I wrote another article on wheel alignments a short time ago. If you’re not conversant with wheel alignments, this is a good article to read and you can find it here. Also, this is a great video on YouTube, http://www.tirekiller.com/.
Most everyone thinks of a wheel alignment as a maintenance item which is the owner’s responsibility that you don’t need to worry about when you first buy the car…at least not until you drive into a pothole, notice a pull to the left or right, or uneven tire wear. Unfortunately most car manufacturers and dealers also look at alignments the same way.
A few months ago, I invested in a new state-of-the-art wheel alignment machine. Older wheel alignment machines require a lot of time and labor to measure the wheels for proper alignment. In fact, it actually takes almost as long to determine if your car’s wheels are out of alignment as it does to also actually correct the alignment. Because of this, most service departments (independents and dealers) will charge you the same just to “check” your alignment as to actually correct it. The cost of 4-wheel alignments averages between $70 and $100. Beware of very low priced alignments. These may be just for the front end of your car and/or by older or obsolete alignment machines. I invested in my new state-of-the-art alignment machine because it allows me to check an alignment in less than 10 minutes which permits me to check a customer’s alignment at no charge.
Now, I check the wheel alignments on every car that comes into my service drive. I also check all of my company cars including my parts delivery trucks my service courtesy vans, my new car demonstrators and my used cars. I do this for the same reason that you should check the wheel alignment on your car, even if it’s brand new. As I explained in my earlier article, a car’s wheel out of alignment is like high blood pressure…often times there are no symptoms. And, just like high blood pressure can be fatal to you, misaligned wheels can be fatal to your tires.
The reason that I’m writing this article so closely on the heels of my last wheel alignment article is because of the astounding data I’ve been able to collect since I began checking every car coming through my service drive (about a hundred each day) for alignment. About one car out of every four that I checked is out of alignment which didn’t surprise me that much. Industry data supports this. But what did surprise me is the fact that about one out of four new cars is also out of alignment! I’m defining a new car as one under one year old or 20,000 miles. My thoughts on this are that some cars may actually be misaligned before they leave the manufacturer and some may have their wheels knocked out of alignment loading and unloading them on ships, trains, and trucks between the manufacturer and the dealer. Of course new cars are also driven by the dealer on road tests, demonstration rides and traded back and forth between dealers. As you can see there are lots of reasons a “new car” can need a wheel alignment.
Because a new car has so few miles on it, it’s impossible for you to notice the misalignment from uneven tire wear. As I explained in my earlier article, the only other tangible symptom for misalignment is pulling to the left or right. But all it takes is two adjustments on two different wheels to be out in opposite directions to cancel each other out in which case there is no revealing pull to left or right.
Now here’s the shocking facts I discovered when I began checking the wheel alignment on all new cars that come through my service drive. Before I purchased my new state-of-the-art Hunter alignment machine, I checked and aligned a new car only when the customer complained of a pull or uneven tire wear. The average number of alignments I checked and fixed each month was only “seven”. Now that I’m checking the measurements on all new cars, I’m aligning an average of forty-six, an increase of 650%! This means that for every wheel alignment I corrected, there were six more that were not detected and fixed. Many of my customers ended up paying for an alignment that should have been covered by their warranty and many may have had to replace their tires sooner than they should have.
It pains me to admit that I haven’t been checking my customers’ new car for alignments before a few months ago, but I really had no choice for two reasons. I couldn’t afford to pay a technician the lengthy labor time required with my old alignment machine and the manufacturer would not pay for an alignment check or alignment on a new car unless the customer complained of a pull or uneven tire wear. This is common practice with most, if not all, manufacturers and I believe it’s a huge mistake. You would think that the manufacturer of the car would understand the technical fact that a car’s wheels can be out of alignment without showing tire wear or pulling. Selling a customer a new car with wheels that are misaligned and not allowing that car to be aligned under warranty is simply not right. The consequences of this can not only be very expensive for the customer, but a potential safety issue as well.
My advice to you is to demand that the dealer and manufacturer who sold you your car prove to you that your wheels are aligned properly as soon as possible after you buy the car. Make this a written condition of the purchase. Ideally all new cars should have their alignments checked just before they are delivered to the customer. Many dealers might encounter a problem with reimbursement by the manufacturer for doing this and that’s why it’s not already being done.
Monday, August 29, 2011
Monday, August 22, 2011
Don’t Be “Flipped” to a Lease
One of the most popular weapons in car dealers’ arsenals is the infamous “lease flip”. This is car dealer jargon for switching a customer who originally intended to buy a car to leasing the car.
Of course the motivation to do this is more profit for the dealer and a bigger commission to the salesman. That’s not to say that leasing a car is always more costly than buying one, but it can be if you’re not careful. And not being careful is exactly what happens when a purchase intender becomes a lessee.
Here’s how it happens. You come into the dealership to buy a car. You may have seen the dealer’s advertisement in the newspaper or TV for a particular model. More than likely you are prepared to make a down payment and/or trade in your old vehicle. You have a monthly payment in mind because almost everybody has a budget and we usually translate most purchases into whether or not we can fit them into our monthly budgets. You negotiate the best price you can to buy the car, or maybe the sale price is good enough.
Now the salesman or more often the F&I manager/business manager tells you what your monthly payment will be. Let’s say that you have a trade-in worth $15,000 and aren’t going to put any cash down. The F&I [Finance and Insurance] manager tells you your monthly payment will be $427 per month. But that’s way more than you can afford and you tell him you can’t buy the car because you can’t afford that big a payment. He asks you how much you can afford and you tell him it must be under $350 per month. Now he has you set up perfectly for the “lease flip”.
“Mrs. Smith, I think I have just the right thing for you. What would you say if I told you that you can drive that new car home today for just $349 per month?” You say, “With glee, you say we have a deal!” Guess what? You’ve just been flipped. If you had bought the car at the advertised price or negotiated a very good price, the dealer probably would have made about $1,000 profit. and the salesman would have made about a $200 commission. Not that you’ve let yourself be flipped to lease, the dealer could be making $15,000 and the salesman could be making a $3,000 commission!
I’m not exaggerating. I get calls weekly from victims of lease flips. Many of the callers are elderly and many of them are widows who never bought a car before, but had relied on their husbands. There’s no law that limits the profit that a dealer can make when he sells or leases a car. $10,000, $15,000, and even $20,000 profits are made and usually on leases. The dealers can do this by using the trade-in as a capital cost reduction on the lease but allowing less for the trade than it is actually worth. In the example above, your trade-in may be worth $15,000 but you were allowed only $5,000 to reduce the capitalized costs of the lease. Also, the dealer could have raised the price of the car you negotiated or the sale price to MSRP or even 110% of MSRP which is allowable by the leasing companies.
By manipulating the number of months of the lease and the down payment [capitalized cost reduction], a dealer can give you as low a payment as you ask for and still make an exorbitant profit. Most buyers are so focused on monthly payments that they don’t carefully analyze what they are agreeing to and signing. The shorter the number of months of a lease, the greater impact the down payment has on the monthly payment. A $5,000 down payment reduces the monthly payment on a 36 month lease by $139 per month, $208 on a 24 month lease, and $417 on 12 month lease.
Incredibly many victims of the lease flip, never thought about the fact that after the 12, 24, or 36 month term of the lease, they own nothing. After 36 months, a car with a good resale value should be worth 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 and for my blog at www.EarlStewartOnCars.com. “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?”
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 and for my blog at www.EarlStewartOnCars.com. “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?”
Monday, August 15, 2011
THE TEN COMMANDMENTS
HOW THOU SHALL TREAT THY CUSTOMER
I composed these ten “commandments” for my car dealership. They didn’t come to me in a vision or on a mountain top, but evolved over forty-three years as a car dealer. Most of them evolved over the past decade which is why I refer to myself often as a “recovering car dealer”. But just like the biblical Ten Commandments, they don’t do any good unless people know, understand, and apply them. In my dealership, all of my managers and other employees know that we must “walk the talk”.
(1) Do whatever our customer asks if she believes she’s right. It’s not important whether our customer is right or wrong, only if she honestly believes she’s right.
(2) Do what is right for the customer even if you don’t have to. Just because we’re not required by law or contract to do the right thing is no excuse.
(3) If your supervisor is not available, then you do what is the right thing for our customer. All Earl Stewart Employees are empowered to spend or do whatever is necessary to do the right thing by a customer. If in 20-20 hindsight you should err, you will not be held to blame because you acted in good faith to make our customer happy.
(4) Always answer all phone calls, emails, texts, and messages of any kind from our customers ASAP. Nothing angers a customer (or me) more than a delayed or no response from us.
(5) All Customers must be treated with courtesy and respect at all times. Just because you judge a customer to be unreasonable is no excuse not to treat that custo9mer with courtesy and respect. If you are incapable of dealing with a particular customer, involve your supervisor or me.
(6) You will always tell our customers the truth, the whole truth, and nothing but the truth. I believe in giving every Earl Stewart employee a second chance except when it comes to dishonesty.
(7) Your first loyalty is to our customer, not to Toyota. In the rare case where a dispute arises between our customer and Toyota over warranty coverage, for example, we advocate for our customer. We argue and present the facts on behalf of our customer but abide by Toyota’s decision.
(8) You must personally take ownership of our customer’s problem. This means that if you are the first person to learn of a customer’s complaint or problem, you have the responsibility to stay on top of its resolution until you personally verify that the issue has been resolved. Don’t just refer or delegate the problem to someone else even it’s outside your department.
(9) Promise our customer less than you will deliver. Always be conservative when making promises to your customers. Over estimate the time of a service or the date of arrival of the new car they ordered. Under-promise and over-deliver.
(10) Trust your customer as much as you hope he will trust you. We’ve all been burned by trusting someone who disappointed us but that’s a very small percentage. The fastest way to earn trust is to trust the person you want to trust you. Somebody has to go first. Let it be us.
I composed these ten “commandments” for my car dealership. They didn’t come to me in a vision or on a mountain top, but evolved over forty-three years as a car dealer. Most of them evolved over the past decade which is why I refer to myself often as a “recovering car dealer”. But just like the biblical Ten Commandments, they don’t do any good unless people know, understand, and apply them. In my dealership, all of my managers and other employees know that we must “walk the talk”.
(1) Do whatever our customer asks if she believes she’s right. It’s not important whether our customer is right or wrong, only if she honestly believes she’s right.
(2) Do what is right for the customer even if you don’t have to. Just because we’re not required by law or contract to do the right thing is no excuse.
(3) If your supervisor is not available, then you do what is the right thing for our customer. All Earl Stewart Employees are empowered to spend or do whatever is necessary to do the right thing by a customer. If in 20-20 hindsight you should err, you will not be held to blame because you acted in good faith to make our customer happy.
(4) Always answer all phone calls, emails, texts, and messages of any kind from our customers ASAP. Nothing angers a customer (or me) more than a delayed or no response from us.
(5) All Customers must be treated with courtesy and respect at all times. Just because you judge a customer to be unreasonable is no excuse not to treat that custo9mer with courtesy and respect. If you are incapable of dealing with a particular customer, involve your supervisor or me.
(6) You will always tell our customers the truth, the whole truth, and nothing but the truth. I believe in giving every Earl Stewart employee a second chance except when it comes to dishonesty.
(7) Your first loyalty is to our customer, not to Toyota. In the rare case where a dispute arises between our customer and Toyota over warranty coverage, for example, we advocate for our customer. We argue and present the facts on behalf of our customer but abide by Toyota’s decision.
(8) You must personally take ownership of our customer’s problem. This means that if you are the first person to learn of a customer’s complaint or problem, you have the responsibility to stay on top of its resolution until you personally verify that the issue has been resolved. Don’t just refer or delegate the problem to someone else even it’s outside your department.
(9) Promise our customer less than you will deliver. Always be conservative when making promises to your customers. Over estimate the time of a service or the date of arrival of the new car they ordered. Under-promise and over-deliver.
(10) Trust your customer as much as you hope he will trust you. We’ve all been burned by trusting someone who disappointed us but that’s a very small percentage. The fastest way to earn trust is to trust the person you want to trust you. Somebody has to go first. Let it be us.
Monday, August 08, 2011
EIGHT STEPS TO ENSURE THAT YOU ARE BUYING THE BEST CAR FOR THE BEST PRICE
(1) Consumer Reports Subscribe to Consumer Reports, go to the library and read past issues, or check out Consumer Reports online. There are other objective sources of information on cars, but this is the best. They accept no advertising from anybody and their sole goal is rigorously and objectively testing merchandise that consumers buy. You can very quickly find the best make car for the model and style you want to buy. Consumer Reports rates cars by performance, cost of operation, safety, and frequency of repair.
(2) Test Drive the car you have chosen This step requires that you visit a car dealership. Remember that this doesn’t have to be the dealership you buy it from. You obviously must see, touch, feel, and drive the car that you think you want to buy. A new car is a very personal thing and just because Consumer Reports loved it doesn’t mean that you will. Be sure that you test drive the car at all speeds in all road types that you normally drive. Drive it in the city but also on the expressway.
(3) Carefully choose the accessories you want There are some accessories that enhance the value of your car and some that don’t or may even lower it. Generally speaking you should accessorize a car comparably to its class. If you are buying a lower priced economy car, you should not load it up with leather seats and an expensive sound system. If you do, you won’t recoup much of what you spent on these accessories in its resale value. On the other hand, if you are buying a luxury car, don’t skimp on items people look for in luxury cars like a navigation system or a moon roof.
(4) Carefully choose your car’s color Color is more important in determining a car’s resale value than accessories. If you want to maximize the trade-in value of this car, choose a popular color. White, silver, black, and beige are the 4 most popular colors. Sports cars and convertibles are exceptions and red is often the most popular color. The difference in trade-in value between the right color and the wrong color can be several thousands of dollars.
(5) Arrange your financing Now that you know exactly what kind of a car you are going to buy, you can check with local banks and credit unions to find the best interest rate. Don’t commit until you have chosen the dealer you will buy from. Manufacturers sometimes offer very low special rates and dealers can sometimes offer a lower rate than your bank or credit union.
(6) Shop your trade-in If you are trading in a car, take it to 3 dealerships for the same make and ask them how much they will pay you for your car. A Chevy dealer will pay more for a used Chevy and a Toyota dealer will pay more for a used Toyota. If you live near a CarMax store, get a price from them too. They have a reputation of paying more money for trade-ins than most dealers. Don’t commit to the highest bid, but give the dealer you buy from a chance to beat that price.
(7) Shop for the best price on the Internet Go to the manufacturer’s Web site. The addresses are all very intuitive. Toyota is www.toyota.com and Chevrolet is www.Chevrolet.com. You can type in your zip code and get the Web sites of all of your local dealers. Depending on how far you are willing to drive to pick up your new car, request price quotes from as many dealers as you like, but be sure you get at least 3 quotes. When you have chosen the lowest price, verify that this price is “out-the-door” with only tax and tag added.
(8) Offer your favorite, or nearest, dealer the right to meet this price. If you have been dealing with one dealership for a long time and have had good experiences with their service department, you should give them a chance to meet your lowest Internet price. Of course, you can take your new car to them for service even if you don’t buy it from them.
You will notice that there were no steps listed above which suggested that you look in your local newspaper’s auto classified section, watch car dealer’s TV ads, or believe their direct mail “too good to be true” offers. When you fall for this, the dealer is in control. When you follow my eight steps, you are in total control.
(2) Test Drive the car you have chosen This step requires that you visit a car dealership. Remember that this doesn’t have to be the dealership you buy it from. You obviously must see, touch, feel, and drive the car that you think you want to buy. A new car is a very personal thing and just because Consumer Reports loved it doesn’t mean that you will. Be sure that you test drive the car at all speeds in all road types that you normally drive. Drive it in the city but also on the expressway.
(3) Carefully choose the accessories you want There are some accessories that enhance the value of your car and some that don’t or may even lower it. Generally speaking you should accessorize a car comparably to its class. If you are buying a lower priced economy car, you should not load it up with leather seats and an expensive sound system. If you do, you won’t recoup much of what you spent on these accessories in its resale value. On the other hand, if you are buying a luxury car, don’t skimp on items people look for in luxury cars like a navigation system or a moon roof.
(4) Carefully choose your car’s color Color is more important in determining a car’s resale value than accessories. If you want to maximize the trade-in value of this car, choose a popular color. White, silver, black, and beige are the 4 most popular colors. Sports cars and convertibles are exceptions and red is often the most popular color. The difference in trade-in value between the right color and the wrong color can be several thousands of dollars.
(5) Arrange your financing Now that you know exactly what kind of a car you are going to buy, you can check with local banks and credit unions to find the best interest rate. Don’t commit until you have chosen the dealer you will buy from. Manufacturers sometimes offer very low special rates and dealers can sometimes offer a lower rate than your bank or credit union.
(6) Shop your trade-in If you are trading in a car, take it to 3 dealerships for the same make and ask them how much they will pay you for your car. A Chevy dealer will pay more for a used Chevy and a Toyota dealer will pay more for a used Toyota. If you live near a CarMax store, get a price from them too. They have a reputation of paying more money for trade-ins than most dealers. Don’t commit to the highest bid, but give the dealer you buy from a chance to beat that price.
(7) Shop for the best price on the Internet Go to the manufacturer’s Web site. The addresses are all very intuitive. Toyota is www.toyota.com and Chevrolet is www.Chevrolet.com. You can type in your zip code and get the Web sites of all of your local dealers. Depending on how far you are willing to drive to pick up your new car, request price quotes from as many dealers as you like, but be sure you get at least 3 quotes. When you have chosen the lowest price, verify that this price is “out-the-door” with only tax and tag added.
(8) Offer your favorite, or nearest, dealer the right to meet this price. If you have been dealing with one dealership for a long time and have had good experiences with their service department, you should give them a chance to meet your lowest Internet price. Of course, you can take your new car to them for service even if you don’t buy it from them.
You will notice that there were no steps listed above which suggested that you look in your local newspaper’s auto classified section, watch car dealer’s TV ads, or believe their direct mail “too good to be true” offers. When you fall for this, the dealer is in control. When you follow my eight steps, you are in total control.
Monday, August 01, 2011
Car Dealers Exploiting the Elderly
I wrote this column over four years ago, but it’s more important and timely today. Not a week passes without at least two or three elderly people contacting me about being victimized by a South Florida car dealership. These are usually pre Baby Boomers in their seventies, eighties and nineties. I’m happy to say that I have a high rate of success if I’m contacted soon after the purchase, within a few days. The first thing I do is contact the dealership’s owner. With publically owned dealerships like AutoNation (Maroone), Penske Automotive, and Sonic, and Group One I have to contact the real General Manager. I emphasize “real” because sales managers will often try to foist themselves off as the General Manager, but they are only in charge of the car sales departments and are really “general sales managers”. In the rare occasions I strike out, I have no alternative but to contact the Florida Department of Motor Vehicle, DMV which is the best governmental agency to keep a car dealer on the straight and narrow.
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 just click on The Upside of Aging or 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.
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 just click on The Upside of Aging or 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.
Monday, July 25, 2011
Out-of-Align Wheels: The Silent Killer
Estimates on the number of cars on the road right now that need an alignment range from as low as 25% to as high as 75%! Even if you have the best tires and vehicle that money can buy, all it takes is a little pothole or curb to cost you a new set of tires. This can cost you anywhere from $300 to over $1,000. If you live in an area with unpaved roads or lots of roads in need of repair and being repaired (Like South Florida) you’re especially vulnerable to potholes and other road obstacles that can knock your front and rear wheels out of alignment. One of my “favorite” ways to misalign my wheels is curbs…I can’t seem to avoid them when I’m parking, especially backing into a parallel parking place. Most people know that if their car is pulling to the left or right, they need an alignment. Most also know that if they see wear on the edges of their tires, they may have an alignment problem (It could also be under inflated tires). But what most people don’t know is that your wheels can be badly out of alignment with no symptoms whatsoever. It’s like high blood pressure and that’s why I used the phrase “silent killer” in the title of this article. Some people can tell their blood pressure is high from headaches or dizziness, but most feel no difference. Most people learn that they have hypertension only when their doctor measures their blood pressure. Unfortunately many never find out until it’s too late.
Last year I had to replace a nearly new set of tires which had only about 5,000 miles on them (it cost me over $1,000) because all four of my wheels were out of alignment. There were no symptoms whatsoever. My car didn’t pull, my steering wheel was perfectly straight, and I saw no abnormal tire wear. I brought my car in for its routine 5,000 mile service and when my technician put it up on the lift to rotate and balance my wheels and tires, he found that the inside of all four of my tires was severely worn. When you have offsetting misalignment on opposing wheels, there is no pull and when the wear is only on the inside of the tire, it’s invisible until the car is up on a lift. I had my car aligned only a few months ago but I knocked it out of alignment again without even realizing it.
Aligning the four wheels of your car, like everything else, is a lot more complicated than it used to be. Cars shocks’ and suspensions are more complex today. When most cars had rear wheel drive, aligning was simple. Now we have mostly front wheel drive and even some all-wheel drive cars on the road. We no longer do just “front end” alignments we have to align all four wheels. In the “old days” service departments routinely checked the alignment for all cars that drove in. There was a simple machine built into the service drive that registered the measurements when you drove over the track. Some service department still use these dinosaurs but they are not naccurate on today’s cars. Nowadays, many alignment machines are so complex that it takes almost as long to measure your alignment as to adjust it. For this reason many service departments will charge you the same to measure your alignment as they do to actually align it even if the measurements find it is perfectly in adjustment. There are newer, very expensive machines that will quickly measure alignments but most service departments don’t have these.
There are three basic measurements that must be exactly right for your tires to be in align, castor, camber, and toe-in. This website links to a video that gives a very clear, easy to understand explanation of these measurements, www.TireKiller.com. The video was produced by the manufacturer, Hunter, who is the largest and best manufacturer of alignment machines in the world.
When you buy a new or used car, you should insist that the dealer check the alignment. A new car can be knocked out of alignment in many ways. Transporting the car to the dealer from the manufacturer and driving it on or off a ship, truck, or train can do it. A technician can do it during a pre-delivery road test or a car salesman or prospective customer might during a test drive. Remember that a demonstration drive in a new or used car won’t necessarily reveal any symptoms like a pull or abnormal tire wear. Many manufacturers will allow one alignment under warranty for a short time and mileage period (like 1 year or 20,000 miles), but some will only permit the dealer do check your alignment if you complain about a pull or abnormal tire wear. Manufacturers consider alignment a maintenance item that is your responsibility. This is why it’s important to be sure your new car is aligned when your car is still within the alignment warranty time and mileage.
When the service department measures your alignment, be sure that they use the latest equipment. A modern alignment machine is computerized, measures all four wheels, requires that your car be elevated on the lift, and the technician must be fully trained. And they are very expensive, about $60,000 for a state-of-the-art machine. Many independent service departments and some dealers can’t afford these. You should ask for a copy of the computer printout showing the specific measurements before and after your alignment. You should have your alignment checked every time you bring your car in for service, approximately every 6 months or 5,000 miles. If you hit a curb, pothole or other obstacle in the road or notice abnormal wear on the edge of your tires, bring it in for an alignment check immediately.
Monday, July 18, 2011
The Internet Price is the Lowest Price for a New Car
Ten years from now, I believe that at least 75% of all new cars will be purchased over the Internet. Right now it is less than 20%. The reason is simply that that Internet price is usually your lowest price and more and more car buyers are figuring that out every day. Dealers must give their best price to a prospect inquiring over the Internet because that dealer probably will have only that one chance to sell the car. If they try “the old negotiating game” the Internet prospect will simply choose the lowest price from several other quotes he gets. When my friends ask me to advise them on how to get the best price on a new car, I always tell them to use the Internet. If they ask me for the best price on my product, Toyota, I give them my Internet price.
I am not suggesting that you don’t visit your local dealer to see, touch, smell, and drive the new vehicles you are considering. This is very important. You can’t make a valid, final decision on which new vehicle is best for you by solely reading data and looking at pictures on the Internet, Consumer Reports, or any other source. Research of that nature is important, but you should finalize your decision with visits to the dealers to actually experience the vehicle.
Once you have made your final decision on the year, make, model, color, and accessories, you are ready to sit down at your PC and choose the dealer from whom you will buy this specific vehicle. If you are not handy with a PC, ask a friend or relative who is. First, go to the manufacturer’s Web site like www.ford.com, www.toyota.com, www.chevrolet.com, etc. You will be able to type in your zip code to find all of the dealers of that make within a given radius, usually about 40 miles, giving you 3 or 4 dealers. To expand the radius, choose another zip code further from yours. The dealers within your radius will show their Web site addresses. Click on their Web site and ask for a quote on the specific car you have selected. Most Web sites have a page for what is called a “quick quote”. You type in the year, make, model, color, and accessories. It will also ask you for your name, telephone number, address, if you have a trade (check “no”), whether you are ready to buy now (yes), and other questions. All you really need to fill out is year, make, model, and accessories and your email address. If you prefer not to be contacted by phone, don’t fill in the phone number. If they require it before you can submit your request, type in any 10 digits so that the Web page will allow you to. If you can’t find a “quick quote” page, just email your request to their Internet sales department.
Depending on your PC and typing skills this whole process should take less than half an hour. Think of all the time, gasoline, shoe leather, and especially aggravation you are saving compared to visiting as many dealerships in person. The time it will take to get back quotes varies from dealership to dealership. You may get some back within a few minutes, some will take a few hours, and some may take a day or two. Believe it or not, some might not respond at all. There are even a few dealers who will not quote a price on the Internet, but try to lure you into their store with false promises. Ignore them. I recommend that you get a minimum of 3 valid price quotes on your specific vehicle. It’s so easy to get quotes, why not get a half dozen or so? You are not necessarily even limited by driving distances. If the best price is from a dealer who is too far away, show that quote to a dealer nearer you and ask him if he will match it.
There are some things that you must be careful about. Be sure that that the price you get is an “out the door” price. That is a price which excludes only federal, state, and local fees and taxes which are usually just for tax and tag. Most dealers in Florida tack on a fee or fees of their own which are variously referred to as “dealer fee”, “delivery fee”, “documentary fee”, etc. This is illegal in many states, but not in Florida. These fees vary from around $500 to $900. Be sure that this fee which is just profit to the dealer is included in your “out the door” price. Also be absolutely certain that you are comparing “apples and apples”. When you select your low bid, double check that this dealer is quoting you on the same year, make, model, and accessories as the other dealers. A good double-check is to compare the MSRP. The MSRP, manufacturer’s suggested retail price, will be identical on identically equipped cars of the same model and year. Also, be sure that the car you have the price on will be there when you come in. Give them deposit on your credit card to hold the car for you.
Internet car buyers are the wave of the future. The retail car business is going through rapid changes and the old fashioned, price-haggling way of buying cars is slowly but surely becoming obsolete. If you haven’t already, now is the time to join the ranks of the smart, sophisticated car buyers.
I am not suggesting that you don’t visit your local dealer to see, touch, smell, and drive the new vehicles you are considering. This is very important. You can’t make a valid, final decision on which new vehicle is best for you by solely reading data and looking at pictures on the Internet, Consumer Reports, or any other source. Research of that nature is important, but you should finalize your decision with visits to the dealers to actually experience the vehicle.
Once you have made your final decision on the year, make, model, color, and accessories, you are ready to sit down at your PC and choose the dealer from whom you will buy this specific vehicle. If you are not handy with a PC, ask a friend or relative who is. First, go to the manufacturer’s Web site like www.ford.com, www.toyota.com, www.chevrolet.com, etc. You will be able to type in your zip code to find all of the dealers of that make within a given radius, usually about 40 miles, giving you 3 or 4 dealers. To expand the radius, choose another zip code further from yours. The dealers within your radius will show their Web site addresses. Click on their Web site and ask for a quote on the specific car you have selected. Most Web sites have a page for what is called a “quick quote”. You type in the year, make, model, color, and accessories. It will also ask you for your name, telephone number, address, if you have a trade (check “no”), whether you are ready to buy now (yes), and other questions. All you really need to fill out is year, make, model, and accessories and your email address. If you prefer not to be contacted by phone, don’t fill in the phone number. If they require it before you can submit your request, type in any 10 digits so that the Web page will allow you to. If you can’t find a “quick quote” page, just email your request to their Internet sales department.
Depending on your PC and typing skills this whole process should take less than half an hour. Think of all the time, gasoline, shoe leather, and especially aggravation you are saving compared to visiting as many dealerships in person. The time it will take to get back quotes varies from dealership to dealership. You may get some back within a few minutes, some will take a few hours, and some may take a day or two. Believe it or not, some might not respond at all. There are even a few dealers who will not quote a price on the Internet, but try to lure you into their store with false promises. Ignore them. I recommend that you get a minimum of 3 valid price quotes on your specific vehicle. It’s so easy to get quotes, why not get a half dozen or so? You are not necessarily even limited by driving distances. If the best price is from a dealer who is too far away, show that quote to a dealer nearer you and ask him if he will match it.
There are some things that you must be careful about. Be sure that that the price you get is an “out the door” price. That is a price which excludes only federal, state, and local fees and taxes which are usually just for tax and tag. Most dealers in Florida tack on a fee or fees of their own which are variously referred to as “dealer fee”, “delivery fee”, “documentary fee”, etc. This is illegal in many states, but not in Florida. These fees vary from around $500 to $900. Be sure that this fee which is just profit to the dealer is included in your “out the door” price. Also be absolutely certain that you are comparing “apples and apples”. When you select your low bid, double check that this dealer is quoting you on the same year, make, model, and accessories as the other dealers. A good double-check is to compare the MSRP. The MSRP, manufacturer’s suggested retail price, will be identical on identically equipped cars of the same model and year. Also, be sure that the car you have the price on will be there when you come in. Give them deposit on your credit card to hold the car for you.
Internet car buyers are the wave of the future. The retail car business is going through rapid changes and the old fashioned, price-haggling way of buying cars is slowly but surely becoming obsolete. If you haven’t already, now is the time to join the ranks of the smart, sophisticated car buyers.
Friday, July 08, 2011
Nobody Knows What Your Used Car Is Worth
All of the wholesale books, except NADA, are based on prices of cars sold at auction. However, you must understand that those prices don’t give you an accurate price that you should expect for your trade. A car sells at an auction for the price offered by the highest bidder if the seller chooses to accept that bid. I often don’t sell my used cars to the highest bidder that week because I might get a much higher price the next week. Lots of things affect the level of prices at a car auction…the weather, holidays, bribing the auctioneer and bribing the buyers. On a cold, rainy day when few dealers show up to buy or sell cars, prices are lower as well as shortly before and after holidays. Sometimes it happens that a buyer “greases the palm“ of the auctioneer so that he “doesn’t hear” (fast gavel) the higher bid from another dealer who bids higher than the dealer who has let the auctioneer know the price at which he wants to buy the car. Sometimes the sellers pay the buyers cash under the table to bid an unrealistically high price for their car. A car doesn’t even have to go through the auction block for the owner to believe it was “sold at the auction”. Buyers and sellers can make a deal before it goes “through the block”…very cozy, only one bidder. Why would they do that? Often the buyers and sellers are employed by the dealer who actually owns the car. The used car manager or wholesale buyer employed by the dealer might pay $2,000 too much for a car if he can earn $500 cash in his pocket from the seller. His boss, the dealer, is never the wiser. Let me hasten to add that the Manheim auctions are very careful to police these kinds of shenanigans and never encourage them. However, as in every large organization (Manheim is the auto auction in the world), there are a few rotten apples.
OK, then if the books are wrong and the auctions are wrong, then surely the car dealer must know the value of my trade-in….WRONG AGAIN. I have a little “test” on used car appraisal knowledge that I administer to my sales managers from time to time. By the way, my managers are among the most knowledgeable and competent anywhere. This isn’t just my opinion but that of all of their peers in this market. My test goes like this. Without prior notice I randomly select a car from among the 100 or so that come into my service department each day. I ask each of my 8 mangers individually to appraise this car for what they think the current wholesale market value is. They keep their appraisal secret from the others and write it down on a piece of paper and hand it to me. I’ve been doing this for 30 or more years and I’ve never had a variance in appraisals of less than $3,000. Some have been greater than $10,000! The reason I do this is to remind all of my mangers of exactly what I’m explaining in this article….Nobody knows the exact value of a used car. That’s important to my managers because under appraising a used car can cost us a sale. Over appraising a used car can cost us a wholesale loss at the auto auction. Therefore we always check and recheck our appraisals and go so far as to call other dealers and even put cars on Ebay. Another good reason not to accept only one dealer’s appraisal is that dealers will often knowingly undervalue your trade-ink, especially if you’ve negotiated a very low price for your new car. The dealer vernacular for his is “stealing the trade”.
After you determine the highest bidder, if it’s not the dealer from whom you’re buying, give him the right of last refusal. If he can match the price from his competitor, you save the sales tax on the price of your trade.
Monday, June 27, 2011
I’m Sorry, but Your Car Is out of Warranty
Most everyone has heard these words, “I’m sorry but you’ll have to pay for this repair because your car is out of the manufacturer’s warranty”. What should you do say or do? Obviously, we’re not talking about cars that are “way out” of warranty. A ten year old vehicle with 200,000 miles that has a 3 year or a 36,000 warranty will not be repaired free by your dealer or manufacturer. However, for cars those that are “close” to being within the warranty time and mileage there is a good chance that you can persuade the dealer/manufacturer to pay at least a portion of the cost of repair. This article is designed to tell you how best to do accomplish this.
The easiest way to have your car repaired at no cost is if you initially brought the vehicle in for a problem while it was still under warranty, the dealer “attempted” to fix it, but did not. When the problem resurfaces, as long as you have in writing and on the record that this happened, you should have no problem getting your car repaired at no charge.
To the lesser degree that your car is out of warranty, the greater is your chance of having the factory authorize a “goodwill” repair. Goodwill is what they call all repairs made at no charge when the car is out of warranty. If you car is only 5 miles out of warranty, this should be very easy to have approved. The further out of warranty, the more difficult this is and the less likely that you will have 100% of the cost paid by the manufacturer. For example, a car that’s 3,000 miles out of a 36,000 mile warranty may be granted just 50% of the cost of the repair under goodwill.
It’s important to understand that the dealer often has no say in whether an out of warranty car can be repaired under goodwill. A good dealer should support your request for goodwill because he gets paid by the manufacturer for doing the repair and this make his customer happy. A bad dealer might not support your goodwill request because he would like to charge you more for the repair than the warranty will allow. A dealer can charge you anything he wants for parts and labor but the factory allows him only his approved warranty labor rate, markup on parts, and time to complete the repair. If a dealer is reluctant to support your request for goodwill, be sure to take your request all the way to top. Take it to the service manager, then to the general manager, and then to the owner. If the dealer won’t support you, try taking it to another dealer who will. It’s very important that you have the support of the dealer when you take your request to the manufacturer. Without it, it’s highly unlikely you will get help.
Some dealers are granted the authority to make goodwill adjustments directly as well as making decisions as to whether a repair should be covered under warranty. This can be good and bad. As I said earlier, a dealer can have an ulterior motive for not want to repair you car under warranty…he can make more money if he makes you pay. A dealer who is authorized to make warranty/goodwill decisions is so authorized because he has kept his warranty and goodwill costs low. This is bad for the customer if the way he has kept them low is by denying legitimate claims to make himself look good in the eyes of the factory. To some service managers, it’s more important to be popular with the factory than with the dealer he works for. You want a service manager who works for a good dealer and whose loyalty is with that dealer who will be for his customers.
Manufacturers and dealers will favor those customers who have bought cars from them and had their cars serviced with them. The dealer/manufacturer has your entire sales and service history on their computer. If you have bought 2 or more cars of this make and had them serviced regularly by the dealers of that make, they will “stretch” on the warranty coverage and goodwill.
When asking for repairs for your car that is out of warranty, be courteous, factual, and as brief as possible. Never threaten to take your business away, sue, or call the media. Never raise your voice or curse. Dealership and factory employees are just like you…they tend to respond more positively to someone who is courteous and rational. You should put your request in writing, email or regular mail. If things are moving too slowly, it’s a good idea to call the factory 800 customer assistance number. Your request will be referred back to the dealer, but it’s good to be on record with the factory.
When encountering difficulties, go on your PC and Google your repair problem. Google will direct you to chat rooms and other sources of information about people who have the same problem. You will be amazed at the number of people who have had the same problem. Sometimes even your dealer may not be aware that this repair is common among owners of the year, make and model. Knowing this gives you a strong psychological advantage.
When you Google your repair problem, you may find out that the manufacturer has issued a notice to their dealers about this problem. This kind of notice is referred to as TSB or Technical Service Bulletin. Sometime s TSB will authorize the dealer to repair the car under warranty but only if the customer asks! You may even learn that this repair is covered under a recall campaign, but the dealer should have now that when he checked your VIN in his computer.
The bottom line is don’t just take “no” for an answer. Go through the steps that I’ve covered above and you should have a pretty good chance of getting at least some of your repair paid for by the manufacturer.
The easiest way to have your car repaired at no cost is if you initially brought the vehicle in for a problem while it was still under warranty, the dealer “attempted” to fix it, but did not. When the problem resurfaces, as long as you have in writing and on the record that this happened, you should have no problem getting your car repaired at no charge.
To the lesser degree that your car is out of warranty, the greater is your chance of having the factory authorize a “goodwill” repair. Goodwill is what they call all repairs made at no charge when the car is out of warranty. If you car is only 5 miles out of warranty, this should be very easy to have approved. The further out of warranty, the more difficult this is and the less likely that you will have 100% of the cost paid by the manufacturer. For example, a car that’s 3,000 miles out of a 36,000 mile warranty may be granted just 50% of the cost of the repair under goodwill.
It’s important to understand that the dealer often has no say in whether an out of warranty car can be repaired under goodwill. A good dealer should support your request for goodwill because he gets paid by the manufacturer for doing the repair and this make his customer happy. A bad dealer might not support your goodwill request because he would like to charge you more for the repair than the warranty will allow. A dealer can charge you anything he wants for parts and labor but the factory allows him only his approved warranty labor rate, markup on parts, and time to complete the repair. If a dealer is reluctant to support your request for goodwill, be sure to take your request all the way to top. Take it to the service manager, then to the general manager, and then to the owner. If the dealer won’t support you, try taking it to another dealer who will. It’s very important that you have the support of the dealer when you take your request to the manufacturer. Without it, it’s highly unlikely you will get help.
Some dealers are granted the authority to make goodwill adjustments directly as well as making decisions as to whether a repair should be covered under warranty. This can be good and bad. As I said earlier, a dealer can have an ulterior motive for not want to repair you car under warranty…he can make more money if he makes you pay. A dealer who is authorized to make warranty/goodwill decisions is so authorized because he has kept his warranty and goodwill costs low. This is bad for the customer if the way he has kept them low is by denying legitimate claims to make himself look good in the eyes of the factory. To some service managers, it’s more important to be popular with the factory than with the dealer he works for. You want a service manager who works for a good dealer and whose loyalty is with that dealer who will be for his customers.
Manufacturers and dealers will favor those customers who have bought cars from them and had their cars serviced with them. The dealer/manufacturer has your entire sales and service history on their computer. If you have bought 2 or more cars of this make and had them serviced regularly by the dealers of that make, they will “stretch” on the warranty coverage and goodwill.
When asking for repairs for your car that is out of warranty, be courteous, factual, and as brief as possible. Never threaten to take your business away, sue, or call the media. Never raise your voice or curse. Dealership and factory employees are just like you…they tend to respond more positively to someone who is courteous and rational. You should put your request in writing, email or regular mail. If things are moving too slowly, it’s a good idea to call the factory 800 customer assistance number. Your request will be referred back to the dealer, but it’s good to be on record with the factory.
When encountering difficulties, go on your PC and Google your repair problem. Google will direct you to chat rooms and other sources of information about people who have the same problem. You will be amazed at the number of people who have had the same problem. Sometimes even your dealer may not be aware that this repair is common among owners of the year, make and model. Knowing this gives you a strong psychological advantage.
When you Google your repair problem, you may find out that the manufacturer has issued a notice to their dealers about this problem. This kind of notice is referred to as TSB or Technical Service Bulletin. Sometime s TSB will authorize the dealer to repair the car under warranty but only if the customer asks! You may even learn that this repair is covered under a recall campaign, but the dealer should have now that when he checked your VIN in his computer.
The bottom line is don’t just take “no” for an answer. Go through the steps that I’ve covered above and you should have a pretty good chance of getting at least some of your repair paid for by the manufacturer.
Monday, June 20, 2011
I Prefer my Customers’ Complaints to Compliments
The July 2011 edition of Consumer Reports has a great article entitled, “What’s wrong with customer service?” Consumer Reports conducted a survey to find “the customer-service problems that infuriate people most.” The number one complaint is “Can’t get a human on phone”. One of the pieces of advice in the article was to contact the CEO’s office of the company that is giving you the problem. They say that “They want their problem solved before it reaches them. But when top executives hear from an unhappy customer, they’ll often be sure that person receives a response”.
Of course getting the CEO of any company on the phone is easier said than done. I agree that top executives “want their problems solved before it reaches them”, but that sword cuts both ways. Often employees “protect” their top executives and, of course, protect themselves at the same time by not allowing customers to climb into the ivory tower.
It ‘s unfortunately true that the owners and top executives of businesses often care more about customer satisfaction than many of those who report to them. This is true because owners and top executives’ careers and fortunes are more directly related to their company’s overall success. They are also more likely to see the big picture of how important their company’s brand image, largely dependent on customer satisfaction, is critical to its success. Last but not least executives have far more power to remedy a customer complaint than their subordinates.
The problem is that most owners and executives exist in a “Disney World” created for them by their subordinates in which all of their customers love their company. They rarely, if ever, hear from or even see any of their customers. After all, why take the time when everything is humming along marvelously? What they do see and hear are reports from their subordinates telling them how happy their customers are. They read these reports on their computers and it’s reinforced verbally in management meetings. The only thing they hear from their customers is what their underlings what them to see and hear. This policy is easy to understand. Nobody likes to hear complaints or be shouted at but we all love to hear compliments. The subordinate is well aware that his boss looks at a customer complaint as a failure by that subordinate. What better way to make himself look better for his next evaluation than to allow his boss to hear no complaints from angry customers?
There is only one way that a boss can find out what’s really going on and that’s by communicating directly with his customers…not reading reports or speaking to just those customers his employees allow to pass through their filter. An owner or CEO has to make himself totally accessible to his customers. Every customer must be able to contact him for whatever reason. Now this is too frightening for most top executives to even contemplate. I have to confess that it even frightened me when I first tried it. Needless to say, I was highly advised not to do such a thing by virtually everyone who worked for me. But looking back on that move several years ago, it was the best business decision I ever made. It not only caused my customers’ satisfaction to soar, but it raised my company’s sales and profits to record levels. It has made my car dealership the largest in Palm Beach County, Florida, 7th in the Southeast USA and 31st in America.
It all started with one red phone that I placed in the center of my dealership’s showroom. Next to the red phone (inspired by the Kennedy-Khrushchev red phone of cold war fame), is a sign with my picture on it that says “CUSTOMER HOTLINE to Earl Stewart. The buck stops here. Have we not exceeded your expectations? Then please let me know. Simply pick up the receiver and wait for me to answer.” This worked so well that over the years I added three more red phones. They’re located next to the service cashier, in the service drive, and in the body shop. When anybody picks up the receiver, they are automatically connected to my cell phone, no dialing required. I carry my red cell phone with me seven days a week and turn my phone off only when I go to bed at night. I have a special ring for hotline calls so that I can prioritize answering them. This includes while I’m at a restaurant eating or in the shower (yes I will get out of the shower to answer a hotline call. I’ll even answer my hotline when I’m in my boat fishing.
Probably the most common question I get is “How many calls do you get every day?” I get surprisingly few when you consider the size of my company. I have tens of thousands of customers but I average about only a half dozen calls each day. Many of my hotline calls are “I just wanted to see if you would really answer” and I also get compliments on my hotline. I believe that the reason I get so few calls is that the red phone has become a deterrent to making my customers unhappy or failing to resolve a problem when it occurs. When one of my employees sees a customer walking toward one of the red phones, he will do everything possible to make that customer happy.
I take direct communication with my customers to an even higher level. I give all of my customers my business card with my home and personal cell phone numbers. My wife, Nancy, got very nervous when we first added the home number, but we were both pleasantly surprised how respectful and trusting our customers are. We get very few calls at home, but when we do, we are glad the customer called because it’s usually very important. I also expand direct customer communication to all of my employees. No manager in our company has a secretary or assistant to take his calls…all calls go directly to him. Our telephone receptionist never asks, “May I say who is calling?” or “May I ask the nature of your call?” If that employee is not in, the call is automatically put through to his cell phone. But wait, there’s more! We have a real live person answering our phone after hours, 24/7, and if there’s an emergency, the person in my company that can handle it is contacted…even in the middle of the night. If it’s not an emergency, the message is given to the appropriate employees via email.
I’ve learned more about my business from my customers in the last ten year than I learned in the 40+ years that I’ve been a car dealer. When my customers call me with a complaint they are often apologetic because they are so unused to speaking with the owner of a business. I always say, “Please don’t apologize. I should be thanking you for taking your time to call me. You’re allowing me to correct a process and/or coach an employee in my company to ensure that this same thing doesn’t happen to another one of my customers. The only complaint that I fear is the one that I don’t hear because I’m helpless to correct the process or employee who was
Of course getting the CEO of any company on the phone is easier said than done. I agree that top executives “want their problems solved before it reaches them”, but that sword cuts both ways. Often employees “protect” their top executives and, of course, protect themselves at the same time by not allowing customers to climb into the ivory tower.
It ‘s unfortunately true that the owners and top executives of businesses often care more about customer satisfaction than many of those who report to them. This is true because owners and top executives’ careers and fortunes are more directly related to their company’s overall success. They are also more likely to see the big picture of how important their company’s brand image, largely dependent on customer satisfaction, is critical to its success. Last but not least executives have far more power to remedy a customer complaint than their subordinates.
The problem is that most owners and executives exist in a “Disney World” created for them by their subordinates in which all of their customers love their company. They rarely, if ever, hear from or even see any of their customers. After all, why take the time when everything is humming along marvelously? What they do see and hear are reports from their subordinates telling them how happy their customers are. They read these reports on their computers and it’s reinforced verbally in management meetings. The only thing they hear from their customers is what their underlings what them to see and hear. This policy is easy to understand. Nobody likes to hear complaints or be shouted at but we all love to hear compliments. The subordinate is well aware that his boss looks at a customer complaint as a failure by that subordinate. What better way to make himself look better for his next evaluation than to allow his boss to hear no complaints from angry customers?
There is only one way that a boss can find out what’s really going on and that’s by communicating directly with his customers…not reading reports or speaking to just those customers his employees allow to pass through their filter. An owner or CEO has to make himself totally accessible to his customers. Every customer must be able to contact him for whatever reason. Now this is too frightening for most top executives to even contemplate. I have to confess that it even frightened me when I first tried it. Needless to say, I was highly advised not to do such a thing by virtually everyone who worked for me. But looking back on that move several years ago, it was the best business decision I ever made. It not only caused my customers’ satisfaction to soar, but it raised my company’s sales and profits to record levels. It has made my car dealership the largest in Palm Beach County, Florida, 7th in the Southeast USA and 31st in America.
It all started with one red phone that I placed in the center of my dealership’s showroom. Next to the red phone (inspired by the Kennedy-Khrushchev red phone of cold war fame), is a sign with my picture on it that says “CUSTOMER HOTLINE to Earl Stewart. The buck stops here. Have we not exceeded your expectations? Then please let me know. Simply pick up the receiver and wait for me to answer.” This worked so well that over the years I added three more red phones. They’re located next to the service cashier, in the service drive, and in the body shop. When anybody picks up the receiver, they are automatically connected to my cell phone, no dialing required. I carry my red cell phone with me seven days a week and turn my phone off only when I go to bed at night. I have a special ring for hotline calls so that I can prioritize answering them. This includes while I’m at a restaurant eating or in the shower (yes I will get out of the shower to answer a hotline call. I’ll even answer my hotline when I’m in my boat fishing.
Probably the most common question I get is “How many calls do you get every day?” I get surprisingly few when you consider the size of my company. I have tens of thousands of customers but I average about only a half dozen calls each day. Many of my hotline calls are “I just wanted to see if you would really answer” and I also get compliments on my hotline. I believe that the reason I get so few calls is that the red phone has become a deterrent to making my customers unhappy or failing to resolve a problem when it occurs. When one of my employees sees a customer walking toward one of the red phones, he will do everything possible to make that customer happy.
I take direct communication with my customers to an even higher level. I give all of my customers my business card with my home and personal cell phone numbers. My wife, Nancy, got very nervous when we first added the home number, but we were both pleasantly surprised how respectful and trusting our customers are. We get very few calls at home, but when we do, we are glad the customer called because it’s usually very important. I also expand direct customer communication to all of my employees. No manager in our company has a secretary or assistant to take his calls…all calls go directly to him. Our telephone receptionist never asks, “May I say who is calling?” or “May I ask the nature of your call?” If that employee is not in, the call is automatically put through to his cell phone. But wait, there’s more! We have a real live person answering our phone after hours, 24/7, and if there’s an emergency, the person in my company that can handle it is contacted…even in the middle of the night. If it’s not an emergency, the message is given to the appropriate employees via email.
I’ve learned more about my business from my customers in the last ten year than I learned in the 40+ years that I’ve been a car dealer. When my customers call me with a complaint they are often apologetic because they are so unused to speaking with the owner of a business. I always say, “Please don’t apologize. I should be thanking you for taking your time to call me. You’re allowing me to correct a process and/or coach an employee in my company to ensure that this same thing doesn’t happen to another one of my customers. The only complaint that I fear is the one that I don’t hear because I’m helpless to correct the process or employee who was
Monday, June 13, 2011
Always Get It in Writing
Many readers of this column call me for advice and to tell me horror stories about their dealing with unethical car dealers. Of course it would be much better had these readers called me before they bought the car.
I have written over 200 columns for Hometown News and given advice on a variety of subjects which should make your car buying, or servicing, experience safer and more pleasant. There is one piece of advice which, if strictly followed, would eliminate over 90% of the problems car buyers have with car dealers. That advice is “always insist that all promises and commitments made by the car sales person or sales manager are put in writing”. The written commitments should be signed by the sales person/manager and you and you should retain a copy.
These are just some examples of promises made by sales people and sales managers that were not kept: (1) Sign the contract, drive the car home, and if you change your mind within three days you can bring the car back and we will refund all of your money. [When the customer brought the car back, the salesman claimed he never said any such thing] (2) After signing a 36 month lease, the salesman assured this customer that, if she got tired of this car in less than 36 months, she could just bring it back anytime. [Of course the leasing company didn’t agree with the salesman on this]. A customer was promised that she would be able to get free loaner cars anytime she brought her car in for service. [The service department didn’t know anything about this. They don’t offer free loaners]. The business manager, also known as the F&I manager, told the customer that the warranty/extended service contract he was selling her covered 100% of anything that went wrong with her car. [When she came in for a brake job, the service manager showed her the fine print in the warranty contract that said maintenance items were not covered]. The salesman told the customer not to trade his car in on the new car because he owed way more on the car than it was worth. He told him to just let the bank take her old car back and because she was making her payments on time on her new car it wouldn’t harm her credit rating. [I don’t think this requires any explanation]. Customers are promised that they can bring their car back after they buy it and have CD players, leather, running boards, and floor mats, and other accessories installed as part of the deal. When they come back, none of the managers knows about this and the salesman can’t be found or doesn’t “remember”. I could list dozens more of these anecdotes.
You have very little chance when it’s your word against the salesman’s or sales manager’s. You have even less of a chance if it’s two against one. Do not be timid about asking that everything you are promised is put into writing. If the salesman objects to this or hesitates, you have to ask yourself why? Another reason for having all promises committed to writing is that the salesman or sales manager may not work at that dealership anymore when you come back to collect on his promise. He may have actually been sincere, but now he’s gone. Will his replacement believe you?
It’s a good idea to carry a note pad with you when you are negotiating to buy a car. I wrote a previous column entitled “Never Go Car Shopping Alone”. When you have an ally with you, she can take notes while you are negotiating. Also, if you do forget to commit a promise to writing, your credibility is enhanced when it’s two against one instead of “he said/she said”. When you are signing the final documents, you have your complete set of notes detailing promises, assurances, and commitments by the salesman. Then, all you have to do is have these signed by both parties and be sure that you get a copy.
I have written over 200 columns for Hometown News and given advice on a variety of subjects which should make your car buying, or servicing, experience safer and more pleasant. There is one piece of advice which, if strictly followed, would eliminate over 90% of the problems car buyers have with car dealers. That advice is “always insist that all promises and commitments made by the car sales person or sales manager are put in writing”. The written commitments should be signed by the sales person/manager and you and you should retain a copy.
These are just some examples of promises made by sales people and sales managers that were not kept: (1) Sign the contract, drive the car home, and if you change your mind within three days you can bring the car back and we will refund all of your money. [When the customer brought the car back, the salesman claimed he never said any such thing] (2) After signing a 36 month lease, the salesman assured this customer that, if she got tired of this car in less than 36 months, she could just bring it back anytime. [Of course the leasing company didn’t agree with the salesman on this]. A customer was promised that she would be able to get free loaner cars anytime she brought her car in for service. [The service department didn’t know anything about this. They don’t offer free loaners]. The business manager, also known as the F&I manager, told the customer that the warranty/extended service contract he was selling her covered 100% of anything that went wrong with her car. [When she came in for a brake job, the service manager showed her the fine print in the warranty contract that said maintenance items were not covered]. The salesman told the customer not to trade his car in on the new car because he owed way more on the car than it was worth. He told him to just let the bank take her old car back and because she was making her payments on time on her new car it wouldn’t harm her credit rating. [I don’t think this requires any explanation]. Customers are promised that they can bring their car back after they buy it and have CD players, leather, running boards, and floor mats, and other accessories installed as part of the deal. When they come back, none of the managers knows about this and the salesman can’t be found or doesn’t “remember”. I could list dozens more of these anecdotes.
You have very little chance when it’s your word against the salesman’s or sales manager’s. You have even less of a chance if it’s two against one. Do not be timid about asking that everything you are promised is put into writing. If the salesman objects to this or hesitates, you have to ask yourself why? Another reason for having all promises committed to writing is that the salesman or sales manager may not work at that dealership anymore when you come back to collect on his promise. He may have actually been sincere, but now he’s gone. Will his replacement believe you?
It’s a good idea to carry a note pad with you when you are negotiating to buy a car. I wrote a previous column entitled “Never Go Car Shopping Alone”. When you have an ally with you, she can take notes while you are negotiating. Also, if you do forget to commit a promise to writing, your credibility is enhanced when it’s two against one instead of “he said/she said”. When you are signing the final documents, you have your complete set of notes detailing promises, assurances, and commitments by the salesman. Then, all you have to do is have these signed by both parties and be sure that you get a copy.
Monday, May 30, 2011
Should I Buy An Extended Warranty?
“Should I buy an extended warranty?” on my new or used car is one of the most common questions I get asked. Extended warranties are also referred to as extended service contracts. This article is how I answer this frequent question.
An extended warranty is simply a warranty that kicks in after the manufacturer’s warranty expires. But, extended warranties are never as comprehensive as the manufacturers’. A manufacturer’s warranty on a new car is about as close to a “bumper to bumper” warranty as you can get. However, even a l manufacturer’s warranty is not truly bumper to bumper because the tires are never included. The tire warranty is offered by the tire manufacturer A extended warranty is far from a complete bumper to bumper warranty but many car salesmen and finance managers will say their extended warranty is bumper to bumper…this is not true.
When the dealer (or anyone else) tries to sell you an extended warranty they will focus on all of the things that the warranty covers, but typically avoid telling you those items the warranty doesn’t cover. My first piece of advice is to determine exactly what is not covered by this warranty. Today’s automobile contains more computer hardware and software than it took to put a man on the moon. Computer modules are very expensive to replace and are usually not covered by extended warranties. Navigation systems are very expensive and usually not covered. Sometimes some or all of the air-conditioning system is not covered and this is another very expensive item to repair and replace. The more expensive a part of your car is to fix or replace, the less likely it is to be covered by the extended warranty.
All extended warranties cover the power train which consists of the engine lower block, drive shaft, and rear axle. It essentially covers the parts lubricated by your engine oil. These components rarely ever fail and, if they do, it’s caused by lack of maintenance or abuse, in which case the warranty won’t cover the repairs anyway. You’ll see a lot of dealers advertising a“free lifetime warranty” with every car they sell. These are power train warranties and they are free because they are virtually worthless.
If you decide to buy an extended warranty, be sure you know the company that stands behind the warranty. Check out the company’s financial stability. It’s not uncommon for warranty companies to go broke and you’re stuck with a worthless warranty. Many manufacturers offer extended warranties and these are generally safer bets than independent companies. If the dealer is selling his own warranty, be sure that he is financially strong and that you don’t have to bring your car back to the dealer anytime you have a repair covered by the warranty. You should have the right to have your car repaired by any service department in North America.
If you ever receive a solicitation to buy an extended warranty in the mail, by email, or by telephone ignore it. Ninety-nine percent of these are scams. The warranties are overpriced and cover virtually nothing that might need repairs, usually just a power train warranty. The companies offering them are likely to be gone when you try to make a claim. These companies (many seem to be based in Las Vegas) buy mailing and email lists from the various states’ departments of motor vehicles. They know your name, address, when you bought your car and the make and model from this data. They know when your car will be out of the manufacturer’s warranty by how long you’ve owned it. A lot of these solicitations appear to be coming from the manufacturer, but manufacturers never solicit their owners for extended warranties. The envelope and letters are made to look very official and threatening giving you only a few days to act before it’s too late.
I still haven’t answered your question about whether or not you should buy an extended warranty. You know to be very careful about which warranty and who you buy it from. I look at an extended warranty just like I look at an insurance policy. In fact, we’re lucky in Florida because automotive extended warranties are regulated by the state insurance commission. The rates are approved and registered with the state. In most states, the dealer can charge anything he can get for an extended warranty. In Florida you can also cancel an extended warranty you haven’t used anytime in the first 60 days. My philosophy is to buy insurance on something that I either couldn’t afford to fix or replace or if it would put a financial hardship on me if I did. I carry fire and flood insurance on my home based of this philosophy. I don’t buy an extended warranty on my iPhone because I can afford to buy another one of mine broke. I also recommend you consider buying an extended warranty if it will bring you “piece of mind”. This varies based on the personality of each individual. Whatever you decide, just remember that most insurance companies make lots of money. This is because they always take in a lot more money in premiums than they pay out in claims. When you buy an insurance policy, you’re betting against the house and in the long run you will always lose. But if you got peace of mind because you protected yourself against a loss that would have severely tapped your financial recourses, it’s worth it.
An extended warranty is simply a warranty that kicks in after the manufacturer’s warranty expires. But, extended warranties are never as comprehensive as the manufacturers’. A manufacturer’s warranty on a new car is about as close to a “bumper to bumper” warranty as you can get. However, even a l manufacturer’s warranty is not truly bumper to bumper because the tires are never included. The tire warranty is offered by the tire manufacturer A extended warranty is far from a complete bumper to bumper warranty but many car salesmen and finance managers will say their extended warranty is bumper to bumper…this is not true.
When the dealer (or anyone else) tries to sell you an extended warranty they will focus on all of the things that the warranty covers, but typically avoid telling you those items the warranty doesn’t cover. My first piece of advice is to determine exactly what is not covered by this warranty. Today’s automobile contains more computer hardware and software than it took to put a man on the moon. Computer modules are very expensive to replace and are usually not covered by extended warranties. Navigation systems are very expensive and usually not covered. Sometimes some or all of the air-conditioning system is not covered and this is another very expensive item to repair and replace. The more expensive a part of your car is to fix or replace, the less likely it is to be covered by the extended warranty.
All extended warranties cover the power train which consists of the engine lower block, drive shaft, and rear axle. It essentially covers the parts lubricated by your engine oil. These components rarely ever fail and, if they do, it’s caused by lack of maintenance or abuse, in which case the warranty won’t cover the repairs anyway. You’ll see a lot of dealers advertising a“free lifetime warranty” with every car they sell. These are power train warranties and they are free because they are virtually worthless.
If you decide to buy an extended warranty, be sure you know the company that stands behind the warranty. Check out the company’s financial stability. It’s not uncommon for warranty companies to go broke and you’re stuck with a worthless warranty. Many manufacturers offer extended warranties and these are generally safer bets than independent companies. If the dealer is selling his own warranty, be sure that he is financially strong and that you don’t have to bring your car back to the dealer anytime you have a repair covered by the warranty. You should have the right to have your car repaired by any service department in North America.
If you ever receive a solicitation to buy an extended warranty in the mail, by email, or by telephone ignore it. Ninety-nine percent of these are scams. The warranties are overpriced and cover virtually nothing that might need repairs, usually just a power train warranty. The companies offering them are likely to be gone when you try to make a claim. These companies (many seem to be based in Las Vegas) buy mailing and email lists from the various states’ departments of motor vehicles. They know your name, address, when you bought your car and the make and model from this data. They know when your car will be out of the manufacturer’s warranty by how long you’ve owned it. A lot of these solicitations appear to be coming from the manufacturer, but manufacturers never solicit their owners for extended warranties. The envelope and letters are made to look very official and threatening giving you only a few days to act before it’s too late.
I still haven’t answered your question about whether or not you should buy an extended warranty. You know to be very careful about which warranty and who you buy it from. I look at an extended warranty just like I look at an insurance policy. In fact, we’re lucky in Florida because automotive extended warranties are regulated by the state insurance commission. The rates are approved and registered with the state. In most states, the dealer can charge anything he can get for an extended warranty. In Florida you can also cancel an extended warranty you haven’t used anytime in the first 60 days. My philosophy is to buy insurance on something that I either couldn’t afford to fix or replace or if it would put a financial hardship on me if I did. I carry fire and flood insurance on my home based of this philosophy. I don’t buy an extended warranty on my iPhone because I can afford to buy another one of mine broke. I also recommend you consider buying an extended warranty if it will bring you “piece of mind”. This varies based on the personality of each individual. Whatever you decide, just remember that most insurance companies make lots of money. This is because they always take in a lot more money in premiums than they pay out in claims. When you buy an insurance policy, you’re betting against the house and in the long run you will always lose. But if you got peace of mind because you protected yourself against a loss that would have severely tapped your financial recourses, it’s worth it.
Monday, May 23, 2011
Don’t be “Spotted", "Puppy-Dogged", or "Yo-Yo'ed"
One of the most common unethical (and some say illegal) sales practices of car dealers is the infamous “spot delivery”. If you’ve bought a car in Florida (and most states), you probably have been spotted, puppy dogged, and yo yo’ed. Upwards of 60% of all car sales in Florida are spotted.
A “spot” is short for “spot delivery” which is literally translated into delivering your new or used car purchase immediately, “on the spot”. The spot occurs as soon as you’ve picked out your car and signed all of the papers. The car dealer has a lot of reasons to do this. The biggest reason is that so you can’t change your mind about buying that car. Legally, a contract is more binding when the seller and buyer have exchanged “consideration”. Your consideration to the dealer was paying him for the car which includes down payments, a trade-in, and a contract promising to make monthly payments. The dealer’s consideration to you is the car which becomes consummated when you drive it home.
Another part of why you won’t change your mind is that you will take the car home, park it in your drive way, and tell your neighbors, friends, and relatives that you just bought a new car. You’ll probably also brag about the fact that you have good credit, got a great price, a low interest rate, and a low down payment. Everybody will envy you because you can afford that new car, were so smart to negotiate such a good price, and had such good credit that you got the lowest interest rate and down payment. When you fall into this trap, you’ve just been “puppy dogged”. Have you ever bought a puppy for your kids and brought it home from the pet store? Your kids play with the new puppy and take it over to their friends’ houses to brag and tell them what great parents they have. What are the odds that you’re going to snatch that puppy out of your child’s arms and take it back to the pet store…even if it poops on your carpet?
As if all that isn’t enough, the dealer has another reason to spot deliver your car. If you traded in your old car, you can’t compare the price you paid for your new car because you no longer have your trade-in. Dealers have a vernacular for this too. It’s called “de-horsing”. In fact, a dealer will often de-horse a prospect before she picks out a new car and/or signs the papers. He will give her a demo to drive home just so that he can keep her from comparing the trade-in allowance on her old car.
In fact, the delivery consideration and the puppy dog are such strong tools to keep you from bringing the car back, the dealer needs an “ace in the hole” just in case he wants you to bring the car back. This could be because he wants or needs you to pay more for the car, pay a higher interest rate or down payment, or have a cosigner on the installment sales contract. The dealer’s ace in the hole is another contract known as the “yo yo” or rescission agreement. This piece of paper which you might not even remember signing says that you have to bring your new car back if the dealer cannot find a lender who will approve your credit, down payment, interest rate, and/or amount financed. A yo yo goes out and back and of course rescission means the contract is canceled. The yo yo agreement says that if you refuse to bring the car back, the dealer can repossess the car and charge you a high fee for its usage until you do bring it back, like 50 cents a mile and $50 a day plus his costs of recovery. If the dealer did not have this agreement signed, you could keep the car and make your monthly payments to the dealer at terms and conditions you originally signed. Dealers won’t do this because they don’t get all of their money up front as they do when they sell the finance contract to the bank. They also don’t like it because they assume the credit risk if the buyer defaults.
An interesting question to ponder is whether the dealer knew in advance that he could not find a lender who would finance your car with such a low down payment, such a low interest rate, for that little number of months. Why would he do such a terrible thing? Well he may think that you will fall in love with that car so deeply that you will agree to pay him more profit in terms of higher interest and down payment. He might know that you won’t want to suffer the embarrassment of telling your family, friends, and neighbors that your credit isn’t as good as you told them it was and you really aren’t so smart that you negotiated such a low price and down payment.
There’s even a good argument to be made for the fact that the spot delivery is illegal and perhaps even criminal because it’s a violation of the Federal Truth in Lending Act (TILA). Without getting too technical, the signing of the yo-yo agreement violates TILA because it means that the dealer is not the actual creditor. The finance contract you and he signed is almost meaningless and used only to take you out of the market. The only meaning is that you may have the option of signing a new contract but this one might be for more money down, a higher interest rate and/or longer terms. If you’re interested in the legal specifics of why the spot delivery and yo yo agreement are illegal and possibly criminal, click on Link to Ingalsbe Memo. This legal memo was written by an attorney, Raymond Ingalsbe, who is an expert on car dealers’ illegal practices. He has practiced law in Palm Beach County for over 40 years and sues only car dealers. He even helps train other lawyers how to sue car dealers. In fact, he sued me several time before I cleaned up may act and entered my phase as a “recovering car dealer”.
The bottom line is that you should not allow yourself to be spot delivered. Whether it’s illegal or not, it’s certainly not a smart move for the buyer. You wouldn’t move into a new home before the bank approved your mortgage would you? When you drive that new or used car home, be sure that your credit has been approved by the lender for all terms and conditions such as interest rate, number of months, down payment, and who signed the contract (is a consigner required). If that means waiting a few days, that’s good too because it allows you time to think over a very important decision. Buying a new car is the second largest purchase most people make in their lives and should never be rushed.
A “spot” is short for “spot delivery” which is literally translated into delivering your new or used car purchase immediately, “on the spot”. The spot occurs as soon as you’ve picked out your car and signed all of the papers. The car dealer has a lot of reasons to do this. The biggest reason is that so you can’t change your mind about buying that car. Legally, a contract is more binding when the seller and buyer have exchanged “consideration”. Your consideration to the dealer was paying him for the car which includes down payments, a trade-in, and a contract promising to make monthly payments. The dealer’s consideration to you is the car which becomes consummated when you drive it home.
Another part of why you won’t change your mind is that you will take the car home, park it in your drive way, and tell your neighbors, friends, and relatives that you just bought a new car. You’ll probably also brag about the fact that you have good credit, got a great price, a low interest rate, and a low down payment. Everybody will envy you because you can afford that new car, were so smart to negotiate such a good price, and had such good credit that you got the lowest interest rate and down payment. When you fall into this trap, you’ve just been “puppy dogged”. Have you ever bought a puppy for your kids and brought it home from the pet store? Your kids play with the new puppy and take it over to their friends’ houses to brag and tell them what great parents they have. What are the odds that you’re going to snatch that puppy out of your child’s arms and take it back to the pet store…even if it poops on your carpet?
As if all that isn’t enough, the dealer has another reason to spot deliver your car. If you traded in your old car, you can’t compare the price you paid for your new car because you no longer have your trade-in. Dealers have a vernacular for this too. It’s called “de-horsing”. In fact, a dealer will often de-horse a prospect before she picks out a new car and/or signs the papers. He will give her a demo to drive home just so that he can keep her from comparing the trade-in allowance on her old car.
In fact, the delivery consideration and the puppy dog are such strong tools to keep you from bringing the car back, the dealer needs an “ace in the hole” just in case he wants you to bring the car back. This could be because he wants or needs you to pay more for the car, pay a higher interest rate or down payment, or have a cosigner on the installment sales contract. The dealer’s ace in the hole is another contract known as the “yo yo” or rescission agreement. This piece of paper which you might not even remember signing says that you have to bring your new car back if the dealer cannot find a lender who will approve your credit, down payment, interest rate, and/or amount financed. A yo yo goes out and back and of course rescission means the contract is canceled. The yo yo agreement says that if you refuse to bring the car back, the dealer can repossess the car and charge you a high fee for its usage until you do bring it back, like 50 cents a mile and $50 a day plus his costs of recovery. If the dealer did not have this agreement signed, you could keep the car and make your monthly payments to the dealer at terms and conditions you originally signed. Dealers won’t do this because they don’t get all of their money up front as they do when they sell the finance contract to the bank. They also don’t like it because they assume the credit risk if the buyer defaults.
An interesting question to ponder is whether the dealer knew in advance that he could not find a lender who would finance your car with such a low down payment, such a low interest rate, for that little number of months. Why would he do such a terrible thing? Well he may think that you will fall in love with that car so deeply that you will agree to pay him more profit in terms of higher interest and down payment. He might know that you won’t want to suffer the embarrassment of telling your family, friends, and neighbors that your credit isn’t as good as you told them it was and you really aren’t so smart that you negotiated such a low price and down payment.
There’s even a good argument to be made for the fact that the spot delivery is illegal and perhaps even criminal because it’s a violation of the Federal Truth in Lending Act (TILA). Without getting too technical, the signing of the yo-yo agreement violates TILA because it means that the dealer is not the actual creditor. The finance contract you and he signed is almost meaningless and used only to take you out of the market. The only meaning is that you may have the option of signing a new contract but this one might be for more money down, a higher interest rate and/or longer terms. If you’re interested in the legal specifics of why the spot delivery and yo yo agreement are illegal and possibly criminal, click on Link to Ingalsbe Memo. This legal memo was written by an attorney, Raymond Ingalsbe, who is an expert on car dealers’ illegal practices. He has practiced law in Palm Beach County for over 40 years and sues only car dealers. He even helps train other lawyers how to sue car dealers. In fact, he sued me several time before I cleaned up may act and entered my phase as a “recovering car dealer”.
The bottom line is that you should not allow yourself to be spot delivered. Whether it’s illegal or not, it’s certainly not a smart move for the buyer. You wouldn’t move into a new home before the bank approved your mortgage would you? When you drive that new or used car home, be sure that your credit has been approved by the lender for all terms and conditions such as interest rate, number of months, down payment, and who signed the contract (is a consigner required). If that means waiting a few days, that’s good too because it allows you time to think over a very important decision. Buying a new car is the second largest purchase most people make in their lives and should never be rushed.
Monday, May 16, 2011
Ten Tips on Buying the Right Used Car
I sell new and used cars, but if I was not a car dealer and I needed to buy a car, I would buy a used one instead of a new. This is because a used car is a better value. You get more for your money due to avoiding the initial rapid depreciation of a new car. I use the term “used car” in this article because I despise mumbo jumbo euphemisms like “pre-owned”. A used car is a used car is a used car.
(1) Never buy a used car without a CarFax report. The dealer should provide you with one at no charge because any dealer worth his salt runs a CarFax report on every used car he trades in or buys to protect him. Simply don’t buy a used car from anybody that does not give you this report. CarFax reports now have, not only the information about collision damage, floods damage, previous odometer reading, and title issues, (all obtained from insurance records) but also the mechanical repair history (obtained from dealer records).
(2) Have your car inspected by an independent mechanic. Insist on having the used car you are thinking about buying inspected by your mechanic, not affiliated with the dealer. This should cost you no more than $150 and will be money well spent. The mechanic should look, not only for mechanical issues, but body and flood damage. If the mechanic finds some minor things that need fixing, insist that the dealer take care of these and include it in the price he already quoted you. If the dealer won’t allow this, don’t buy from him.
(3) Consult Consumer Reports, www.KBB.com, and www.Edmunds.com. These sources have complete information on the safety, reliability, maintenance cost, and even what a fair price is to pay for any used car. Consumer Reports lists the “Best and Worst Used Cars”. This is great guide and don’t ever buy a used car that’s on the “worst list”.
(4) A Certified Used Car is only as good as the dealer who sold it to you. All manufacturers sponsor “certified” used cars of their make. The main reason for this is that they like to sell the dealer warranties that the dealer then marks up and sells to you. A secondary reason the manufacturers do this is to enhance the resale value of their make car. This helps them sell more new cars because of the higher trade in value and the higher residual values on cars they lease enhance their profits. You can buy a warranty for used car even if it’s not certified, but in a certified used car it’s usually included in the price (which makes the price higher). One good thing about manufacturers’ certified programs is that sometimes the manufacturer will offer you lower financing rates. Certified used cars require that the dealer inspect all critical parts of the car and fill out a checklist that is anywhere from 75 to 150 items. That’s all well and good but how carefully is this inspection being done and by whom? You should ask to see a copy of the check list and ask about the qualification of the mechanic who performed and signed the inspection. All too often, the dealer assigns the lowest priced mechanic he has to perform these checks. It’s questionable whether he even performs all of them. A red flag is if you notice a straight line drawn through all of the check boxes instead of them being checked off individually.
(5) Money Back Guarantee. A lot of dealers advertise that if you change your mind about the car you bought you can bring it back and exchange it for another. This is a worthless guarantee. You can be sure that they will pick the car and the price of the car they will exchange it for and will end up making an additional profit. CarMax has a reasonable guarantee which refunds all of your money within five days with restriction that the car is returned in the same condition that it was sold. CarMax is a good place to buy a used car.
(6) Contact the previous owner of the car. The previous owner of the used car should be happy to talk to you. Insist that the seller provide you with his telephone number. If the dealer sold the car to that owner as a new or used car and serviced it, ask if you can see the service file.
(7) Test drive the car just as you will be driving it later. Simply taking the car for a spin around the block with the salesman is not enough. I recommend that you drive the car in the manner and places that you will be driving it when you own it. Take it out on the expressway if you do a lot of higher speed driving. You should drive the car for at least a few hours at all the same speeds, conditions, and on the same roads that you normally experience. Park the car, back it up, and take a friend for ride to get their opinion. You don’t want to have any surprises when you bring it home for keeps.
(8) The Internet is the best place to shop for your used car. Most dealers today display all of their used car inventory right on their website along with the prices. These prices are pretty close to the real price you will pay. The dealer knows that he won’t get many responses if he overprices his used cars. Shopping on the Internet give you ample opportunity to compare the same or similar used cars with lots of different dealers. As always, call the dealer before you come in to confirm the Internet price is an out-the-door price without a dealer fee, doc fee, dealer prep, etc.
(9) Commit all of the dealer’s promises to writing. Take notes of everything the salesman and sales manager promises you such as “we’ll fix that CD player if you’ll bring your car in next week” or “if you ever have a problem with the car we’ll give you a free loaner when you come in for service”. Make those notes part of the buyer’s order and be sure that a manager signs it. It’s also a good idea to always shop with a friend. In a “He said she said” situation, two people trump one.
(10) Get at least three bids on financing. Know what your lowest interest rate is for the year, make, and model car you’re buying. Get quotes from your bank or credit union and at least one other bank in addition to the rate your dealer offers you. If you do use your dealer’s financing, be sure you know and understand everything that’s included in your finance contract. You will be offered products like warranties, GAP insurance, maintenance, road hazard insurance, etc. It’s illegal for a dealer to tie your acceptance for financing or interest rate to your buying a warranty or any other product.
(1) Never buy a used car without a CarFax report. The dealer should provide you with one at no charge because any dealer worth his salt runs a CarFax report on every used car he trades in or buys to protect him. Simply don’t buy a used car from anybody that does not give you this report. CarFax reports now have, not only the information about collision damage, floods damage, previous odometer reading, and title issues, (all obtained from insurance records) but also the mechanical repair history (obtained from dealer records).
(2) Have your car inspected by an independent mechanic. Insist on having the used car you are thinking about buying inspected by your mechanic, not affiliated with the dealer. This should cost you no more than $150 and will be money well spent. The mechanic should look, not only for mechanical issues, but body and flood damage. If the mechanic finds some minor things that need fixing, insist that the dealer take care of these and include it in the price he already quoted you. If the dealer won’t allow this, don’t buy from him.
(3) Consult Consumer Reports, www.KBB.com, and www.Edmunds.com. These sources have complete information on the safety, reliability, maintenance cost, and even what a fair price is to pay for any used car. Consumer Reports lists the “Best and Worst Used Cars”. This is great guide and don’t ever buy a used car that’s on the “worst list”.
(4) A Certified Used Car is only as good as the dealer who sold it to you. All manufacturers sponsor “certified” used cars of their make. The main reason for this is that they like to sell the dealer warranties that the dealer then marks up and sells to you. A secondary reason the manufacturers do this is to enhance the resale value of their make car. This helps them sell more new cars because of the higher trade in value and the higher residual values on cars they lease enhance their profits. You can buy a warranty for used car even if it’s not certified, but in a certified used car it’s usually included in the price (which makes the price higher). One good thing about manufacturers’ certified programs is that sometimes the manufacturer will offer you lower financing rates. Certified used cars require that the dealer inspect all critical parts of the car and fill out a checklist that is anywhere from 75 to 150 items. That’s all well and good but how carefully is this inspection being done and by whom? You should ask to see a copy of the check list and ask about the qualification of the mechanic who performed and signed the inspection. All too often, the dealer assigns the lowest priced mechanic he has to perform these checks. It’s questionable whether he even performs all of them. A red flag is if you notice a straight line drawn through all of the check boxes instead of them being checked off individually.
(5) Money Back Guarantee. A lot of dealers advertise that if you change your mind about the car you bought you can bring it back and exchange it for another. This is a worthless guarantee. You can be sure that they will pick the car and the price of the car they will exchange it for and will end up making an additional profit. CarMax has a reasonable guarantee which refunds all of your money within five days with restriction that the car is returned in the same condition that it was sold. CarMax is a good place to buy a used car.
(6) Contact the previous owner of the car. The previous owner of the used car should be happy to talk to you. Insist that the seller provide you with his telephone number. If the dealer sold the car to that owner as a new or used car and serviced it, ask if you can see the service file.
(7) Test drive the car just as you will be driving it later. Simply taking the car for a spin around the block with the salesman is not enough. I recommend that you drive the car in the manner and places that you will be driving it when you own it. Take it out on the expressway if you do a lot of higher speed driving. You should drive the car for at least a few hours at all the same speeds, conditions, and on the same roads that you normally experience. Park the car, back it up, and take a friend for ride to get their opinion. You don’t want to have any surprises when you bring it home for keeps.
(8) The Internet is the best place to shop for your used car. Most dealers today display all of their used car inventory right on their website along with the prices. These prices are pretty close to the real price you will pay. The dealer knows that he won’t get many responses if he overprices his used cars. Shopping on the Internet give you ample opportunity to compare the same or similar used cars with lots of different dealers. As always, call the dealer before you come in to confirm the Internet price is an out-the-door price without a dealer fee, doc fee, dealer prep, etc.
(9) Commit all of the dealer’s promises to writing. Take notes of everything the salesman and sales manager promises you such as “we’ll fix that CD player if you’ll bring your car in next week” or “if you ever have a problem with the car we’ll give you a free loaner when you come in for service”. Make those notes part of the buyer’s order and be sure that a manager signs it. It’s also a good idea to always shop with a friend. In a “He said she said” situation, two people trump one.
(10) Get at least three bids on financing. Know what your lowest interest rate is for the year, make, and model car you’re buying. Get quotes from your bank or credit union and at least one other bank in addition to the rate your dealer offers you. If you do use your dealer’s financing, be sure you know and understand everything that’s included in your finance contract. You will be offered products like warranties, GAP insurance, maintenance, road hazard insurance, etc. It’s illegal for a dealer to tie your acceptance for financing or interest rate to your buying a warranty or any other product.
Monday, May 09, 2011
A Topsy Turvy Car Market
Every now and then something comes along and disrupts the normal ebb and flow of the markets. It happened back in 2008 to the world financial markets. This was brought on by a lot of manmade factors like unrestricted extensions of credit and lack of enforcement of regulations on Wall Street and Banks. In the last quarter of 2009, the famous “Cash for Clunkers” program disrupted car markets, new and used, and this was also manmade program by our government. It artificially stimulated new car sales for a short period and also had the effect of raising the prices of used cars.
Now we have both manmade and God made events disrupting the car markets. Political unrest in the Middle East has driven up the price of oil along with increased consumer demand as we emerge from the recession. But we also have an “act of God” event which was the catastrophic earthquake-tsunami that devastated Japan last month. Not only has production of cars built in Japan been disrupted, but the lack of parts manufactured in Japan has interfered with the production of cars all over the world, including the USA. We can expect a severe shortage of economy cars until the end of this year.
This couldn’t have happened at a worse time for the American car buyer because she was just getting back on her feet after three years of the greatest recession since the Great Depression. There is large pent up demand from consumers who have delayed buying that new or used car in 2008, 2009, and 2010. When car buyers delayed their purchases, there were fewer used cars traded in. You put high demand together with a low supply and every economist will tell you that spells soaring prices.
The good news is that prices are soaring only on fuel efficient cars, not gas guzzling trucks, vans, and SUV’s. In fact, prices on those are actually declining. Some more good news is that used car values have never been higher. If you’re driving a fuel efficient car now, it has actually appreciated in value since the beginning of this year. For example a 2008 Ford Fusion, rose $1,800 to $11,375 between January and May. Incredibly, the average value of a hybrid car such as a four-door Toyota Prius jumped $3,775 to $17,040 in those four months.
What does all of this mean to you? First, it means that if you’re thinking of trading in an economy car, you have something that the car dealer wants very much to add to his used car inventory. He will allow you a lot more money for it today then he would a few months ago. But don’t just settle for one dealer’s opinion on the price of your trade. Get at least three bids. Pit one used car manager against the other. If you’re driving a Honda Civic, visit at least two other Honda dealers (A Honda dealer will pay more for a used Honda than another brand) besides the one from whom you’ve decided to buy your new Honda. If there’s a CarMax used car outlet in your area, get a bid on your used Honda Civic from them too. When you’re getting these competitive bids, tell the used car managers that you are not buying a new or used car, but just want to sell your old one. Do not rely on the “book value” of your used car. When the market moves this fast on used cars, the books are way behind the market.
If you’re not in the market for a car but you own an economy car that you can get by without, you should consider selling it now at the peak of the used car market. The largest wholesale seller of used cars in the world, the Manheim Auto auction has an index (like a stock index) and it’s at an all time high since they began the index in 1995. Selling your used car now would be like selling your stock on October 9, 2007 when the Dow was at 14,164. I can’t promise you that used car prices won’t go higher for a few more weeks, but I can promise you that they won’t go much higher and that they will come down significantly from here. You can’t time the exact high or low of any market. There’s a saying on Wall Street…”Pigs get fat but hogs get slaughtered”.
We’ve talked about buying and selling used cars, but what about buying a new one? I’ve always preached that you should be careful in buying a new vehicle and it’s even more important now than ever before. You are in the driver’s seat in selling or trading your used car, but the dealer is in the driver’s seat in selling you the new one. If you don’t have to buy a new car in the next few months, don’t. New car prices will be coming down toward the end of end of this year. Manufacturers are reducing and removing incentives on new cars now but the y will be back. Dealers are holding out for more profit now on economy cars, but they won’t be later this year.
If you have to buy a new car, get at least three competitive bids on the new car as well as your trade-in and financing. Watch out for “addendum stickers”. Dealers are marking up the MSRP of new cars by thousands of dollars. Be sure that the discount you’re offered is off the MSRP and not off the “dealer list” which is MSRP plus another profit markup and over priced dealer installed accessories.
Your best price on new or used car is the Internet price. You can get this price and shop as many dealers as you want without ever having to leave your home or office. Consumer Reports, USAA, AAA, Capital One OverStock.com, Bank of America, and American Express have car buying services operated by company named Zag. They pit dealers against one another for competitive bids and give you access to the lowest price on a specific car in your market.
Now we have both manmade and God made events disrupting the car markets. Political unrest in the Middle East has driven up the price of oil along with increased consumer demand as we emerge from the recession. But we also have an “act of God” event which was the catastrophic earthquake-tsunami that devastated Japan last month. Not only has production of cars built in Japan been disrupted, but the lack of parts manufactured in Japan has interfered with the production of cars all over the world, including the USA. We can expect a severe shortage of economy cars until the end of this year.
This couldn’t have happened at a worse time for the American car buyer because she was just getting back on her feet after three years of the greatest recession since the Great Depression. There is large pent up demand from consumers who have delayed buying that new or used car in 2008, 2009, and 2010. When car buyers delayed their purchases, there were fewer used cars traded in. You put high demand together with a low supply and every economist will tell you that spells soaring prices.
The good news is that prices are soaring only on fuel efficient cars, not gas guzzling trucks, vans, and SUV’s. In fact, prices on those are actually declining. Some more good news is that used car values have never been higher. If you’re driving a fuel efficient car now, it has actually appreciated in value since the beginning of this year. For example a 2008 Ford Fusion, rose $1,800 to $11,375 between January and May. Incredibly, the average value of a hybrid car such as a four-door Toyota Prius jumped $3,775 to $17,040 in those four months.
What does all of this mean to you? First, it means that if you’re thinking of trading in an economy car, you have something that the car dealer wants very much to add to his used car inventory. He will allow you a lot more money for it today then he would a few months ago. But don’t just settle for one dealer’s opinion on the price of your trade. Get at least three bids. Pit one used car manager against the other. If you’re driving a Honda Civic, visit at least two other Honda dealers (A Honda dealer will pay more for a used Honda than another brand) besides the one from whom you’ve decided to buy your new Honda. If there’s a CarMax used car outlet in your area, get a bid on your used Honda Civic from them too. When you’re getting these competitive bids, tell the used car managers that you are not buying a new or used car, but just want to sell your old one. Do not rely on the “book value” of your used car. When the market moves this fast on used cars, the books are way behind the market.
If you’re not in the market for a car but you own an economy car that you can get by without, you should consider selling it now at the peak of the used car market. The largest wholesale seller of used cars in the world, the Manheim Auto auction has an index (like a stock index) and it’s at an all time high since they began the index in 1995. Selling your used car now would be like selling your stock on October 9, 2007 when the Dow was at 14,164. I can’t promise you that used car prices won’t go higher for a few more weeks, but I can promise you that they won’t go much higher and that they will come down significantly from here. You can’t time the exact high or low of any market. There’s a saying on Wall Street…”Pigs get fat but hogs get slaughtered”.
We’ve talked about buying and selling used cars, but what about buying a new one? I’ve always preached that you should be careful in buying a new vehicle and it’s even more important now than ever before. You are in the driver’s seat in selling or trading your used car, but the dealer is in the driver’s seat in selling you the new one. If you don’t have to buy a new car in the next few months, don’t. New car prices will be coming down toward the end of end of this year. Manufacturers are reducing and removing incentives on new cars now but the y will be back. Dealers are holding out for more profit now on economy cars, but they won’t be later this year.
If you have to buy a new car, get at least three competitive bids on the new car as well as your trade-in and financing. Watch out for “addendum stickers”. Dealers are marking up the MSRP of new cars by thousands of dollars. Be sure that the discount you’re offered is off the MSRP and not off the “dealer list” which is MSRP plus another profit markup and over priced dealer installed accessories.
Your best price on new or used car is the Internet price. You can get this price and shop as many dealers as you want without ever having to leave your home or office. Consumer Reports, USAA, AAA, Capital One OverStock.com, Bank of America, and American Express have car buying services operated by company named Zag. They pit dealers against one another for competitive bids and give you access to the lowest price on a specific car in your market.
Monday, May 02, 2011
Dealer or Independent: Who Should Service My Car?
Should I, or must I, take my car back to the dealer for service? I can answer the 2nd half of that question easily. No, you do not have to take your car to the dealership’s service department for maintenance or repairs unless the repairs are covered under your car’s warranty. Be advised that the manufacturer has the right to take into consideration how well you maintained your car in accordance with his recommendations spelled out in your owner’s manual when approving warranty repairs. If you do choose an independent service facility, be sure that they perform the maintenance as recommended in your owner’s manual. Also, be sure that you keep a record of that maintenance.
Whether you should is more complicated. The fact that most new car buyers (about 75%) don’t bring their cars back to the dealer for service is a huge problem for all manufacturers and car dealers. It’s a problem for manufacturers because they can lose the parts sales which include oil filters and oil. The profit margin on auto parts is much higher than on the car itself. If you added up the price of all the parts in your car (twenty to thirty thousand), the total would be many times the price you paid for your car. It’s also a problem for dealers. The retail markup on an auto part is at least 40% and your car’s markup is less than half of that. The average dealer makes more money selling parts than he does cars and he also makes more money selling the labor to service and repair cars than he does selling cars. In most dealerships, the new car department loses money or makes relatively little. The parts and service departments are the real money makers. Finally, a customer who does bring his back to the dealer for service is twice as likely to buy his next car from that dealer.
The reasons that car buyers don’t usually bring their cars back to the dealer for service is very simply price and convenience. Independent service facilities and fast-lube shops are more plentiful than dealers and there’s usually one closer. Why drive 20 miles to your dealer for an oil change when there’s a Jiffy Lube around the corner. Prices are usually less at independent service facilities. Independents have lower overheads and usually don’t use factory parts. Non factory parts, often manufactured overseas are usually less expensive than original factory parts. Independents also don’t have to pay their technicians as much as dealers do.
To combat this problem, many manufacturers are offering free maintenance on new cars for two years and even longer. The idea is to get the new car buyer into the habit of coming back to the dealer. The dealer also has the opportunity to sell the free service customer some services that aren’t included in the free maintenance package. Dealers are also offering such things as free oil changes and a very few even offer free tires and batteries as long as the customer has all of her factory recommended service done by him.
I know I still haven’t answered the question of whether you should bring your car back to the dealer. The answer is that it depends on the dealer’s service department. Most car dealers have better trained technicians and more and better diagnostic equipment than the average independent. Furthermore the dealer’s technicians are specialists in his brand of car. A Ford dealer’s technician knows more about Fords than a Chevrolet dealer’s technician and more than the average independent technician. For this reason I usually recommend that you bring your car to a dealer of that brand for more expensive, difficult repairs. A good independent technician can change the oil and rotate and balance the tires on any car. But he can’t always diagnose a transmission problem and, if he could, might not have the specialized tools needed to fix it.
If the dealer of your brand is not price competitive, by all means check out the independent service companies. But, be sure that their technician, sometimes the owner is the technician, has the proper training. He should have certifications in the National Institute for Automotive Service Excellence, ASE. There are ASE certifications for all components of the car, including air-conditioning, engine, and transmission. Ask to see his certification and be sure that it’s up to date. Check the company out with the BBB, the County Office of Consumer Affairs, and the Attorney General’s office. Ask for the names of references from existing customers. Be sure that he is bonded so that in the event you have a claim against him, he has to pay. Find out how long he has been in business.
Two thing to be on the guard against (for both dealers and independents) is the “up-sell” and hidden charges. When you see an ad for a $16.95 oil change, you can be assured that you won’t leave that service department paying only $16.95. The oil change includes a “free inspection” which means the commissioned technician and service advisor will look for anything else that may need maintenance or fixing on your car. Just be sure what they recommend is really needed and the safest way is to take it somewhere else for a second opinion. Also, watch out for that hidden, extra charge at the bottom of your service invoice. It goes by many different names. Some of the most common are Sundry Supplies, Environmental Impact Fee, Hazardous Waste Disposal Fee, and Supplies and Small Tools. This is nothing more than profit to the dealer and is calculated by adding a percent of the total invoice usually five or ten percent. Almost all dealers and Independents add this charge that should be made illegal. My advice is to refuse to pay it and in most cases they will agree to remove it from your bill.
Whether you should is more complicated. The fact that most new car buyers (about 75%) don’t bring their cars back to the dealer for service is a huge problem for all manufacturers and car dealers. It’s a problem for manufacturers because they can lose the parts sales which include oil filters and oil. The profit margin on auto parts is much higher than on the car itself. If you added up the price of all the parts in your car (twenty to thirty thousand), the total would be many times the price you paid for your car. It’s also a problem for dealers. The retail markup on an auto part is at least 40% and your car’s markup is less than half of that. The average dealer makes more money selling parts than he does cars and he also makes more money selling the labor to service and repair cars than he does selling cars. In most dealerships, the new car department loses money or makes relatively little. The parts and service departments are the real money makers. Finally, a customer who does bring his back to the dealer for service is twice as likely to buy his next car from that dealer.
The reasons that car buyers don’t usually bring their cars back to the dealer for service is very simply price and convenience. Independent service facilities and fast-lube shops are more plentiful than dealers and there’s usually one closer. Why drive 20 miles to your dealer for an oil change when there’s a Jiffy Lube around the corner. Prices are usually less at independent service facilities. Independents have lower overheads and usually don’t use factory parts. Non factory parts, often manufactured overseas are usually less expensive than original factory parts. Independents also don’t have to pay their technicians as much as dealers do.
To combat this problem, many manufacturers are offering free maintenance on new cars for two years and even longer. The idea is to get the new car buyer into the habit of coming back to the dealer. The dealer also has the opportunity to sell the free service customer some services that aren’t included in the free maintenance package. Dealers are also offering such things as free oil changes and a very few even offer free tires and batteries as long as the customer has all of her factory recommended service done by him.
I know I still haven’t answered the question of whether you should bring your car back to the dealer. The answer is that it depends on the dealer’s service department. Most car dealers have better trained technicians and more and better diagnostic equipment than the average independent. Furthermore the dealer’s technicians are specialists in his brand of car. A Ford dealer’s technician knows more about Fords than a Chevrolet dealer’s technician and more than the average independent technician. For this reason I usually recommend that you bring your car to a dealer of that brand for more expensive, difficult repairs. A good independent technician can change the oil and rotate and balance the tires on any car. But he can’t always diagnose a transmission problem and, if he could, might not have the specialized tools needed to fix it.
If the dealer of your brand is not price competitive, by all means check out the independent service companies. But, be sure that their technician, sometimes the owner is the technician, has the proper training. He should have certifications in the National Institute for Automotive Service Excellence, ASE. There are ASE certifications for all components of the car, including air-conditioning, engine, and transmission. Ask to see his certification and be sure that it’s up to date. Check the company out with the BBB, the County Office of Consumer Affairs, and the Attorney General’s office. Ask for the names of references from existing customers. Be sure that he is bonded so that in the event you have a claim against him, he has to pay. Find out how long he has been in business.
Two thing to be on the guard against (for both dealers and independents) is the “up-sell” and hidden charges. When you see an ad for a $16.95 oil change, you can be assured that you won’t leave that service department paying only $16.95. The oil change includes a “free inspection” which means the commissioned technician and service advisor will look for anything else that may need maintenance or fixing on your car. Just be sure what they recommend is really needed and the safest way is to take it somewhere else for a second opinion. Also, watch out for that hidden, extra charge at the bottom of your service invoice. It goes by many different names. Some of the most common are Sundry Supplies, Environmental Impact Fee, Hazardous Waste Disposal Fee, and Supplies and Small Tools. This is nothing more than profit to the dealer and is calculated by adding a percent of the total invoice usually five or ten percent. Almost all dealers and Independents add this charge that should be made illegal. My advice is to refuse to pay it and in most cases they will agree to remove it from your bill.
Monday, April 25, 2011
What You See Isn’t Always What You Get with Businesses... Especially Car Dealers
There’s a new catch phrase among businesses, “Reputation Management”. In fact, auto manufacturers are advising their dealers on ways to improve Internet surveys that are springing up all over. Probably the biggest one is Google that displays customers’ reviews of virtually every business. The manufacturers’ advice is to solicit as many happy customers as possible to overwhelm the negative reviews that are posted. There are also companies that specialize in doing exactly this…contacting large numbers of customers and persuading them to post positive reviews for a particular business. The theory is that a happy customer is less likely to respond to a survey than an unhappy one. That’s not entirely true. The fact is that a very happy customer is just as inclined to respond to a survey as a very unhappy one. The customers that are less inclined to respond to surveys are those that are “sort of” happy or “sort of” unhappy. The honest way to get lots of positive surveys is to make more customers very happy.
There was an interesting column in last Sunday’s NY Times by “The Haggler” entitled “A Customer Who’s Always Satisfied”. The reporter discovered that companies were hiring a company named “Homestead Technologies” (owned by Intuit) that sold a special software program to businesses that wanted to improve their reputations. This software program was comprised of a website template that companies filled out with customers’ names and positive reviews. The way the reporter discovered the scam was that some companies weren’t changing the names in the template. This fake name was “Lucas Fayne” and when the reporter Googled that name, he found that Lucas had given very positive Internet reviews to more than 50 roofing companies all over the USA. Each review said the same thing! There are many companies like that selling their deceptive services to companies that treat their customers badly but want to have good reviews anyway. One tipoff is finding one company that has an extraordinarily large number of reviews compared to their competition.
Another common scam by car dealers is to make their surveys look good is by making up customers’ email addresses. Rather than report a customer’s real email address, the dealers make one up using free email services like Hotmail and Yahoo. The survey from the auto manufacturer comes to the dealership address and then the salesman or sales manager fills out the survey. A variation of this scam is for the dealer to give incorrect email addresses to the manufacturer for customers he knows are dissatisfied. Some manufacturers police this by determining what computer the survey originated from by identifying the IP address. For example, my PC’s IP address is 66.176.54.44. If Toyota found out that hundreds of customer surveys were coming from that address, they might be a little suspicious. But most dealers are way ahead of the manufactures on this. There is software obtainable on the Internet that disguises the IP address of your PC.
Less sophisticated car dealers resort to simple bribery. “When you get your survey from the manufacturer, bring it into the dealership in blank and we’ll give you a free tank of gas”.
My dealership’s rating by the Better Business Bureau is A+ which is the highest rating obtainable. I don’t advertise this or mention it to my customers because it really doesn’t mean anything to me. Why? Because many dealers have high rating by the BBB that clearly don’t deserve it. Businesses pay dues to be members of the BBB and the BBB is hard pressed to give a bad rating to the people that pay their salaries. The businesses and dealers who “don’t join” the BBB are the ones who get the lower ratings. After this was exposed by the press recently, the BBB is claiming to come up with a more honest approach to rating companies.
One might ask, how does “reputation management” by bribery and deception continue to propagate when it’s so painfully apparent? The answer is “money” and corporate bureaucracy. The CEO of a large business including auto manufacturers probably would like their dealers to treat their customers with courtesy, respect, and integrity. He thinks that the best way to accomplish this is to incentivize and measure his subordinates, all the way down the long line, by how good the customer’s surveys look. When a vice president’s annual bonus or chances for promotion hinge on customer satisfaction scores, he’s not going to investigate the accuracy of good surveys too closely. His philosophy is to get those customer satisfaction scores up “any way you can”. I can remember one occasion when I questioned a particular dealer’s scores because they were a perfect 100%. I think you can agree that no one or no company is perfect and that dealer wasn’t either, as it turned out.
What the manufacturers and the dealers should understand it that it’s not the customer satisfaction scores that make or break you…it’s the individual customer. The power of one very happy customer is almost beyond imagination and so is the power of one unhappy customer. I liken a customer’s experience to a “pebble dropped into an infinite pond”. The ripples go on forever. You can fool a lot of people for a short time with phony scores on the Internet, the manufactures’’ surveys, or the BBB. But when you trick a customer into doing business with you and you don’t live up to the score, she will never return and she will tell all of her friends.
There was an interesting column in last Sunday’s NY Times by “The Haggler” entitled “A Customer Who’s Always Satisfied”. The reporter discovered that companies were hiring a company named “Homestead Technologies” (owned by Intuit) that sold a special software program to businesses that wanted to improve their reputations. This software program was comprised of a website template that companies filled out with customers’ names and positive reviews. The way the reporter discovered the scam was that some companies weren’t changing the names in the template. This fake name was “Lucas Fayne” and when the reporter Googled that name, he found that Lucas had given very positive Internet reviews to more than 50 roofing companies all over the USA. Each review said the same thing! There are many companies like that selling their deceptive services to companies that treat their customers badly but want to have good reviews anyway. One tipoff is finding one company that has an extraordinarily large number of reviews compared to their competition.
Another common scam by car dealers is to make their surveys look good is by making up customers’ email addresses. Rather than report a customer’s real email address, the dealers make one up using free email services like Hotmail and Yahoo. The survey from the auto manufacturer comes to the dealership address and then the salesman or sales manager fills out the survey. A variation of this scam is for the dealer to give incorrect email addresses to the manufacturer for customers he knows are dissatisfied. Some manufacturers police this by determining what computer the survey originated from by identifying the IP address. For example, my PC’s IP address is 66.176.54.44. If Toyota found out that hundreds of customer surveys were coming from that address, they might be a little suspicious. But most dealers are way ahead of the manufactures on this. There is software obtainable on the Internet that disguises the IP address of your PC.
Less sophisticated car dealers resort to simple bribery. “When you get your survey from the manufacturer, bring it into the dealership in blank and we’ll give you a free tank of gas”.
My dealership’s rating by the Better Business Bureau is A+ which is the highest rating obtainable. I don’t advertise this or mention it to my customers because it really doesn’t mean anything to me. Why? Because many dealers have high rating by the BBB that clearly don’t deserve it. Businesses pay dues to be members of the BBB and the BBB is hard pressed to give a bad rating to the people that pay their salaries. The businesses and dealers who “don’t join” the BBB are the ones who get the lower ratings. After this was exposed by the press recently, the BBB is claiming to come up with a more honest approach to rating companies.
One might ask, how does “reputation management” by bribery and deception continue to propagate when it’s so painfully apparent? The answer is “money” and corporate bureaucracy. The CEO of a large business including auto manufacturers probably would like their dealers to treat their customers with courtesy, respect, and integrity. He thinks that the best way to accomplish this is to incentivize and measure his subordinates, all the way down the long line, by how good the customer’s surveys look. When a vice president’s annual bonus or chances for promotion hinge on customer satisfaction scores, he’s not going to investigate the accuracy of good surveys too closely. His philosophy is to get those customer satisfaction scores up “any way you can”. I can remember one occasion when I questioned a particular dealer’s scores because they were a perfect 100%. I think you can agree that no one or no company is perfect and that dealer wasn’t either, as it turned out.
What the manufacturers and the dealers should understand it that it’s not the customer satisfaction scores that make or break you…it’s the individual customer. The power of one very happy customer is almost beyond imagination and so is the power of one unhappy customer. I liken a customer’s experience to a “pebble dropped into an infinite pond”. The ripples go on forever. You can fool a lot of people for a short time with phony scores on the Internet, the manufactures’’ surveys, or the BBB. But when you trick a customer into doing business with you and you don’t live up to the score, she will never return and she will tell all of her friends.
Monday, April 11, 2011
Gas Price Gouging Is Illegal, Why Not Car Price Gouging?
Florida Statute 501.160 states that during a state of emergency, it is unlawful to sell, lease, offer to sell, or offer to lease essential commodities for an amount that grossly exceeds the average price for that commodity during the 30 days before the declaration of the state emergency, unless the seller can justify the price by showing increases in its prices or market trends. Examples of necessary commodities are food, ice, gas, and lumber. As I write this article, gasoline prices are very near or have already exceeded $4.00 per gallon. Oil has surged to over $107 a barrel. Middle Eastern and North African countries are in turmoil. Japan has suffered a huge earthquake/Tsunami disaster temporarily slowing supplies of Japanese fuel efficient cars, especially the number one volume hybrid vehicle in the USA, the Toyota Prius. The global economy is still struggling to come back from the worst recession since the Great Depression and home foreclosures and unemployment in the USA are at historic highs. Doesn’t it seem like the above qualifies as an “emergency”? If gasoline is a “necessary commodity”, doesn’t it stand to reason that what you put the gasoline in, your car, is also necessary? What good is affordable gas if you can’t afford to buy a car? As always happens when gas prices rise, car dealers jack up the price of fuel efficient cars. Up to a point this is understandable and a result of the rules of the free market place…supply and demand. But at a certain level, it crosses the line between understandable economics and enters the arena of greedy price gouging. I believe the line should be drawn at the manufacturer’s suggest retail price of the vehicle. This window sticker is officially called the Monroney label. It’s required by federal law that every new vehicle has the manufacturer’s suggested retail price displayed on the window of the vehicle up until the customer takes delivery. Not to do so subjects the dealer to a $10,000 fine. We can thank Senator Mike Monroney of Oklahoma for this law passed in 1958 (the year I graduated from Palm Beach High School). Every car dealer knows that he can very rarely sell any of his cars for as much as the manufacturers’ suggested retail price. Common practice is to discount new car by hundreds or thousands of dollars below the MSRP. Therefore I think drawing the line between a fair profit and price gouging profit at the MSRP is very fair to the car dealers. But many dealers don’t stop there. They add something commonly known as an “addendum sticker” next to the official Monroney sticker. This dealer sticker is usually designed to exactly resemble the Monroney sticker. Most customers looking at it assume it to be the Monroney sticker. But, what it is truly is the dealer’s way of raising the price of the car above the manufacturer’s suggested retail. There are two approaches the dealers take to marking up the MSRP. The most common is by adding “dealer accessories”. These are items like pin stripes, glass etching, nitrogen in the tires, door edge guards, paint sealant, fabric protection, undercoating, road assistance, etc. A package of these virtually worthless items is typically priced at couple of thousand dollars when their true value is less than $100. The second ploy is a price markup called a “market adjustment”, ADM (additional dealer markup), “Dealer Adjustment Addendum”, or some other euphemism. One of the best examples of price gouging can be seen with the Toyota Prius. A few months ago, they were being sold at, or only slightly above, dealer’s invoice. Toyota was even offering the dealers and customers added incentives to further reduce the price. Now, given the rising gas prices and the earthquake/Tsunami in Japan, you are hard pressed to find a dealer who will sell you a Prius that’s not priced thousands over MSRP! The irony is that the number of Priuses available for sale will be only temporarily interrupted. In fact, Japan will definitely increase their exports of Priuses to the USA because their domestic economy has suffered such a blow. I really don’t expect the Florida legislature to pass a law making it illegal for car dealers to price-gouge. I can’t even get them to pass a law eliminating or controlling the dealer fee. But what you can do is be very aware of what is going on now with respect to insane markups on fuel efficient cars. By doing so, you can avoid being a victim and buy the fuel efficient car of your choice at a reasonable price. This shortage of economy cars is only temporary. Waiting a few weeks and getting at least 3 competitive bids when you do decide to buy can save you thousands of dollars.
Subscribe to:
Posts (Atom)