Beware of Car Dealer Direct Mail Advertising

Of course, you should be careful of all advertising…newspaper, TV, and radio, but direct mail can be especially deceptive. The reason this is so is because direct mail usually “flies beneath the radar” of the regulators. There are so many ads in violation of rules and laws that the regulators are overwhelmed. They focus on the most visible ads, often the ones that they see themselves in the newspaper or on TV. Direct mail represents a very small percent of total advertising. One reason for this is that it is considered by many advertising agencies to be too expensive and relatively ineffective. I believe that the only way to make direct mail effective for many advertisers is to use deception.

I have a couple of direct mail pieces on my desk and will cite some examples of this deception. “We’ll will buy back your present vehicle for up to $5,000 over current Kelly Blue Book Value on trade towards the purchase of a Brand New Toyota or Pre-Owned model.***” The asterisk is for the very fine print disclosure on the back of the letter which reads: On select models. Discounts and rebates will vary from model to model. Of course, with the two words “up to” in front of the $5,000, no disclosure is really necessary. Buying back your present vehicle for $1 over current Kelly Blue Book Value is technically “up to”$5,000.

Attached to the letter is a something that looks like a check made payable to the recipient for $8,207. Here we go again with the “up to”. “You can apply this registered voucher for a discount ‘up to’ $8,207 off MSRP on a new Toyota.” Of course there is another asterisk which states “on select models”.

But there’s more! “Just for attending this event, you will receive 5 “golden” $1 coins as a gift, and you may have won $100, $250, $50, or possibly even $4,500 cash!” We, of course, have another asterisk which says that your odds of winning anything are 1 in 25,000. I often wonder who responds to these ads, not understanding the difference between a “golden coin” and a gold coin. Or, who really think they have a reasonable chance to win anything.

It’s not over yet! “Every application for credit will be immediately submitted and processed for approval and on-the-spot delivery REGARDLESS OF PAST CREDIT HISTORY”. Of course, the operating key word here is “submitted”. There is no guarantee of “approval”. They will simply “submit” you application to the bank and if you have bad credit, the back will reject your application.

“During this weekend event, any new Toyota or used vehicle could be purchase with ZERO cash down!” The key word here is “could” instead of “can”. Of course, there is the old asterisk, which, if you can find and then read the fine print, it says with approved credit. You have to a very high Beacon score to buy a new or used car with zero down payment. Less than 1% of car buyers would have this high a Beacon score. There is also a phrase which says “CASH DOWN IS NOT SUGGESTED”. This dealer might not suggest it but I can almost guarantee the bank will not only suggest it but demand it.

“Due to overwhelming response and customer request, I would like to again offer you a personal invitation to receive 80% of base original MSRP for the car you are currently driving.” This promise doesn’t even have an asterisk. Of course the base MSRP excludes accessories. Sometimes an offer is so ridiculous that you wonder who would ever believe it. Ask yourself how any car dealer could promise to pay 80% of the new base MSRP on a used car that they have never seen. They don’t know how many miles are on the car, whether it has been wrecked, or even if the car will still run.

A customer recently sent me another direct mail scam from a local Honda dealer that I have to admit is pretty ingenious (albeit completely unethical). It is designed to look like an email sent from the dealership’s general manager to one of the sales managers and printed out. The "email" says:

Al,

I wasn’t able to get any pre-owned cars from the auction. Get in touch with and offer them up to $6,006¹ for their 2004 Honda Civic.

I NEED IT!

If you didn’t already, you may just want to print this email and send it to again. I will honor this offer through June 30, 2014.

Thanks,

Casey

The printed “email” has a "handwritten" note on it that says “I tried calling you about this email from my general manager. If you’re interested, call me at 866…). This, of course, is a mass produced direct mail solicitation intended to fool customers into believing the general manager is personally interested in their particular vehicle. As in all direct mail scams, the fine print negates the offer. In this case, the fine print stipulates a $.40 per mileage deduction, a deduction for the cost of reconditioning, among other disqualifying requirements.

click to enlarge

Direct mail claims like those above, unfortunately do work. People actually come in and buy cars. Unfortunately these ads prey on those who are uneducated, have difficulty reading English, or are simply gullible. My advice is to ignore all car dealers’ direct mail solicitations. I’m not saying that 100% are phonies, but 99% are and the odds are so overwhelming, you’re better safe than sorry.

Undercover Car Dealer

You may have seen episodes of the very popular reality TV show, “Undercover Boss”. If not, the premise for this show is that the CEO’s of companies disguise themselves as “just another employee” and infiltrate their own company. Their purpose is to learn what is really going on when their employees think “no one is looking”.

What these bosses find out is often surprising, shocking and always very entertaining. Undercover bosses find, not only very bad employee behavior, but also very good. Of course they fire the bad employees and handsomely reward the good ones. In a recent episode, the CEO of “Menchie’s Frozen Yogurt”, Amit Kleinberger, bought one good employee a new car. He paid for the college education of another. He fired a third employee who was doing “terrible things” which hurt his company’s reputation with their customers. Of course, the CEO’s must disguise themselves so that they aren’t recognized.

I’ve never gone undercover in my own car dealership, but I regularly do the next best thing. I hire people to mystery shop my company. I would do it myself, but I have only 148 employees and they know me too well not to recognize me even in disguise. Going undercover or using others to infiltrate your company is the only surefire way a boss can really know what’s going on within his business. You’ve heard the expressions, “When the cats away, the mice will play” and “Don’t tell me what you think I want to hear; tell me the truth.”

I know that a lot of car dealers, owners and general managers, read this column and my blog. “Mr. Car Dealer...This one is for you.” If you’re the owner or general manager of a car dealership in South Florida, you probably don’t like me very much. For seven years I did a live radio show with my wife, Nancy, which was critical of many car dealers. In fact, I mystery shopped your dealerships and told our radio audience what happened…the good, the bad, and the ugly. I also write about your dealerships in this column and my blog. I wrote a book about your shenanigans, “Confessions of a Recovering Car Dealer.”

I believe in giving anybody the benefit of the doubt. I know that car dealers can be like any businessman and have things go on inside their businesses of which they are unaware. Therefore, I’m suggesting that car dealers that think my allegations are totally unsubstantiated and untrue go find out for themselves. Send in a mystery shopper to find out what really happens when a prospective customer or a current customer comes in to buy a car or have their car serviced. Right now all a car dealer knows is what his managers and reports tell him. Nobody likes to “tell the boss what he doesn’t want to hear”. Customer satisfaction surveys are very easy to manipulate. Most customers are surveyed by email and car dealers will “accidentally” get the wrong email address for an angry customer or reward a customer with a free tank of gas for a good survey.

Some CEO’s of larger dealerships like the Penske Automotive Group, AutoNation, and even the Ed Morse Auto Group could actually go undercover just like in the TV series, Undercover Boss. Roger Penske, Mike Jackson, and Ted Morse could disguise themselves and find out what’s really going on “behind closed doors’. I guarantee Roger, Mike, and Ted that they will be shocked and surprised at how some of their employees are treating their customers. How can I be so sure of that? It’s because I’ve mystery shopped dealerships run by each of these CEO’s. I regularly shop my competition to keep a competitive edge just like I shop my own company to find out what’s really happening. By the way, Roger, Mike, and Ted, once your employees find out that you are mystery shopping them, it has a deterrent effect. That employee who may be inclined to take advantage of a customer will be more reluctant knowing he might be his boss or an agent for his boss.

You Get What You Pay For (Car Dealers & All Companies)

I know you’ve heard the expression, “You get what you pay for.” It’s often used to justify paying more for a quality product or service because the real cheap products can’t measure up. “That steak was tough and tasted terrible!” “Well, what did you expect for $3.99?” I’m thinking of another meaning for “You get what you pay for.”

Virtually all companies, private and public, pay their employees in some form to motivate those employees to maximize the profits of the company. Obviously, all employees are not paid directly on commission in all companies. There are those that are paid set hourly, weekly, or monthly wage. But, indirectly, even those hourly and salaried employees’ compensation is correlated directly to profits. This is because the supervisors’ (the ones that that hire, fire, and set the pay level of hourly and salaried employees) compensation is tied to profits.

General Motors is in the news now and probably will be for quite some time. You can’t avoid the news story of GM’s massive recall of cars with defective ignition systems which deactivated airbags causing at least 15 deaths and thousands of injuries. The amazing thing about this terrible and seemingly obvious defect is that it existed for 11 years without anybody raising the safety issue. Investigations have shown that there were several GM employees that knew about the defect, including high level engineers. Fifteen employees have been terminated and the US Justice Department is conducting a criminal investigation. Logic defies one to believe that only 15 employees are guilty. I believe that hundreds knew about this problem.

I posted the following on Facebook last Saturday:

“I listened to Mary Barra's address last Thursday and was struck by this thought. What if Mary Barra was a car dealer, not the CEO of GM, and she was giving this address to the employees of her dealership. Finally, what if the subject of her address was not "safety", but customer satisfaction? If you take the time to listen to this entire speech and mentally substitute "customer satisfaction" for safety, it sends a very important message that all car dealers should take to heart. Unfair and deceptive advertising and sales practices are as embedded in the culture of most car dealerships, as building unsafe cars was in GM.”

This posting let me to think about what caused this disaster at General Motors and is the subject of this column. The cause in just two words is “Pay Plans”. General Motors and all companies whose purpose is to make profits design their pay plans to maximize just one thing…profit. The cost of auto recalls is very high, in the millions and even billions of dollars. GM has just come out of bankruptcy and it’s not inconceivable that this series of recalls could put them right back into bankruptcy. It’s also not inconceivable that GM managers can end up in prison. As you know, the number one instinct of all animals, including humans, is survival. When a GM engineer or any employee thinks he or she may lose their job if they “blow the whistle” on something, they usually won’t. In fact, the higher-ups in the management ladder have a saying, “I don’t want to know about this”. When it “hits the fan,” upper management wants deniability.

There are few companies that have a higher percentage of commissioned employees than car dealers. You know that virtually all car sales people are on straight commission based on how big a profit they make when they sell you a car. But did you know that he mechanic that fixes your car is also paid on straight commission based on how much you are charged for maintenance or repairs? Of course the service advisor who greets you in the service drive and “advises” you on what you need to have done is also commissioned. The service manager, who is in charge the entire department, is also on commission. The same thing applies to all the other departments of a car dealership…the body shop, parts department, and the Finance department.

You should be beginning to understand that the only protection you have against being overcharged at a car dealership is the inherent moral integrity of the person you are dealing with and his supervisor. That car salesman’s livelihood depends on the size of his weekly or monthly paycheck. That paycheck depends on how big a profit he makes on each car he sells. He probably has a family to support and he has to put food on the table, make monthly mortgage payments, and provide healthcare for his family and an education for his kids. As I stated earlier, survival is our most basic instinct. Given all of this, what are your odds of getting the lowest price on that new or used car you’re trying to buy?

This same principal applies to the car dealer advertisements you see. Survival dictates that every car dealer outsells his competition; it’s what drives bait and switch sales tactics in which dealers try to get you to buy a higher priced car than the advertised car. A lot of these advertisements and sales practices are actually illegal. Oftentimes, the actual sales person doesn’t even know or understand this. The guilt usually lies with the managers who design the advertising and the sales systems. Just as in other companies, the higher up the management ladder you go, the “less anybody knows” about anything illegal or unethical. Usually the owner or General Manager has total “deniability” that he or she had any idea that anything wrong was going on. This is because they don’t want to know.

What can we do about this sad state of affairs? Please understand that I’m a businessman and my dealership makes a profit. I’m a capitalist and I believe making profits is a good thing. I only have a problem with this when making a profit is not in the best interest of our society and when ethics and morals are compromised to make it. Crime can be very profitable but nobody advocates crime except criminals. My solution to change the way businesses treat their customers is to introduce different pay plans than those prevalent today which reward on pure profit. Incentives should be based on employees’ actions that promote customers satisfaction, safety, quality, integrity, courtesy, and ethics. This won’t be easy because they’re not as easy to measure as profits. However, the beauty of this compensation plan will be having most of your employees working hard to accomplish these objectives. The profits will follow because customers will want to do business with your company.

Unfortunately, too many companies out there really don't get it and have pay plans that set up conflicts of interest between their employees and their customers. These conflicts of interest will always tempt employees to cross boundaries of honesty and ethics. So, when looking for companies to do business with, remember to consider attributes of integrity because you will typically get exactly what you paid for.

Google Can Be Your Best Friend If Your Mechanic Can’t Fix Your Car

Most everyone has encountered a problem with their car that baffled the dealer’s service department or your own mechanic. One of the most frustrating things we encounter with car problems is being told “We are unable to reproduce or experience the problem you’ve described.” Another favorite of car dealers' service departments is “That condition is normal for this model car.” With the former, the implication is “you’re imagining this nonexistent problem.” With the latter, they are telling you that just because this manufacturer built a model that’s defective, you had better learn to live with it because they all are defective! In both of these situations, you are often told, we’ve had no complaints like this from anyone else.

Now, this is when you go to Google! If you are one of the few people who has refused to join the “cyber world” and are not computer savvy, just check with a younger friend, your children or grandchildren because they are. Type into Google, in your own words, what the condition is with your car and the exact year make and model. For example, “2014 Mustang rust”. The reason I chose this subject is that an owner of new Mustang called me last Saturday for advice on what do because is car was rusting badly and it had only about 800 miles on it. The dealer told him that all of them rust just like that and offered to paint over the rust. He Googled his problem and found out that lots of Mustang owners were complaining about the same thing. He has contacted Ford directly and they are calling him today about replacing his Mustang with another model that doesn’t rust.

The wonderful thing about the “social media revolution” on the Internet is that everybody now has an amazing and easy way to share their stories of happiness and woe. We can hop on Facebook, Twitter, Instagram, Myspace, or any of dozens of others. Google finds all of your comments and groups them together by subject. In my opinion Google should be recognized as one of the greatest inventions in the history of the World. It rivals the printing press, fire and splitting the atom. Google has become a part of our brains. Today, if you don’t have the answer to something, Google does because Google can instantly recall the answer to every question for which there is an answer. You can open Google on your smartphone and ask (voice recognition) or type, “How old is Brad Pitt or who won the Heat game last night?” But you can also find out if somebody else with a new Mustang is having rust problems.

You will be amazed how many people have experienced the same problem that you have with your car! In some cases you will find out that they found a solution to their problem, either with their mechanic or with the manufacturer. You might find out that the manufacturer even agreed to pay for the repair. In some serious cases you might find out that the manufacturer bought back the car or paid you money so that you could trade your old car back in for another car without losing any money from depreciation.

I’ve written a column about TSB’s which are “Technical Service Bulletins” issued by auto manufacturers to their dealers. These are not made public and there are so many issued that too often, even the dealers don’t know about them. You probably have read the negative publicity about GM cars with the faulty ignition systems. There are millions of these on the roads and if you have too many keys hanging on your key chain, dangling from your ignition, the engine can turn off suddenly right in traffic! With no power, your airbag is deactivated. My point is that GM issued TSB’s on this issue years ago, but very few people outside of GM and some of their dealers knew about them. Why nobody, even GM engineers, understood that airbags won’t deploy with the car’s engine turned off, we may never understand. If more people had “Googled this like the NHTSA, it may have dawned on somebody sooner and a lot of lives might have been saved.

OK, let’s assume that you’ve just Googled your problem with your car that your dealer told you they had never heard of before. Or, they may have told you that they were unable to duplicate your problem (aka, you’re nuts!). And, of course, there’s the absurd explanation that that your car’s problem exists with all cars of that particular year-make-model and this somehow makes it OK. When you contact your mechanic or dealer service department you can show and tell them how many others have experienced the exact same problem with the exact same car you own. You may even be able to give them the number of the TSB that the manufacturer issued telling the dealer how to fix it. You might learn that the manufacturer has paid for these repairs out of warranty (called goodwill). Your chances of winning an argument with the mechanic or dealer are greatly increased and you may even be doing them a favor by telling them something they didn’t know.

If I was the director of the National Highway Traffic Safety Associations, I would have a “Google Division” that would tap all of the social media for comments, complaints, and suggestions from car owners about their cars.

Why Do Car Dealers Advertise Cars Priced Below Their Actual Cost?

Many of those cars you see or hear advertised on TV, radio, and newspaper would be great buys, IF YOU COULD buy the car. The problem is that the advertised cars cannot be bought at the advertised price. You might ask, how I can I know this? You might also suspect that, because I’m a car dealer, I’m just making mean spirited, unfounded allegations against my competition. For many years, at least once every week, I’ve “mystery shopped” car dealers all over South Florida. A mystery shopper is a person I train and pay to surreptitiously visit a car dealer in response to his advertisement on a specific car. The shopper feigns interest in buying a specific car advertised and is instructed to take the buying process as far as the seller will allow. In fact, in some cases we have asked the shopper to actually buy the car, but only if the dealer will sell the car at the advertised price. So far, we’ve never been able to buy a car at the advertised price, or even to get a signed contract to do so.

The reason for this is that most car dealers will never advertise a price that a competitor can beat and the only price a competitor would refuse to beat is one that is below his true cost. This means that 99% of the cars advertised cannot be bought at the advertised price. Their strategy is to lure you into their dealership at a price that is “too good to be true”. The car dealers’ vernacular for this kind of advertisement is “low ball” and the Federal Trade Commission calls it “bait and switch”. There are several ruses that car dealers use to avoid selling you the car at the advertised price.

(1) The most common is the “dealer fee” which is required by law to be included in the advertised price. Most dealers don’t obey the law and the Florida Attorney General does not enforce the law. Those that do follow the law have only one car available at the advertised price. If they do sell it to a very persistent buyer, they chalk up the loss on one car as a cost of advertising. The law permits the dealer to add the dealer fee to the price of all the other cars that weren’t specifically advertised, even though they are identical. The ad car is identified by a “stock number” hidden in the fine print.

(2) Probably the second most common bait and switch trick is “dealer installed accessories”. These usually consist of grossly overpriced items like “nitrogen in tires”, paint sealant, pinstripes, windows etch, and floor mats. These items typically cost a dealer less than $100, but he will price them over $1,000. The advertisement will sometimes disclose something like “prices don’t include dealer accessories”, but this is violation of the FTC law on fine print contradicting the advertised price.

(3) Another, not uncommon practice is to advertise a current year car that appears to be new, but in fact is used. This is also sometimes disclosed in the fine print. Dealers will often advertise current model cars that they have in their rental companies.

(4) Advertising a new car that has hidden features which would dissuade you from buying it. A favorite trick is advertising a new car with a manual (stick shift) instead of an automatic transmission. Another ruse is to have a very unpopular color, exterior and interior trim. Dealers even advertise “new” cars with lots of miles. There’s nothing in the law that prohibits a dealer from calling a car new because it has lots of miles. New cars can accumulate hundreds or thousands of miles by being driven between dealerships when they are “dealer traded”. Dealers commonly buy or trade cars with other dealers to get the right color and accessories on the model a customer wants. New cars are commonly driven by prospective customers who change their mind or whose credit turns out to be bad.

(5) As you probably know, most car salesmen are paid strictly on commission. This commission is typically 25% of the profit they make on the car you buy. The higher the price they sell the car for, the more they make. The advertised cars have no profit and usually there is no commission paid for selling it. Even if the dealer is willing to sell an advertised car at below his cost, what are the chances a salesman will sell it to you? He will do everything in his power to get you to buy another car where he can make a commission. This includes telling you that car has already been sold.

The best thing you can do is to ignore all advertised car prices and do your own independent research on what a good price is. You can learn this from Consumer Reports, Edmunds.com, and KBB.com. My favorite is www.TrueCar.com. When you determine what is a good price on the car you want to buy, get at least three out-the-door prices from three competing dealers.

Does the Internet Threaten The First Amendment?

A few years ago, my wife, Nancy, and I were fortunate enough to have lunch with one of the greatest living journalists, Bob Woodward of the Washington Post and Watergate fame.  He asked us what we considered “the greatest current threat to our American society”. This was shortly after 9-11 and we answered international terrorism. He disagreed and said that his biggest fear was that “the media is failing to fulfill its vital role to report all of the news fearlessly, completely, honestly, and ethically.” Bob Woodward told us he could see signs of this today, and that was back in 2009. He alluded to the economic pressures on the conventional media which allowed outside “forces”, like advertisers, to exercise influence that in previous times was ignored. The Internet is radically changing the way we get our information, news and opinion and this has taken away readers, viewers, and listeners from newspapers, TV, and radio. Of course this has resulted in fewer advertisers and plunging revenues, especially for newspapers and radio.

A few weeks ago, I wrote a letter to the Editorial Page Editor of the Palm Beach Post, Rick Christie. In the letter I complimented him on his Sunday editorial criticizing gas stations for posting gasoline prices that included a five cent discount, but only for those who paid cash. This deception caused buyers of gasoline to come in and buy gas only to discover that they had to pay an extra nickel a gallon if they paid with their credit card, which most of us do. I also included in my letter a request that he write another editorial or ask one of his investigative reporters to expose a similar pricing deception propagated by car dealers. That is the common practice of advertising car prices in newspapers and on radio and TV excluding a large portion of the price, commonly referred to as the DEALER FEE.  I told Rick Christie that I would like to meet with him and explain in detail this chronic problem with virtually all South Florida car dealers.

I was pleasantly surprised when I received an email from Rick Christie. He told me that he would be sure to pass along my story suggestion to Joel Engelhardt, the PB Post’s investigative Editor. He also commented, “As you know, we have a well-established policy of keeping our advertising and news operations separate.”  This comment was in response to my letter to the Editor in which I stated, “Why  is there no hue and cry about dealer fees ripping off car buyers for thousands of dollars like there is for gas station operators ripping off gas buyers for much less? I have a theory that the local media is afraid to spotlight dealer fees because car dealers represent such a large percentage of their advertising revenue.”

Rick Christie said he would meet with me “for a cup of coffee”. We agreed on Starbucks at CityPlace and we did meet there last Friday morning. It was a very surprising and pleasant meeting. I’d never met Rick before and was very impressed. Not only is he very knowledgeable and intelligent (as you would expect the editorial Editor of the Palm Beach Post to be, but he was a very nice guy who you couldn’t help but like very much. The “surprising” part of our encounter was the fact that he was totally honest and candid with me about why my letter to the editor will not be published, why no PB Post reporter will ever write a story about it, and why he will never write an editorial about it. The surprise was not that he refused to write about what I’d written in my letter to the Editor, but that he was so truthful about the reason.

In the briefcase that I brought to our meeting at Starbucks, I had several copies of car dealers’ advertisements from the PB Post in the previous Saturday’s edition as well as about a dozen consumer complaints submitted to the Florida Attorney General’s Office on local car dealers who had violated Florida’s law against deceptive and unfair trade practices. I also brought copies of the Florida statute requiring that the dealer fee be included in all advertised prices and the Federal Trade Commission law against fine print contradicting the understanding of the advertisement. We discussed all of this and, in my opinion, Rick Christie fully understood and agreed that that the allegations in my letter to the Editor were accurate and truthful.

Rick explained to me that he could not print negative stories about car dealers who advertised in the PB Post because they would stop advertising in his paper. This was in stark contradiction to what he had written in his email, “We have a well-established policy of keeping our advertising and news operations separate. I can only assume that he believed this when he wrote it, but his mind was changed by his boss, Tim Burke, the Publisher and Executive Editor of the PB Post. Why else would he write one thing in an email and a short time later contradict it in a face to face meeting? Earlier in our conversation at this meeting he said that he believed in printing virtually every kind of opinion in letters to the Editor. He said the only exceptions were those that were profane, obscene, or mean and hateful. He said that since he had been Editorial Page Editor at the PB Post, Tim Burke had asked him not to print only two letters to the Editor. I asked him why mine had not been printed, and he just gave me a knowing smile which I fully understood. Mine was one of those two.

It may surprise you to hear that I completely understand and “almost” agree with the decision by the PB Post not to print the truth about car dealers’ illegal advertising. The PB Post does a lot of good in our community and employs a lot of people. If the car dealers stopped advertising, they might go out of business and we would have no newspaper and hundreds of people would lose their jobs. Self-preservation is our strongest instinct. If I was Tim Burke and the decision was mine, what would I do? What would you do?

I don’t have a solution to this problem which is not confined to the PB Post. You read, see, and hear a lot of stories about businesses and individuals that defraud the public. Local TV, radio, and the newspapers are full of these investigative exposés. When was the last one you saw about a local car dealer or, for that matter, any other large advertiser on that TV or radio station or newspaper?

I don’t think the answer is government subsidy of the media as in PBS, the Public Broadcasting System, because then we are inviting government control. We could ask private enterprise to subsidize the media but then you have control by corporations. Maybe the thing that caused the problem may also be the cure…the Internet. Will truth in journalism prevail with Internet news and social media? Only time will tell.

Demand Genuine Factory Parts From Your Insurance Company

This is not the first article I’ve written for my blog and Hometown News on this subject. Thanks to my body shop manager, Alan Napier, a few years ago I was made aware of a very dangerous and common practice by virtually all auto collision insurance companies. This practice is the use of cheaper collision parts, like hoods, fenders and doors which are not proven to be as safe as the original factory parts that your car was manufactured with.

The law on this is very clear, “An insurer may not require the use of replacement parts in the repair of a motor vehicle which are not at least equivalent in kind and quality to the damaged parts prior to the loss in terms of fit, appearance, and performance.” For many years my body shop manager and I have asked all insurance companies who specified aftermarket parts (parts not made by the car’s manufacturer) to provide proof that they were compliant with federal crash test regulations. Not once has an insurance company agreed to do so. To my knowledge our federal government has never approved any aftermarket part as being equivalent in kind and quality to the original manufactures’ part.

Nevertheless, insurance companies continue to insist on the use of aftermarket parts because they cost them much less. That hood, door, or fender that your insurance company specified to repair your wrecked car was never tested and proven safe by any federal mandated crash test. Not only do the insurance companies save money by this practice but the body shop that repairs your car makes more money because they have a wider profit margin between the cost of the part and what the insurance company allows them to charge.

As I’ve said in previous columns, insurance companies usually have a list of “approved” body shops. They tell you that their shops are approved because they do high quality work and will guarantee the repair. The truth is they approve those shops that agree to “play ball” with them. The “approved” shops will agree to use non-manufacturer aftermarket parts unproven in U.S. government crash tests. Approved shops also agree to charge a lower price to the insurance company than other shops which can lead to short cuts on the repair. This can also lead to not paying the body repair technicians a wage high enough to employ those that are higher skilled.

My company and a large number of other body shops have filed a class action suit against the insurance companies because of this dangerous practice of specifying untested aftermarket parts. We have also pursued this with the National Highway Transportation Safety Association, NHTSA, and the Florida Office of Insurance Regulation. I have also reported this to the media. All have expressed interest and are “cautiously” investigating my allegations. I say “cautiously” because Big Insurance is the proverbial 800 pound gorilla. They have huge political clout with virtually unlimited lobbying resources. Nobody wants Big Insurance for an enemy. I will keep you posted on any progress I make with the state or federal regulators as well as the media.

My advice to you if you have a wrecked car that needs repairing is to insist that the insurance company and the body shop use only original manufacturer’s parts. If they balk at this or tell you that you will have to pay more money, show them this link www.AfterMarketPartsCanBeDangerous.com. You can click on this if you’re reading my blog or cut and paste it in your browser if you’re reading this in Hometown News. This is the complete Florida law specifying that insurance companies use only parts that are at least equivalent in kind and quality. To qualify, the parts must have been successfully crash tested on a car by our federal government. If they still refuse, tell the body shop that, under protest, you will pay extra for the original manufacturer parts, and that you will then sue the insurance company for the difference. My company sues the insurance company on behalf of our customers whenever necessary. We ask our customers to assign their right of litigation against their insurance company to us. Our customer pays only the lower amount and we recover the difference from the insurance company. We have never lost a case and the insurance companies prefer to settle these before they go to trial because they know they are wrong and know they will lose.

Suggested Word Track For No-Haggle, No-Hassle Car-Buying

You can use this word track to buy a car online, via regular mail, over the telephone, or in person. I strongly recommend that you use online but I know that some car buyers, seniors like me, are not as comfortable with buying over the Internet. Using this word track in person can work, but it will be much more difficult and take a lot longer. Only a person with a very strong will, stamina, and a very thick skin should attempt this. I strongly recommend that you don’t.

(1)   Dear Car Salesman,  “Within the next two weeks (enter your own time frame), I will be purchasing (leasing) a (fill in the specific make, year, model and optional accessories).”  You should carefully research the vehicle that you decide to purchase using all sources of information available such as Consumer Reports. You should also test drive the car to be sure it feels and drives the way you want it to. It is vital that you not change your mind during the purchasing process. If you do change your mind, you must begin all over again. Never let a car salesman change your mind for you. That is one of their favorite ways to charge you more money than you had anticipated paying.

(2)   “Please quote me your lowest price on (your specific car). This price must be an out-the-door price with only state sales tax and the license tag fees paid to the state. To be sure there is no confusion, please understand that the only dollar amounts that I will pay in addition to the price you quoted are taxes and fees actually paid to the state government. I will not pay dealer fees by any name such as electronic filing fees, tag agency fees.”

(3)   “I understand that my request may not be one you wish to comply with because you are concerned that I will shop and compare your price with other car dealers. Your concerns are valid because this is exactly what I will do. You may be asking yourself, ‘why should I do this if I know that my lowest price may not be low enough and that I will show it to your competitor to get an even lower price?’ My answer is quite simple; you may have only a small chance of winning my business if you do give me your lowest price, but you will have ZERO chance of winning my business if you do not, because you will never hear from me again.”

(4)   “I will sell my trade-in to the highest bidder, just like I will buy my new car from the lowest bidder. I will also finance my car at the lowest interest bid by a bank or credit union. If you can meet or beat other dealers and banks, I will trade my car into you and/or finance with you.”

(5)   “If you quote me your lowest out-the-door price and I come to your dealership to purchase my car, please don’t even think about: (A) Telling me that the car I specified was sold and that you would like to show me other cars just like it. (B) Telling me that the car I specified has some accessories/options that you installed like nitrogen in the tires, glass etch, pin stripes, floor mats, paint sealant, etc. (C) Telling me that you priced in rebates and incentives that I don’t qualify for like college graduate, military, customer loyalty, customer conquest, etc. (D) The price you quoted me is only valid if I finance my car through you. If you do any of these things, I will not only not buy from you, but I will report you to the Florida Department of Motor Vehicles, BBB, the County Office of Consumer Affairs, Florida Attorney General, and your manufacturer. “

(6)   “If everything goes well with no shenanigans, I will write a letter of commendation to your owner and manufacturer. I will also tell all of my friends, neighbors, relatives, work associates, and club members about my wonderful experience with you and your dealership. I will also post  recommendations on Google, Yelp, Facebook, and Twitter.”

(7)   “The choice is yours and I hope that you see the benefits of selling me a car at the lowest price you can afford to give me. I also hope you can see the dangers of giving me a dishonest price so that you can get me into your dealership and try to charge me more than we agreed.”

(8)   “I wish you the best of luck and I sincerely hope we can do business and have a long car buying and servicing relationship.”

The 3 Main Reasons You Overpay for a Car

Almost everyone that buys a new or used car looks at the purchase as a single transaction. But it’s not; it’s THREE transactions. Those are (1) Getting the lowest price for the used or new car you have decided to buy. (2) Getting the highest price when you sell your trade-in. (3) Getting the lowest interest rate when you finance your purchase.

Car dealers depend on you looking at the purchase of your car, the trading in of your old car and the financing as one transaction done with them. This allows them to sell you a new car at a very low price (even below their true cost) if they can get your trade-in for less than it’s really worth. The vernacular that car dealers use for this practice is “stealing the trade”. The same thing is true if they can finance your purchase at an interest rate higher than normal. Car dealers get “kick-backs” from banks when they charge an interest rate higher than the lowest interest rate the bank offers. In fact, car dealers make more money from the financing of cars than they do from the cars they sell.

Car dealers know that most prospective car buyers have a “hot button” when it comes to buying a car. With many it’s the monthly payment. With some it’s “How much can you allow me for my trade?” Some are mainly focused on the price of the car their buying. Some are actually focused only on how small a down payment they have to make. With others, it’s the lowest interest rate. The salesman’s job is to find your hot button. Once they know that, they can give you what you’re focused on, like high trade-in allowance, but still make a much bigger profit on the overall transaction than you should be willing to pay.

You’ve seen and heard the advertisement. “$3,000 Over Kelly Blue Book for your trade-in,  Minimum $10,000 trade-in if you can push, pull, or drag it in, or We need your (fill in the blank of any year-make-model) and will pay you $5,000 over book.” All those ads are designed to do are get you into the dealership based on your hot button. They can actually give you a high trade-in allowance just by marking up the car you’re buying enough to offset how much extra they give you for your trade. 

The same thing sort of trickery applies to any one single hot button. A low monthly payment can generate a huge amount of profit to the dealer with a long enough terms (84 months for example) or a high interest rate. A low price on the car you’re buying is offset by “stealing your trade”, allowing you thousands less than your trade is really worth. A low down payment leaves the door open too. You’ve all seen the 0% financing ads, but this means nothing if you overpay for the car you’re buying or let go of your trade for too little.

The only save way to get the lowest total transaction price is to negotiate each price separately…the car, the trade-in, and the financing. When you’re shopping for the lowest price for your car, tell the car dealers you don’t have a trade-in and you’re paying cash. When you’re shopping for the highest price on your trade-in, tell the car dealers that you don’t want to buy a car, just sell the one you have. When you are shopping for the lowest interest rate, check with you own bank or credit union and another bank or credit union for their best rate before you ask the dealer what his lowest rate is.

After you’re armed with all of this information, go to the car dealer who offered you the lowest price on the car you want to buy. Then ask him if he can meet or beat the highest price you have quoted on your trade-in. Similarly, ask if he can meet or beat the lowest rate you have on your financing. When you’ve done all this, you can be assured you have the best total transaction price. There’s one caveat on the trade-in. In Florida, you pay 6% sales tax on the difference between the trade in and the price of the car. Therefore the dealer you trade the car to can be 6% lower than the high bid on your trade from another dealer and still match it, because you will lose the sales tax savings if you sell your car to another dealer since you won’t have a trade. 

The Truth Sells Cars

Remember that you heard it here first. There is a company that “gets it” when it comes to selling cars. If you’re a reader of my weekly column and blog, you’ve heard me mention TrueCar before. In full disclosure, I’m a dealer for TrueCar and I’m also a member of their national dealer council.

The CEO of TrueCar is a very smart man named Scott Painter, and about 10 years ago he figured out that the way to be successful in the retail car business was to create a company that always told the truth about selling cars. He saw that most car buyers, not only disliked the car buying process, but actually feared it. He knew that car buyers are usually fearful that they will pay too much for their next car. Nobody likes to be taken for a sucker. How bad do you feel when you find out that your friend bought the same car that you did for $2,000 less? He read the annual national Gallup polls that ranked car dealers last in honesty and integrity. He saw and heard the bait and switch advertising and was aware of the unethical and deceptive sales practices that exist in most car dealerships.

Scott Painter also saw the amazing success of 21^st century companies like Apple, Amazon, Starbucks Costco and Nordstrom. They are successful because their customers believe what they tell them is true. He saw a huge opportunity if he could create an online company that would take the fear and distaste out of buying a new or used car. Scott found a group of very smart investors who shared his vision and TrueCar was born.

TrueCar sells cars through existing dealerships.  To become a TrueCar dealer the dealership must allow TrueCar to access their data management system, DMS. TrueCar keeps this information confidential and does not disclose the name of the individual dealers. But by analyzing the data of all the cars sold in a market, TrueCar knows what each year-make-model car is selling for. They can then tell prospective car buyers what they should pay for that car. The buyer knows the price of the average transaction as well as the lowest and the highest transactions. TrueCar then gives them the “TrueCar Price” which is the lowest price that a TrueCar dealer will sell that car for. This price is a good, low price, considerably below MSRP, and lower than the average price transaction in that market.

The TrueCar dealers are giving you a low price because they know you are comparing their price with, not only other TrueCar dealers, but other dealers for that make in your market. The TrueCar dealer is contractually obligated to sell you that car at the price he posts on the TrueCar website. 

I’m not suggesting that buying a car from a TrueCar dealer today is completely without risk. I am saying that it’s the safest way to get your best price on a new or used vehicle. You should still shop and compare your TrueCar price with at least two other car dealers. TrueCar is evolving and improving their processes and their dealers continuously. I speak from the perspective of a member of TrueCar’s dealer council. Last week I attended a meeting in Santa Monica, Ca. where I met with Scott Painter and all of the top executives of TrueCar. Plans are in the works for even more transparency when it comes to the TrueCar price.

Scott Painter walks a tightrope between the car dealers and the consumers. The car dealers, car dealer associations, and politicians (influenced by dealer lobbyists) rebelled against TrueCar two years ago. Dealers did not like the fact that TrueCar was requiring them to offer their lowest price to the car buyers. Most car dealers think that the “haggle and hassle” way of selling cars is the best way to make more money and sell more cars. Dealers quit in large numbers and TrueCar lost over half of their dealers nationwide. This mass defection was aimed at the heart of the True Car business model: in several states, True Car charges dealers $299 for every new car sale and $399 for every used car sale generated through their referral process. The FTC is currently investigating this as an illegal boycott by the car dealers and it hurt TrueCar financially.

 Since then, TrueCar has rebounded strongly and is currently bigger and financially stronger than ever before. Dealers have come to realize that they do sell more cars with TrueCar, albeit at a lower profit. TrueCar is growing exponentially and I expect them to be the main way that cars are bought and sold in the USA within the next ten years. Scott Painter has a favorite saying…”Truth Sells”. In fact, he bought the URL, www.Truth.com. He’s looking at expanding the honest way of retailing to other industries worldwide. Who knows? We may be buying houses, stocks, and insurance through a “True” company in the next decade.

My advice to you, the car buyer, is that the next time you buy any new or used car, click on www.TrueCar.com. My advice to the car dealers (who regularly read my column and blogs) is “Get aboard the TrueCar train before it leaves the station.” The way TrueCar is growing, you may not be able to sign up with TrueCar in the future.  TrueCar will sign up only a limited number of the franchises of one make in a particular market. By the way, TrueCar also won’t sign you up unless you agree to play by the rules and they will enforce the rules. Hiding dealer fees and dealer installed accessories when you quote the price, bait and switch, and all those other shenanigans are strictly forbidden. But don’t be afraid, because you will sell more cars and have happier customer because, as Scott Painter says, “The truth sells.”

With Car Insurance Companies Profit Comes First; You’re Second

“Like a good neighbor, State Farm is there. You’re in good hands with Allstate. Saving people money for over 75 years (GEICO). Think easier; think Progressive. Nationwide is on your side.”  You’ve heard all of these slogans thousands of times and seen the warm and fuzzy ads on TV too many times. I can tell you from personal experience owning and operating body shops for 46 years, insurance companies are not like good neighbors.

Insurance companies are the most profitable companies on Earth, but you can’t always tell that by their tax returns or financial statements. Insurance companies are sheltered from paying taxes like other corporations must do because they can, and are required, to “reserve” large amounts of cash contingent to paying claims. Then they take those huge hoards of cash and wisely invest them in stocks, bonds, real estate, etc. so that they can grow those cash reserves. When you pay a monthly premium to your car insurance company, they don’t pay any income tax on that. They invest it and grow that premium, compounding it over the years. Only after years of accumulating your premiums and growing that cash through investments do insurance companies begin to pay income taxes. This continuous, compounding tax deferral is how Warren Buffet made the bulk of his vast fortune.

How did insurance companies come to win this great tax advantage over all other corporations? They can afford to pay the best and most powerful lobbyist, in Washington D.C. and all fifty states. When a big insurance company says “jump” our elected officials say “how high”. For a politician to vote against a bill that Big Insurance wants is political suicide.

I have nothing against profit and I applaud those companies that make large profits. Under our capitalist system and the free market place, those companies that can provide the best products and services and satisfy the customers the best should prosper. I have a problem with companies that make their large profits by distorting the tax code to favor their companies over others and that earn greater profits by exploiting their customers and associates.

Collision insurance companies pay body shops less than $50 per hour to repair your car after it has been damaged in a collision. Car manufacturers pay mechanical service departments over $100 to fix your car when it has a mechanical problem, more than twice what insurance pays for body repair. Mechanical and body repair technicians are typically paid a commission based on the amount of labor they perform. This commission is a percentage of what the insurance company or manufacturer pays the service department or body shop. It follows that body repair technicians earn far less than their mechanical technical counterparts.

Now, here’s the rub! Body repair technicians are at least as well trained and skilled as mechanical repair techs. In fact, there is a greater shortage of good body repair techs than mechanical. One would think that the laws of supply and demand would command a higher wage for body repair techs, or at least the same as mechanical techs. But they make much less. This is where you come into the picture. Let’s say your car has been in a bad accident incurring thousands of dollars in damages. You want it repaired right, not just so it looks as good as it did before, but, more importantly, so it’s as safe as it was before. You want to be sure that the technician who repairs your car knows and cares what he’s doing! You’ve heard the expression, “You get what you pay for.” This means that if you hire a plumber to fix your clogged sink because he agreed to charge you half the hourly rate of what all the other plumbers were charging, it’s likely that the problem wasn’t corrected the it should have been.

The reason that body repair technicians are paid so little is because the insurance companies mandate it. About 95% of all auto repair work is paid for by insurance. Insurance companies largely control which body shops repair the vehicle of the insured. Each insurance company has a list of “preferred body shops”. If body shops are not on the preferred lists of any insurance companies, it’s very likely that they won’t be able to remain in business. One of the requirements to be on that list is to charge the insurance company what they say you can charge. The insurance companies claim to arrive at these hourly rates by market studies, but the studies are bogus and rigged to come up with an hourly rate far below what it should be.

The body shops and the insurance companies know that it’s impossible to repair cars safely and properly at the hourly rate they pay so they “do what they have to do” to get around that rate. The insurance companies force the body shops to use cheap after-market or used parts when new original manufacturer’s parts should be used. Insurance companies also “look the other way” when body shops repair or straighten a metal part that should have been replaced, but cost more. Most of the damage that’s done to a car in a collision is below the surface and invisible after the repair is completed. This means that all visible evidence of substandard and unsafe repairs is hidden. The customer comes in to pick up her car and it “looks great”. She may never how many short cuts were taken so that the car could be repaired for what the insurance company was willing to pay.

My advice to you if you have a car in need of body repair is be sure that you choose the body shop, not your insurance company. Check out this body shop carefully, just like you’d check out a doctor or dentist for yourself or a family member. Ask for referrals, check with the BBB, and the County Office of Consumer Affairs. Google the company and check out their online ratings. Your insurance companies will try hard to persuade you to use their “preferred shop”. They will tell you that they won’t guarantee the repair unless you take it here. If you pick a good body shop, that shop will give you as good, or better, guarantee on their work than the insurance company. Be sure that the body shop you choose is on your side and not the insurance company’s. Explain that you want new parts, not used, rebuilt, or after-market. If the insurance company objects, stand shoulder to shoulder with your body shop and demand that the repair be done properly and safely. If the insurance company still gives you a hard time, tell them that you will take them to court and they will usually back down. Some body shops will do this for you, but you have to assign your rights to litigate on your behalf to that body shop.

If this sounds like too much trouble, it’s not as bad as it sounds. Insurance companies know that they are doing the wrong thing and they don’t like to go to court or attract attention. You will be surprised how often people like you who have the courage to stand up to Big Insurance will find them backing down.

How to File a Car Dealer Complaint With the Florida Attorney General

www.FileAComplaintFloridaAttorneyGeneral.com

Some of my regular readers will recall that I testified before the Florida Senate Commerce Committee a few years ago. My purpose was to introduce legislation to make the dealer fee illegal in Florida. The bill never got out of the senate committee because it was “shot down” by the Florida Automobile Dealers Association, FADA, which is referred to as and pronounced fah-dah.  For those who don’t already know, FADA is a powerful lobby for the car dealers. They have a lot of money because car dealers make a lot of money and can donate a lot of money to their political action committees, PAC’s. In full disclosure, I have donated to FADA political action committees in the past and continue to do so. That’s because they protect car dealers against harmful action by the auto manufacturers, but I abhor the way FADA protects car dealers that advertise and sell cars in deceptive, unethical, and even illegal ways.

A big reason that I was defeated in that effort was that the attorneys at the hearing representing the Florida Attorney General (AG) told the panel of senators that they received relatively few complaints on car dealers charging dealer fees. In fact, they received many more complaints on other businesses like storm shutter installers and paving contractors. The AG lawyers said they had to focus their limited resources on those businesses that had the most number of complaints. Of course, the lawyers from FADA completely concurred with that excuse.

Hence, I’m writing this article on “How to file a car dealer complaint with the Florida Attorney General”. There’s no question in my mind that most car owners in south Florida have a “beef” with a car dealer that they bought, leased, or serviced their car with. In fact, it’s not just south Florida, it’s the entire country. The Gallup organization conducts a national poll every year asking us which businesses we consider the most honest and ethical. Car dealers finish last almost every year (Congressmen are usually next to last).

I’m not sure why more victims of car dealers don’t file complaints with the regulatory agencies. I do know why car dealers do not receive as much negative publicity as they deserve and that’s because the local media is afraid of them. Car dealers are the largest local advertisers and they spend a huge amount of money on advertising that newspapers and TV and radio stations rely on. You may know that car dealers banded together to force Seaview Radio (WSVU in North Palm Beach) to cancel my consumer advocate show, Earl Stewart on Cars, which had been on the air for 7 years. They told the owners and management of Seaview that they would not advertise unless my show was canceled. Perhaps it’s the lack of reporting by our local media on how car dealers deceive car buyers with their advertising and sales practices that makes for so few complaints being filed.

If everyone who reads this column/blog who has been wronged by a car dealer will take the time to file a complaint with the Florida Attorney General’s office, I’m confident that we will see some immediate action. Because of my role as an advocate for car buyers, I hear from dozens of victims of car dealers every month. If those same people would also file a complaint, car dealers would rise on the priority list of companies that are ripping of Florida consumers so that the AG would be able to allocate their limited resources to control and curtail unethical, deceptive, and illegal advertising and sales practices by car dealers.

Please click on this link, www.FileAComplaintFloridaAttorneyGeneral.com and file a complaint. You may also call the Office of Citizen Services at 850 414-3990 or the Fraud Hotline at 866 966-7226. I know you’ve complained to your friends and neighbors and maybe even to me. But now it’s time to complain to somebody who can stop these car dealers from taking advantage of you.

Dealer Installed “Options”, Not Optional

I’ve written many articles about the infamous “Dealer Fee”. There’s another very common trick that most dealers use that is equally prevalent, deceptive and called “dealer installed options”.

Dealer installed options are products that have very low cost and value that have huge markups. Typically they are preinstalled on all of the dealer’s cars in inventory, with the exception of a few “ad cars”. These ad cars are ordered in small quantities, stripped of factory accessories and often without even an automatic transmission. They are typically ordered in the least desirable color and trim. The advertised car also either pays no commission to the salesman or a very small one. Typically only one car is available and when you ask to see it, the salesman will tell you that it’s been sold.

The advertisement will sometimes say, “Many cars are available at similar prices” or words to the effect that there is more than one, but they are all priced higher than the one car advertised. The dealers will put a stock number in the fine print. This is the stock number of the advertised car and is the dealer’s defense for having only one car (which was just sold) at that low price. Even if you are able to read the fine print, seeing something like “#6339A” is not something that would give anyone a clue that this means there’s only one car available at this price.

I recently sent a mystery shopper in to investigate an advertisement by a South Florida dealer who was advertising a new 2014 Toyota Corolla for $14,988. The shopper was told by the salesman that this offer was for only one Corolla and it was a stick shift. When she asked to see the car, the salesman said the car was “unavailable”. Then the salesman explained that all of their other Corollas had an additional charge of $897. This was for “dealer installed options” consisting of pin stripes ($199), floor mats $299), and nitrogen in the tires ($399). The dealer’s approximate cost for these items is about $100, about a 900% markup! There was also a charge of $24.99 for an “electronic filing fee” and $75 for a “Tag Agency Fee”. These sound like state fees but they are not, only costs from subletting to outside private companies being passed along to the car buyer for more profit to the dealer. The bottom line is that the car advertised for $14,988 really cost $15,985, almost a thousand dollars more!

What I’ve described above is the rule, not the exception, with most South Florida car dealers. The only way to avoid this sort of thing is to insist on a bottom line price. The only charge you should pay in addition to an advertised or quoted price is state sales tax and fees for the license tag and registration. You can check with the Florida Department of Motor Vehicles to confirm what a tag and registration costs. Costs the dealer may claim he incurs for obtaining these like “electronic filing fee” and “tag agency fee” are bogus charges which simply reimburse the dealer for his normal operating expenses. When you pay a dealer for his expenses, you are paying him a higher price and profit on the car. The law requires that this be disclosed as a dealer fee and included in all advertised prices.

As far as “dealer installed options” go, the safest bet is just don’t buy them. Make it clear from the beginning that you insist that all options or accessories be factory installed. If a dealer won’t agree to this, don’t buy a car from him. If there is an option the factory doesn’t offer that you want to buy, be extra careful to compare prices on that option with others who offer the same thing. The only reason dealers install options on cars is because they can mark them up exorbitantly as in the “900%” example above. Also, remember that dealer-installed options are not warranted by the manufacturer of the car and their quality is not as high.

By getting at least three out-the-door prices on the exact same year, make, model car you want with identical MSRP’s you are assured of getting a good price. Don’t be fooled by “dealer list” which many dealers quote you to make you think it’s the manufacturer’s suggested retail price, MSRP. Also, do the same thing with getting the best price on your trade-in and the best rate on your financing. Shop your trade-in just like you want to sell it without buying another car. Be sure you check interest rates with your bank or credit union and another bank just be sure.

Shame on Consumer Reports!

Consumer Reports (CR) is considered to be the journalistic icon of consumers’ rights in America. I have written columns for this blog and Hometown News. I’ve advocated on my radio show for Consumer Reports. I considered them the single most reliable source for consumers selecting the best products and sellers of those products, and I still do. Since 1936 Consumer Reports has set the example for unbiased, scientific evaluations and opinions on virtually every product Americans buy. They report, not only on products and services, but those who sell those products and services. They accept no advertising or any other consideration from companies. In fact, they will not even allow a company to use their name if they have endorsed a product of that company. When Consumer Reports recommends a product, you can be sure that it is their honest belief that that the product is a good one. Everyone is entitled to one honest mistake and I have to believe that this was the case with Consumer Reports.

Consumer Reports offers an auto-buying service to its members and charges $12 to give their members “Consumer Reports bottom line price” to buy any new car. They sublet this to an outside car buying service, TrueCar, which provides this data. In fact, TrueCar provides this service directly to car buyers for no charge at www.TrueCar.com, whereas CR chargers $12 for each car you want to get the “best” price on.  In full disclosure, I’m a member of TrueCar’s national dealer council. I’ve written about TrueCar in Hometown News and my blog, highly recommending them, just as I have Consumer Reports. TrueCar, as a result of my advising and urging, will be moving soon to require all car dealer members of the TrueCar program to more clearly disclose the “true”, bottom line price.

Consumer Reports is inadvertently leading their members who purchase what they believe to be the “bottom line price” a price which is actually much higher than the bottom line. In the example above, the “estimated dealer price” of $22,253 with “estimated savings: $4,782” on a new 2014 Toyota Prius, is actually $23, 252, almost one-thousand dollar higher! The estimated savings are only $3,783, not $4782.

The extra $999 that the dealer adds to the bottom line price is disclosed in the pricing that CR gives their members, but it’s disclosed in the fine print and below the focal point of their documentation which states, “This is your Estimated Dealer Price” and the price is featured in bold print and color. Some might say that as long as the extra dealer profit not included in the “bottom line” price is disclosed in the fine print, CR’s done nothing wrong. First of all, this is not the way Consumer Reports does business. CR is vehement against fine print ads that trick buyers. This issue was actually brought to my attention by a very well educated, intelligent consumer who was tricked by this very CR “bottom line” price. She brought it to the attention of her mother (who happened to be my wife) because she thought my price (I’m a Toyota dealer) was higher than the other two dealers’ prices. If an intelligent woman that is a college graduate, and investment banker can be duped by Consumer Reports’ “bottom line price, what chance has the average consumer?

Florida law requires that that dealer fees aka “Dealer Processing Fees” and many other names be included in the advertised price of the vehicle. I’m not a lawyer, but I think a good argument could be made that this information emailed to a prospective car buyer could be construed to be an advertisement. This particular dealer adds $999 to the Consumer Reports’ “bottom line price”, but he could add as much as he likes. In fact, Florida law has no cap on the amount of fees (by names limited only by the imagination of car dealers) that dealers can add to their quoted prices. The phrase, dealer fee, is used only for convenience; other fee names commonly used are dealer prep, pre delivery inspection, tag agency, electronic filing, administrative, doc., documentary, notary and closing, etc. If a dealer thought he could get away with hit, he could charge a million dollar dealer fee and Florida would deem that legal! Florida requires that the dealer disclose on the invoice the following: “This charge represents costs and profit to the dealer for items such as inspecting, cleaning, and adjusting vehicles, and preparing documents related to the sale”. The truth be known, added cost to the price of a product is defined as “profit” so the disclosure should simply read this charge represents profit to the dealer, period.

I know that Consumer Reports is not aware of any of this and hopefully they will read this blog or Hometown News column and realize that they are inadvertently aiding and abetting dealers in unfair and deceptive advertising and sales practices. If you are a subscriber/member of Consumer Reports or have used their auto-buying service, please consider calling and or emailing them on this subject. Maybe you should send them a copy of this column.