OPEN LETTER TO FLORIDA CAR DEALERS III SUBJECT: WE HAVE MET THE ENEMY & HE IS US!

Dear Florida car dealer, even if you weren’t a good history student in school, you probably remember the quote from Commodore Perry from the War of 1812, “We have met the enemy and they are ours”. The satirical comic strip, Pogo, has a memorable quote satirizing Commodore Perry, “We have met the enemy and he is us”. This fits the image problem we car dealers have today. We brought it on ourselves through our devious advertising and sales practices. However, we blame everybody but us…our customers, lawyers, the media, and car dealers like me who dare to speak the truth.

This is the 3^rd letter I have written to Florida car dealers in my weekly column. The first asked you to stop charging your “dealer fee” on top of the price you quote your customers. The second asked you to advertise cars at a price you were willing to sell the car for and have an ample supply of. In both letters I made the point that there is a minority of car dealers like me who do not charge dealer fees or resort to “bait and switch” ads. I also confessed that I used to be one of those dealers that I am writing about today. I did charge a dealer fee once and I did advertise cars that I hoped the customer would not buy. At the end of each letter, I asked that you call or email me to discuss my letter. So far, I have received no phone calls and the only emails blame me and others like me, for the negative image that car dealers have in our society. Here is an example of the emails I have received from dealers: “I read your sanctimonious babble in today’s Post and you are correct in assuming your comments will garner the attention of other dealers. It is comments like the ones you made that keep public opinion of our chosen profession in the doldrums. Like it or not we’re together in this battle and your “holier than thou” claim will only fuel the fire. Want to show the world your true compassion? Donate 20% or more of you net profit to charity then you’ll truly be the “great guy” you aspire to be.”

We can see this sort of “shoot the messenger” attitude with our politicians who blame the media for their negative image. It always amazes me to hear Republicans accuse the media of left wing bias and the Democrats blame the same media for a right wing bias. Sure there is bias in the media just like there is some bias in all of us.  But, when your image in the eyes of the American public is as bad as that of politicians and car dealers, how can you not understand that there is a problem? The only profession I can think of that ranks as low in the public esteem is that of lawyers.

If you will call or email me to discuss my position in an open minded manner, I think you will be surprised and happy that you did. My business has grown steadily since I began to really understand that satisfying and respecting my customers was the most important single ingredient for my overall success. I’m certainly not making the claim that my way of doing business is the only path to success. I know a lot of car dealers who sell more cars and make more money than I do who do not take my approach with their customers. You can “fool some of the people all of the time”. However, that minority that can be fooled all of the time is shrinking daily as our customers become more educated and sophisticated. One day soon, there won’t be enough of them to go around and the majority of car buyers will be doing business with guys like me.

Sincerely,

Earl Stewart

HOW TO COMMUNICATE BEST WITH YOUR CAR DEALER

As many of you know, I communicate directly with my customers. Some would say to a fault. I don’t have a secretary or administrative assistant. My dealership’s telephone receptionist never asks the caller “who’s calling” or “may I ask the nature of your call?” and she puts my calls (and the calls to all my employees) right through. If I am not in my office, she puts them through automatically to my cell phone…7 days a week. I also have four red phones in four locations of my dealership…the showroom floor by the receptionist, the service customer waiting lounge, outdoors in the service drive, and in the body shop waiting lounge. Each phone has a picture of me with the message, “Customer Hotline To Earl Stewart. The Buck Stops Here. Have We Not Exceeded Your Expectations? Please Let Me Know. Simply Pick Up The Receiver And Wait For Me To Answer.” As if all this wasn't enough, I put my home telephone number and cell phone number on my business cards and pass them out to my new customers at our bimonthly New Owners Dinner.

I say all this, not to brag (or maybe just a little). It might surprise you that I am not deluged with phone calls. I get quite a few, but considering I sell 400-500 cars a month and service thousands of cars each month, I doubt if I average more that 25 calls per day. Most of them are positive, complimentary calls. I believe one reason for this is that my employees are motivated to work harder to satisfy my customers because they know, if they don’t, I’m going to hear about it very quickly. Another reason is that my customers are remarkably respectful of the fact that they can call me and do not take advantage of it. Frankly, my wife, Nancy, was very nervous about this when I first started passing out my business card with my home telephone number. Would you believe that I don’t get more than 5 or 6 home calls a week? When you extend your trust to people, they almost always respect that and do not take advantage.

Of course, you are not going to find a lot of car dealers who do what I do. But here is how you can improve your communications in other ways that will allow you to get problems solved and promises kept. Always ask for the business card of every person you deal with. If they don’t have a card, be sure to get their name. This improves your service right away because the person is no longer anonymous. Ask the person for his cell phone number. There was a time when it was considered wrong to call someone on his cell phone, but that was before cell phone rates became so cheap and the cell phone became universal. If this is a critical person you are dealing with, ask for his home telephone number too. Here is a little trick that I use when I do this. I always start out by giving them my cell phone and my home phone number. Then I say “and may I have yours?” I can’t remember ever having been refused. If someone you are doing business with refuses to give you his cell or home phone number, maybe you should wonder why.

Also, make it a point to be introduced to this person’s manager. Get the manager’s business card and as many contact numbers as he is willing to share with you. When you do this, you have put the salesman or service advisor on notice that if he doesn’t return your phone calls you will be calling his boss. If you really want to have an edge, ask to meet the general manager and/or owner of the dealership. Get his telephone numbers. Now you will have everybody’s attention when you come into the dealership to transact business.

If you are a “computer person”, collect email addresses from everybody you deal with. Email is not as timely as a telephone, but it has the advantage over the telephone because it is “on the record”. When you make a request of a person by email, he can’t deny it because you have a copy of the message. I know that with Microsoft Outlook email, I get an acknowledgement every time somebody opens an email that I sent them. Furthermore you can copy as many people as you like with an email. You can send copies that the primary recipient knows about or make them blind copies that he can’t tell were sent. Someone is a lot more likely to act on your request when he knows that it is a matter of record and his boss was copied with the email.

If you can force yourself into the habit of getting names, telephone numbers, and email addresses from everybody you deal with and their managers, conducting business with your car dealer (or any other business) will be much smoother and trouble free. 

Being Fair to Your Customer is not only Right But it’s the Fastest Path to Long Term Success

I was shocked to read the AP news release last week about the RL Polk study on hybrid loyalty, the measurement of how many owners buy another hybrid.  My first shock was that only 25% of hybrid buyers buy another hybrid. Based on my dealership’s experience (I thought to myself) “This cannot be right!” In fact, the article was brought to my attention by a Prius customer of mine who had just bought his fourth Prius from me.

My second shock was to learn that my market in Palm Beach County was the number one market in the USA for hybrid loyalty! RL Polk termed it the West Palm Beach market but that identifies the central, major city in a given market which is all of Palm Beach County. How could my market have a greater hybrid loyalty than Los Angles or Seattle?  These markets are where the demographics are skewed heavily toward environmentally sensitive people, often disparagingly referred to as “tree huggers”. Now I was “sure” that this RL Polk report was wrong!

I Googled the report and found it at www.HighestHybridLoyaltyInUSA.com . After studying the report, I learned that with Prius, the number one selling hybrid by a wide margin, removed from the study, the national hybrid loyalty was only 25% vs. 35%. Now I felt a little better. I knew from my dealership’s experience selling Priuses that we had a very high percentage of repeat buyers…over 75%!

Finally, it all dawned on me. My dealership sells more hybrids than any other dealership in the Southeast USA and ranks very high nationally. The only dealers that outsell us are a few in California and the Pacific Northwest where, as I said, the demographics skew toward very environmentally sensitive people. Also, California and some of the other Northwestern states give special subsidies to purchasers of hybrid and all electric cars. Because we sell so many, in Palm Beach County, we moved the average from only 25% loyalty all the way up to 43%, the highest in the USA. I sell a lot of hybrids on the Internet to markets outside of Palm Beach County too. If I sold all of those in Palm Beach County, the average would have moved much higher toward 75%.

So what has all of this got to do with “Being Fair to Your Customer is Not Only Right, but it’s the Fastest Path to Long Term Success”? The answer is in how I became the largest volume hybrid seller in the Southeast USA and one of the largest in the USA. Flash back to 2001 when the Toyota Prius was first imported into the USA. Toyota began selling them in Japan in 1997 and just a few were exported to the USA in 2001. My dealership received only one Prius every couple of months or so. But word had spread that the Prius was a remarkable vehicle from the experience of the first four years they were sold in Japan. Toyota could not keep up with the demand. Consequently, “everybody wanted to buy a Prius”. We had a waiting list over a year long. Other dealers do what they usually do when they have a high demand, low supply vehicle…they marked their Priuses up over MSRP by THOUSANDS of dollars. They do this by adding another sticker next to the Monroney label with a markup they sometimes call ADM for “additional dealer mark up” or MAA for “market adjustment addendum”.  I refer to this as the “Phony Monroney”.  Crazed customers gladly paid egregious prices to have the first Prius on their block. My dealership took, and still takes, the approach to never charge over MSRP for any vehicle, no matter how low the supply and high the demand. In fact, we wish we could sell all of our cars for MSRP because it represents a generous profit to the dealer. My customers had to wait  a long time to get their Priuses back in the first few years of its introduction, but they paid a much lower price than all of the other dealers charged. We actually had customers flying in from as far away as California, buying their Prius from us and driving it back home. They saved so much that they were able to cover their airfare and a Florida vacation while they were here.

Over the last eleven years, the price dealers charge for Priuses has fluctuated pretty much in direct correlation to the price of gasoline. But we have never varied from capping our price at MSRP. Now here comes the real interesting part. Auto manufacturers, including Toyota, distribute cars to their dealers based on the “turn and earn” system. This means that the faster you sell cars, the faster they ship you fresh cars to sell. The dealers marking up their Priuses thousands of dollars over sticker didn’t sell their Priuses nearly as fast as I sold mine. Because we had a waiting list during times of high demand, all Priuses that came into my dealership by truckloads were sold and delivered immediately. Consequently, I began receiving more Priuses than any other dealership in the Southeast USA and than most in the entire USA!

Now you can understand what I meant by “Being Fair to Your Customer is Not Only Right, but the Fastest Path to Long Term Success”. Now, after over eleven years, I’m selling many times more Priuses and other hybrids than any other dealer in my market and more than any dealer in the Southeast USA. I’m making a smaller profit per car but I’m selling so many more that my total profit is much greater. Words and phrases like Karma, “What goes around comes around”,  “Cast thy bread upon the water”, and “As ye sow so shall ye reap” come to mind.

You would think that the other dealers would catch on some day, but they still haven’t. Gas is over $4.00 per gallon again and they are price-gouging their customers on Priuses just like always. More and more of their customers are coming to me and buying their hybrid at a fair price. This is why my hybrid customers are so loyal. They know their next hybrid will be priced fairly just like their last. My sales are soaring and other dealers’ are plummeting. They do make a lot more on a Prius than I do, but I make a lot more in total, and I get their customer when she’s are ready for her next Prius.

Another interesting fact is that Toyota did a study when they first came out with the Prius that proved people would pay up to 20% more for a Prius than a comparable gasoline car just for the idea of driving an environmentally friendly car. They really scooped the rest of the industry on this. Nobody else figured this out until it was too late and Toyota had already captured the hybrid market. But what Toyota didn’t anticipate was the greed of their dealers. Toyota priced the Prius on the MSRP to be under that 20% limit that a customer will pay over a gasoline car, but the dealers wouldn’t listen and greed overcame logic. Toyota has no power to tell a dealer what he can charge for a car. But fortunately for me, they do reward the dealer who sell their cars fastest and that’s how I came to be #1 in hybrid sales in the Southeast USA with the highest hybrid customer loyalty in the USA.

Newspaper Ethics: An Oxymoron?

Regular readers may wonder what newspaper ethics have to do with cars, which are what I write about. The answer is that car dealers are the biggest advertisers in most local newspapers. In fact, in the last ten or twenty years, they have grown to become the largest, maybe second to real estate. Without car dealers’ ads, most local newspapers could not exist. One notable exception is Hometown News which publishes this column weekly. The reason you don’t see more newspaper ads in Hometown News is because of my column and for this, I salute Steve Erlanger, the publisher. He has the courage and ethics to allow me to write the truth in spite of the fact that it costs him advertising revenue.

This is not the first fight I’ve had with the Palm Beach Post. I wrote “Journalistic Ethics in Car Advertising” for my blog and Hometown News two years ago. And I wrote “Never Having to Say you’re Sorry if you’re the Palm Beach Post” just a couple of months ago. I don’t know if feel more anger about the erosion of journalistic ethics in newspapers or more pity. Self Preservation is our strongest, most basic instinct. Advertising revenues are the lifeblood of newspapers and ad dollars have dried up to the point where most local daily newspapers are hanging by a thread. This newspaper ad revenue draught started with Television and the Internet was the coup de grace. If I and my family were starving and I had no other choice, I might resort to less than ethical means to provide us food.

However, it’s one thing to print unfair, deceptive and even illegal ads for car dealers in your newspaper because you rely on them for ad revenue. It’s an entirely different thing to attack the good, ethical, and honest sheriff of Palm Beach County and imply that he’s stealing money from the taxpayers to buy lunches for himself and political supporters.

Below you will see the headline from the Palm Beach Post of April 5, 2012. Below that is my letter to the editor which was published April 9, 2012. The highlighted parts are portions of my letter that the PB Post chose to redact.

The most important message I wanted to send with my letter is that it’s easy for the PB Post to attack a good man like Sheriff Ric Bradshaw. After all he’s a Republican and a public figure. Most of the Post’s readers will applaud this attack because they side with the PB Post politically and because they read only the headlines. Ric Bradshaw knows that a public figure has little chance of winning a libel suit against a newspaper and a lawsuit would just draw more attention to the accusations. That’s why you never see an attack like this on a large advertiser in their paper. A car dealer can fight back by, not only suing for libel, but stopping his advertising.

I wrote another blog article several years ago after having the honor and privilege to have lunch with Bob Woodward of the Washington Post and Watergate fame. The article is entitled, “A Conversation with Bob Woodward about Integrity in the Media”. Bob Woodward told me that he believed that the greatest threat to the future of the USA and the world was that “the media is failing to fulfill its vital role to report all of the news fearlessly, completely, honestly, and ethically”.

 POST BURIED LEAD; SHERIFF DID NOTHING WRONG

If the PB Post wants to express its opinion that Sheriff Ric Bradshaw is untrustworthy and not fit for his elected position, say it in your Opinion section, not a front page, headline news article as you did Thursday, April 5..."Post Exclusive"; Ethics Investigation; SHERIFF CHIDED FOR USING TAX MONEY FOR MEALS.

You covered yourself quite well for those few who read long newspaper articles completely to their conclusion. You ultimately disclosed that Sheriff Bradshaw had done absolutely nothing wrong! In fact, what he had done was commendable. So why is this headline on the front page?

The answer, of course, is that you know people scan newspapers and read headlines and it’s that first impression that gets your message across. Would the PB Post write a headline story, "TIM BURKE ACCUSED OF CHILD MOLESTATION”, if he was so accused by a disgruntled ex-employee (of which the PB Post has many)and there was no other evidence?

One last thing, what purpose did you have for digging up the fact that John Staluppi, who Sheriff Bradshaw took to lunch, "was 'accused' decades ago of mob ties"? John Staluppi is a very successful businessman and philanthropist who provides thousands of jobs and donates millions of dollars to worthy causes. Since when is being "accused" something to be ashamed of?


I'm beginning to believe that the only way a South Florida resident can protect her or himself from a character attack by the PB Post is to be a large advertiser. From the looks of your plummeting advertising revenues, this will soon leave most of us without protection.

Beware the Phony Monroney

This blog post originally ran five years ago. It’s important that I run it again today because violation of this Federal law, especially its intent, which is to inform car buyers of the official retail price suggested by the car manufacturer, is rampant by most car dealers. The US Senator who drafted this law, Mike Maroney, said this about his law, “The dealer who is honest about the so-called ‘list price’ cannot compete with the one who ‘packs’ several hundred dollars extra into it so he can pretend to give you more on the trade-in.” Senator Monroney said this in 1958 and the only thing that has changed is that dishonest dealers are now charging several thousand dollars extra. As I write this, the national average price of a gallon of gas is over $4 and climbing. Car dealers are marking up fuel efficient cars, especially, hybrids by thousands of dollars. They add  their dealer window sticker, identical in style to the Monroney label right next to it so that it’s virtually indistinguishable. Then, to add insult to injury, they remove the both labels before delivery which is illegal. 

“Phony Monroney” should not be confused with “Boney Maroney” (I got a gal named Boney Maroney. She’s as skinny as a stick of macaroni). That song was first recorded by Larry Williams during my high school years, 1956-1958. You will appreciate this lame attempt at humor only if you are about my age, 66.

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

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

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

When customers confuse the phony Monroney with the real one, this distorts their point of reference for comparing prices between different dealerships. One manufacturer’s Monroney labels are consistent. A 2007 Honda Accord with the same factory accessories will have the same MSRP at every Honda dealership you visit. But if dealers fool you into thinking their label is part of the Monroney, you are not comparing “apples and apples”.  This can adversely affect a good buying decision in a number of ways. Some buyers focus mainly on how big a trade-in allowance they can get for their old car. If one dealer has the same car marked up $3,000 more than another dealer, he can offer you $3,000 more for your trade and still make the same profit as the other dealer. Some buyers focus on how big a discount they get from “sticker”. It’s easy to give a higher discount if you have artificially inflated the MSRP by thousands of dollars.

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

An Eagle Scout Gone Bad: Rationalizations of a Car Salesman

The following are comments posted by a car salesman last week on one of my blog articles. The post came from "Anonymous", but he identifies himself as “an Eagle Scout with morals and ethics intact”. He refers to himself as “Johnny”, which may or may not be his real name.

His letter is interesting because Johnny’s comments perfectly capture the rationalization of car dealers and salespeople about why it’s OK to take advantage of their customers. It’s OK because deceiving a customer is necessary to make a profit and profit is a good thing. I guess, the greater the deception and the larger the profit, the more good it provides. Johnny is intelligent and articulate (although his spelling and grammar leaves a little to be desired) and he truly seems to believe what he’s saying.  

If I sent Johnny’s letter to every car dealer in the United States, a majority of them would not only agree with him but applaud him for saying it. Many auto manufacturers also follow Johnny’s brand of faulty logic and refuse to influence their dealers against deceptive tactics like dealer fees and addendum labels, which I call “phony Maroney’s”. Manufacturers know that for a dealer to sell the maximum number of cars, he must sell some at exorbitant profits to those “suckers” who can be taken advantage of…suckers like young first time buyers, the very elderly, the uneducated, and the language impaired. Large profits from these victims allow dealers to sell more cars near or below his actual cost, increasing his normal volume in order to hit factory objectives which pay large bonuses to the dealer.  

At first I thought I would answer all of this car salesman’s rationalizations and point out his lapses in logic. On further thought, I thought it best to leave it completely unedited, with no retorts, challenges, corrections etc. and let you be the judge.  

The following comments are unedited:

PART ONE-Hi. I've been in car sales for 3 years now and at first (I am an eagle scout with morals and ethics strongly intact), I felt guilty when I would make full profit on a consumer. Sometimes that would pay me 1,000.00 in my pocket to help support my family of four. Which supports the economy to btw... Then my mgr asked me how long will that thousand dollars last me, a week? I said yes maybe two if I plan accordingly. How long do you think your client will use his new car, helping him get to work to make money to feed his family? Three maybe four years before they trade it in... Let me ask you these questions earl, and EVERYONE else: since when is profit a dirty word? And who wins in the long run in a car purchase transaction? Why can every other business in the UNITED STATES OF AMERICA Mark up their products 2 or 3 times the cost making houge profits (300%) while car dealerships make maybe 1-3% of a profit margin? I understand a car or a house is a big ticket item so they can be negotiated (so said somebody one day), but one day I would like to haggle for the price of a t-bone at Publix, or gasoline or underwear or shoes or suits or GROCERIES or the cell phone bill or the electric bill. Seems as if everything for sale that you and use to Live goes up in price doesn't it? Um, wouldn't it be nice to see the invoice price of oil and bargain for gas? I think I made my point.

PART TWO-I work 60 hours a week selling a quality product, New or preowned, and I get paid by commission only. Most new car shoppers research the invoice price, market price, kbb price, blah blah blah. I understand that price is important as I am on a budget just like you... but what about the person that spent 2.5 hours presenting, explaining, and demonstrating the vehicles' features and how they will benefit YOU? Do you not see the VALUE in that salesperson's time? Isn't he/shemance allowed to make a decent wage for working hard for YOU? Nope and nope. Why? "Because car salespeople are scumbags and are trying to screw over every hardworking person. How can they live with themselves and make a profit? How dare THEY?" Dealer fees are profit, but it's very little in the grand scheme of things. The state of Florida makes more on cars than the dealership does about 80% of the time.

PART THREE-Since the internet changed the car business years ago to help the consumer get a fair deal (a couple hundred bucks over invoice), dealer fees came out to help keep dealerships open by making a DECENT profit and provide a service to the community helping people find what they want to go be mobile to have FREEDOM TO DO WHAT THEY WANT TO DO. nice huh? Again, profit is not a dirty word. We are providing a service and there is nothing wrong with getting paid for working.
I'll end this diatribe with an interesting fact: we say "Buyers are liars." It's kinda funny that 90% of people who are pointing a FINGER at car salespeople calling us scumbags are the ones who lie and treat us with disrespect and disregard us as human beings. My granddad told me a long time ago, "johnny, if you point your finger at someone remember that there are three of your own pointing back at you."

FINAL PART-I hope the day comes that the dealer fee goes away and EVERYONE pays MSRP. or EVERYTHING can be bargained for. Including gasoline. Unfortunately neither will happen so I can only hope that everyone I meet will end up liking me, my service, my product, and the VALUE of the car I am helping someone purchase, and that value exceeds the PRICE for which they will pay. Good Luck to you all, Godspeed, and try to treat us car guys with a little dignity. Come in well armed with.your pricing sheets and if we work hard enough, decide what percentage of profit we should make if we help you find the right car for your needs and if you received a world class experience. Think of it as a tip. Like a server in a restaurant, which I used to be... Carrabbas btw. Yum! A good server can make 20-29% of total sales in a tip for an hour worth of work. And good car salesman can work up to four hours helping people find a car, and not make a dime when the customer walks out because we didn't lower our price by 130.00. Wtf? Think about that. We put our pants on one leg at a time like you. And we go to work to put up with your bull. So just be cool.

One more thing. Where does a business get the money to pay its employees? From their profits of course. Dealer fees are.profit but it does eventually get distributed to pay the detailers, the lot porters, the office ladies, the receptionist, the mechanics, the parts dept, the electric bill, the gas we put in your car when you purchase it, the overhead, etc. Just another business trying to keep people employed to help spend money to keep our dragging economy from crumbling. Blame the oil companies and Starbucks. 6.00 for a cup of .30 coffee? Who are the ripoff artists now

Johnny, if you read, this, please call me and let’s discuss your beliefs about how cars are sold. My personal cell phone number is 561 358-1474. I promise to listen to everything you say with an open mind.  I would like you to visit my dealership in North Palm Beach and see how we do business. I would like you to talk to some of my salespeople and ask them how we sell cars and how we feel about our customers. My dealership is the largest volume, and most successful one in Palm Beach County and one of the largest in Florida and the USA. I promise to keep your identity confidential. I don’t have to know your real name or the car dealership you work for. I’ll even buy you lunch. If you like the way we do business, I might even offer you a job. What have you got to lose? By the way, respect and admire that you attained the rank of Eagle Scout. I was a Boy Scout, but never made it past the rank of Star.  

What is the “True” Cost of that New Car?

It is almost impossible for you to determine the true cost of a new car. This might sound crazy, but many dealers don’t know the true cost of their cars. The manufacturers and distributors invoice their dealers for an amount when they ship them a car that is almost always several hundreds of dollars more than the true cost. It’s fair to say that in virtually every case the “invoice” for a new car is much higher than the true cost. By true cost, I am referring to cost as defined by GAAP, generally accepted accounting principals.

You probably have heard about “holdback”. That is an amount of money added into the invoice of a car ranging from 1% to 3% of the MSRP which is returned to the dealer after he has paid the invoice. Some manufacturers include the cost of regional advertising in the invoice which offsets the dealer’s advertising costs. Another fairly common charge included in invoices is “floor plan assistance”. This goes to offset the dealer’s cost of financing the new cars in his inventory. Another is “PDI” or pre-delivery expense which reimbursed the dealer for preparing the car for delivery to you. I could name several more, depending on the manufacturer or distributor. Some of these monies that are returned to the dealer are not shown as profit on his financial statement and some are. Technically a dealer could say that the cost he showed you reflected all of the profit (by definition of his financial statement), but the fact would remain that more money would come to back to him after he sold you the car. To me, that’s called profit.

Besides holdbacks and reimbursements for expenses, you must contend with customer and dealer incentives when trying to figure out the cost of that new car. You will probably be aware of the customer incentives, but not the dealer incentives. Most dealers prefer and lobby the manufacturers for dealer rather than customer incentives just for that reason. Also, performance incentives are paid to dealers for selling a certain number of cars during a given time frame. These usually expire at the end of a month and are one reason why it really is smart to buy a new car on the last day of the month.

Last but not least, remember the “dealer fee”, “dealer prep fee”, “doc fee”, “dealer inspection fee”, etc. which is added to the price you were quoted by the salesman.. It is printed on the buyer’s order and is lumped into the real fees such as Florida sales tax and tag and registration fees. Most dealers in Florida (it is illegal in many states) charge this fee which ranges from $500 to $1,000. If you are making your buying decision on your perceived cost of the car, even if you were right, here is up to $1,000 more in profit to the dealer.

Hopefully you can now understand why it is virtually impossible to precisely know the cost of the new car you are contemplating buying. Most often the salesman and sales manager is not completely versed on the cost either. Checking the cost on a good Internet site like www.kbb.com or www.edmunds.com is about the best you can do. Consumer Reports is another good source. One reason that Internet sites don’t always have the right invoice price is that different distributors for cars invoice their dealers at different prices.

Do not make a decision to buy a car because the dealer has agreed to sell it to you for “X dollars above his cost/invoice”. This statement is virtually meaningless. As I have advised you in an earlier column, you can only be assured of getting the best price by shopping several dealers for the exact same car and getting an “out the door” price plus tax and tag only. 

Are Car Buyers as Culpable as Decepetive Car Dealers?

Almost all of my columns and radio shows are aimed at car dealers who take advantage of their customers through unfair and deceptive advertising and sales practices. In my columns and my radio show I offer advice to car owners and car buyers on how to avoid being taken advantage of. I’m very far from being unique in that respect. There are many others who do the same thing and there’s a “mountain” of consumer information available online as well as in books and magazines. Furthermore, there are lots of government and private agencies who are there for the consumers’ protection including the Department of Motor Vehicles, the State Attorney General, the County Office of Consumer Affairs, the Better Business Bureau, the Department of Agriculture and Consumer Services, and the Department of Financial Services. But these sources of information and regulators cannot help the car buyers if they don’t avail themselves of them.
If a person leaves his car running with the keys in it, isn’t he just as responsible for having it stolen as the thief? Most women know better than to leave their purse out on the front seat when they park their car at the mall. How about those people who forget to lock their doors when they leave home? Or how about those that go on vacation and don’t stop their newspaper delivery, don’t leave on some lights, and don’t ask the local police and/or neighbor to keep an eye on their house? It’s not uncommon to see women and men wearing very expensive jewelry in public places.

How many professional animal handlers have been mauled and even killed because they didn’t take the proper precautions with wild animals. I hate to say this, but there has always been, and there will probably always be, an element of society that will take advantage of others. It’s just the “nature of the beast”…like the tiger mauling his trainer or the scorpion stinging the frog that carrying him across the river on his back in the parable.  We live in a very imperfect world and there are animals and humans whose nature it is to harm us or take advantage of us.

When I say that buyers are as culpable and deceptive as car dealers, I don’t mean all buyers who are taken advantage of. Just as there will always be those in our society whose nature it is to harm others, there will always be those in our society who will be victimized. These include the very young, the very old, the uneducated, the mentally challenged, and the language impaired.  Society must protect those who cannot fend for themselves. We must do a lot better job than we are now doing on this element of our society, but that’s for another column. This column is directed at those who do have all of the faculties needed to make an intelligent and safe decision to buy or service their car, but choose not to for expediency sake or maybe because their emotions overcame their rationality.

No car buyer who isn’t part of the “chronic victims group” that I’ve described is likely to be taken advantage of by any car dealer if he does his homework before he buys or services a car. Readers of this column and listeners to my radio show have read and heard it all before. Don’t go car shopping alone, always get three price quotes, never buy a car on the first day you begin shopping, your Internet price is the lowest, etc.

Those who are taken advantage of because they didn’t avail themselves of all of the protective sources and advice often complain loudly, to me and to their friends. But they don’t complain to the regulators very often. You’ve probably heard me rail at the regulators for not doing their job. The Attorney General and other agencies claim to be understaffed and spread too thin. Their excuse is true to some extent, but “the squeaky wheel gets the oil”. When I was asked to address the state senate commerce committee in Tallahassee about the evils of the dealer fee, the Attorney General testified with me and said they didn’t receive that many complaints about the dealer fee! If a person is taken advantage of, there is an “embarrassment factor’ involved in not notifying the regulatory agencies.  But that’s a feeble excuse. If more people would complain about unscrupulous car dealers to the regulators, the wheel would squeak loudly and action would be taken to fix it. You might not be made whole for the loss you just incurred, but you would lessen your chance of this happening to someone else, or you again, in the future.

Those of us who are able must exercise our free will and take accountability and responsibility for all of our actions including educating ourselves in the car buying and servicing procedures and reporting to the regulators those car dealers who don’t play by the rules.

Predatory Car Dealers Prey On South Florida Boomers

This is the third time I've run this article which originally ran five years ago. I ran it again last year, but it’s so important that I’m repeating it for the third time. The original title was “Car Dealers Exploiting the Elderly”. I’m doing for several reasons. First and foremost is that this problem is deadly serious and getting worse. The number of calls I get from elderly victims is increasing exponentially. There are many new readers to my blog and my Hometown News column who have not read either of my first two articles. And finally, the Associated Press recently issued a release, “Scams on elderly lucrative, rarely reported”.

The AP news release begins “Boomers beware: Scams, frauds and other financial exploitations schemes targeting older Americans are a growing multibillion-dollar industry enriching the schemers, anguishing the victims and vexing law enforcement officials who find these crimes among the hardest to investigate and prosecute.” The article goes on to explain that only a fraction of the abuse gets reported, often because victims are too befuddled or embarrassed.  Just last week I was helping female victim in her eighties, a widow who was all alone, having recently lost her son too. She told me that she was too embarrassed to tell any of her friends or the authorities. She asked me not to use her name in my column or on my radio show. I get calls from elderly victims of car dealers weekly and I’m sure that it’s “the tip of the iceberg”. How many more are afraid to call me, just as they are too embarrassed to tell their friends or the authorities.

Last year MetLife estimated the annual loss by victims of elderly abuse at $2.9 Billion. There is no more fertile feeding ground for predators on the elderly than South Florida. A car purchase is the second largest purchase a person makes and what more lucrative target and reward is there than an elderly widow buying a $30,000 new car, perhaps for the first time in her life.

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 www.TheUpsideOfAging.com  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.

What Makes Me Different From Other Car Dealers?

My wife, Nancy, and I were chatting this morning over breakfast. We were talking about my first book that I just completed, Confessions of a Recovering Car Dealer, which will be published next month. In the book’s research, I had printed out my father’s obituary from the Palm Beach Post. Dad died on January 14, 1977 at 84 years of age. Nancy said, “Wow! That means he was born in 1893!”  I replied, “Actually it was 1892. He was born in September. Maybe that’s why I’m kind of different”.  I meant it as a joke, but then I began to think about it and I do believe being raised by a father born in the 19th century has a unique influence on his children.

Henry Ford built his first car in 1896 and it was 1908 before he began building the Model T to sell to the public.  My Dad was 16 years old then. Dad was alive while Edison was either inventing things or his inventions were being put into use…the electric light bulb, motion picture camera, the phonograph and thousands of others. The Wright Brothers flew the first airplane when Dad was 11 years old. Back in the day, Dad flew Biplanes because nobody even needed a license then to fly or drive. The radio, forget about TV, wasn’t invented until my father was a young man. Dad used to tell me stories of how he and my grandfather and grandmother gathered around the crystal radio at night in their home in Detroit listening to broadcasts from over a thousand miles away in New York and Las Angeles.

Dad’s automotive career began in Detroit in 1910 when he drove a car he helped build. His first job was with the Maxwell Company (Do you remember that Jack Benny drove a Maxwell?). After a year with Maxwell, Dad was assigned as a road man for Maxwell, working out of Denver. In 1915 he went to work for the Dodge Brothers and soon became the sales manager in Springfield, Massachusetts. During World War I, he worked for the Lincoln plant in Detroit helping prevent sabotage. After the war, he left Lincoln to return to Dodge in Toledo, Ohio.

After a short time he left Dodge and was associated with a firm building the Oakland car which was the predecessor of the Pontiac. This began Dad’s long and successful career with General Motors. The Oakland became the Pontiac in 1922. In 1926 General Motors bought Pontiac and appointed my father the general manager of the Toledo, Ohio dealership. He remained in that capacity until 1936.

Dad was then assigned as a district manager for Pontiac for all of Florida. In February of 1937, he founded Stewart Pontiac Company. He borrowed $10,000 from my mother to get started in his own Pontiac dealership (She never let him forget that). The first car he sold was to a woman named Annie Swan. You can see that original car today on display in my Toyota dealership in North Palm Beach. Dad bought it back from Annie when she could no longer drive and had it restored.

Why does this family history make me different? Hearing all of these stories and more at my father’s knee and later when I was young man coming to work for my father in 1968, gave me a unique perspective on things. It made me realize how fast things can change. I believe we’re entering an era in the beginning of the 21^st century like my father experienced at the beginning of the 20^th century. The cars we’re driving today will bear no more resemblance to the cars we’ll be driving in 20 years than the Model T Ford does to today’s cars.

The way cars are sold today also will change drastically. In twenty years all cars will be bought over the Internet. The car dealership as we know it today will no longer exist. The car buyer of today is far more educated, sophisticated, and demanding than ever before. The manufacturers will truly understand this and with the advent of the Internet as the purchasing medium, the car dealer’s role will change dramatically.

Today’s manufacturers and car dealers will either “adapt or die”. All manufacturers and most car dealers pay lip service to customer satisfaction but too many still don’t walk the talk. The customer truly is “king” and what she wants and how the manufacturers and dealers respond to her will dictate their success or failure.

The third generation of Stewarts, my three sons, will be running things at my dealership in the future and I’m very comfortable with the fact that they “get it” when it comes to the customer reigning supreme. I know that they will look back on their grandfather as being the root source of that invaluable insight.

From the Palm Beach Post Opinion Zone Blog: Should ‘bad drivers’ be told who accused them?

Please follow this link to the Palm Beach Post Opinion Zone Blog and feel free to weigh in using the comments section.

Should ‘bad drivers’ be told who accused them?

Coming soon to your town… The Sam Walton of Car Dealers?

Sam Walton reinvented the retail business for just about every product except automobiles. Wal-Marts are now global and they’re both praised and vilified. They’re vilified by the small businesses and/or inefficient businesses they drove out of the market and they’re praised by consumers for their low prices. Sam accomplished what he did by building a retail machine that was more efficient than his competitors. He mastered the science and art of purchasing quality merchandise in volume domestically or abroad and tight inventory control which allowed him to charge the lowest prices. He built a reputation for quality, low price and integrity that is unmatched by any other retailer.

The reason Wal-Mart sells every other product except new cars is because of state franchise laws which protect car dealers from competition like Wal-Mart. In all 50 states, car dealers have been able to lobby their legislators over the years to pass state laws which give them an exclusive market territory. In Florida, for example, a manufacturer may not add another dealer of the same make within a 9 mile radius of the existing dealer. If they attempt to do this, the dealer can appeal this to the Florida Department of Motor Vehicles where a hearing judge makes the decision. The franchise laws also tell the manufacturers who can retail cars. A manufacturer is prohibited from doing so. A car retailer must have a factory franchise agreement. The results of all these archaic laws put a real damper on competition in the retail car business. It allows inefficient car dealers to remain in business and allows the haggling, horse-trading system of purchasing cars that dates back to the 19^th century to perpetuate.

Polls of consumers regularly rank their car buying and servicing experiences as among the worst of any other product or service. Car dealers are a consistently ranked in the bottom three of all professions along with lawyers and politicians. If we learned anything from the explosive growth of Wal-Mart, it is that consumers what the best price and a pleasant buying experience. A consumer doesn’t want to go into a retail store, buy a product, and find out the next day that his next door neighbor bought the same car for hundreds or thousands of dollars less from the same store. Yet, this is standard operating procedure for car dealers. The shrewd, educated, sophisticated negotiator can buy a car very close to dealer cost.  The very young, very old, uneducated, naive, or those not schooled at speaking English are likely to pay a lot more for the exact same car from that same dealer.

I have a hunch that Neanderthal car dealers are nearing extinction. The American consumer is getting smarter and more sophisticated every day. This new enlightened consumer won’t put up much longer with the old way of buying cars. If a customer walked into Macy’s and asked the salesman for the price of a Samsung big screen TV and the salesman responded, “How much are you willing to pay?” or “I can’t give you a price unless your willing to buy today.”, that consumer would “scream bloody murder”. But this exact thing happens as standard operating procedure in most car dealerships today.

The American consumer is also the American voter and I have a feeling that we are about to see some new pro-consumer legislation with respect to how cars are sold in America. State franchise laws that help to preserve the status quo will be examined closely. An example of these laws surfaced recently when a startup company, TrueCar.com, offered a new and refreshing way for car buyers to actually find out what the lowest price in their market was. This lasted about a year and TrueCar.com was growing like wildfire.

I wrote two columns about TrueCar.com. The first was entitled “Will TrueCar.com Change the Way You Buy a Car in The 21^st Century?” I wrote this before the intense pressure from car dealers, manufacturers, and state legislators caused TrueCar.com to “cave in” and redesign their unique, consumer-friendly lowest price system. My next article was entitled “Online Car Buying Service, TrueCar.com Caves in to Pressure by Auto Industry”.

Somewhere out there is another Sam Walton biding his time and waiting for the tolerance level of the American car buyer to “redline” when it comes to the old way she must buy a car today. I think the founder of TrueCar.com, Scott Painter, could have been that automobile Sam Walton, but he lacked the courage and folded under pressure. The American car buyer is waiting for you, Sam, and just like they did with Wal-Mart, the world will beat a path to your door. 

Never Having to Say You’re Sorry If You Are the Palm Beach Post

Can you remember when newspapers were the best and most prevalent sources of news? Unless you’re a baby boomer or even older, you probably can’t. Newspapers were the “only game in town” a long time ago. They were virtually the only way to advertise. Newspapers had a monopoly and most of them made tons of money. If a newspaper endorsed a political candidate, he got elected. They had huge influence over legislation. Their editorials strongly influenced social behavior. If you were the publisher or an editor of a newspaper you were very powerful and had to apologize to no man.

That’s the way it was, but no longer. Many newspapers have gone out of business and those that haven’t are struggling for survival. I personally believe that good newspapers with smart management will survive albeit in a different form than we used to think of them. Newspapers will have to think of themselves just like any small business that wants to succeed.  First and foremost, they must not only understand that “the customer is king” but they must act on it…walk the talk. The first rule of treating a customer like a “king” is that when you make a mistake and make the “king” unhappy you acknowledge the mistake, sincerely apologize, and then make it right. That’s how I run my small business and my great success is proof that this works.

About three weeks ago, a reporter for the Palm Beach Post, Mary Thurwatcher, interviewed my service manager, Wendy Smith, for a news story. The story was to be printed in the business section of the Palm Beach Post in a regular weekly feature entitled “Moving Up” which appears every Monday. Part of the regular format to “Moving up” is to ask the interviewee, what their favorite quotation is. It appears at the beginning of the article, just under the headline. Right under the quotation is the source, the name of the person credited with this quote. Wendy Smith, prior to becoming the service manager at Earl Stewart Toyota, worked twenty years for Southeast Toyota. For most of that time, Jim Moran was the owner and CEO of Southeast Toyota, her boss and mentor. In answer to the reporter’s question, “what is your favorite quotation?”, Wendy answered, “The future belongs to he who prepares for it”. Wendy told her that Jim Moran was the source of that quotation.

The Palm Beach Post reporter wrote a fine story about Wendy including the quotation. It was to run on the following Monday. Friday night, before that Monday, I checked with the Palm Beach Post’s website and found the story online. I was shocked to discover that the source of this quotation at the top of the article had been changed. Instead of Jim Moran being listed, the source of “The future belongs to he who prepares for it” was Malcolm X, the infamous racist hate monger and anti-Semite. It couldn’t have angered and frightened me much more if the article had listed Adolph Hitler.

My customer demographic is largely white, older, above average education and a significant percentage of my customers are Jewish. Virtually every customer I have was reading online that my service manager’s hero and mentor was Malcolm X! On Monday, those that missed the online article would see it in the newspaper. I don’t know if you’ve ever tried to reach anybody in authority at a newspaper on the weekend, typically you can’t even find anybody to report  that your newspaper wasn’t delivered until the following Monday. It was a miracle that a woman that works for me was able to get through to someone that was able to change the article’s quote. This effort took until late afternoon on Saturday before I was assured.

The reporter, Mary Thurwatcher, told us that she had written and submitted the quote just as given her by Wendy with Jim Moran listed as the source. She told us that the copy editor had never told her that there had been any change to the article whatsoever. I sent an email to the Publisher of the Palm Beach Post telling him what happened. I asked him to investigate and take the necessary action to fix the problem he has with his staff.  I told him that whoever made the change was either grossly uniformed as to who Malcolm X was or had made the change maliciously. In other words the act was either grossly incompetent or malicious. I had two reasons to send him the mail. One was to inform him so that he could fix the problem and the second was to elicit a sincere apology.

I received no apology and the emails I did receive from Tim Burke, the publisher and Nick Moschella, the senior editor were platitudinous. Tim Burke told me that he stood by the only email I got from Nick Moschella and felt it was sufficient.

Mr. Stewart:

  Thanks for following-up. I have talked to all parties involved. Of course, the editing change was well-intentioned – we do encourage our copy editors to question and challenge our reporters but there was a breakdown in this process.

  Glad you enjoyed the quite interesting story.

Sincerely,

  Nick Moschella

I guess Tim Burke thinks that just like in the old days he’s an 800 pound newspaper mogul who apologizes to no one. This attitude is not just plain thoughtless and rude, it’s bad business. I was responsible for saving the Palm Beach Post a lot of money. Had that article showing Malcolm X as the source of the quote run in Monday’s newspaper, I would have had no choice but to file a lawsuit against Cox Enterprises/Palm Beach Post. My damages would have been huge and so would have been the cost to the Palm Beach Post. Tim Burke dodged a bullet thanks to my catching his huge mistake before it was too late.  “Tim, it’s still not too late. How about telling me you’re sorry?

Online Car Shopping Service, TrueCar.com Caves in to Pressure by Auto Industry

You, the car buyer, just lost a big battle that you never even knew was going on! Regular readers of this blog and my Hometown News column, and listeners to my radio show know that I praised TrueCar.com for “Changing the Way Cars Will Be Bought in the 21^st Century”.  TrueCar was started by a young entrepreneur, Scott Painter, in 2008 and has grown remarkably up until now. Last year about 235,000 cars were bought through TrueCar, 2% of total USA car sales. Private investors have poured $275 million into the company. Why was it such a good company? For the first time ever, a car buyer was guaranteed the absolute lowest price in the market for any make and model. Once car buyers heard about TrueCar and understood what they did, it was a “no-brainer”. To buy a car any other way was insane. TrueCar was the best thing that ever happened to car buyers.

Now, it’s just like every other online car buying service, back under the control and manipulation of the car dealers. Last week TrueCar knelt down and surrendered to “The Man”, the power establishment of large car dealer groups like AutoNation, manufacturers like Honda, and politicians and regulators in the pockets of dealers in states like Colorado. As the pressure mounted, TrueCar was forced to stop doing business in 14 states. Their dealership members plunged from 5,200 last year to 4,200 this year. TrueCar makes their money, not from the car buyer, but from the dealer. The dealer pays TrueCar $299 for each car they sell on their program. The politicians, manufacturers, and large dealer groups caused many dealers to drop out of the program costing TrueCar millions of dollars.

Last week TrueCar stopped posting the lowest price in the market for you to choose. Instead, they offer a “target price”. A target price is higher than the lowest price in the market. To get the “lowest” price, you now have to contact the dealer. You’re not much better off than you are with no buying service. The MSRP on every new car window sticker is a “target price”, but you have to contact the dealer to get the lower price. I’ll agree that the MSRP is probably higher than the target price, but the principal is the same. If you have to negotiate with each dealer to get the real lowest price, how is the target price any better than sticker price?

Now, when you go to www.TrueCar.com and try to find the lowest price, you will find all of the dealers listed have the same “target price”. If a dealer submits a price above the target price, he is not listed. Before this capitulation to the power brokers, you had the price that each dealer in your market had submitted to TrueCar as his absolute lowest price. Now that price is hidden from you, the car buyer, only the car dealer who submitted the price and TrueCar know the lowest price.  In fact, other dealers don’t know the lowest prices submitted by their competition. They know only their own lowest price. This removes the very essence of what formerly made TrueCar, the car buyers’ best friend…COMPETITION between car dealers.

Now a TrueCar customer is right back to the old way of buying a car which is to call, email, or personally visit a dealer and ask him what his best price is. This invites the same old run around that you’ve probably experienced hundreds of times. “Are you prepared to buy today? That car is no longer available but I have another one just like it. When you’re ready to buy, come back and I’ll beat any price you get. That $999 is our “dealer fee”. All dealers charge this and we’re prohibited by law from removing it. The pinstripes, nitrogen in the tires, paint sealant, and fabric coat are an extra $1,799.”

I’m not a lawyer, but this whole thing sounds like price-fixing to me. A free market place is supposed to allow and encourage sellers of the same product to offer their lowest price to the buyers. Buyers are supposed to be enabled to easily choose the lowest price from among those offering those products. When sellers and manufacturers conspire to thwart this process, it’s called price fixing. Right now you can go on the Internet, click on www.Amazon.com  and dozens of other online retailers and select most any product (except a car) and find out the names of the sellers and the prices sorted from the lowest to the highest. Of course, you can also read customer reviews and determine shipping costs before you make your final decision. What makes cars exempt from that free market place process?

I’m especially disappointed in Scott Painter, founder and CEO of TrueCar because he had a really great concept, an “out-of-the box”, genius idea.  He could have been the Steve Jobs of online car buying services and changed the way cars were bought all over the world, just like Steve Jobs changed the world with the Macintosh, iPod, iPhone, and IPad.  But unlike Steve Jobs who stood up to enormous pressure from the establishment and most everyone telling him this can’t succeed, Scott Painter threw in the towel to make the fast, sure buck and avoid the conflict that lay ahead.

The good news is that someone will come along, take Scott Painter’s idea and have the courage and perseverance to make it work. That person will change the way cars are bought in the 21^st century. 

Car Dealers’ Bogus Lowest Price Guarantee

On my weekly radio show, I introduce myself as “the recovering car dealer”.  I say this because many years ago I employed many of the same unethical and deceptive advertising and sales practices as a lot of dealers do today. For a lot of reasons I won’t go into now, I finally “got it right” and in many ways, like a recovering addict, I’m preaching integrity like an addict preaches sobriety. At an AA meeting what lends credibility and authenticity to the message is that it’s coming from those who have “been there and done that”. Unless you've hit the bottom and struggled back to sobriety, you can’t really assure another addict that it can be done. An ex drunk or drug addict also knows all of the “tricks of the trade”. He knows how he deluded himself into believing he was not addicted. He knows how he rationalized his behavior as being acceptable and how he blamed his family and friends for not understanding him.

Years ago, I advertised a $500 lowest price guarantee. I did this for several years but I only paid the $500 out once. It wasn’t because nobody ever beat my price. It’s impossible for any retailer to always have the lowest price. I began to feel nervous because I never did pay out the guarantee. I was the first car dealer that I know of to come up with this idea. I wasn’t sure how the regulators would look upon a guarantee that was never paid out. The regulators know that car dealers are competitive and that no one dealer always sells his cars for less than his competition. If that were true, there would be only one car dealer of each make in a market. I instructed my sales managers to be sure and pay the $500 to anyone who bought a car from another car dealer because he beat our price. It was only after practically threatening my managers that we finally paid just one $500 guarantee.

What I learned from this experience is that it’s against “the nature of the beast” for a car salesman, manager, or dealer to admit that they lost a sale to a competitor. They will rationalize, ignore, or even lie to avoid confessing that they lost the sale. My lowest price guarantee was actually fair by today’s standards. We had a printed guarantee form that showed our price and left a blank for the other dealer’s price. We kept a copy and gave a copy to the prospective customer. Our conditions were that the customer return with a signed buyer’s order from the competitor and allow us the right of first refusal. This is what makes paying this guarantee virtually impossible. No competitor is going to give a prospective customer a final price knowing that the customer will take it back to the other dealer for a chance to beat his price.

Today, these dealers with the lowest price guarantees have raised the ante to as much as $3,000 or, if you can beat their price, will give you the car free! And they’ve added another condition which makes it totally impossible for you to ever earn their guarantee. In the fine print, this condition is “dealer reserves the right to purchase the exact vehicle the competitive dealer offers to sell for a lower price from that dealer”. What this means is that unless the dealer’s competitor agrees to help the customer “steal” the business from him by selling that same car to him, the dealer offering the guarantee is under no obligation to honor that guarantee. Take it from a guy who has been a car dealer for 44 year. If a competitor called me and said, “Earl, I’ve got Mr. and Mrs. Jones in my showroom. They’re the folks that you gave a price of $19,766 on this VIN number Camry. I can’t beat that price, so please sell me that same car for the same price so that I can sell it to Mr. and Mrs. Jones. If you don’t, they’ll buy the car from you and I’ll have to pay Mr. Jones my $3,000 lowest price guarantee. And I know you wouldn’t want that to happen to me, your competitor. What do you say, Earl?”

The real reason for the lowest price guarantee is to catch car shoppers off guard. They assume that the prices they are being quoted are the lowest in the market. Or else, how would that dealer dare to offer $3,000 if they beat his price or even pay for the car? By assuming that they are getting a good price they are less likely to shop and compare it. Repeat after me: “I SWEAR NEVER TO BUY A NEW CAR WITHOUT SHOPPING AND COMPARING THE PRICE WITH AT LEAST THREE CAR DEALERS”.

Do you agree with my premise that it’s impossible for any retailer to always have the lowest price? Then it would logically follow that dealers offering this guarantee will have paid out a few. I have a guarantee for those dealers. Mr. Dealer, prove that you’ve paid your cash guarantee to a customer who beat your price on a new car sale and bought the car from your competitor, and I’ll donate $500 to your favorite legitimate charity. To prove this, all of the paperwork will be submitted to an arbitration board of three CPA’s, one chosen by you, one by the customer, and one by me. To avoid you “setting me up” this offer is restricted to sales from the date of this column, 1-30-12,  back one year.

Ways Dealers and Manufacturers Deliberately Distort Selling Prices

Before 1958, there was no such thing as a manufacturer’s suggested price (MSRP) on cars. We can thank the late Senator Mike Monroney for changing this with what has become known as the Monroney Label. Congress passed this into law on July 7, 1958 with severe penalties for violating the law. A dealer or manufacturer found guilty of removal or alteration of the label can be fined up to $1,000 and/or imprisoned for up to one year. It may be removed only by the purchaser for the vehicle.

The purpose of the Monroney label was to give consumers the ability to compare prices between different dealerships on the same make, model and equipped car. If you were shopping for a new Chevy Impala with power steering, power brakes, AC and other specified options, you could compare “apples and apples” at several different Chevrolet dealerships and make your buying decision on which gave you the biggest discount from MSRP.

Unfortunately, like so many well intended consumer laws, this law is no longer enforced. I do a weekly mystery shopping investigation of competing car dealers in South Florida and I know of at least one dealer that removes his Monroney labels and replaces then with his own retail price. The regulators don’t know about this and they don’t seem to care. Virtually all of the dealers add their own label next to the Monroney label to artificially increase the suggested retail price by thousands of dollars. The dealer label is disguised to resemble the Monroney label and, being adjacent, many customers assume it’s the official MSRP. More often than not, customers never look at the Monroney label on the car they buy. This means that you probably can’t shop and compare the car you want by discounts from the retail asking price which is what the U.S. Congress intended with the Monroney label. 

But what about comparing the dealers’ profits by measuring his markup above cost? You can find out what the invoice is on the car you want to buy very easily. This information is available on the web and, strangely enough, many car dealers will gladly show you their car’s invoice. The reason the dealer will willingly show you his invoice is because it does not reflect his true cost. In fact, it reflects thousands of dollars in profit on the average. This is where the manufacturers join the conspiracy. The manufacturers add thousands of dollars to their dealers’ invoices which they subsequently “kick back” to the dealers monthly. You probably have heard the term “holdback” which was the original 1%, 2% or 3% that is added. There are many other additions now including advertising fees, dealer prep fees, interest fees, and extra holdbacks on port installed accessories. The biggest item that dealers get back monthly is “dealer cash” which is a secret rebate on different models that the consumer doesn’t know about. I’ve seen dealer cash rebates as high as $10,000. In fact, there’s a dealer cash rebate known as the “stair step incentive” which can pays the dealer as much as hundreds of thousands of dollars every month. He gets paid an amount per car retroactively on every car he sells in one month if he hits his sales objective. Theoretically, a dealer can sell one car, at or below his invoice, and make an effective profit of tens of thousands of dollars…even hundreds of thousands!

As if all of the above isn’t enough, I haven’t even mentioned dealer fees or dealer “packs”. If you read this column or know me you know that my war against the dealer fee has been going on for 14 years. The dealer fee is just more profit to the dealer that he surprises you with when you sign your paperwork to take delivery of the car. It varies from a low of around $500 to high of $2,500, but there is no legal cap in many states.

I normally wouldn’t mention the dealers “pack” because it’s not something that affects the MSRP or is kicked back from the manufacturer to the dealer. A caller to my radio show last Saturday brought this up and I’m covering it in an abundance of caution just in case others would like to understand it. However, it possibly could affect the price you pay for the car, but not in the same way distorting the sticker price and the invoice does. A “pack” is an amount the dealer subtracts from the profit a salesman makes on a car he sells. A typical pack would be $700. A salesman sells you a car on which the dealer makes a profit of $1,700 but before he pays his salesman the typical 25% commission, the dealer subtracts the pack. The salesman is paid 25% of $1,000, not $1,700 saving the dealer $175 in sales commission expense.  Years ago packs were used by dealers to trick their sales people into thinking they were earning a higher percent commission than they really were. Since then, federal wage laws have been passed that require full disclosure of packs so that sales people do know exactly what their percentage is. However, I’m sure that there are some dealers still ignoring the law and tricking their sales people just like their customers. But, packs continue to exist even though there is no good reason for them. One could argue that the salesman will sell the car for more with a pack than without one, but the dealer and the sales managers generally set the price, not the salesman.

What does all this mean for you when you buy your next new car? Nothing more than what I’ve already warned you about in previous columns. Pay no attention to dealer advertised prices, window sticker prices, or dealer invoices. Never make a buying decision on the size of a discount from “retail” or markup over “invoice”. Make your buying decision by picking the lowest selling price from at least three different dealers on the exact same make, year, model, and accessorized vehicle. Separate your trade-in valuation and financing from the purchase transaction and get at least three bids on both of these too.