It's War! Car Dealers VS TRUECar

This is the second time that the car dealers have declared war on the online company, www.TrueCar.com. The last time was in 2011 when thousands of car dealers boycotted TrueCar to force them out of business. The U.S. Justice Department investigated this for being an “Illegal Boycott” and, as far as I know, it’s still under investigation. The car dealers were joined by their state dealer associations (well financed political lobbying groups). These lobbyists pressured legislators and state attorneys general to find legal reasons to stop TrueCar from doing business in their states.

The car dealers almost won the last war by depriving TrueCar of millions of dollars in revenue (TrueCar earns $299 for every new car sold through their referrals). TrueCar was losing money and almost went bankrupt, but Scott Painter, the founder and CEO, was able to negotiate a truce with the car dealers and their political lobbying groups. TrueCar began to grow very rapidly again. They signed up dealers very quickly because they were attracting millions of car buyers. They grew to about 10,000 car dealers and are selling about 5% of all the cars sold in the USA.

 You, the car buyers, love TrueCar when you experience their service. Why? Simply because they offer an honest, low price and a fast, pleasant car-buying experience. Car dealers make their money by negotiating (haggle and hassle) the highest price that they can on each customer that walks into their showrooms. You and your next door neighbor might buy the exact same car but your neighbor might pay thousands of dollars less because he was a better negotiator. In most dealerships no two people pay the same price for a car. Typically the disadvantaged in our society end up paying the highest prices which is most unfortunate because they can least afford it.

You might be wondering “If the car dealers hate TrueCar so much, why do they have 10,000 dealer members?” That’s a good question and the answer is that car dealers “see the handwriting on the wall” and know that TrueCar is the wave of the future. Only a limited number of car dealers will be signed by TrueCar and they are getting close to that limit right now. TrueCar will never sign up all of the dealers. They will sign only enough to have representation in all markets. Dealers have rushed to join TrueCar for fear they will be left out in the cold when most car buyers find out that the only sure way to get an honest, low price is through a TrueCar dealer. Most TrueCar dealers joined up because they feel they have no choice…they have too!

But, there is a hardcore group of dealers that HATE TrueCar intensely. These dealers are usually owners of a large number of dealerships or publicly held dealer groups like AutoNation. AutoNation was recently “fired” by TrueCar when they were caught cheating on the fees owned to TrueCar. AutoNation was not only cheating on payments but they were not providing the transparency in pricing promised by TrueCar. They were using TrueCar to attract customers expecting an honest, low price and then charging them more than the TrueCar price. When confronted with this, AutoNation refused to turn over their sales transaction data which would have proven TrueCar’s charges. AutoNation claimed this data was proprietary even though all other TrueCar dealers (including me) gladly provide it to TrueCar.

Car dealers that own a large number of dealerships are very wealthy; many have nets worth exceeding a HUNDRED MILLION DOLLARS. Dealership groups like AutoNation are also very flush with cash. There’s nothing plaintiffs lawyers like better than rich men and companies that are angry with, and/or feel threatened by, a competitor! Lawyers in New York and California leaped at this opportunity. Most lawyers don’t care whether their clients are right or wrong; they do care about how much money they can make. Smart plaintiffs’ lawyers ALWAYS structure their fees so that they get paid handsomely even when their client loses.

Lawyers in New York and California where TrueCar has the most dealer-partners knew a great opportunity when they saw one. Most of them were already lawyers for car dealers and knew how much their dealer clients hated TrueCar. Even though these lawyers, and likely the car dealers, knew that TrueCar was in the right and lawsuits would be judged without merit or even frivolous by the courts, they proceeded for two reasons. First, collectively, they have more cash than TrueCar and might be able to force them to settle favorably for the car dealers. Secondly, they might be able to drive down the TrueCar stock price. If they can accomplish that, other plaintiffs’ lawyers would join in the fray and file class action suits on behalf of TRUE stockholders. Their hope was that, by joining forces with the stockholder class action lawsuits, they could put TrueCar out of business.  TrueCar stock plummeted and they were sued in class action suits representing the stock holders. TRUE stock has plummeted from a high of 25 to $5.99  as I write this article. The further the stock price drops, the more incentive for more shareholder suits.

This is truly a “David vs. Goliath” battle similar to what Uber is fighting against the entrenched taxi and limo companies of the world. Uber and TrueCar both provide far better, less expensive, honest services for their customers, but they are outnumbered and out financed by entrenched old ways of doing business. Change is a very difficult thing to bring about. I believe that truth, justice, and transparency will prevail for TrueCar as well as Uber.

I urge you to join the fight on the side of TrueCar the next time you buy a car. Click on www.TrueCar.com. You will be offered a platform to specify the exact car you want. You will be shown the prices for that car in your market, not just your price but the lowest prices, the highest prices and the average price. You will then be given three certified TrueCar dealers in your market and three low prices. You will be shown all extra fees that they might charge like doc fees, dealer fees and dealer installed accessories. You select the dealer of your choice and before you even visit that dealer you have an “out-the-door” price plus government fees (sales tax and tag) only. If you encounter any problem with that car dealer, you can contact TrueCar directly at 1-888-TRUECAR and they will make it right. You can also call me on my personal cell phone, 561-358-1474.

Nobody Knows What Your Trade-in Is Really Worth

A lot of people think that all used cars have a specific value and they can learn this by looking it up in the “Blue Book” or some other used car wholesale book. Nothing could be further from the truth. The wholesale books that dealers use and those that are available online to consumers have varying degrees of accuracy, but you can’t rely on a book tell you the best price at which you can sell or trade in your car. The most accurate book is the Manheim Auto Guide because it’s based on the latest wholesale auctions nationwide and it’s updated weekly and daily online. The least accurate book is the NADA guide which relies solely on surveys sent to dealers. The dealers exaggerate the wholesale value of their make to make it easier to take in trades.

All of the wholesale books, except NADA, are based on prices of cars sold at auction. However, you must understand that those prices don’t give you an accurate price that you should expect for your trade. A car sells at an auction for the price offered by the highest bidder if the seller chooses to accept that bid. I often don’t sell my used cars to the highest bidder that week because I might get a much higher price the next week. Lots of things affect the level of prices at a car auction…the weather, holidays, bribing the auctioneer and bribing the buyers. On a cold, rainy day when few dealers show up to buy or sell cars, prices are lower as well as shortly before and after holidays. Sometimes it happens that a buyer “greases the palm“ of the auctioneer so that he “doesn’t hear” (fast gavel) the higher bid from another dealer who bids higher than the dealer who has let the auctioneer know the price at which he wants to buy the car. Sometimes the sellers pay the buyers cash under the table to bid an unrealistically high price for their car. A car doesn’t even have to go through the auction block for the owner to believe it was “sold at the auction”. Buyers and sellers can make a deal before it goes “through the block”…very cozy, only one bidder. Why would they do that? Often the buyers and sellers are employed by the dealer who actually owns the car. The used car manager or wholesale buyer employed by the dealer might pay $2,000 too much for a car if he can earn $500 cash in his pocket from the seller. His boss, the dealer, is never the wiser. Let me hasten to add that the Manheim auctions are very careful to police these kinds of shenanigans and never encourage them. However, as in every large organization (Manheim is the auto auction in the world), there are a few rotten apples.

OK, then if the books are wrong and the auctions are wrong, then surely the car dealer must know the value of my trade-in….WRONG AGAIN. I have a little “test” on used car appraisal knowledge that I administer to my sales managers from time to time. By the way, my managers are among the most knowledgeable and competent anywhere. This isn’t just my opinion but that of all of their peers in this market. My test goes like this. Without prior notice I randomly select a car from among the 100 or so that come into my service department each day. I ask each of my 8 mangers individually to appraise this car for what they think the current wholesale market value is. They keep their appraisal secret from the others and write it down on a piece of paper and hand it to me. I’ve been doing this for 30 or more years and I’ve never had a variance in appraisals of less than $3,000. Some have been greater than $10,000! The reason I do this is to remind all of my mangers of exactly what I’m explaining in this article….Nobody knows the exact value of a used car. That’s important to my managers because under appraising a used car can cost us a sale. Over appraising a used car can cost us a wholesale loss at the auto auction. Therefore we always check and recheck our appraisals and go so far as to call other dealers and even put cars on Ebay. Another good reason not to accept only one dealer’s appraisal is that dealers will often knowingly undervalue your trade-ink, especially if you’ve negotiated a very low price for your new car. The dealer vernacular for his is “stealing the trade”.

Now that we’ve established that nobody has any idea what your trade-in is worth, what does that mean to you? It means you should stop worrying about getting an accurate appraisal because there’s no such thing. However, what you should positively insist on is getting the highest appraisal. In fact, you should hope that the guy who gave you the highest appraisal was very inaccurate and made a huge mistake that will cost his dealership a large wholesale loss at the auction. You accomplish this by never accepting only the appraisal by the car dealer from whom you’re buying your next car. Before you allow him to appraise your car, you should get at least two other bids from dealers of the make of car you are buying. For example, a Ford dealer will usually appraise a Ford for more than a Honda dealer because more people wanting to buy a used Ford will shop the larger selection at a Ford dealer. Deal directly with the used car department at these other dealerships. Tell the used car manager that you need to sell your car for cash and that you’re getting two more bids from two other dealers. If you have the time to get more than two more bids it’s even better. Another good place to get a bid on your used car is from CarMax, the largest retailer of used cars in the world. They buy lots of cars directly from owners even when they don’t buy a car from CarMax. Their prices are sometimes higher than dealers will offer you.

After you determine the highest bidder, if it’s not the dealer from whom you’re buying, give him the right of last refusal. If he can match the price from his competitor, you save the sales tax on the price of your trade.

$100 for Information About Your Car Purchase

If you purchased your vehicle from an Autonation dealership through TrueCar in last six years, I want to hear from you!

I need to know:

1. Which Autonation dealership you purchased your vehicle
2. The date of the purchase
3. The make and model you purchased
4. The VIN of your vehicle
5. Your name
6. The sale price on your buyer's order

I will need to see copies of your deal paperwork - I promise to keep your name and information private. I will only furnish it to TrueCar so they can verify the transaction with Autonation. I will not use your information for any other purpose.

If you're not sure if your dealership was an Autonation dealership, you can check here

To say ""thanks for helping out with this, I'll pay you $100. I'm limiting this to the first 100 respondents, so hurry :)

Just email me at earl@earloncars.com to get the ball rolling!

Thanks!

Earl Stewart

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 is the True Cost of that New Car?

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

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

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

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

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

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

Worthington/Quantum High Schools Commencement Address

 

My column this week is the commencement address that I delivered last Thursday, June 18 at the Worthington and Quantum High School of West Palm Beach graduation ceremony.  

I’m deeply honored to be asked to speak to you this afternoon. I do a lot of public speaking at civic clubs, churches and synagogues, libraries, and chambers of commerce. I do a live radio show every week with my wife, Nancy. Normally I speak extemporaneously. I’ve never written out a speech, and I rarely even use notes. But I have to confess, addressing a group of young women and men who will graduate from high school in a few minutes “scares me to death”. And, as you can tell, I’ve written out my words and I will read them to you. I want to be sure that I say the right things and give you the best advice I possibly can because you're beginning one of the most important phases of your lives.

When I was asked to speak to you, I was naturally very flattered, but I was also surprised. I wondered why I was chosen out of all the very qualified people that would be just as honored as I to speak to you. Then it came to me that I’m a successful businessman, a car dealer that is very different from most other car dealers. Not only am I different, but I’m far more successful than most other car dealers. But the reason I'm more successful is not that I’m smarter, or that I work harder or even that I sell a better product. I do sell a good product…Toyotas, but I also outsell all of the Toyota dealers in my market.

I haven’t always been different from all other car dealers; In fact for most of my career I was just like them. I started in the automobile business in 1968, long before any of you were born, and probably before most of your parents were born. I was successful for many years doing business just like all the other car dealers. The conventional, simple formula for success of car dealers was then, and still is today: (1) Advertise whatever it takes to lure prospective customers into your dealership. (2) When they arrive, do whatever it takes to sell them a car at the highest possible profit.

Back in the day when I was just like every other car dealer, I didn’t think I was doing anything wrong. There’s a sociological phenomenon that makes many of us think we’re doing the right thing because everybody else is doing the same thing. Two extreme examples of this are Nazi Germany in the thirties and forties and the Southern USA during the slavery era.

When we were kids, almost all of us used this excuse to our parents when we were caught doing something stupid like smoking or drag racing. “But, Mom…EVERYBODY IS DOING IT!” Then your Mom would say, “If everybody jumped off a cliff would you do the same thing?”

 I’m not really sure when I began to “see the light” and realize what I was doing was very wrong. It wasn’t an overnight revelation; it was more of an evolution. Twenty years ago, only one of my three sons had any interest in my business. The other two didn’t want to do what I did for a living. About that time I came very close to selling my business and retiring. Thirteen years ago my first (of five) grandchildren were born. About that same time, I married Nancy, the second marriage for us both. She loved the business and has taken an active role in it. A little over 10 years ago, I contracted colon cancer and thought I might die. These are “life changing events” in a person. My evolution from a “run of the mill” car dealer began back then. I began to “clean up my act”. I stopped my bait and switch advertising and I reformed from deceptive sales practices. My youngest son, Josh, and oldest son, Stu, joined me in the business. I remember one day my oldest son, Stu, told me that his children, my grandchildren, told him that they were proud of what he did for a living and that they would like to be car dealers one day. This had a very powerful impact on me and when I think about it today, it still brings tears to my eyes.

A funny thing happened as I began to treat my customer with more respect and integrity. My business began to improve. The customers that I sold for the first time began to come back again and again. They even told their friends and families. I was becoming more successful than I had ever been before. Suddenly it dawned on me! Being honest and respectful of others is GOOD FOR BUSINESS. Not only was I able to have my family with me, sleep better at night with a clear conscience, but I was making a lot of money.

I discussed this with my family and we decided to do what we were doing even better. Our company motto is “Kaizen” the Japanese word for “continuous improvement”. The next major step we took was to eliminate the “Dealer Fee”. The dealer fee also known by many other names like doc fee and dealer prep fee, is car dealers’ dirty little secret. It’s extra profit added to the price of a car making the customer believe it's an official state or federal fee. It’s the single most profitable component of most car dealers’ income. In my case, it amounted to about a $150,000 monthly. I was taking a huge chance by eliminating a source of profit that could literally bankrupt us. But, we agreed that if our goal was to be totally honest with our customers, the dealer fee had to go. Our profit per car did drop but the number of cars we sold increased so much as to offset the loss. Almost every car dealer in Florida and the USA, still charges a dealer fee.

Our next major step was to stop making high profits on those who could least afford to pay them, the less educated and sophisticated members of our society, and making low profits on those who are highly educated, shrewd negotiators. This is the hassle and haggle way of selling cars which is still prevalent today. For the past 3 or 4 years we have posted our lowest price on every car we sell. We encourage our customers to shop and compare our price with other dealers. Everybody pays the same price when they buy a particular car from us.

Another change we made was to offer unconditional money back guarantees on every car we sell. If a customer changes his mind for any reason, maybe they found a lower price or don’t like the color, we refund 100% of their money. No other car dealer I know of offers unconditional money back guarantees. On the contrary, most car dealers do everything they can to persuade you to take the car home the same day that you visit the dealership. “Taking delivery” is a vital component to making the car purchasing contract legally binding. It’s called a “spot delivery” by car dealers and most sell virtually all of their cars this way. You are rarely ever allowed to return the car and get your money back.

Our next change, in the spirit of Kaizen, will be to become the Amazon.com of car dealers. Very soon we will make it as easy to buy a car as it is now to buy flowers or a box of candy online. We will offer our customers the ability to choose their car, trade in their old car, and finance or pay for their car on their computer or smart phone. We will accept credit cards for a down payment or full payment and approve credit online for financing. We will send our appraisers to the customers’ homes to establish the trade-in value and we will also deliver their purchased car to their home. Our unconditional money back guarantee will take all of the risk and fear out of buying a car, even online.

I mentioned earlier that I do a lot of public speaking, just like I’m doing now. In recent years my role has changed from that of a car dealer to more of a consumer advocate. Because we’ve built the Earl Stewart brand so solidly to represent integrity to the car buyers of South Florida, I’ve moved to the “next level of trust” from a seller of Toyotas to an educator to buyers of all makes. In any business this is the highest level of trust attainable. I’m betting that you have a great amount of trust in your teachers that worked with you over the past twelve years to bring you to this great moment in your lives. Your parents also had a great deal of trust in your teachers in choosing this high school that you attended.

In addition to my weekly radio show and my regular speaking engagements, I write a weekly blog and newspaper column. I am looked upon by the local and national media as a source of candid, truthful information about the retail auto industry. I’ve been quoted by the Wall Street Journal, USA Today, CNN, Fox News, US News and World Report, Fortune Magazine, Forbes and many local medium. I’ve written a book, Confessions of a Recovering Car Dealer, that I sell on Amazon and I donate 100% of the proceeds to charity. In fact, tonight, as a graduation present to each of you, I will give you a copy of my book. Just email your address to earl@earloncars.com and I will mail you a copy of Confessions of a Recovering Car Dealer.

So, you might ask, what has all of this got to do with me? What it has to do with you is that I’ve shared a “secret” with you…a secret that is “hidden in plain sight”. You’re mother always told you to be a good person, "do unto others as you would have them do unto you", "never say anything about anybody else unless you have something nice to say", "honesty is the best policy", don’t be a bully, and so on. We see and hear this advice often and from an early age, but what we don’t see is the majority of people around us, friends, family, and most others, following all of this advice themselves. You can compare this to the speed limit signs on I-95. Everybody sees and understands their meaning all the time they are driving, but very few pay any attention including the Florida Highway Patrol. J

 The reason that you don’t obey the speed limit is that you want to get where you’re going faster and you know that if you exceed the speed limit by just 5 or 10mph, you won’t be issued a ticket. You also notice that everybody else is exceeding the speed limit and they aren’t being ticketed either. In fact, your trip is actually smoother if you stay in the flow of traffic. If you slow down, other drivers continuously pass you and some might tailgate or even blow their horns.

But what if, counter intuitively, you discovered that, for whatever reason, you actually made better time by rigidly obeying the speed limit? Do you see where I’m going with this? I discovered, almost by accident, that all other car dealers were doing it wrong! And remember, this phenomenon isn’t confined to only car dealers. This applies to all businesses everywhere.

 This is because the world is changing at warp speed. At the end of WWII, human knowledge was expanding at the rate of doubling every 25 years. Remember that in 1945 we had no computers, no Internet, and there wasn’t even any television. Today the sum total of human knowledge is doubling every 12 hours and that rate is accelerating as I speak! Today, the smart phone you hold in your hand has more computing power than was available to the President of the United States twenty years ago!
\Some of you will be going on to college next and some won't, but all of you will be looking for a job at some point. You might be tempted to take job with the company that offers or promises you the most money. You must overcome that temptation because, in the long run, very few 21st Century companies will prosper without transparency and integrity. This is because of the "knowledge explosion" I've told you about. Today's consumer is far smarter, more sophisticated, and more demanding than the consumer of just a few years ago.

My advice to you is to look for a company to work for that believes, understands, and applies the "secret" that I've shared with you this afternoon. Good companies always try to hire good people. That’s what makes them good companies. In your job interviews let them know that you strongly believe in total transparency and honesty and that you chose their company because they have that reputation. It goes without saying that a strong work ethic, high energy, and a good education are prerequisites for most jobs. But, what will make you stand out from the crowd at a good company is your ability to fit well into their culture of transparency and integrity. 

Thank you for honoring me by asking me to speak to you today. Good luck and God bless.

Don't Get "Flipped" to a Lease

One of the most popular weapons in car dealers’ arsenals is the infamous “lease flip”. This is car dealer jargon for switching a customer who originally intended to buy a car to leasing the car. 

Of course the motivation to do this is more profit for the dealer and a bigger commission to the salesman. That’s not to say that leasing a car is always more costly than buying one, but it can be if you’re not careful. And not being careful is exactly what happens when a purchase intender becomes a lessee. 

Here’s how it happens. You come into the dealership to buy a car. You may have seen the dealer’s advertisement in the newspaper or TV for a particular model. More than likely you are prepared to make a down payment and/or trade in your old vehicle. You have a monthly payment in mind because almost everybody has a budget and we usually translate most purchases into whether or not we can fit them into our monthly budgets. You negotiate the best price you can to buy the car, or maybe the sale price is good enough. 

Now the salesman or more often the F&I manager/business manager tells you what your monthly payment will be. Let’s say that you have a trade-in worth $15,000 and aren’t going to put any cash down. The F&I [Finance and Insurance] manager tells you your monthly payment will be $427 per month. But that’s way more than you can afford and you tell him you can’t buy the car because you can’t afford that big a payment. He asks you how much you can afford and you tell him it must be under $350 per month. Now he has you set up perfectly for the “lease flip”. 

“Mrs. Smith, I think I have just the right thing for you. What would you say if I told you that you can drive that new car home today for just $349 per month?” You say, “With glee, you say we have a deal!” Guess what? You’ve just been flipped. If you had bought the car at the advertised price or negotiated a very good price, the dealer probably would have made about $1,000 profit. and the salesman would have made about a $200 commission. Not that you’ve let yourself be flipped to lease, the dealer could be making $15,000 and the salesman could be making a $3,000 commission!

I’m not exaggerating. I get calls weekly from victims of lease flips. Many of the callers are elderly and many of them are widows who never bought a car before, but had relied on their husbands. There’s no law that limits the profit that a dealer can make when he sells or leases a car. $10,000, $15,000, and even $20,000 profits are made and usually on leases. The dealers can do this by using the trade-in as a capital cost reduction on the lease but allowing less for the trade than it is actually worth. In the example above, your trade-in may be worth $15,000 but you were allowed only $5,000 to reduce the capitalized costs of the lease. Also, the dealer could have raised the price of the car you negotiated or the sale price to MSRP or even 110% of MSRP which is allowable by the leasing companies. 

By manipulating the number of months of the lease and the down payment [capitalized cost reduction], a dealer can give you as low a payment as you ask for and still make an exorbitant profit. Most buyers are so focused on monthly payments that they don’t carefully analyze what they are agreeing to and signing. The shorter the number of months of a lease, the greater impact the down payment has on the monthly payment. A $5,000 down payment reduces the monthly payment on a 36 month lease by $139 per month, $208 on a 24 month lease, and $417 on 12 month lease. 

Incredibly many victims of the lease flip, never thought about the fact that after the 12, 24, or 36 month term of the lease, they own nothing. After 36 months, a car with a good resale value should be worth about half of what you paid for it. Many people who have never leased before think they can bring their lease car back early if they want. Leasing is not renting and you can bring your car back early only if you make all of the remaining lease payments. If you had bought the car for $30,000 and financed it for 36 months, you would have about $15,000 in equity at the end of 36 months and no monthly payments. You were building equity with every monthly payment in the purchase but you were building zero equity with your 36 lease payments. 

As I said before, don’t let this frighten you from ever leasing a car. Leasing can be a good choice and sometimes the best choice. You can find six articles I’ve written for Hometown News: “Lease a New Car before You Buy It”, “Car Leasing Booby Traps”, “Be Very Careful When Leasing a Car”, “The Lease Acquisition Fee…the Bank’s Gotcha”, “Buy or Lease Your Car at the Right Time of Year”, and “Should I Buy or Lease My Next Car?” 

TrueCar and Tesla: Car Dealers' Worst Nightmares

If you want to know who car dealers dream about at night and wake up screaming about, their names are Scott Painter and Elon Musk. Scott Painter is the founder and CEO of TrueCar and Elon Musk is the CEO of Tesla.

What these two men have in common is an understanding of why most Americans distrust car dealers and why they consider today’s car buying experience unpleasant and even fearsome. Scott Painter and Elon Musk also have a vision for how this can be changed and both of their companies are moving rapidly to do so. They also have something else in common; they are two of the smartest, most honest people I know.

These men and their companies both have the same goal which is to bring total honesty and transparency to the car-buying experience, but they have chosen different paths to accomplish their goals.

Elon Musk and Tesla are lobbying state legislatures and federal agencies to allow Tesla, an auto manufacturer, to sell cars directly to the consumer and by-pass franchised car dealers. Some states have already complied and the U.S. Federal Trade Commission, FTC, has sided with Tesla, and is “strongly recommending” that all state legislatures pass legislation allowing direct sale of automobiles by all manufacturers. 

During the early part of the twentieth century privately owned franchised car dealerships were a rarity. Gradually car dealers were able to lobby all state legislatures to pass law making it illegal for a manufacturer to sell cars in their states and requiring that all cars be sold through private dealerships that were franchised by the auto manufacturers. The dealer franchise laws also prevent manufacturers from adding “too many” car dealerships in a given market. These same laws make it very difficult for a manufacturer to cancel a dealer’s franchise. Unless a car dealer commits some very egregious act, like committing a felony, manufacturers have a very difficult time doing anything to replace him. Car dealers make a lot of money and they form associations that are essentially lobbying organizations to maintain the status quo.

Elon Musk’s task is not an easy one. The car dealers and most politicians are and will continue to vigorously oppose him. But he does have a strong trump card which is the “American car buyer”. The Gallup Company has been conducting an annual poll on “Honesty and Ethics in Professions” for 37 years. Car dealers have ranked either dead last or in the bottom three since the poll began. They have shown no improvement. They are frozen in the 1950’s ways of bait and switch advertising and deceptive sales practices. There is no question that, if there were a national referendum vote on whether car buyers should be allowed to buy their cars from other than a franchised dealer, it would pass overwhelmingly.

As you probably know, I am a car dealer and I have been one since 1968. My father started in the retail car business in 1937 and I joined him at his Pontiac dealership in West Palm Beach. My wife and I are still involved in our Toyota dealership and my three sons will continue to operate it, hopefully, for many years to come. I would like to obtain another one or two car dealerships for my sons. Clearly, I do not look forward to the demise of the auto franchise system, but I clearly do understand why this could happen.

Scott Painter offers an alternative to Elon Musk’s goal to eliminate franchised car dealers. His company, www.TrueCar.com, offers a far superior, safer, totally transparent and less expensive way than buying a car directly from a car dealer. TrueCar has established firm rules for car dealers to abide by, if they want to become a Certified TrueCar Dealer. These rules include posting a firm out-the-door price without “surprises” like dealer fees, doc fees, and dealer installed accessories. This affords the TrueCar buyer the ability to compare out-the-door prices with at least 3 certified TrueCar dealers. TrueCar also offers unique and invaluable data to their buyers on what the real transaction prices are for the exact car they wish to purchase in their market. This data is obtained directly from the computers of over 10,000 TrueCar dealers. A potential buyer of a Ford F150 can see the lowest price, highest price, and average price that this vehicle has sold for recently in his market. The buyer can compare these with the prices quoted by the TrueCar dealers as well as MSRP and invoice….TOTAL TRANSPARENCY.

About 30% of all U.S. car dealers are Certified TrueCar dealers. Dealer who won’t comply with the rules are “fired”. Last year TrueCar fired 275 dealers. Customers who have a complaint about a TrueCar dealer can complain directly to TrueCar and they resolve all complaints. There has NEVER BEEN A LAWSUIT AGAINST TRUECAR BY A CUSTOMER since they started in business ten years ago.

There are lawsuits against TrueCar from car dealers and car dealers’ lobbying associations. There is even an effort to certify a class action suit purportedly on behalf of TrueCar stockholders. This is because the other frivolous lawsuits by the car dealers and their associations have driven down the TrueCar stock price. It’s my personal opinion that Wall Street short-sellers are behind this lawsuit. In full disclosure, I own TrueCar stock and I am buying more because I firmly believe TrueCar is the wave of the future in the way that cars will be bought in the USA. I am also a member of the TrueCar national dealer council and a certified TrueCar dealer.

Should I Buy a Car or Have a Colonoscopy?

I wrote this column 3 years ago, but in honor of my routine colonoscopy this morning, I’ve decided to re-run it ;)

If you are over 55, you should have had a colonoscopy. If you haven’t, call your doctor because this could save your life. It did mine, but that’s another story. I had another colonoscopy yesterday and I have to tell you that it’s a very unpleasant experience, mainly from the mental anguish anticipation and the discomfort of the preparation the previous day. I had a lot of time to think about my procedure and I started thinking about how this experience parallels that of buying a car. It’s something you must do and has a very good benefit, but you dread the process. 

This column, my 39th for Hometown News, has consisted mainly of suggestions and inside information that can make your new or used car buying experience less of a fearful occasion. Some of the titles/subjects are “Always Get an Out the Door Price”, “Bait and Switch Advertising”, “Beware of Deceptive Internet Car Pricing”, “Beware of Direct Mail Car Advertising”, “Buying a Car When You Have a Credit Problem”, “Eight Steps to Ensure You Are Buying the Best Car for the Best Price”, “List Price and MSRP Might Not Be the Same”, “Negotiating to Buy a Car”, “Open Letter to Florida Car Dealers” (I, II, III, and IV), “Shop Your Financing and Trade”, “Should I Buy My Car at the End of the Lease?”, “Should I Lease or Buy my Next Car?”, “Should I Pay Cash or Finance My Next Car?”, “Should I Trade in My Old Car or Sell it Myself”, “Tell Your Car Dealer to be Nice”, “The Right Used Car is a Better Buy than a New Car”, “Translating Misleading Car Ads”, “What is the True Cost of that New Car?”, “What to do if You Are Treated Badly by a Car Dealer”, “When is a Car Sale Not a Car Sale?”, and “The Internet Price is the Lowest Price for a New Car”. 

Almost every one of these articles originated from my customers’ and others’ experiences when buying cars from other car dealers. I get a lot of calls from people who have never bought a car from me. They call to tell me of their bad experience with another dealer and, when I get several calls on the same subject, I write a column on it. People often call me asking for advice or assistance after they have already bought, which is “closing the barn door after the horse is gone.” On more than one occasion I have called car dealers asking them to consider undoing a wrong they have caused one of their customers. I have to confess that I am “batting zero” on this effort. I won’t give up, however. I just made another call this afternoon on behalf of a customer whose installment sales contract, signed by her and the dealership had a higher interest rate than a second contract that the dealer sent to the lender. The customer told me she signed only one contract, the one she took home a copy of. 

One thing that amazes me about these weekly columns that I have been writing for almost a year is that no car dealer has ever called me to complain or for any other reason. I have not been sued either. I think that says something about the truth of my articles. I’m not a lawyer, but I do know that you can’t successfully sue somebody for libel or slander if they write or say the truth. I know of one car dealer who threatened to cancel her advertising in the PB Post because she thought it owned the Hometown News. I am puzzled why not one single dealer would call me just out of curiosity. I don’t have a secretary and I don’t screen any of my calls…nor do any of my employees. They do know how successful my dealership is and how fast my sales are growing. They know that I am selling a lot of their former customers. Many of these new customers tell me how they told the other dealers why they chose to take their business elsewhere. I believe that before too much longer we will see some changes in the way other car dealers do business even if they refuse to call me, as I have repeatedly invited them to do. Sooner or later they will understand that treating your customers with courtesy and integrity is just plain good business.

Cadillac Service at Chevy Prices

This post is directed at luxury car owners. If you drive an Acura, Cadillac, Lexus, Lincoln, or Infiniti and you’re taking your car to the dealer of that same make you drive, you’re paying as much as twice as much as you have to for maintenance and repairs.

Most people know that General Motors manufacturers Cadillac as well as Buick, Chevrolet, and GMC trucks. Most of the models of each of these makes share in the engineering and design. This also holds true for Acura and Honda, Lexus and Toyota, Lincoln and Ford, and Infiniti and Nissan. Some models are almost totally identical “under the skin”. The manufacturers make their luxury version look fancier and add luxury options and accessories, but the underneath it all, they are mostly the same vehicles.

The reason that many people don’t know that their Infiniti is built by Nissan and Lexus is built by Toyota is “marketing”. The manufacturers don’t want you to know that that the Lexus ES you’re driving is really a Toyota Camry, “all dolled up” or that the Acura ILX is really a fancy Honda Civic. Volkswagen, Mazda and Hyundai all made big marketing mistakes when they introduced their luxury models, Phaeton, Amati, and Equus. The VW Phaeton which cost over $100,000 bombed badly and is no longer sold in the USA. The Mazda Amati was announced in the early 90’s but Mazda canceled their plans when they suddenly “saw the light”. The Hyundai Equus, over $60,000, is not selling well either and I predict it won’t be able to compete in the USA luxury car market either. 

The reason these three models failed is that Volkswagen, Mazda and Hyundai made the fatal marketing mistake in expecting a luxury car buyer to spend $100,000+ for a car sold in a Volkswagen dealership or $60,000+ for one sold in a Hyundai dealership. To compete with established luxury brands like Mercedes and BMW, manufacturers must offer buyers a car that they feel confident is not only a luxury car, but perceived by their friends, neighbors, relatives, and business associates to be a luxury car. When a luxury owner is leaving a fancy restaurant or his country club and gives his ticket to the valet, he doesn’t want to be asking for a Volkswagen or Hyundai, albeit the most expensive one. When he brings his car in for service, he wants to mingle with other luxury car owners with all of the luxury amenities offered…it’s like first class vs. coach. I know Lexus dealers who offer massages and manicures to their service customers. JM Lexus, the world’s largest Lexus dealer, has a putting green on their roof for their waiting service customers.

Luxury owners expect to pay more for service and luxury car dealers are happy to accommodate them. If you’re willing to pay twice as much for an oil change because you can play golf while you wait or have a manicure, that’s up to you. But you can save a whole lot of money and have technicians that are totally qualified to maintain your luxury car by bringing it to the same manufacturer’s dealer for the lower price make…Acura to Honda, Cadillac to Chevrolet, Lexus to Toyota, Lincoln to Ford, and Infiniti to Nissan. 

There is one caveat and that is the manufacturers require that you have your factory warranty repairs done by the luxury car dealer. You may also experience some problem with parts availability. Although most parts are the same, there are some parts like a cabin air filter which the dealer may have to buy from the luxury car dealer. My suggestion would be to make an appointment for your service in advance and tell the Honda dealer what you would like done. He then can be sure to already have all the necessary parts on hand when you arrive. You will be shocked at how much money you can save and, measured over the total time you own your car, this can amount to thousands of dollars.

I know that a lot of luxury car owners will read this and continue to bring their luxury car to the luxury car dealer just like there are diamond jewelry buyers who will pay Tiffany’stwice as much for the exact same caret, color, and clarity diamond as Costco sells, when the only tangible difference is the “little blue box”. Brand image is a powerful marketing tool.

Fine Print Serves No "Good" Purpose

Fine print taken from a car dealer's ad in last Saturday's (5-23-15) Palm Beach Post and magnified 10X

There are lots of federal and state laws that that are supposed to “regulate” fine print in advertising. My premise is why should we only “regulate” something that is patently wrong; why not just ban it? 

The Federal Trade Commission has regulations on fine print with language that says the fine print may not change the implied intent of the main advertising message. In other words, if an advertisement states a price, the fine print cannot have hidden costs like dealer fees and dealer installed accessories which increase the real price. Florida laws state that the fine print must be of sufficient size and location so as to be “readable” All of these laws and rules are largely ignored mainly because “nobody reads the fine print anyway”.

In TV advertisements you’d have to be a speed reader to have any chance of reading the fine print and this is assuming you have exceptional eyesight. Have you noticed radio’s version of fine print? They record a 20 second disclosure of the advertisement and double or triple the speed when it’s broadcast it so that you hear it in only 5 seconds. Furthermore, notice that the volume is much lower than the rest of the message, a different much softer voice is used and oftentimes it’s played at the very beginning of the advertisement so that your mind doesn’t even associate it with the advertising message. 

I am suggesting that we pass laws, state and federal, banning fine print entirely from advertising. It would be a good idea to ban fine print in all things including contracts. The saving grace in contracts is that we can pay a lawyer to read the contract for us. 

I believe that lawyers are the cause of fine print not being made illegal. Lawyers derive a significant percentage of their income by creating fine print for contracts and later interpreting the fine print that they wrote in incomprehensible legalese. We almost always pay a lawyer to read the contracts when we buy or sell a home, but nobody pays a lawyer to read a contract when they buy a car. I’ve been a car dealer for close to half a century, I never remember a buyer completely reading the fine print on any of the paperwork or having a lawyer do so. If we did read all of the fine print, we wouldn’t understand because it’s deliberately worded to make it too difficult to comprehend for anybody except a lawyer. 

I challenge any lawyer, car dealer, or anybody else to tell me one saving grace for fine print in advertising or contracts. Tell me why it wouldn’t be better for everybody (except car dealers and other advertisers and lawyers) if all language pertinent to an advertisement or contract was stated in large, easily understood print, audio, or video. 

If you are able to read the fine print above, it says that the prices advertised in the large, obvious and colorful print above the fine print is not the price that you can buy those vehicles for. It says that in addition you must pay a $599.95 dealer fee plus the cost of dealer installed options. There is no description of what these dealer installed options consist of or what they cost. There are numerous other restrictions such as the prices are good only on May 23, the cars advertised may already be sold, you have must the advertisement with you, rebates and incentives used to calculate these prices can change without notice, and the models and equipment shown may not be the car they will sell you for the advertised price.

I don’t realistically believe that fine print will ever be made illegal, at least not in this century. We have too many lawyers in the USA and I don’t just mean lawyers that are practicing law. Our legislators are lawyers, our judges are lawyers, our federal and state attorney generals are lawyers as well as our local state attorneys. Talk about a stacked deck!

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: 

• 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.  

• 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. 

 

• 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. 

• 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”. 

 

• 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. 

 

• 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. 

 

• 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.

Is Paying Cash for a Car a Bad Idea?

When I was growing up, my parents taught me that if I wanted to buy something expensive, I should save my money until I had enough in the bank to pay cash for it. It was the old school, “Neither a lender nor borrower be” school of thought. Actually, that hasn’t been a bad school of thought for most of my life; especially when you look at the Great Recession that we’re slowly emerging from. Easy credit was a big part of the cause of the most severe recession since the Great Depression of the thirties.But today we’re experiencing interest rates that are lower than any time any of us can remember. We’re also experiencing a stock market that offers record high returns on investment and investing very conservatively can give you’re a return greater than the cost of borrowing money if you have good credit. The average transaction price on a new car today is about $35,000. If you invested that $35,000 in the stock market, you could expect to earn at least 10% compounded over the next four years. You would have $52,211 in your investment account at the end of 48 months, a total return of $17,211. If you have excellent credit and borrowed the money at 2% (there are even lower rates available), you would pay only $1,478 in interest over 48 months. You net profit, subtracting the interest from your investment return is $15,733!

Even if you’re ultra conservative and don’t want to invest in stocks, there are bonds, even tax free municipal bonds, paying higher than 2%, the cost of your car loan. There are many blue chip stocks paying dividend yields higher than 2%. For a person with good credit, it is “absolute insanity” to pay cash for a new or used car today. Interest rates will go up eventually and we should take advantage of these low rates because we may never see them this low again in our lifetimes.

But, remember that the only reason all of this is true is because of these historically row rates. Your car dealer will not offer you a low rate unless he has to. On the average, car dealers make more money financing your car than they do selling it to you. Car dealers get kick-backs from banks based on the interest rate they charge you. They call this kick-back finance reserve and it can amount to thousands of dollars on a car sales. Your sales person is paid on profits from the dealer’s finance department. You cannot get a complete and honest answer from your salesman if you ask him about interest rates. You should have already shopped for your interest rate with your credit union and bank before you began car shopping. By the way, credit unions usually have lower rates than banks because they are less regulated and have lower expenses than banks. If your workplace does not have a credit union, you can join one anyway. There is a small fee for joining, but it is well worth the savings you’ll realize on your checking account and borrowing money.

There are situations when the dealer, through your car’s manufacturer, can meet or beat even a credit union rate. This is rare, but worth looking into. Manufacturers will offer very low rates, even 0%, to stimulate sales of certain models. Rarely does it apply to all models and these low rates are offered as an “either-or” to cash rebates. Be very careful not to be misled by this “either or” of low interest rate OR cash rebate. Most dealers advertise prices including the cash rebate but they also offer in the same advertisement the low rate. This “either or” may or may not be disclosed in the fine print.

There is one more caveat to using the dealer’s (manufacturer’s) low rate. The dealer still has a trick or two up his sleeve offering a lower rate than a bank. Those tricks are add-on products like extended warranties, maintenance contracts, GAP insurance and a plethora of other products, many of which are overpriced and/or worthless.

Good and Bad Car Dealer Lists

Nancy Stewart and I did a weekly radio talk show on Seaview Radio in North Palm Beach for 7 years, took a year off, and now we’re back on the radio with a 2 hour weekly talk show, Earl Stewart on Cars, every Tuesday from 4-6 PM. You can tune in this show at “900 AM the Talk of the Palm Beaches” or you can stream it at www.StreamEarlOnCars.com. Every week we send a mystery shopper into a South Florida car dealership that pretends to buy or lease a car. I discuss the results on my radio show every week. This information allows me to build a dealer database of information that is very beneficial to you when you go out to buy or lease a car. Because my information from a year ago is somewhat dated, I’m beginning a new list of dealers I recommend and those that I don’t.

I use information in addition to the mystery shopping reports in constructing this list including my personal acquaintance with certain car dealers, Google ratings and other business rating services, and input from customers of these dealers. I get a lot of emails, letters, and phone calls from people that have been taken advantage of. I also get some calls from customers of dealers that received good treatment. I encourage you to contact my with any information about your recent car buying experiences. My email address is earl@estoyota.com and you can call or text me at 561 358-1474. Finally, I look at dealers who are affiliated with TrueCar, www.TrueCar.com. In full disclosure, I’m a TrueCar dealer, stockholder, and a member of their national dealer council. Being a TrueCar dealer doesn’t get a dealer on my Good Dealer List, but it is a positive sign. AutoNation is the dealership group in the USA with about 250 dealerships. There are a large number in South Florida. I admire and respect Michael Jackson, the CEO of AutoNation and believe he encourages his dealerships to do the right thing by their customers, but just like TrueCar, there are AutoNation dealers who don’t qualify for my Good Dealer List. Mike Jackson can’t personally police 250 dealerships.

I also encourage car dealers to contact me with information as to why they should be on the Good Dealer List or why they should be removed from the Bad Dealer List. I have a large following in South Florida and I honestly believe that being on the Good Dealer List would be good for business. In fact, I would be happy to meet with any car dealers who would like to sit down and discuss this with me.

I’m releasing these lists before they are finished because of the large number of requests I’m getting from the public. Please understand that this list is not complete and is a “work in progress”. Dealers that appear on these lists will be supplemented and some will be deleted. I strongly urge you to let me know of any experiences that you’ve had with any dealers on either list, good or bad. Finally, please be advised that being on the Good Dealer List doesn’t mean that you can “let down your guard”. The dealers on this list are the better than others but none have received an A+ rating from our mystery shopper. The 2nd best score on this list was Gunther Volkswagen of Delray with a B+. Some of these dealers have received C and C- scores. I’m hoping to see all the scores improve on this list, but sadly, the average car dealership in South Florida is not nearly as good as it can and should be.

Finally, I debated with myself long and hard about including my dealership on the Good Dealer List. Doing so gives the appearance of being self-serving. In fact, it is self-serving. I admit this but that is not why I included it; I did so because I honestly believe we are a Good Dealership. I give my dealership an A- rating because I know we can improve and we will.

Good Dealer List

• Mullinax Ford in North Palm Beach
• Schumacher Chevrolet in North Palm Beach
• Earl Stewart Toyota in North Palm Beach
• Johnson Honda; Stuart
• Delray Nissan (AutoNation) in Delray
• Wallace Hyundai in Stuart
• Delray Dodge Chrysler Jeep Ram in Delray
• Gunther Kia in Ft. Lauderdale
• Schumacher GMC in North Palm Beach
• Delray Subaru in Delray
• Vista BMW in Pompano Beach
• Gunther VW in Delray
• Mercedes Benz of Delray in Delray
• Gunther Mazda in Ft. Lauderdale
• JM Lexus in Cocoanut Creek
• Schumacher Buick in North Palm Beach
• Audi of Stuart in Stuart

Bad Dealer List

• Grieco Mazda of North Palm Beach 
• Napleton Hyundai of West Palm Beach and North Palm Beach
• West Palm Beach Kia
• Napleton Dodge-Chrysler-Jeep-Ram of North Palm Beach
• Napleton Kia in Riviera Beach
• Napleton Nissan in Riviera Beach
• Al Hendrickson Toyota in Coconut Creek
• Lake Park Mitsubishi
• Braman Honda in Greenacres

Good People Make Good Car Dealerships

In my columns over the years I’ve always advocated carefully choosing the car dealership that you buy your vehicle from or allow to service it. I still believe this is important. In fact, I recently published a list of dealers that I recommend you buy your car from and a list that I recommend you avoid. We’ve all visited a restaurant or retail store and had a terrible experience with a waitress, sales person, or other employee and never returned. Yet, we’ll friends recommending the same store that we swore never to patronize. We condemned an entire company because of one person.

I also wrote a column a couple of years ago in which I suggested that you carefully choose the individual who advises you and sells you service on your car. These individuals are really commissioned sales people who sell you service just like car sales people sell you cars. Unfortunately most dealerships call them something else like “assistant service manager” or service advisor. In my dealership we used to call them Assistant Service Managers because that’s the term that Toyota uses. We now call them “service advisors” because too many people thought they were dealing with the service manager. In all candor, I’d feel more comfortable naming them what they are, “service sales people” and I may make that change.

It occurred to me that the same recommendation applies to all companies, not just car dealerships and it applies to all departments in a company. Whichever car dealership you choose, take the time to pick and choose those individuals you deal with. Car dealerships, just like other organizations, are nothing more than the sum of their parts…their people. You should get to know the person who sells you service and, if you don’t like him, ask for another person to handle your service requirements. You should also meet and cultivate a manager in the service department.

The same holds for the sales department. When you buy a car, don’t settle for the first salesman who approaches you. For example, if you’re a woman you may feel more comfortable dealing with another woman. Or, if your native language is Spanish or Cajun, you may feel more comfortable with one who can converse with you in your native tongue. Don’t be shy about asking and don’t feel bad about hurting the feelings of the first sales person. An automobile is the 2nd largest purchase most people make and it’s very important that you feel comfortable with the person selling it to you. Furthermore, if after dealing with your sales person for a while, you think you made a bad choice, ask to speak to the sales manager or general manager. Believe me, car buyers hold all the cards in today’s shaky economy and no sane sales manager is going to lose a sale because a prospective customer doesn’t like or trust the sales person she’s dealing with. He will handle your sale personally or choose another sales person you do feel good about.

Car dealerships have other departments including parts, finance and insurance, accounting, and some have body shops. My same recommendation applies to all departments. A word of caution, when you ask to speak to a manager, be sure you’re really are truly speaking to one. Car dealerships are notorious for calling rank and file employees managers to trick the customer.

My purpose in writing this column is in realization of the fact that there are no perfect companies, especially car dealerships and that includes mine. I employ 150 individuals and I would be less than candid if I didn’t say I have a few rotten apples in my barrel. Unfortunately, I don’t know who they are and finding them is a continuous work in progress. The same thing applies to all companies including car dealerships. In my list of recommended dealers, there are some employees of those dealerships who would take advantage of you but most would not. In those dealerships that I recommend you don’t buy your car from, there may be a few honest, courteous employees. Then there are all the dealerships that I don’t put in either category. Your odds of finding the right individual are much better if you patronize a good company or car dealership, but don’t totally let your guard down.

Just stay away from the ones that I recommend you don’t deal with. In every organization there’s a tipping point. A great company reaches a critical mass of good employees and as their reputation grows, more good employees from other companies seek to be employed there. Honest, hardworking, courteous people enjoy working in an environment where others are like them. The same holds true for evil dealerships and bad companies (those on my “don’t buy” list). A good person with a conscience has a very difficult time functioning in an environment where, from top management all the way down, the design is to trick and take advantage of customers. These few good people don’t last long in evil dealerships and flee to a place where they can treat their customers in a manner that lets them sleep at night.

The Technical Service Bulletin (TSB) aka The Secret Warranty

Last Friday, the New York Times ran an article entitled “GM Deems Steering Issue Unworthy of Recall’. In the article is a quote from one of many GM owners who wrote the NHTSA on this problem: “I was driving through a construction zone when my steering wheel locked up,” the owner of a 2013 Buick Verano wrote the National Highway Traffic Safety Administration in December. The owner is one of more than 50 who cited a similar problem to the agency. Clearly, this is a serious and frightening issue; so why isn’t GM issuing a recall?

Last July, G.M. sent dealers a technical service (TSB) bulletin that told them how to fix the problem, but only if an owner complained to a dealer. This practice in not unique to General Motors; all manufacturers employ TSB’s. They are sometimes referred to as “secret warranties” because the manufacturers don’t notify the owners of the cars that are affected and they even forbid the dealers to advise the customer. 

The reason that auto manufacturers don’t tell their customers and won’t allow car dealers to tell them either is clearly to keep down their expense of repairing these vehicles. They are afraid if they go public with the manufacturing defect too many customers will come in to have the repair made. And the reason manufacturers advise their dealers not to tell the customer unless the customer complains is that they simply don’t trust their dealers to be honest about fixing cars that need repair. 

There are voluminous numbers of TSB’s sent out, around 20 monthly depending on the manufacturer. It’s close to impossible for a car dealer’s service personnel to keep up with most of them. In other words, when you drive your car into a car dealer’s service drive, there’s a good chance that the service advisor/salesman has no idea that there is a Technical Service Bulletin issued on your vehicle. If he happened to know that there was one issued, he is forbidden by the manufacturer to tell you about it unless you complain! 

The NY Times article was written because the writer felt that this GM problem of a steering wheel sticking should have been considered a safety defect. A safety defect, by law, must be addressed by a recall of all affected vehicles. I can’t understand how GM or any auto manufacturer would not consider a problem with a steering wheel sticking not to be a safety issue. GM argued that all the driver had to do was to apply additional force to “unstick” the steering wheel. This may be true, but how would some people react to a steering wheel that was stuck in one position? A young, inexperienced driver, an elderly driver, or a very nervous, excitable driver may overreact by yanking the steering wheel too hard or freezing. 

I think the point to be made is that the decision on whether a defect is a safety issue or not should not be made by the auto manufacturer; it should be made by the National Highway Traffic Safety Administration, NHTSA. Every Technical Service Bulletin, TSB, should be shared with NHTSA and they should make this determination and order the manufacturer to recall all defective vehicles on safety issues. 

Many recalls began with the TSB. Rather than seriously analyzing the defect, the manufacturers issue the TSB which NHTSA and most owners of that particular car never learn of. In fact, due to the high volume of TSB’s most dealers are unaware of them too. The manufacturers wait until they have a large number of complaints from customers and until they can count a number of injuries and/or deaths before they issue a recall. The NHTSA began looking into this issue with GM 5 years ago and recently concluded its investigation after reviewing 3,465 complaints from owners including allegations of 107 crashes resulting in 40 injuries. One can only speculate on why the NHTSA would not order a recall at this point of crashes and injuries. There is dissention in the NHTSA over this decision and, I’m guessing, a recall will be issued soon largely due to this NY Times news report. 

What can you do to protect yourself until this issue is rectified? First, ask your car dealer to see if there are any TSB’s issued on the specific year-make-model car you drive. He will look in his computer for this. Secondly, I also recommend that you go on the Internet and Google the question. You can input your VIN and the year-make-model and ask are there any Technical Repair Bulletins TSB’s? If there is one or more TSB’s on your car, you should demand that that the car be repaired as indicated by the TSB. There is the possibility that the defect is not detectable at this time and mileage of your car and also the possibility that it will not manifest itself at all. My recommendation is that if there is any question about whether the defect exists, insist on having the repair made. The cost is covered by the manufacturer as long as the vehicle is still covered under the factory warranty (in terms of time and mileage). However, many manufacturers will offer assistance with TSB repairs to owners if their vehicles are out of warranty, so make sure you ask!