SHOP YOUR FINANCING AND TRADE-IN WHEN BUYING A CAR

If you have read my earlier columns you know how important it is to get several competitive prices from different car dealers on the car you are buying. Equally important is to get at least 3 prices/bids on your financing and the true value of your trade-in.

The absolute worst thing you can do is to tell the dealer “all I care about is keeping my payments under “$X per month” and not know what the interest rate, terms, or products are included in the payments. Part of the profit a dealer makes on his cars is called “F&I income” and averages from $500 to as much as $2,000 per car sold. You can do your homework and buy your car at a very good price, but by not shopping your financing you can pay the dealer thousands of dollars in finance profits.

Credit unions are often the best source of funds for buying a car. Because they get special tax breaks from the government not available to banks, they usually have the lowest finance rates. Even if you don’t belong to a credit union, there are several you can join for a nominal fee. You should also get a financing quote from the bank you do business with. Also, give the dealer that you are buying from an opportunity to beat the rates you were quoted. Sometimes he can.

When you are taking delivery of your car, you will be asked to consider buying products like extended warranties, maintenance plans, road hazard insurance, GAP insurance, roadside assistance, credit life insurance, etc. My suggestion is that you do not make a snap decision on these products at the last minute. You should get complete information on each product and determine if it has value for you. You may already have coverage for some insurance products in policies you already own. With extended warranties and maintenance be sure you understand what is covered and what is not covered and what the deductibles are.

You should get at least 3 bids on the value of your trade-in. You can get some pretty good guidance from Kelly Bluebook, www.kbb.com and www.edmunds.com. Make an appointment to drive your trade-in to show the used car manager at a dealer who is franchised to sell the make you own. A Chevrolet dealer will likely pay you more for a Chevrolet trade-in than a Ford dealer would. That’s because people generally will shop for a used Chevy from a Chevrolet dealer. Get one or two more bids from other dealers in the same make. If you are near a CarMax store, you should take your car there too. They regularly buy cars like this for their inventory. The price you will be quoted is referred to as the ACV which stands for “actual cash value”. This is the wholesale value of your trade in.

Don’t confuse the ACV with the trade-in allowance that the dealer you are buying from gives you. The trade-in allowance includes part of the markup on the vehicle you are purchasing. You have probably read ads saying “MIMIMUM $4,000 ALLOWANCE ON ALL TRADES”. It’s not hard to offer thousands more on a trade-in than its ACV (true wholesale value) when you mark up the new car several thousand dollars more. Be sure that you explain that want to compare the ACV of your trade-in. Tell them you want the markup on the price of the car you are buying discounted, not added on to the ACV of your trade. Remember, however, that if you sell your trade-in to another party, you lose the advantage of deducing the trade-in from the price your sales tax in calculated on. At 6%, you would pay an extra $600 in sales tax for a trade-in with a $10,000 ACV.

With competitive bids on the car you are buying, the interest rate on your financing, and your trade-in ACV you are sure to minimize the total cost of that new or used car.

YOUR CAR’S COLLISION INSURANCE - DO YOU KNOW YOUR RIGHTS?

If you don’t read one other sentence of this article, please read this one: YOU HAVE THE RIGHT TO HAVE YOUR DAMAGED CAR REPAIRED BY THE BODY SHOP OF YOUR CHOICE.

You’ve probably read, seen, and heard a lot about insurance companies over the past 3 years. They ranked right up their with our nation’s big banks in dragging our country into the biggest recession since the Great Depression. AIG who was bailed out by our tax dollars is the largest insurance company in the world and were considered “too big to fail”.

Insurance is a great business if you happen to own an insurance company. Just ask Warren Buffet, the richest man in America and one of the richest in the world. You might think of Buffet as owning lots of different kinds of companies besides insurance and he does. But he will be the first to tell you that he got (and gets) most of the money to buy all of these other companies like Coca Cola, Wells Fargo, NetJets, American Express, Proctor and Gamble, etc. from tax deferred dollars that he raked in from his insurance companies like General Re, GEICO, Travelers, and United States Liability Group.

I laughed at a joke that David Letterman made about Oprah Winfrey….he said “Oprah got ALL the money!” and she is the richest self-made woman in America. Not as funny, but a truer statement, would be “the insurance companies got all the money!” Here’s why. One of the biggest reasons is that they don’t have to pay income tax like you and me or most all other companies in America. Now, to be fair, they do eventually pay income tax, but not until they’ve had a chance to double their money on our insurance premiums by investing them. How did they get this unfair advantage over you and me? Can you say LOBBYISTS? Our nation’s insurance companies own our politicians. When AIG says “jump”, most of our Congressmen say how high? Those few that don’t play ball don’t get reelected because their opponent is getting huge political contributions from the insurance companies.

Think about this for a minute. Did you know that when you mail your premium check to State Farm, All State, or GEICO that they don’t pay a nickel in taxes until years afterward? But you paid income tax on the money that you earned to pay the premium in the same year you earned it. These insurance companies can invest your premium dollars which are tax free to them and earn interest, dividends, and capital gains which are also not taxable for years. That’s simply not fair but “that’s the way it is” as Walter Cronkite used to say. I used to love watching Walter’s documentary, “The 20th Century” sponsored by the “Prudential Insurance Company”.

You would think that our auto insurance companies would have enough money without taking advantage of their insureds, wouldn’t you? Well if this is true why do they:

(1) Drastically underpay body shops that repair their insureds’ cars? In South Florida the average labor rate charged by dealerships’ service departments which does mechanical repair on your car is about $100 per hour. Dealer body shops are paid less than half of that. Now you might not be concerned that a car dealer’s body shop is being underpaid, but you should be concerned that the body repair technician that works on your car is being underpaid. The skill and training level of a body repair tech is at least equal to that of a mechanical repair tech. Why should the body repair tech be paid half as much? Because insurance companies control the payment of 95%+ of all collision repairs, they dictate which body shop gets to repair your car. If the body shop says they can’t do a safe quality repair for the price offered by the insurance company, the insurance company gives the repair to the body shop that will “play ball”.
(2) Often insist on the use of used and non-factory parts. Insurance companies don’t like to call the parts that are bought from junk yards to repair your car “used”. They prefer the euphemism, “recycled”, just like car dealers prefer to call used cars “pre-owned”. In many cases, the car’s manufacturer recommends or requires that new factory built parts be used to repair their cars. This doesn’t prevent many insurance companies from insisting that cheap used or Chinese made parts be substituted for new parts made by the car’s manufacturer. The insurance companies keep precise records on the body shops that they will recommend as to the percent of used or non factory parts they use. If one of their approved shops falls short of their average, they drop them and do not recommend any of their insureds to that body shop.
(3) Mislead their insureds into not filing a claim by underestimating the total damage. In 90%+ of collision repairs there is hidden damage. This unseen damage is only revealed when your car is disassembled after the repair process has begun. Often this hidden damage represents thousand of dollars in repairs. Many people carry large deductibles today to soften the cost of higher insurance premiums. If you have a $1,000 deductible and the insurance company’s estimate repair is around $1,000 you might think it’s not worth it to file a claim. We all know that filing a claim will cause your premiums to go up when you renew your insurance. Some people decide to pay for the repair out of their own pocket. If the car is drivable, many decide not to have the repair done at all.

OK, you’ve been warned, but if you’re a Florida resident you’re very lucky. You can choose the body shop that does your collision repair. Your insurance company will pressure you by telling you that they can’t guarantee the work if it’s not performed by their cut-rate body shop. If this is of concern, simply ask the body shop you choose to match the insurance company’s guarantee. Most do anyway. I also highly recommend that you choose a body shop operated by a dealer for the make of car you drive. They have better trained technicians and they have direct access to new factory parts. Also, be sure to check out the body shop with the BBB and the County Office of Consumer Affairs. If your insurance company gives you a hard time, just call 800 342-2762, the Florida Office of Insurance Regulation toll free line for consumer complaints. They will “explain the law” to your insurance company.

BUY OR LEASE YOUR NEW CAR AT THE RIGHT TIME OF THE YEAR

The total cost of a new car consists of many factors including initial purchase price, maintenance and repairs, and insurance. One of the most often overlooked and biggest costs of owing a car is depreciation. Some makes and models of cars depreciate more than others. By choosing the right make and model you can minimize depreciation. You can also minimize depreciation by properly maintaining your car, protecting it from the elements, and selecting the best color. One important factor in depreciation that is most often overlooked is the time of year that you buy or lease your car.You should always buy your new car as soon as possible after that year model is introduced. Some would disagree, arguing that you can buy a car for less at the end of the model year. Even if this were so (and I don’t agree with this), the savings would not offset the increased cost of depreciation that you inherit by buying a new car that is a year old. If you follow the advice I have given in my previous columns on the smartest way to buy a new car, you can usually buy a new car for close to the same price at the beginning of the model year as at the end.There was a time when virtually all makes of cars were introduced in the last quarter of the calendar year preceding the model year. If you bought a new model in September, you could be assured that you got it at the right time to minimize your depreciation. Nowadays, new models are introduced at almost any time and the introductions are nearly unpredictable. It’s not unheard of for a manufacturer to actually skip a model year entirely, selling last year’s model for another year. Or, sometimes a manufacturer will introduce a new model as much as two years before the calendar date of that model year. You should be sure you know exactly when that model year you are contemplating buying was introduced. You don’t want to buy a model year that was introduced 6 or 8 months agoIf you are leasing your car, you should also try to lease it as soon as possible after that year model is introduced. Also, when deciding on the length of the lease, your lease should end when the new model that you will lease or buy next is introduced. You don’t have to lease a car for a full one, two, three, or four years. You can lease a car for 39 months, for example, which may assist you in having your lease terminate at just the right time to buy or lease your next car.Be sure you know how many more years the make and model you select will remain before it is replaced by a major model change. The life cycle of a particular model varies between manufacturers from as short as 3 years to as long as 6 or 7 years. Your car will retain its value considerably more if it is still within its current product cycle when you trade it in. You need to be especially wary when a specific model is discontinued entirely. Research this carefully and time your purchase or lease as early in the product cycle as possible.If you are buying a brand new model at the beginning of its product cycle, be sure that you are buying from a manufacturer that has a very good reputation for quality. You can get a pretty good idea of the quality of the new model by researching the reliability of the previous year model. It is true that a brand new model can experience some bugs during the early months of its first year. If you are nervous about this, it might pay to wait for 3 or 4 months after a brand new model is introduced to see if problems in the form of recall campaigns or otherwise do occur.

Ed “P.T. Barnum” Whitacre, GM Chairman and CEO

Have you heard the rumor that General Motors is changing their slogan from “Mark of Excellence” to “There’s a sucker born every minute”?

Two weeks ago, I wrote a column about Ed Whitacre, the CEO and chairman of General Motors and his saturation TV commercials about how GM had repaid us taxpayers all of the money we loaned GM. If you missed that column, you can read it on my blog, www.EarlStewartOnCars. The bottom line is that Ed was “speaking with forked tongue” and GM did not do what he said. Taxpayers have not received one dime back from the TARP money our Congress voted to give GM. His whole claim was a “smoke and mirrors” effort to mislead the American taxpayer in an attempt to hype the value of GM stock when their IPO comes to market soon.

Following further along the lines of the famous huckster, PT Barnum, last week Ed fired his marketing manager who had been hired only a few months ago. Ed replaced her with the marketing manager from Hyundai. He chose this guy because of the way he had increased Hyundai’s sales during the recession. That seems like a good reason, but there’s more. He specifically chose the Hyundai marketing manager because of his advertising campaign claiming that Hyundai would allow a customer to stop making her car payments and return the car if she lost her job. I exposed this scam on my radio show. There are so many conditions in the fine print of this offer that virtually nobody can qualify. It’s “get ‘em in the door”, bait and switch advertising. Is this the kind of advertising we will be seeing from General Motors from now on?

Actually Ed “P.T. Barnum” Whitacre has already started with his bait and switch adverting. General Motors was exposed in last Monday’s (May 10, 2010) Wall Street Journal of being guilty of paying Consumers Digest to give their cars “Best Buy” ratings. Please don’t confuse Consumer’s Digest with Consumer Reports, an honest, accurate and non-profit organization. Of course, Consumers Digest is intended to be confused with Consumer Reports which has earned the trust of millions of car-buyers. Consumer’s Digest charges car manufacturers $35,000 for the first “Best Buy” rating and $25,000 for each subsequent one. General Motors paid for fifteen of their models to be rated a Consumers Digest “Best Buy”. That totals $350,000 to fool you and me into believing that GM makes good cars. Oh, I forgot to mention that Consumers Digest has no subscribers and sells no advertising! I guess we know how they make their money, don’t we?

I wrote an article for Hometown News about 3 years ago entitled “Consumer Reports is your best friend in choosing a car”. You can read that article on my blog by clicking on www.EarlStewartOnCars.com. In that article I warned car buyers not to be fooled by other publications that were “on the take” to give high quality ratings to car manufacturers. Consumer Reports is a non-profit and will not accept any payment from any product manufacturer. In fact, when they test a car, they buy the car from the manufacturer and will not even accept a car on loan. Furthermore, they do not allow any manufacturer to use their name in any advertising about the test results.

As most of my readers and listeners to my radio show know, I continually fight unfair and deceptive and illegal advertising by car dealers. Generally, I don’t have a problem with deceptive advertising by manufacturers. In fact, up until our government became the majority owner of General Motors, their advertising was basically OK. One of the big reasons Florida car dealers get away with so much is that our Attorney General, Bill McCollum, doesn’t enforce the “Unfair and Deceptive Trade Practices Act”. Florida car dealers may advertise any way they like, even illegally, without fear of reprisal. The Attorney General of the United States is Eric Holder, an Obama appointee. I can only speculate on why he hasn’t done anything about General Motors unfair and deceptive advertising. I’ll leave the speculation up to you.

Car Dealers Exploiting the Elderly

I don’t like to run old columns, but some things bear repeating. This column originally ran in Hometown News and my blog on March 9, 2007. I’m writing this on Monday May 2 and I received a call yesterday from an 83 year old woman victimized by a car dealer. She called me because she is a regular reader of my column in Hometown News (apparently she missed this one from over 3 year ago). This is why I’m rerunning this column. He son-in-law called me after she did yesterday. I asked him to send me an email, which he did, with all of the information about how she was exploited in the purchase of her car. I promised that I would call the owner of the dealership and ask him to intervene. As is usually the case in the exploitation of the elderly, it cannot be proven that any law was broken. I believe that when an 83 year old widow pays thousands of dollars more than others pay for the same car, that’s prima facie evidence that a she was, at the very least, deceived.

I use the term “car dealer” often in my columns and I want to make it clear that I am not trying to get personal. I could use the terms “car salesman” or “car sales manager”, but the dealer is the boss and I firmly believe the placard Harry Truman had on his desk, “The buck stops here”. The guy that owns the place is responsible for the actions of his employees. Just because he doesn’t know that there are some salesmen or managers taking advantage of his customers, is no excuse.

When I became a senior citizen I truly began to see the world in a different light. I have been a car dealer for over 40 years, but I have seen my own business through the eyes of a senior citizen for only the last few. One thing that has helped this awareness has been my relative new public persona, brought on by my TV commercials. Seeing me on TV (and also reading this column) precipitates a lot of phone calls, emails, and letters from seniors in Palm Beach, Martin, and St. Lucie counties. Some of these are very complimentary. Many of them are also calls for help or advice from those who were taken advantage of when they bought their car.

I get more calls from widows than any other single category. In my dealership last Friday, I was introduced to a widow in her seventies who had come in to buy a car with her nephew. She had never bought a car before. Her husband had always handled this responsibility. He passed away 2 years ago. She was very wise to bring along her nephew to assist her in her first car purchase.

I am learning as I approach 70 that I’m not quite as sharp in some areas as I once was. My memory is not as good and I am not as fast as I used to be. This is not to say that I am not as smart as I was when I was younger. In fact, I’m a lot smarter. There was a great article in the February 16 Wall Street Journal entitled “The Upside of Aging”. It explained how recent scientific studies have proven that even though certain mental abilities like memory and reaction times regress as we age, other more important mental abilities like judgment, empathy, vocabulary, and semantic memory more than offset the negatives. Semantic memory is the recollection of facts and figures from your field of endeavor or hobby and is most robust in seniors. If you would like to read this article, send me your email address or fax number and I will send it to you.

Buying the right car at the right price is no easy task. There are a lot of variables like trade-in allowances, monthly payments, discounts, interest rates, lease or buy, finance or pay cash, and all that I just mentioned has to do only with the cost of the car. What about which is the best make and model for you? This process should take lots of time in the study and preparation but too often purchases are made in just a few hours with little or no preparation.

The reasons why the elderly are so often targeted and exploited by car dealers (and other businesses) are many and complex. For one thing, there are just a lot of elderly people living in Palm Beach, Martin, and St. Lucie Counties. When a reporter asked John Dillinger why he robbed banks, Dillinger replied, “Because that’s where the money is”. Even though most senior citizens are smarter than ever, I believe that we are perceived by many as not being so smart. We are looked upon as easy prey. Also, I think that we pre-baby boomers grew up in a more trusting, family oriented time and we sometimes trust others more than we should.

In summary, if you are a pre-baby boomer like me, take extra precautions before you enter a car dealership. Do your homework carefully. Never, never make a rush decision. Do not buy that car on the same day you come into the dealership. Go home, discuss it with friends and family, and sleep on it. And if you call me, please call me before you buy the car, not after it’s too late.

“Pump and Dump” by Government on GM Stock?

For those not familiar with the stock market, “pump and dump” is the illegal activity of overstating the value of a stock to encourage unsuspecting buyers to buy the stock and thereby drive up the price. Those giving out the misinformation on the stock (pumping) then suddenly sell (dump) all of their stock which they had previously acquired at much lower prices and make a large albeit illegal profit.

You must not own a TV set if you haven’t seen the recent new commercial by General Motors starring Ed Whitacre, the CEO and Chairman of the Board. He is strutting through a GM plant and bragging about how GM just repaid a $5 billion government loan 5 years early. This advertisement began the very day the “repayment” was made and the press release was issued. This was no coincidence and it was very well coordinated.

All of the media, TV cable and network, and print jumped on this and spread the word that General Motors was doing a lot better than expected and the taxpayers’ $50B investment in GM would not only be repaid soon but with a big profit.

The fact is that we taxpayers got back none of the money we gave GM. The $5 Billion that Ed Whitacre said GM paid back early was already in the U.S. Treasury’s possession in an escrow account. It was simply moved from one column on the Treasury’s books to another. At best, one could say that GM used one source of TARP funds to repay another. This was reported to Congress last week in a TARP audit by its inspector general, Neil Barofsky. Strangely enough, the conventional media has ignored this. The way I found out about it was from an article in my trade journal, Automotive News. This article cited a letter written to Treasury Secretary Tim Geithner, from Senator Charles Grassley of the finance committee.

Also, remember that our government loaned GM $50B, not $5B. When GM went bankrupt and could not repay anything, the government took majority ownership (61%) and converted the loan into worthless stock. You probably know that debt holders (bond holders) are in a much safer position than equity owners (stockholders). For Ed Whitacre to brag about repaying a $5B loan 5 years early that was really a $50B loan is patently absurd. But wait, there’s even more.

Now here’s the “smoking gun” for “pump and dump”. General Motors will be coming out very shortly with a stock offering to the public, an IPO. The only way that the taxpayers can really be paid back is if our government sells their stock in GM for a lot more than they paid for it. The only way they can sell stock is if the stock buyers believe GM can recover and begin to make a profit. Now do you get it? Using “smoke and mirrors”, Ed Whitacre and our politicians whose reelection depends on the survival of GM are trying to raise public opinion about the viability of GM so that they can drive up the price of the stock offered.

I hope the government doesn’t sic the SEC on me like they did Goldman Sachs because I’m going to short GM stock if the government sells it for, or above, the IPO price. In my opinion GM has little chance of being profitable in its present form anytime soon. Almost all of their improvements have come from laying off workers, closing plants, and other radical cost cuts, not from car profits. They have shown sales increases but most of those are to large rental and leasing fleets like Hertz and Avis that buy cars dirt cheap. GM does this even though they don’t make a profit so that they don’t have to close more plants and to make their numbers look better. The fleets then dump the cars back on the used car market which drives down the resale value of GM cars and trucks. This has the net effect of raising the cost of GM cars and trucks to GM owners because their trade-ins are worth much less.

It’s bad enough that Ford, Honda, Toyota and other manufacturers have to compete with the US government, but now the government isn’t even playing fair. The bottom line is that it’s the marketplace that decides which manufacturers will succeed, not the government. The American buyer will buy those products that have the best value, the ratio of price to quality. If GM, Chrysler, and our politicians don’t like those rules, they should get out of the car business.

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.

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?

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.

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.

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?

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.

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.

“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.

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?

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.

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.

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.

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.

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.