Open Letter to all Auto Manufacturers: Get Sincere About Customer Satisfaction

Dear, GM, Ford, Chrysler, Toyota, Honda et al,
Isn’t it about time you “got real” about how your dealers satisfy their customers? I know you pay lip service to this, just like your dealers do. Ask any auto manufacturer CEO what the most important thing “in the world” is and he will say “satisfying our customers”. This is the same verbal assurance every car dealer will give, especially when they’re being interviewed by the media. But in your hearts, you know that profit, market share, and volume are numbers one, two, and three in your books and sincerely satisfying your customers is lucky to be number four.

Now I know you only build the cars and it’s your dealers who sell them to the public. The dealer is your customer and the car buyers are the dealers’ customers. Therefore it must be the dealers’ fault that car buyers rank auto retailers as the least ethical profession, tied with Congressmen and lawyers. I’m going to tell you why that isn’t the case. I’m going to tell you why you bear the ultimate responsibility for why car buyers fear, distrust, and dislike your dealers.

Reason #1: You measure your dealers’ success and reward them primarily by how many cars and parts they buy from you. High volume dealers “can do no wrong” and you look the other way when they resort to unethical advertising and sales practices. I challenge you to show me one high volume dealer whose franchise contract you terminated or didn’t renew based on bad customer satisfaction. What kind of message does that send to all of the other dealers? The message is clearly that as long as I sell a lot of cars, how I do it doesn’t really matter to my manufacturer. Most of my competitors are using sleazy, bait and switch advertising to sell lots of cars; therefore I have no choice but to follow suit.

Reason #2: To save face, you measure your dealers’ customer satisfaction by email and snail mail surveys that you know can be, and are, manipulated by your dealers. With email surveys, dealers can simply “make a mistake” when they record an angry customer’s email address. Or, worse yet, they can fabricate an email address, angrycustomer@yahoo.com which comes to the dealership address. When the survey arrives, they rate their dealership 100%. Some manufacturers were forced to recognize the fact that this was being done and scolded the dealers when they traced the IP addresses from hundreds of customers back to the dealership. Scolded dealers now use PC’s at diverse IPs like libraries and employees’ homes. For snail mail and email, dealers offer incentives like a free tank of gas for bringing in a blank survey which the dealer fills out and mails in. Or the car or service salesman simply intimidates the customer into giving the dealers a good score, “If you give me a bad survey, I might lose my job!”

Reason #4: Your compensation plans from the top down are designed to reward only high car and parts sales. In those few compensation plans that do reward high customer satisfaction scores, they work against you because it’s so easy for the dealers to cheat on the surveys. Your employees either look the other way or actually encourage the dealers to cheat. All they care about is their dealers getting high customer satisfactions scores and don’t care or want to know how they do it.

Reason #5: Most auto manufacturer senior executives don’t have a clue about what’s going on in the trenches of car dealerships. They don’t see the unfair, deceptive and even illegal advertising and sales practices. Their vision of what’s going on in the auto retail world is largely from their computer reports which are based on flawed data from manipulated customer surveys. Or, they get their input from big volume dealers who often have the same problem of not really knowing what’s going on in the trenches. Large volume dealers, the heroes of the manufacturers, are usually out of touch just like the senior manufacturing executives. There are two reasons that large dealers and senior manufacturing executives don’t take action to honestly improve customer satisfaction. One reason is that some truly don’t know. The second reason is that they know, but don’t “want” to know because they would lose their “deniability” if it ever comes out.

There are other reasons and I could go on and on but I think five reasons are enough to get your attention. I have two messages for you. The first is for the executive who truly doesn’t know what’s going on in the trenches of your car dealers. Visit several of your car dealerships anonymously. Don’t go to the dealerships near your headquarters around Detroit or Torrance, but out of the area to dealers who never see a senior factory guy. Pretend to buy a car and actually drive your car in for service. You will be shocked, and at last enlightened. My second message is for those senior auto executives who know damned well what’s happening in the trenches, but pretend not to in order to maintain deniability. I’ll speak your language. Sincerely satisfying your dealers’ customers will determine your future success, compensation, and bonuses in the very near future. This is the 21st century and consumers are a lot smarter and demanding then they were in the 20th. They are very sensitive to being ripped off and the only reason they have accepted it this long is that they had no choice. Most car dealers took advantage of them and all manufacturers tolerated it. More dealers will begin to do business the right way because it “works” and you will see their incredible success. If you want to succeed in your position you will make those changes in the way you reward and accept those dealers who treat their customers right and those who don’t.

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 www.IngalsbeSpotDelivery.com. 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.

I DARE Car Dealers to Answer Just One Question about their Dealer Fee

Why don’t you include the profit you make on your dealer fee in the price of the car you quote to your customer? If you will answer this question truthfully then I pledge never to raise the issue of the dealer fee again.

The reason that I do hear from car dealers and the Florida Auto Dealers Association, FADA, as to why most car dealers charge a dealer fee is that it’s an “economic necessity”. Dealer margins are so low, the economy is so bad, and the car buyers are so armed with information on dealers’ costs and profit margins via the Internet that dealers need the extra profit they make from their dealer fees. OK, I’ll give you the benefit of the doubt and stipulate that this is a fact. I won’t even argue that I don’t charge a dealer fee and have been profitable for many years and even through this Great Recession.

Now answer my question because you can still charge the extra profit you must have to “survive” economically if you simply include your dealer fee in the prices of the cars you sell. Don’t add the dealer fee to the price if the car after the customer commits to buy at a lower price. Don’t hide the amount of your dealer fee in the fine print. Don’t tell the customer that the price is “plus tax, tag, and ‘fees’” fooling her into believing “fees” are state, federal, or local taxes. Don’t tell the customer that “all dealers charge a dealer fee” which you know to be untrue. Don’t tell her that the law requires that you must charge her the dealer fee because you charge others, which you also know to be untrue. Don’t tell the customer that the dealer fee is not a profit but expenses that you must recoup like doc fees, preparing the car for delivery, and administrative costs. When you went to school you should have learned in Economics 101 that the definition of profit is “the difference between the selling price of a cost or service and its total costs”. Besides, you don’t even pay to prepare your new cars for delivery because you are reimbursed by the manufacturer and you are not allowed by law to charge doc fees.

When I ask car dealers or FADA officials this question they always give me the same answer…Hamma, Hamma, Hamma, just like Ralph Kramden of the Honeymooners. You know what I mean…”the deer caught in the headlights” or the politician on “Meet the Press” when the moderator shows the video of something the politician said on camera two weeks ago that directly contradicts something he just said.

OK car dealers and FADA, if I’m wrong about this, here’s your chance to shut me up about the dealer fee forever. All you have to do is give me a truthful answer to this question. Why don’t you include the profit you make on your dealer fee in the price of the car you quote to your customers?

Negotiating to Buy a Car

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

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

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

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

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

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

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

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

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

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

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

What’s My Trade-in Worth? Not Very Much at CarMax

I've written about trade-in values previously, but a recent experience drove home how scary it is for car buyers to get an accurate and fair dollar amount for their present car.

CarMax is the largest retailer of used cars in the world. They also sell new cars in a few of their locations but used cars are their forte. As a Toyota dealer for 37 years, I routinely shop my competition as do most businesses. Last week I sent my mystery shopper to CarMax in Boynton Beach. He drove there in a 2004 Mazda6 and feigned an interest in buying a 2010 Mazda6 using his old car as a trade-in. The CarMax salesman, Paul, gave our shopper a price of $14,999. That was plus a $199 dealer fee, and a $12 markup on the electronic filing fee. In addition to that was the standard sales tax and tag and registration fee. The next step was to appraise our shopper’s 2004 Mazda6 trade-in. This process takes about 30 minutes and the appraisal was for $2,000. Now, CarMax is one of the few car dealerships that truly don’t haggle over price, neither the price of the car you’re buying or the car you’re trading. Some dealers advertise that they have fixed prices with no haggle, but they will haggle if you try.  Our shopper tried to haggle, but to no avail. 

Here’s where it get interesting. More people buy used cars, sell used cars, and trade in used cars to CarMax than any other car dealer in the world. Because of their no-haggle, no-hassle one-price policy and very friendly and ethical reputation, they have grown to dominate used car sales worldwide.  CarMax doesn’t have the lowest prices, but they have the highest trust of their customers. They even have a 5 day money back guarantee on the cars they sell…no questions asked. Other dealers advertise guarantees, but it’s always an “exchange” for another car, not your money back.

We carefully appraised the 2004 Mazda6 before we visited CarMax. Three of our appraisers agreed that the wholesale market value was $3,000. One guide book, Kelly Blue Book valued it at $3,500. When I found out that CarMax had appraised it for one-third or $1,000 less than the true value, I was incredulous. I thought we might have made a mistake, but upon careful scrutiny I was reassured that the $3,000 value was accurate.

One of my appraisers was a former appraiser for CarMax and I discussed this discrepancy with him at length. Here’s what I discovered. CarMax adjusts all of their appraisals downward by a factor dictated from their central corporate office. This factor is called the “Appraisal Cost Adjustment” or ADR and it is based on an algorithm or matrix which is determined by CarMax’s central office. The local CarMax appraiser appraises a customer’s car for the true market value and then subtracts the dollar amount dictated by the ADR. The bottom line is that our mystery shopper’s trade-in was reduced by about $1,000 to just two-thirds of its true wholesale market value. I say “about” because I don’t know what the CarMax exact appraisal was and I don’t know exactly what the CarMax ADR is. However, I can tell from looking at the 2012 fiscal year CarMax annual stockholder’s report that CarMax averages $953 wholesale profit on every used car they sell. This means that they pay their customers, on the average, $953 less than the true wholesale value.

As a competitor to CarMax, this is amazing to me. Most car dealers actually lose money on the average wholesale cars they sell at auction. The goal of most dealers is to break even on wholesale profit or loss. The reason for this is that attempting to appraise a car below the true value can cause the dealer to lose the sale of the new car or used car they are retailing. This is simply because the dealers’ competitors will offer that customer higher trade-in allowances and win the business. In their last fiscal year CarMax made $300 million in profits on wholesaling cars that their customers traded in. Put another way, CarMax made “double profits” on their customers…a profit on the car they sold the customer and a profit on the car the customer traded in. Now remember, I’m not talking about making a retail profit on the customers’ trade-ins. This is something all dealers try to do, including me. I’m talking about making a wholesale profit on those trades that they couldn’t or wouldn’t retail. This kind of wholesale profit is unprecedented in the retail/wholesale auto industry.  Now, please understand that car dealers will deliberately under-appraise a trade-in when they think they can “get away” with it. The common vernacular for this is “stealing the trade”. This occurs when a customer is so focused on getting a very low price on the new or used car they’re buying that they neglect to carefully consider their trade-in allowance. Also, trade-in allowances can be inflated beyond reality through the use of artificial markups on the new car via addendum labels, or, as I call them “phony Monroneys”. But, most car dealers average about $100 loss on every trade he wholesales vs. CarMax making an average of $953 profit.  I can understand now why Warren Buffet bought stock in CarMax.

Now don’t get me wrong, I’m not accusing CarMax of doing anything wrong. There’s absolutely nothing illegal or unethical about allowing a customer below market value for her trade-in…any more than it’s illegal or unethical to charge a higher price for the new or used car you retail than your competition does. CarMax does a lot of things better and smarter than most other car dealers which has allowed them to earn the trust of their customers. CarMax customers, not only trust them, but they look forward to a true haggle, hassle free buying experience. You combine all of that and it gives CarMax something called “pricing power”. Customers are willing to pay CarMax a higher price for the car they are purchasing and accept less for their trade-ins.

However, my advice to CarMax customers is to “have your cake and eat it too”. Enjoy the haggle, hassle free and trusting environment of CarMax, but shop your trade-in with at least three other sources. You will likely be able to sell your car to another dealer of the same make as yours for more than CarMax will allow you. Had all of CarMax customers done that during the last year, they would have saved an average of $953 per car, totaling $300 million! 

The Dealer Fee… “Just Following Orders”

For the benefit of new readers, the “dealer fee” is the dirty little secret of most Florida car dealers. It’s an extra charge ranging from about $400 to over $1,500 and averaging about $800 that the dealers surprise you with after you've been quoted a lower price. If you want to learn more about this rip off to the car-buyer, just Google “dealer fee” and “Earl Stewart”.

Battling the dealer fee for years, I've often wondered why so many car dealers, sales managers, and sales people could go along with this unfair and deceptive sales practice. I truly believe that most people (including lawyers, politicians, and car dealers) are inherently good, honest people. I have to ask myself why an honest person would quote a price that he knows is a lot lower than the real one to a customer. 

I was watching CNBC and there was a discussion about the “Milgram Experiment”. This psychological experiment was conducted at Yale University by Professor Stanley Milgram. What motivated him to perform the experiment was to discover why millions of good Germans followed the orders of evil Nazi’s like Adolph Eichman while conducting the Holocaust during WWII.

The experiment involved volunteers called “teachers” who questioned other people called “learners”. The teacher asked the learner to correctly match certain pairs of words. The teacher and learner could not see each other, separated by a partition. The experimenter instructed the teacher to push a button sending an electrical shock through the leaner for each incorrect answer. The initial voltage was very low and not enough to cause any discomfort. However, the experimenter told the teacher to increase the voltage with each successive wrong answer. The learner and the experimenter were in on the ruse, which was that no electricity was actually flowing. The machine was connected to an audio device which emitted recorded shouts of pain when the fake voltage reached higher levels…all the way to 450 volts.

The amazing results were that 65% of the “teachers” went all the way to 450 volts, hearing screams of pain. They did this even though they believed their actions were causing intense pain and may also cause permanent bodily damage.

Psychologists ascertained that there were two reasons for this. The first is called “the Agentic State Theory”. This is the “I was just following orders” reason as repeated often in the Nuremburg Trials. The essence of obedience consists in the fact that a person comes to view himself as the instrument for carrying out another person’s wishes, and he therefore no longer sees himself as responsible for his actions.

The second reason psychologists believe accounted for this behavior is the “Theory of Conformism”. A person who has neither ability nor expertise to make decisions, especially in a crisis, will leave decision making to the group and its hierarchy.

So there you have it. Car sales people follow the orders of their sales managers, who follow the orders of their general manager who follows the orders of the owner of the dealership. But why do the owners, the dealers, trick customers with the dealer fee? They aren’t following anybody’s orders. The car dealers fall under the “Theory of Conformism”. They feel that as long as everybody else is doing it, it must be OK for me to follow suit.

A great local example of this started about two years ago when Ft. Pierce Nissan began charging a $799 dealer fee plus a $750 freight fee, totaling $1,549. Napleton Nissan in Riviera Beach picked up on this and matched Ft. Pierce by adding $750 freight to their current $795 dealer fee. Next, Royal Palm Nissan in Wellington followed suit. Then most Nissan dealers from Ft. Pierce to Riviera Beach add over $1,500 to the price you are quoted on a Nissan. Recently, I haven’t seen advertisements adding the double charge for freight to the dealer fee and I suspect the Attorney General’s office may have had something to do with this.

Now you can understand why that smiling salesman can so guiltlessly throw the lever causing 450 volts of electricity to course through your body which is about the way most car buyers feel when they realized that they’ve been deceived. The salesman was “just following orders”.

Silent Majority Wants 343 ft. Flag Honoring First Responders of 9/11

The flag honoring the First Responders of 9/11 will go up and it will be the tallest American flag in the World. I'm writing this from my hotel room in New York City where I had lunch on Tuesday, June 5 with Mayor Rudy Giuliani. We discussed the First Responders of 9/11, he is totally supportive of the flag, and I will invite him to speak at the flag-raising.

The flag might not go up in Lake Park, FL but it will go up somewhere nearby and soon. I will give the town commission of Lake Park one more chance to understand what this flag will mean to Americans and the World, but I'm confident that other local municipalities would be honored to be the home of such a tribute to our First Responders who willingly gave their lives to save other Americans. I firmly believe that a majority of Lake Park residents want the flag to be in their community. As happens all too often, the vocal few are mistaken for the silent majority and these “professional naysayers” got the ear of the Lake Park town commission.

I have spoken with elected officials in other towns and cities in Palm Beach and Martin County who are very positive about being the home of this memorial flag. Although I would l prefer to keep the flag in Lake Park where my business has been for 37 years, I will change the location if I have to. Lake Park borders North Palm Beach, Palm Beach Gardens, Riviera Beach and Palm Beach County. In fact, Martin County is just a few miles north, bordering Jupiter and Tequesta which Jupiter Inlet Colony borders and is where I live.

The flag will be so tall (I've decided to make it 343 feet tall rather than 341 because 343 is the exact number of firefighters who died at 9/11) that whether or not it's in one municipality or another, it will be visible to all for many miles.

The objections that have been raised against this flag are not surprising. I've been told all my life that I can't do things but I do them anyway and successfully. People laughed when I told them I would become the largest volume car dealer in Palm Beach County because my dealership is in the tiny town of Lake Park, population about 9,000. I was told that I would never dare put red phones all around my company so that any customer can call me personally anytime. They said the same thing about giving my home telephone and cell phone numbers to all of my customers. They told me that if I did a TV commercial in Spanish, it would tarnish my reputation and hurt my business but my business thrived.

It's always interested me how my ideas are attacked. When I made the Hispanic TV commercial, I was attacked from the far right and defended by the far left. With the flag, I'm attacked from the far left and defended by the far right. The extreme left and right are always the most vocal and visible. What neither "far side" understands or cares about is the vast silent majority who, in the long run, determine the direction in which we move. The silent majority hears and sees what the left and right are making all the noise about, but they are too busy going about their daily lives, raising kids, going to work, and enjoying life to immediately "jump into the fray". However, they are not too busy to get involved when they have to. They usually vote the best candidates into office and they vote with their pocketbooks when they buy products and services. If I had to tell you one thing that has been responsible for my success it's that I think like a member of the silent minority but I've not always been silent. Maybe I should think of myself as a "spokesman" for the silent majority. 

When the flag honoring the 9/11 First Responders is raised soon in one of our local communities, I and the silent majority will prevail as we usually do and the ranting of the fringes will be long forgotten. Florida, Palm Beach County (or Martin) and a local town will be known as the home of the World's tallest American flag and a memorial to the First Responders of 9/11. The vast silent majority will benefit all economically and righteously even the fringes who always protest progress.
www.earlstewarttoyota.com

Why Do Some Reporters and Editors Deliberately Misreport the News?

I was very disappointed to read the slanted news article in Sunday’s paper resulting from Palm Beach Post reporter, Bill DiPaolo’s, interview of me last Friday. Mr. DiPaolo called me because he had heard about my efforts to erect the tallest American flag in the World to honor the fallen heroes of 911, the firefighters and policeman who sacrificed their lives to save others.  Below is the letter that I wrote last week to the Lake Park town commissioners:

Dear Commissioners,

I am writing you in hopes of getting your support on what I feel is the most important and meaningful endeavor I have ever undertaken. As America winds down a decade of war, I cannot help but feel there is something we should do as a community to honor the sacrifices made by our soldiers and by the first responders of 9/11. I am proposing to erect a monument in our town that will serve this purpose. I intend to install the tallest flag pole in the United States of America and fly what will be the tallest American flag in the entire world on top of it, here, in Lake Park, Florida. I will assume 100% of the cost of its construction, installation, and continued maintenance. The pole will be constructed by a licensed and bonded company that specializes in flag poles of this scale and it will be installed by a local contractor. Once complete, the height will reach three hundred and forty-one feet and will fly an American flag that is sixty feet by thirty feet.

This flag will benefit our town in numerous ways, among which is the draw it will have on visitors to south Florida: it will have very positive impact on local tourism. It will serve as a source of pride in our community, particularly among each of us who were so profoundly affected by the attacks of 9/11 and who call Lake Park their home.

Once installed, I will arrange a dedication ceremony and the monument will be dedicated to the living and fallen first responders of 9/11. This will be tastefully done, as will the continued display of the flag – without the taint of commercialism or hype.

I am asking for your support because I believe this requires people with a vision of the possible to not think that this is “crazy.” I’m used to being called crazy, but I know that credit for my successes in life and business goes to my craziest ideas. I am asking you to believe in this crazy idea. I am asking for a leap of faith.

Sincerely,

Earl Stewart

You can read the PB Post article by clicking on this link, www.PBPostFlagArticle.com. I will also post the article in its entirety at the bottom of this blog post. The headline has changed because I strongly protested it to the PB Post, but it’s already run in last Sunday’s paper and the text of the article remains slanted and inaccurate.

I was disappointed because what DiPaulo reported was not what I told him. After reading my letter above to the Lake Park town commission, you can see there’s no resemblance between that and DiPaolo’s article. My main motivation for erecting this flag is to honor the fallen heroes of 911 and to bring attention to this flag which will be the tallest American flag on the Earth. By bringing attention to the world’s tallest American flag, awareness will also be brought to the USA, Florida, Palm Beach County, the town of Lake Park but most importantly the 422 first responders who died. Yes, of course, it will also bring recognition to me because the flag was my idea, it’s on my property and I paid for it. But to write and headline the article that a “Car dealer seeks towering legacy in flagpole” is maliciously false and libelous. Florida, Palm Beach County, and Lake Park all will benefit by those who travel to our community to see and take pictures of the World’s tallest American flag which is dedicated to honor our fallen 911 heroes.  

I did say to DiPaolo that “I would be less than honest if I did not admit that having the world’s tallest American flag flying above my property would bring awareness to me and my business too’. I did not think that he would take that honest admission and make it the focal point of the “news” story.

Isn’t it interesting that nowhere in the article does DiPaolo mention the American flag, only the flagpole? In fact, this is not the tallest flagpole in the world, there are taller flagpoles flying the flags of other countries. I specifically told him that and suggested that he Google tallest flags and flagpoles. He said that he would. He also makes only a slight, passing mention of the fact that I’m dedicating the American flag to the fallen heroes of 911. DiPaulo also brought up the long forgotten feud that I once had with one of the Lake Park town councils many years ago. This had to do with the ire of a very few Lake Park residents and councilman who resented my using the name of North Palm Beach in my marketing. I believe DiPaulo supported that view at that time and decided to resurrect the argument for this article…presumably in an attempt to defeat my request for permission to erect this American flag.  

I believe that DiPaolo’s comparing this flag to Donald Trump’s flagpole was a deliberate attempt to make what I’m attempting to do appear to be an ego enhancing marketing stunt which “the Donald” is famous for.

I’ve been interviewed by the press and other media hundreds of times over the years including national and local and most often by the Palm Beach Post. Ninety-nine percent of the time I’m quoted accurately and the story is written honestly. Interestingly, recently there was another false article written about one of my employees by a Palm Beach Post reporter when the reporter falsely attributed my service manager’s favorite quotation to “Malcolm X”, the infamous racist. The editor of both stories was Nick Moschella…sheer coincidence?   I demanded an apology from Moschella then and I never received one. I won’t waste my time asking for one again. You can read the article I wrote about this, “Never Having to Say You’re Sorry if you’re the PB Post”. 

Here is the Palm Beach Post article in its entirety:

Car Dealer Seeks Towering Legacy with 341 Foot Flag Pole

By BILL DIPAOLO

Palm Beach Post Staff Writer

LAKE PARK — Earl Stewart wants to put up a 341-foot flagpole - almost five times as tall as Donald Trump's 70-footer at Mar-a-Lago - at his Toyota dealership on U.S. 1.

"Yes, it's self-serving. I'm 71 years old. I want to build something that will be around for a long time," Stewart said.

The steel pole would be about 5 feet in diameter at the base and would cost about $800,000. The flag, 50 feet by 30 feet, would be about twice as large as Trump's. It would be dedicated to 9/ 11 victims, Stewart said.

The pole must be built to withstand hurricane-force winds. Approval from the Federal Aviation Administration is required. The proposal is scheduled to go before the town commission for approval at 6:30 p.m. Wednesday .

Stewart could face resentment from town officials and residents about his dealership advertisements. In television commercials and print ads, Stewart states his red-and-white dealership is in North Palm Beach. In fact, the dealership is in Lake Park.

"That's upsetting to me. He should be proud to be in Lake Park," said Lake Park Commissioner Steve Hockman.

The ads anger many residents, said Chuck Balius, who served 12 years on the commission before retiring in 2008.

"People would stand up and boo (Stewart) when he stood up to speak at commission meetings. A lot of people complain about it," Balius said.

Stewart said he uses the North Palm Beach address so potential customers will know where his dealership is.

"When people hear Palm Beach, they know where it is. Many do not know where Lake Park is. It's good marketing sense," Stewart said.

He said he does about one-third of his sales on the Internet. The dealership sells about 400 used and new vehicles a month and employs 146 full-time workers, he said.

The flagpole would be about the same height as the 32-story Trump Plaza in downtown West Palm Beach, just north of the middle bridge on Flagler Drive. It would be almost twice as high as the 180-foot Seacoast Utility Authority water tower at Hood Road and Alternate A1A.

Negative feelings about the ads should not play a role in deciding the flagpole issue, Hockman and Balius agreed.

Issues that should be considered include the reaction of nearby residents. Commissioners also must determine whether raising and lowering the giant flag, especially on windy days, could affect traffic on U.S. 1. And the base's location must ensure that if the pole falls, it won't land on U.S. 1, nearby buildings or utility lines, Hockman said.

"I think it would put Lake Park on the map. But we have to look at all the pros and cons," Hockman said.

bill_dipaolo@pbpost.com

www.earlstewarttoyota.com

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.