said that people driving recalled Toyotas should stop driving them immediately and take them to their dealers [how can you take them to your dealer if you can’t drive them?). Of course, somebody higher up in the Obama administration (Maybe our President himself] made him retract that statement immediately but “the bell had already rung” and more panic was created.
Why do you suppose this phenomenon occurs? I think it has something to do with the American psyche of “loving the underdog” and conversely “loving to kick the top dog”. Most people wanted the New Orleans Saints to win the Super Bowl even though the Indianapolis Colts was the better team. No other golfer except Tiger Woods would have suffered such a fire storm of criticism for infidelity.
Another factor might be “politics”. Our government has invested billions in GM and Chrysler against the argument from many that they should have been allowed to fail. You and I (the taxpayers) are now the majority stockholders of GM and Chrysler. We taxpayers are also the voters who will decide the next election. If our stock in GM and Chrysler rises we may be more inclined to reelect those who invested billions of dollars of our money in these two auto companies. One way to help GM and Chrysler sell more cars is to crush their competition. Speaking of pandering to those who have a powerful influence on elections, how about the UAW? They never liked Toyota because most of Toyotas plants are non union. If Toyota gets squashed and GM and Chrysler get larger, that creates lots more jobs for the UAW.
A final reason for this unfair piling on might be over zealous patriotism. Even though 95% of Toyotas are manufactured in America by Americans, lots of people still think of Toyota as a “foreign” car. If they gave this a little more thought, they would understand that Chrysler is a foreign car. Previously Chrysler was owned by Daimler Benz, a German company and now it will be controlled by Fiat, an Italian company. You would be amazed at some of the vile, racist email and voicemail I receive from bigots who think of themselves as patriots.
In closing I want to thank my customers and friends for the fantastic support they’ve given me and my family during these difficult times. When my home, cell, and red phones ring, most all of the calls are those of support like “hang in there, Earl. We will always continue to be you customer”. I’m writing this column on Sunday morning, February 6. A woman just called me on the red phone from my dealership. She had driven up from Boca Raton so that we could fix the accelerator pedal on her Camry. She told me that another dealer had told her it would be several weeks before they could get to her. Furthermore, not only are people still buying Toyotas from my dealership, but we are gaining market share like never before. In January we soared from the #31 volume Toyota seller in the USA to #16! We began February as the #1 seller of Toyotas in the Southeast USA.
So, first I’ll say that Toyota brought a lot of this on itself. Last October 2nd, Akio Toyoda, the current CEO and grandson of Toyota’s founder, said “We have to listen to our customers and make better cars”. Mr. Toyoda also said that that his company has gone through 4 of the 5 stages leading to failure, of “hubris born of success, undisciplined pursuit of more, and denial of risk and peril,” Toyoda was citing Jim Collins, the author of How the Mighty Fail. He said that leaves his company in the 4th stage which is “grasping for salvation”. Looking back on the past few weeks, this seems almost prophetic. After hearing Akio Toyoda’s remarks, I immediately read How the Mighty Fail. I did so out of respect for Akio Toyota’s courage to “tell it like it is” and was heartened about Toyota’s future because the first step to improvement [the Japanese word for continuous improvement is “kaizen”] is recognizing and admitting your mistakes. I also read the book because I wanted to be sure my company would never experience similar problems.
Now, let’s talk about “piling on” Toyota. Akio Toyoda has been strongly criticized in recent weeks by virtually all of the media, especially the Wall Street Journal and Automotive News for going into hiding and refusing to address the recall issues. I have to ask myself “why?” given the astonishingly candid remarks he made to the world on October 2nd. Have you ever heard a CEO of GM, Chrysler, Ford, or Honda make such a statement? His comments that Toyota needed to “listen to its customers and make better cars” and that his company was “grasping for salvation” are unprecedented by any CEO of any company, auto or other, that I can recall. They were made in response to the sudden acceleration problem which, at that time was being addressed as a floor mat issue. What is it exactly that the media wanted the man to do... fall on his Samurai sword?
Toyota is the biggest and best auto manufacturer on the Planet. They build the highest quality cars on the Planet. Consumer Reports, in my opinion the most accurate, objective judge of consumer products anywhere, recommends more models made by Toyota than any other manufacturer. They have temporarily taken the eight Toyota models recalled off their recommended lists, but are putting them back on as soon as the pedals are fixed. As of February 8 all of these new models have the new accelerator pedal and are recommended. Dealers are in the process of fixing all of the ones that have already been sold.
A problem with the brakes of the 2010 Prius was announced and may result in a recall by the time you read this. Consumer Reports has gone on record as saying that the 2010 Prius’ brakes are safe and the vehicle is perfectly safe to drive. They also rank the Prius as the most reliable car on the Planet, including not only other hybrids but all gasoline powered cars too.
Guess what? Now the Washington Post is attacking Consumer Reports for saying good things about Toyota! The Washington Post also attacked NHTSA, the National Highway and Traffic Administration, NHTSA, for not being tough enough on Toyota. I wonder if they thought they were being tough enough when Ray LaHood, the U.S Secretary of Transportation, said that people driving recalled Toyotas should stop driving them immediately and take them to their dealers [how can you take them to your dealer if you can’t drive them?). Of course, somebody higher up in the Obama administration (Maybe our President himself] made him retract that statement immediately but “the bell had already rung” and more panic was created.
Why do you suppose this phenomenon occurs? I think it has something to do with the American psyche of “loving the underdog” and conversely “loving to kick the top dog”. Most people wanted the New Orleans Saints to win the Super Bowl even though the Indianapolis Colts was the better team. No other golfer except Tiger Woods would have suffered such a fire storm of criticism for infidelity.
Another factor might be “politics”. Our government has invested billions in GM and Chrysler against the argument from many that they should have been allowed to fail. You and I (the taxpayers) are now the majority stockholders of GM and Chrysler. We taxpayers are also the voters who will decide the next election. If our stock in GM and Chrysler rises we may be more inclined to reelect those who invested billions of dollars of our money in these two auto companies. One way to help GM and Chrysler sell more cars is to crush their competition. Speaking of pandering to those who have a powerful influence on elections, how about the UAW? They never liked Toyota because most of Toyotas plants are non union. If Toyota gets squashed and GM and Chrysler get larger, that creates lots more jobs for the UAW.
A final reason for this unfair piling on might be over zealous patriotism. Even though 95% of Toyotas are manufactured in America by Americans, lots of people still think of Toyota as a “foreign” car. If they gave this a little more thought, they would understand that Chrysler is a foreign car. Previously Chrysler was owned by Daimler Benz, a German company and now it will be controlled by Fiat, an Italian company. You would be amazed at some of the vile, racist email and voicemail I receive from bigots who think of themselves as patriots.
In closing I want to thank my customers and friends for the fantastic support they’ve given me and my family during these difficult times. When my home, cell, and red phones ring, most all of the calls are those of support like “hang in there, Earl. We will always continue to be you customer”. I’m writing this column on Sunday morning, February 6. A woman just called me on the red phone from my dealership. She had driven up from Boca Raton so that we could fix the accelerator pedal on her Camry. She told me that another dealer had told her it would be several weeks before they could get to her. Furthermore, not only are people still buying Toyotas from my dealership, but we are gaining market share like never before. In January we soared from the #31 volume Toyota seller in the USA to #16! We began February as the #1 seller of Toyotas in the Southeast USA.
Monday, February 01, 2010
SHOULD I BUY MY CAR AT THE END OF THE LEASE?
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 then 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 its 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 can not 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 mean that if you did take very good care of your lease car, drove it carefully, kept it in a garage, waxed and washed 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. Oftentimes 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 them 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 usually very competitive.
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?
Unless you buy a new car, you can not 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 mean that if you did take very good care of your lease car, drove it carefully, kept it in a garage, waxed and washed 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. Oftentimes 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 them 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 usually very competitive.
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?
Monday, January 25, 2010
Business Ethics:
Niche Opportunity for Car Dealers
If you tuned in my live radio talk show either of the last two Saturdays, you heard me interviewing Professor Marianne Jennings, an expert on business ethics. She’s written 10 books, the most recent being The Seven Signs of Ethical Collapse; How to Spot Moral Meltdowns in Companies…Before It’s Too Late. She made the comment that with the ethical vacuum in today’s business environment there was a true niche opportunity for those that do run ethical businesses.
I’d be lying if I said “I hate to toot my own horn” because I’m no different from anyone else. I love to brag about the accomplishments of my company’s team. The only reason I don’t do it more is because I know its boring to my customers. My customers care a lot more about being treated with courtesy, efficiency, and integrity than the fact that we sell more cars than anybody else.
But, if my company’s success can send an important and useful message to other car dealers, then touting my company’s success can serve a useful purpose. My company’s stated purpose is to “Make the car buying and servicing experiences pleasurable ones for our customers, and, leading by example, bring integrity and respectability to the image of car dealers everywhere.” Therefore this is my “excuse” to tell you and other car dealers how well Earl Stewart Toyota did in 2009. The message to other car dealers is that you too can prosper if you follow the ethical guidelines that Earl Stewart Toyota has followed.
Earl Stewart Toyota has the highest customer satisfaction scores in sales for 2009 of any other Toyota dealership from Orlando to Key West, coast to coast. We also were in a virtual tie with Maroone Toyota in Ft. Lauderdale for the best in service and parts customer satisfaction. We are the #1 volume Toyota dealership in sales satisfaction in the entire USA based on the November YTD numbers. The December numbers were not out as of today, but we were so far ahead, I’m confident we will remain #1,
We outsold every car dealership Palm Beach and Broward Counties in 2009. In fact, only Kendall Toyota in Dade County and Ft. Myers Toyota in Lee County sold more cars. We finished 2009 as the #4 volume Toyota dealership in the Southeast USA and #31 in the USA. We were #3 in Florida in 2009, but were #2 in Florida and the Southeast USA for the last half of 2009.
All of this is pretty amazing when you consider we’re located in the small town of Lake Park, Fl, population approximately 9,000. It defies conventional wisdom to think that a small town car dealer could outsell all of the dealers in Jacksonville, Orlando, Tampa, Ft. Lauderdale and even Atlanta Ga. It also defies conventional wisdom for a car dealer who rarely ever advertises a price or has a sale to outsell all those who seem to never stop having sales.
So there you have it car dealers of Florida…the secret to my success. Half of me hopes that you will listen and treat your customers better…the human side. The competitive side of me hopes that you never get it and allow me to continue to grow my market share and win over your customers.
If you tuned in my live radio talk show either of the last two Saturdays, you heard me interviewing Professor Marianne Jennings, an expert on business ethics. She’s written 10 books, the most recent being The Seven Signs of Ethical Collapse; How to Spot Moral Meltdowns in Companies…Before It’s Too Late. She made the comment that with the ethical vacuum in today’s business environment there was a true niche opportunity for those that do run ethical businesses.
I’d be lying if I said “I hate to toot my own horn” because I’m no different from anyone else. I love to brag about the accomplishments of my company’s team. The only reason I don’t do it more is because I know its boring to my customers. My customers care a lot more about being treated with courtesy, efficiency, and integrity than the fact that we sell more cars than anybody else.
But, if my company’s success can send an important and useful message to other car dealers, then touting my company’s success can serve a useful purpose. My company’s stated purpose is to “Make the car buying and servicing experiences pleasurable ones for our customers, and, leading by example, bring integrity and respectability to the image of car dealers everywhere.” Therefore this is my “excuse” to tell you and other car dealers how well Earl Stewart Toyota did in 2009. The message to other car dealers is that you too can prosper if you follow the ethical guidelines that Earl Stewart Toyota has followed.
Earl Stewart Toyota has the highest customer satisfaction scores in sales for 2009 of any other Toyota dealership from Orlando to Key West, coast to coast. We also were in a virtual tie with Maroone Toyota in Ft. Lauderdale for the best in service and parts customer satisfaction. We are the #1 volume Toyota dealership in sales satisfaction in the entire USA based on the November YTD numbers. The December numbers were not out as of today, but we were so far ahead, I’m confident we will remain #1,
We outsold every car dealership Palm Beach and Broward Counties in 2009. In fact, only Kendall Toyota in Dade County and Ft. Myers Toyota in Lee County sold more cars. We finished 2009 as the #4 volume Toyota dealership in the Southeast USA and #31 in the USA. We were #3 in Florida in 2009, but were #2 in Florida and the Southeast USA for the last half of 2009.
All of this is pretty amazing when you consider we’re located in the small town of Lake Park, Fl, population approximately 9,000. It defies conventional wisdom to think that a small town car dealer could outsell all of the dealers in Jacksonville, Orlando, Tampa, Ft. Lauderdale and even Atlanta Ga. It also defies conventional wisdom for a car dealer who rarely ever advertises a price or has a sale to outsell all those who seem to never stop having sales.
So there you have it car dealers of Florida…the secret to my success. Half of me hopes that you will listen and treat your customers better…the human side. The competitive side of me hopes that you never get it and allow me to continue to grow my market share and win over your customers.
Saturday, January 23, 2010
LIST PRICE & MSRP MIGHT NOT BE THE SAME
Just when I thought that I knew all the tricks that some car dealers play, I discovered a new one in Saturday’s Palm Beach Post.The ad screamed “GET UP TO $12,000 OFF”. The new cars featured in the ad showed many discounts over $3,000 and $4,000. Then I found the gimmick. The discount was off of “List” price, not the manufacturer’s suggested retail, or MSRP. Most people, including me, use the terms list price and MSRP interchangeably. However, MSRP is a legal term deriving from a law sponsored by U.S. Senator Monroney, about 40 years ago. The Monroney label is required by law to be displayed on all new vehicles showing the manufacturer’s retail price, MSRP.The purpose of this law was to offer the consumer some basis for comparison of prices between different car dealers. Before this law was passed, a car dealer could post any price he wished on the window of a new car. If he posted a price with a markup of $10,000, he could advertise a $5,000 discount and still make a $5,000 profit.The ad I am referring to in Saturday’s Palm Beach Post shows discounts from “list” price, but defines it in the very fine print at the bottom of the ad as being “MSRP plus installed options”. There it is! The giveaway is “plus installed options”, if your eyes are good enough to read the fine print (I had to use my magnifying glass). By jacking up the MSRP with “installed options”, a car dealer has circumvented the law sponsored by Senator Monroney. This dealer can now advertise huge discounts, limited only by how high a markup he wants to put in his “installed options”. There is no law limiting the markup in an installed option. Dealers commonly install options with very low cost with high perceived value to the too trusting or careless customer. Some examples are undercoating, paint sealant, fabric protector, stripes, theft insurance, and rust proofing.I came across another surprise in The Stuart News. If you have read my past columns, you know about “dealer fees” aka “dealer prep”, doc fees, and a few other misleading names. This charge is simply additional profit to the dealer disguised as a state or federal fee like sales tax or license and registration. The amounts range from $495 to $895. State law requires that this “fee” be included in all advertised prices and my surprise was that there are some dealers ignoring this law. The prices advertised in The Stuart News in the ads I am referring to disclosed in the very fine print “all prices plus tax tag & dealer fee”. This is a violation of state law. Unfortunately, it is impossible for the Attorney General’s office to police all of the car ads in the state every day.Dealer fees, dealer prep, doc fees, etc. are bad enough even when they are included in the advertised price. The tactic employed by dealers to get around the law requiring that the dealer fee be included, it to switch the prospective buyer to another car. This is easily done by these means: (1) Pay the salesman no commission or a minimal commission on the advertised car. (2) Make the color and accessories of the advertised car very unattractive. (3) Have only 1 or 2 cars available at that advertised price. (4) Limit the time a buyer can buy that specific car by fine print saying “price good on date of publication only”. (4) Simply telling you that the car has already been sold. How are you to know? Many states like California make dealer fees illegal. In my opinion they should be made illegal in Florida. Please write your legislator on this issue.Your best defense against this kind of thing is to choose the dealership you buy your car from with great care. Find a dealership that has a good reputation with the Better Business Bureau, Count Office of Consumer Affairs, and the Attorney General’s Office. Preferably choose a dealer who has been in business for a longer time. Ask friends, neighbors or relatives who may be driving a model that you are interested in how their experience was with that dealer.
Monday, January 11, 2010
South Florida Car Dealers: Give Me a Call Saturday
As many of you know, I’ve been doing a live radio talk show, “Earl Stewart on Cars” for over three years. The show is aired on Seaview radio, 95.9 FM and 960 AM every Saturday morning between nine and ten. My wife Nancy is part of the show and we try to give advice to car buyers and car owners about buying and servicing their cars, especially how to avoid being taken advantage of by some car dealers. My weekly intro to the show goes like this:
“Good morning. My name is Earl and I’m a recovering car dealer. I sold my first car in 1968. A little more than ten years ago, I decided I was selling cars the wrong way. This show is just one of the ways I’ve changed my company and my life for the better. I’ll share with you all of the tricks of the trade I’ve learned in almost 40 years of selling cars. I’ll answer all of your questions about buying a car or having it serviced. I’d like to share with you this quote from Jim Press, the former top Toyota executive for all of North America. Jim said, ‘It’s what you do for a customer when you don’t have to. That’s the measure of true character…kind of like sticking up for someone who can’t defend himself’.”
We get a lot of callers almost every Saturday. People call to share their bad experiences, and some good, with their car purchase or service. We get a lot of questions on subjects like is leasing better than buying or should I always take my car back to the dealership for service or use an independent shop. Our Saturday morning show has exceptionally good ratings and our listener base is growing rapidly. The Seaview management is even discussing bringing the show national through syndication.
If I have any regret about my show, it’s that I don’t get any calls from other car dealers or their employees. I have received a few calls from car dealers from other parts of the country. Most of these are retired and have moved to South Florida. These calls are always complimentary. If you’ve listened to my show, you know that I’m very candid in my criticism of many South Florida car dealers. I’ll specifically name a car dealership and a specific ad if it’s illegal or deceptive. I also discuss specific unethical sales practices like quoting prices that are lower than what the dealer will sell the car for. I’m highly critical of the “dealer fee” which is added to the quoted and advertised prices of cars by almost every dealership in South Florida.
Last Saturday, I thought I had a great idea about how to encourage car dealers or their employees to call my show. I offered $100 to the first employee or ex employee [employed within the past year] to call into the show. I even offered $500 to the first such caller from any of the many Napleton dealerships. The Napleton dealerships are the largest auto advertisers in the PB Post and have many franchises and locations in PB County. Napleton advertises prices that are disclosed in the fine print to be plus his $799 dealer fee and “dealer installed accessories”. He also excludes multiple rebates from the advertised prices like college graduate, active military service, and owner loyalty when very few, if any, buyers could qualify. I consider this to be unethical and deceptive advertising.
I was amazed that I did not get one call from a single car dealer or their employee taking me up on my offer. I deliberately included ex-employees as being eligible because I thought that current employees may be intimated to call the show if still working for the dealership. I promised the callers that I would give them as long as they wanted to voice their side of the story regarding their advertising and sales practices. I assured them that they would not be cut off or muted out as many talk show hosts do when they have a caller who is vociferously disagreeing with them.
I’m going to give this another try this coming Saturday, January 16. I might even “up the ante” if I have to. Hearing the car dealers’ side of the story is not only fair, but it makes for much more interesting and exciting radio. If you’re employed by a car dealership in South Florida or were within the past year, please consider calling in. The show will run this Saturday morning between 9 and 10 and the toll free call-in number is 877 960-9960. I promise you that your opinions will be heard and I will not insult, abuse, or embarrass you or cut you off. Do you know someone that works for a South Florida car dealership or did within the last 12 months? Please let them know that they can make a fast $100 [or $500] if they are the first to call into my show.
“Good morning. My name is Earl and I’m a recovering car dealer. I sold my first car in 1968. A little more than ten years ago, I decided I was selling cars the wrong way. This show is just one of the ways I’ve changed my company and my life for the better. I’ll share with you all of the tricks of the trade I’ve learned in almost 40 years of selling cars. I’ll answer all of your questions about buying a car or having it serviced. I’d like to share with you this quote from Jim Press, the former top Toyota executive for all of North America. Jim said, ‘It’s what you do for a customer when you don’t have to. That’s the measure of true character…kind of like sticking up for someone who can’t defend himself’.”
We get a lot of callers almost every Saturday. People call to share their bad experiences, and some good, with their car purchase or service. We get a lot of questions on subjects like is leasing better than buying or should I always take my car back to the dealership for service or use an independent shop. Our Saturday morning show has exceptionally good ratings and our listener base is growing rapidly. The Seaview management is even discussing bringing the show national through syndication.
If I have any regret about my show, it’s that I don’t get any calls from other car dealers or their employees. I have received a few calls from car dealers from other parts of the country. Most of these are retired and have moved to South Florida. These calls are always complimentary. If you’ve listened to my show, you know that I’m very candid in my criticism of many South Florida car dealers. I’ll specifically name a car dealership and a specific ad if it’s illegal or deceptive. I also discuss specific unethical sales practices like quoting prices that are lower than what the dealer will sell the car for. I’m highly critical of the “dealer fee” which is added to the quoted and advertised prices of cars by almost every dealership in South Florida.
Last Saturday, I thought I had a great idea about how to encourage car dealers or their employees to call my show. I offered $100 to the first employee or ex employee [employed within the past year] to call into the show. I even offered $500 to the first such caller from any of the many Napleton dealerships. The Napleton dealerships are the largest auto advertisers in the PB Post and have many franchises and locations in PB County. Napleton advertises prices that are disclosed in the fine print to be plus his $799 dealer fee and “dealer installed accessories”. He also excludes multiple rebates from the advertised prices like college graduate, active military service, and owner loyalty when very few, if any, buyers could qualify. I consider this to be unethical and deceptive advertising.
I was amazed that I did not get one call from a single car dealer or their employee taking me up on my offer. I deliberately included ex-employees as being eligible because I thought that current employees may be intimated to call the show if still working for the dealership. I promised the callers that I would give them as long as they wanted to voice their side of the story regarding their advertising and sales practices. I assured them that they would not be cut off or muted out as many talk show hosts do when they have a caller who is vociferously disagreeing with them.
I’m going to give this another try this coming Saturday, January 16. I might even “up the ante” if I have to. Hearing the car dealers’ side of the story is not only fair, but it makes for much more interesting and exciting radio. If you’re employed by a car dealership in South Florida or were within the past year, please consider calling in. The show will run this Saturday morning between 9 and 10 and the toll free call-in number is 877 960-9960. I promise you that your opinions will be heard and I will not insult, abuse, or embarrass you or cut you off. Do you know someone that works for a South Florida car dealership or did within the last 12 months? Please let them know that they can make a fast $100 [or $500] if they are the first to call into my show.
Monday, January 04, 2010
BAIT & SWITCH ADVERTISING
(READ THE FINE PRINT)
All car dealers pay the manufacturers the same prices for their new cars. Dealers will lead you to believe that volume dealers pay less, but this is not true. So, when a car dealer advertises a price for a new car in the newspaper, he has no price advantage over his competition.
Virtually all of the prices for new cars you see advertised in the newspaper are so low that it would be impossible for a dealer to remain in business if he sold more than a very few cars at that price. The reason for this is that, if a dealer advertised realistic prices with a reasonable profit built in, another dealer would advertise a lower price. The dealer who advertised a realistic price is actually helping his competitor sell a car.
Most of the new car prices advertised in the newspaper are below the dealers actual cost. He protects himself by selling very few at this price and counting this loss as a cost of advertising. Next to an advertised car you will see some letters and numbers like, #5632A. That is the “stock number” of the car being advertised. This is all that the dealer does to tell you he has just one at this price. The chances are that if you are not the first person in the dealership on the morning of the ad, this car will be gone.
Look for these two fine print disclosures at the bottom of the ad: (1) Price good on date of publication only. (2) Price good with copy of this ad only. These are just two more ways the dealer can avoid selling you the car at the advertised price.
If you read my last column, you understand about “dealer fees”. These fees are additional dealer profits ranging from $500 to almost $1,000 that are added to the agreed upon price of the car by most dealers in Florida. Florida law requires that this dealer fee be included in the advertised price. When the salesman tells you the advertised car has been sold but he has another one “exactly like it”, he can legally add back on that dealer fee.
As you can guess, the salesman’s commission on an advertised car is either zero or very small. Having a very small incentive to sell an advertised car, he will most likely encourage you to buy any other car.
My recommendation to you is to ignore advertised new car prices. If you must respond to an ad car, call the dealership first and ask if the car is still available. If the answer is no, you have saved yourself a lot of time and aggravation. If the answer is yes, ask if they will hold the car for you. If you have to, offer to give them your credit card for a deposit to hold the car. If they won’t hold the car, save yourself the wasted trip.
The only way to get the best price on a new car is by getting competitive bids from at least 3 car dealers for the exact same year, make, model, and accessorized car with the identical MSRP. You can do this on the Internet, by phone, or in person. Use Consumer Reports magazine, the Internet (www.edmunds.com and www.kbb.com are two excellent free sources of information), or even your local library.
All car dealers pay the manufacturers the same prices for their new cars. Dealers will lead you to believe that volume dealers pay less, but this is not true. So, when a car dealer advertises a price for a new car in the newspaper, he has no price advantage over his competition.
Virtually all of the prices for new cars you see advertised in the newspaper are so low that it would be impossible for a dealer to remain in business if he sold more than a very few cars at that price. The reason for this is that, if a dealer advertised realistic prices with a reasonable profit built in, another dealer would advertise a lower price. The dealer who advertised a realistic price is actually helping his competitor sell a car.
Most of the new car prices advertised in the newspaper are below the dealers actual cost. He protects himself by selling very few at this price and counting this loss as a cost of advertising. Next to an advertised car you will see some letters and numbers like, #5632A. That is the “stock number” of the car being advertised. This is all that the dealer does to tell you he has just one at this price. The chances are that if you are not the first person in the dealership on the morning of the ad, this car will be gone.
Look for these two fine print disclosures at the bottom of the ad: (1) Price good on date of publication only. (2) Price good with copy of this ad only. These are just two more ways the dealer can avoid selling you the car at the advertised price.
If you read my last column, you understand about “dealer fees”. These fees are additional dealer profits ranging from $500 to almost $1,000 that are added to the agreed upon price of the car by most dealers in Florida. Florida law requires that this dealer fee be included in the advertised price. When the salesman tells you the advertised car has been sold but he has another one “exactly like it”, he can legally add back on that dealer fee.
As you can guess, the salesman’s commission on an advertised car is either zero or very small. Having a very small incentive to sell an advertised car, he will most likely encourage you to buy any other car.
My recommendation to you is to ignore advertised new car prices. If you must respond to an ad car, call the dealership first and ask if the car is still available. If the answer is no, you have saved yourself a lot of time and aggravation. If the answer is yes, ask if they will hold the car for you. If you have to, offer to give them your credit card for a deposit to hold the car. If they won’t hold the car, save yourself the wasted trip.
The only way to get the best price on a new car is by getting competitive bids from at least 3 car dealers for the exact same year, make, model, and accessorized car with the identical MSRP. You can do this on the Internet, by phone, or in person. Use Consumer Reports magazine, the Internet (www.edmunds.com and www.kbb.com are two excellent free sources of information), or even your local library.
Monday, December 28, 2009
CASH FOR CLUNKERS COVER UP?
“Cash for Clunkers” aka CARS, the government stimulus program for the auto manufactures and dealers last August was generally regarded as one of the more effective stimulus programs of the Obama administration. It cost us taxpayers $3 Billion but it sold almost one million new cars. There are arguments on how many extra new cars it sold and how many of those that were sold would have been sold eventually anyway. But, overall, it is generally considered a far more effective stimulus than TARP and certainly a lot less expensive.
What puzzles me is why there is so little media coverage of the fact that most customers who bought new cars under this program did not receive a fair trade-in for their clunker. There was a class action lawsuit filed in New York against one of the largest dealer groups in the country on this point and the Oregon Attorney General has ruled that all car dealers must pay their clunker customers what they received from the salvage yards to which they sold the clunker. Both of these incidences received virtually no national or local media coverage.
In my judgment, the clear intent of the Cash for Clunkers program was that the buyer should receive a trade-in allowance commensurate with the value of her clunker, just like a normal sale with a trade-in would. Unfortunately, the government did not make this abundantly clear and therefore most car dealers took advantage of this “loophole”. Most car dealers allowed hundreds of dollars less than they actually sold the clunkers to salvage yards for. Some dealers gave their clunker customers absolutely nothing for their trades.
I read in the auto manufacturer/dealer trade publication, Automotive News, that the average trade-in allowance estimate for clunkers was $75. Since the government did allow the dealer to keep $50 for administrative costs, this meant that the average clunker customer netted $25. I sold 286 new Toytota in the clunker program and my average sale to the salvage yards was for $445. If this average applied nationally to the one million clunkers, this would mean that car buyers under the clunker program were underpaid on their trade-ins by about $400 million.
One has to ask, why the media is ignoring this at least ethical violation which has cost American car buyers hundreds of millions of dollars. I can think of only one reason and that is the fact that car dealers and manufacturers are among the largest advertisers. Asking the same question of why the NHTSA doesn’t take action I can think of only one reason too. That is that the National Automobile Dealers Association, NADA, is a very powerful lobbying group. They are so powerful that they were able to at least temporarily halt the cancellation of GM and Chrysler dealers by GM and Ford which was mandated under the government bailout program.
The amount that a clunker was sold to a salvage yard for is a matter of public information and should be available from NHTSA under the Freedom of Information Act. If you bought a car under this program, you might be interested to know how much you should have received as a trade-in vs. how much you actually received. I’m working on accessing this information and I will advise all of my readers when I’m successful.
What puzzles me is why there is so little media coverage of the fact that most customers who bought new cars under this program did not receive a fair trade-in for their clunker. There was a class action lawsuit filed in New York against one of the largest dealer groups in the country on this point and the Oregon Attorney General has ruled that all car dealers must pay their clunker customers what they received from the salvage yards to which they sold the clunker. Both of these incidences received virtually no national or local media coverage.
In my judgment, the clear intent of the Cash for Clunkers program was that the buyer should receive a trade-in allowance commensurate with the value of her clunker, just like a normal sale with a trade-in would. Unfortunately, the government did not make this abundantly clear and therefore most car dealers took advantage of this “loophole”. Most car dealers allowed hundreds of dollars less than they actually sold the clunkers to salvage yards for. Some dealers gave their clunker customers absolutely nothing for their trades.
I read in the auto manufacturer/dealer trade publication, Automotive News, that the average trade-in allowance estimate for clunkers was $75. Since the government did allow the dealer to keep $50 for administrative costs, this meant that the average clunker customer netted $25. I sold 286 new Toytota in the clunker program and my average sale to the salvage yards was for $445. If this average applied nationally to the one million clunkers, this would mean that car buyers under the clunker program were underpaid on their trade-ins by about $400 million.
One has to ask, why the media is ignoring this at least ethical violation which has cost American car buyers hundreds of millions of dollars. I can think of only one reason and that is the fact that car dealers and manufacturers are among the largest advertisers. Asking the same question of why the NHTSA doesn’t take action I can think of only one reason too. That is that the National Automobile Dealers Association, NADA, is a very powerful lobbying group. They are so powerful that they were able to at least temporarily halt the cancellation of GM and Chrysler dealers by GM and Ford which was mandated under the government bailout program.
The amount that a clunker was sold to a salvage yard for is a matter of public information and should be available from NHTSA under the Freedom of Information Act. If you bought a car under this program, you might be interested to know how much you should have received as a trade-in vs. how much you actually received. I’m working on accessing this information and I will advise all of my readers when I’m successful.
Monday, December 21, 2009
The Six Deadly Sins of Car Salesmen
The internationally renowned research and polling company, J.D. Power, LLC conducts an annual survey of U.S. car buyers to learn what motivates them to buy from one particular car dealer rather than another. Their latest survey of 48,000 recent car buyers discovered that there were six reasons that people chose 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 48,000 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” or “sweetie pie” 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. A buyer rightfully assumes that, if the salesman can’t even show me how the navigation system works or tell me what the city gas mileage is, why she 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 drinking in that fearful scene.
(5) Thou shalt not ignore thy customer. My first reaction to this one is how a salesman, especially in such dire economic times, 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 guy who 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 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, he 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 wish all of my readers a Merry Christmas or I hope you already enjoyed a happy Hanukah and I wish everyone a happy New Year.
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 48,000 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” or “sweetie pie” 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. A buyer rightfully assumes that, if the salesman can’t even show me how the navigation system works or tell me what the city gas mileage is, why she 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 drinking in that fearful scene.
(5) Thou shalt not ignore thy customer. My first reaction to this one is how a salesman, especially in such dire economic times, 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 guy who 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 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, he 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 wish all of my readers a Merry Christmas or I hope you already enjoyed a happy Hanukah and I wish everyone a happy New Year.
Thursday, December 17, 2009
Shame on Florida and Federal Politicians and Regulators
On December 11th [my birthday] the U.S. House of Representatives passed a bill which provides a sweeping overhaul for oversight of financial institutions by a new Consumer Financial Protection Agency. This was in response to an effort by our federal government to improve regulation of our lending institutions and avoid another financial meltdown which came close to bringing us into a 2nd depression.
Before the bill could be passed, an amendment to subject car dealer-assisted financing to some Consumer Financial Protection Agency oversight was withdrawn. This was the result of strong lobbying efforts by the National Automobile Dealers Association. Consumer advocates argued that dealers are the biggest target of consumer complaints to state agencies and have been the subject of a number of lawsuits over financing for consumers.
“The House exempting auto dealers from fiscal oversight is just not right”, said a Consumer Federation of America spokesman Jack Gillis. “Each year millions of Americans finance their second biggest purchase through car dealers, and these consumers deserve the same protection as those working directly with financial institutions.”
We see the same dereliction of duty by Florida politicians, regulators and the Florida counterpart to the NADA, the FADA Florida Automobile Dealers Association. The Florida legislature is lobbied heavily by the FADA not to pass good laws to protect Florida car buyers and the Attorney General will not enforce the ones we already have.
I know exactly what car dealers and political conservatives [I’m both] will say when they learn about this…”We don’t need more government regulations and laws”. However, I have to reluctantly differ on this. It’s easy enough to say that we don’t need more laws and regulations but what we do need is enforcement of the laws and regulations we already have. That’s true, but what happens when you do not enforce the current laws and regulations? We do not enforce them and that’s what got us into this recession. When you see more laws added to the books, it’s because the current ones are being ignored. It may be faulty logic, but making new laws is at least doing something.
If Bill McCollum reads this or politicians like Dave Aronberg who are running for Bill’s current position of Florida Attorney General, I’m talking to you. I’ll describe advertisements by just one car dealer in the PB Post auto classified section. You can see for yourself if you can locate a copy of last Saturday’s paper. If you can’t don’t worry because the same ads run almost every day. You can see similar ads in newspapers [and TV and radio] all over Florida. I gave you an easy one to find because this dealer spends more on advertising in the PB Post than any other. You can’t miss his ads…or maybe you can because you have allowed him to run rampant for years.
Before the bill could be passed, an amendment to subject car dealer-assisted financing to some Consumer Financial Protection Agency oversight was withdrawn. This was the result of strong lobbying efforts by the National Automobile Dealers Association. Consumer advocates argued that dealers are the biggest target of consumer complaints to state agencies and have been the subject of a number of lawsuits over financing for consumers.
“The House exempting auto dealers from fiscal oversight is just not right”, said a Consumer Federation of America spokesman Jack Gillis. “Each year millions of Americans finance their second biggest purchase through car dealers, and these consumers deserve the same protection as those working directly with financial institutions.”
We see the same dereliction of duty by Florida politicians, regulators and the Florida counterpart to the NADA, the FADA Florida Automobile Dealers Association. The Florida legislature is lobbied heavily by the FADA not to pass good laws to protect Florida car buyers and the Attorney General will not enforce the ones we already have.
I know exactly what car dealers and political conservatives [I’m both] will say when they learn about this…”We don’t need more government regulations and laws”. However, I have to reluctantly differ on this. It’s easy enough to say that we don’t need more laws and regulations but what we do need is enforcement of the laws and regulations we already have. That’s true, but what happens when you do not enforce the current laws and regulations? We do not enforce them and that’s what got us into this recession. When you see more laws added to the books, it’s because the current ones are being ignored. It may be faulty logic, but making new laws is at least doing something.
If Bill McCollum reads this or politicians like Dave Aronberg who are running for Bill’s current position of Florida Attorney General, I’m talking to you. I’ll describe advertisements by just one car dealer in the PB Post auto classified section. You can see for yourself if you can locate a copy of last Saturday’s paper. If you can’t don’t worry because the same ads run almost every day. You can see similar ads in newspapers [and TV and radio] all over Florida. I gave you an easy one to find because this dealer spends more on advertising in the PB Post than any other. You can’t miss his ads…or maybe you can because you have allowed him to run rampant for years.
Monday, December 07, 2009
Should I lease or buy my next car?
Unfortunately, as with most things, there is no simple answer to this question. However, it is important that you evaluate both options because one or the other usually will have a significant cost advantage.
The most important factor in deciding between a lease and a purchase is the vehicle you choose. If you are buying a used vehicle, you can pretty much rule out a lease as a viable alternative. The reason for this is that banks and other leasing institutions do not offer favorable money factors or residuals on used cars. This translates into you paying more for the lease. Ironically, residuals should be relatively higher for used cars. The residual is the percentage of the depreciated value of the car remaining at the end of the lease. A used car experiences the largest portion of its depreciation when it is driven off the showroom floor. But banks and leasing institutions are leery of used cars because they have to rely too heavily on the dealer for their true condition and most used cars have no new car warranty remaining.
If you are buying a new car, the most attractive leases will usually be with makes and models having the highest resale values. You can check this by comparing the cost of the new car with the wholesale value of a 2, 3, or 4 year old model. A good Web site for this is www.kbb.com, the Web site for Kelly Bluebook. This is how the banks and other leasing companies calculate their residuals. The makes with the higher residuals and resale values are your more popular makes, those that don’t employ excessive rebates and incentives, and those that don’t sell large numbers of cars to rental and leasing companies. Generally speaking, these are mostly your Japanese makes, some European, and even some domestic cars that are in high-demand and low supply like the Chevrolet Corvette or Pontiac Solstice.
If you decide to purchase a new car that has a high resale value which makes it makes it a good candidate for leasing, be sure that you get lease quotes from several banks and/or leasing companies. The money factor (equivalent of the interest rate in a purchase) and residuals will vary. You should shop your financing if you are buying and shop your lease rates/residuals if you are leasing.
Many people think there is a “tax advantage” to leasing. This is not true. You can deduct only that portion of the usage of a car that is for business whether you lease or buy. For a lease that represents part of the lease payment and for a purchase that represents part of the depreciation.
Here are some things to be careful of if you lease: (1) Your insurance cost will be considerably higher. (2) Do not opt for a lease term beyond the time you want to drive the car. You may be tempted by lower payments on lease terms from 60 to 72 months, but don’t do this! You are obligated to pay the leasing company for many more months than you want to keep the car and you will have to pay a very large sum of money to get out of the lease early. (3) Never allow a dealer to switch you from a purchase to a lease at the last minute simply because they offer you a lower payment. This is common tactic to raise the profit on the transaction. Remember, at the end of the lease you own nothing, but after the last payment of a purchase, you own the car so naturally, your lease payment will be lower than a purchase payment. (4) Be sure you understand how many miles per year you will be allowed in your lease without a charge per mile. Most leases are for 12,000 miles per year. If you drive more miles per year, you could be confronted with a very large surprise charge at your lease termination. (5) When you sign your lease, there will be a “fee” commonly labeled a “lease acquisition fee”. Part of this fee goes to the leasing company but part may go to the dealer and is negotiable. Ask him to waive his portion of the lease acquisition fee because it is part his profit on the lease.
The cost of a car is total cost of the car during the time you drove it. If you lease, that is the sum of the payments. If you buy it, it is the total cost of the depreciation plus interest. Of course you have extraneous costs like maintenance, insurance, repairs, and fuel, but (except for insurance), these are the same for a lease and purchase. Too many people look only at the purchase price of the car. A higher priced car with a higher resale or residual value can actually cost you less than the lower priced car.
Wednesday, December 02, 2009
10 New Years Resolutions for Car Dealers in 2010
(1) Eliminate your dealer fee. We’ve seen some progress in dealers eliminating their dealer fees in
(2) The buck stops with you. You are responsible for the actions of your employees. Your salesmen, service technicians and service advisors are virtually all paid on commission. If you do not police your people and hire ethical people your customers will be taken advantage of. If you are an absentee owner, as most owners of car dealerships are in South Florida are, you have to have someone running your store that knows and cares about what is happening to your customers. Your ignorance of the mistreatment of your customers is no more an excuse than being ignorant of a law when you break it. You may think you know how your employees are treating your customers, but I promise you that you don’t unless you communicate directly with some of them. You cannot rely exclusively on reports from your managers to tell you the truth.
(3) Don’t advertise a car at a price that you don’t want to sell it for. If you advertise a car for a specific price, you should be willing and able to sell that car to as many customers as respond to the ad. If you run out of stock, give the customer a rain check. Also, pay your salesmen a commission on the ad cars. Now most of you don’t pay a salesman a commission if he sells the ad car. What do you think that salesman is going to tell the customer who comes in on the ad? If you run out of that model, you should give your customers a rain check. When you don’t do that, it’s called “bait and switch”.
(4) Don’t insist or encourage your customers to buy and take delivery of their car on the same day. This is called a “spot delivery” in the trade. There are lots of thing bad about this. A car is the 2nd largest purchase a person makes. The customer should be allowed time to reflect and think about this decision. Cars are often spot delivered when the credit has not been approved, especially nights and weekends when the banks are closed. Customer often have to be called back to sign another contract at higher payments, higher interest, and/or higher down payments. This is sometimes done deliberately because customers are often too embarrassed to tell their friends that they really haven’t bought that shiny new car they were showing off. Attorneys in other states have filed class action suits against car dealers and attorneys in this state are working on doing the same.
(5) Give customers who are” just looking” a price when they ask for it. It’s insulting to today’s sophisticated buyers to be told when they ask for the price that they can buy the car for, that they have to make an offer in writing with a deposit first. It’s also insulting when you tell the customer that you won’t give her a price until she’s “ready to buy”. Can you imagine being told this by a salesman at Best Buy when you asked the price of 50” Plasma TV? Your salesmen won’t give prices to your customers because they are afraid the customer will compare his price with the competition. This is what the free market place is all about! Customer should shop and compare. If you treat your customers with respect, integrity, and courtesy, they will return to you an offer you the right to meet or beat a lower price.
(6) Don’t advertise discounts from “dealer list” price. When you mark up the manufacturer’s list price by thousands of dollars and then advertise a discount, you are misleading you customers. The federal government has a law that every new car displays a “Monroney label” [named after the
(7) Don’t advertise lease payments that require large down payments hidden in the fine print. Most people lease cars to minimize their monthly payment. When your customer comes in on the ad finds out she has to pay $4,000 cash down to get the lease payment you advertised, it’s just plain wrong. There are some dealers who actually advertise prices with a qualification that the customer pays an additional sum first to get the advertised price.
(8) Do not advertise that you can get anybody financed no matter how bad their credit. This is not true and just plain cruel, especially during these terrible economic times with very tight credit.
(9) Don’t guarantee the lowest price with qualifications that cannot be met. Your qualifications are usually that you “reserve the right to buy the other car from the other dealer who beat your price” and that the customer must have a signed buyer’s order from the other dealership. You know that the other dealer will never agree to sell you that car and you also know that the chances of the customer getting out of the dealership with a signed buyer’s order without taking delivery are slim and none. Dealers reading this, I dare you to show me evidence that you have honored your guarantee with jus one customer. I’ll make you a bet that you have never honored that guarantee.
(10) Don’t offer a minimum $10,000 [or some other high number] for every trade-in. Sometimes these ads, say “if you can push, pull, or drag your old car in we will give you at least $10,000 toward the purchase of a new car. You then mark up the new car so high, you are not really offering the customer anything more than the wholesale value, if that.
Friday, November 20, 2009
Don’t Be “Flipped” to a Lease
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 about 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?”
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