Monday, July 21, 2014
Though some say so, I don’t believe all car dealers are evil or even unethical any more than I believe that all lawyers or all politicians are. These three professions have something in common. They are all ranked at the bottom of the annual Gallup poll on “Honesty and Ethics in Professions.”
I have many friends who are car dealers, lawyers, and politicians that I respect and trust greatly. They feel the same way about their profession as I, and many endeavor, as I, to raise the level of public trust for what they do for a living. The Florida Bar Association regularly fines, suspends, and disbars lawyers who violate their code of ethics or the law. Similarly, the US Congress and Florida Legislature have internal codes of ethics which are enforced. Unfortunately, the National Auto Dealers Association (NADA) has a code of ethics, but with no enforcement. The Florida Auto Dealers Association (FADA) has no code of ethics or internal enforcement of any kind. I’ve been asking and working with the leadership of FADA for years to change this, but they can’t get the approval of their dealers.
I believe time is running out for NADA, FADA, and all car dealers to accept the fact that we have too many rotten apples in our barrel. The consumer of the 21st Century’s intelligence, education, and awareness has exponentially increased in the past 20 years, largely due to the Internet as a source of knowledge and instantaneous, universal communication via the social medial. Tesla has begun to sell cars directly, by-passing the dealer. My sons and I visited the Tesla showroom in Boca Raton on July 2nd and what a refreshing and amazingly satisfying experience! The sales person was very well informed, pleasant, and there was absolutely no pressure to buy a car. We were given bottom-line prices on all the models. If ordered a car there was no deposit required and we could change our mind at any time before we took delivery.
The car dealers and their associations are vigorously fighting against the right of Tesla to sell their cars directly, bypassing the car dealer. The NADA and state dealer associations are very powerful and have been politically successful so far. Only a few states are allowing Tesla to sell directly to the public. But the public is overwhelmingly behind Elon Musk and Tesla and over 95% of Americans would rather buy their cars directly from the manufacturer. You would think that this would send a “message” to car dealers and car manufacturers. I’m not a big advocate of the Tesla product because I don’t think all electric cars will be the answer for long, long time. But I am an advocate of the way Tesla factory stores sell their cars with total courtesy, respect, honesty, and transparency.
I think it’s only a matter of time before GM, Ford, Toyota and all of the auto manufacturers start thinking about doing the same thing that Tesla is trying to do…eliminate the car dealer and go direct. This is what Apple has done so successfully and, in a fashion, so does Amazon. The only thing stopping this from happening today is the lobbying, political power of car dealers and their national and state associations. But this can only buy them time. Ultimately, it’s the American public that runs things in the USA. The politicians need the car dealers’ money to get elected, granted. But ultimately it’s the voters who elect them and allow them to stay in office. The voters are almost all car buyers and almost all of the car buyers would rather buy directly from a manufacturer in the Tesla way of doing business than from their local car dealer.
The car dealers still have time to get their act together…maybe even 10 or 15 years, but they better get started right away. They have a whole lot to change and way too many “rotten apples” in their barrel.
Posted by Earl Stewart at 10:58 AM
Monday, July 14, 2014
A TRUE, TYPICAL STORY
OF THE FEAR OF CAR BUYING
Below, you can read the Facebook exchange between a young widow from Arizona and me. She contacted me to help her buy a car. I chose to write this article about her request, because her fear of car buying is so typical, epidemic in the USA. The annual Gallup poll on Ethics and Honesty in Professions, always lists car dealers last or next to last. Many people would prefer to experience a root canal at their dentist than buy a car from their dealer. Those victimized the most are the very young, elderly, less educated, overly trusting, and the English language impaired.
I chose to make this young woman’s fear of car buying and my proposed solution the subject of this blog because it is so typical of so many, but who are afraid to speak out and ask for help. With her permission, I will follow up later with what actually happened when she followed my advice to use www.TrueCar.com to buy her car.
I’ve advocated this online buying service for several years. In full disclosure, I’m a TrueCar dealer, a member of TrueCar’s national dealer council, and a stockholder in this company. TrueCar is the best, safest way for you to buy a car. When you buy from a TrueCar dealer, he is contractually obligated to follow strict ethical guidelines. The dealer quotes you his best price on the car of your choice, knowing that you are free to shop and compare that price with other dealers. TrueCar also monitors the prices of their dealers. They can accurately do so because a condition of TrueCar membership is that the dealer must allow TrueCar direct access to his financial data via his computer system. TrueCar knows what price he quoted you and what price they actually sold it to you for. TrueCar also knows what prices other dealers are selling cars for and whether these prices are low, average, or high. Not all TrueCar dealers abide by the rules, but, if they don’t, TrueCar will drop them from their dealer network. TrueCar prints their phone number on the price certificate you receive from them, 888 TRUE CAR (888 878-3227). For Spanish, it is 888 256-5461.
This is my Facebook dialog with the young widow from Arizona:
Can I hire you to help me to lease a car :) I am a widow. My husband died Sept 2001. I bought a brand new Ford Expedition off the show floor and paid over $40,000+..I got taken because I had never bought a new car before. In the 1st week an elderly 82 yr. old man took out the passenger side in a Walmart parking lot. He had no insurance. the 3rd year, a woman ran a red light and completely totaled the truck leaving the Vets office after doing an animal rescue and nearly killed me. Again, she was from Mexico and had no insurance. Doing my homework and research I fought with the insurance company and got a decent value to buy another vehicle but still lost tons of money on the lot value at purchase and went without a car for nearly 4 months (had to rent). In 2008 I bought a used 2003 Navigator from A dealership in Scottsdale, It was mechanically totaled in the 2nd year, after $4000 in repairs I traded it in to the same dealership for $11,000 in 2010 for a 2010 slightly used Chrysler 300 for $17000. The total price I ended up paying for the 300 after my trade deduction was...$29,000 including interest at 14% I still have this car and I am still paying it off at $360.oo a month and still owe almost $11,000. I needed a big SUV because I do animal rescue and have to have large kennels for transport so I bought a 2005 navigator less than a year ago in cash and paid over $250 to have it professionally inspected by a licensed mechanic and test driven. I was given the go ahead to buy the vehicle as 98 out of 100 % mechanically sound. In less than a year I am now looking at a $4300 repair bill to keep it running and with a/c with a very near future repair coming possible transmission. The Fletcher's mechanic recommended I Trade it in while it is still running and filled a/c fluid for cold air. My fear is getting taken at a dealership, yet again. I am all most out of money and sick of dealing with car issues and slimy criminal mechanics who charge too much and do not even do anything but make things worse. I have to date lost nearly $60,000 in car loss. I am a good, honest person who saves animals through my rescue. I need a lil karma from my Karma savings account :) Will you please help. I can pay you $100 an hour for up to 3 hours by phone (if a dealer can even finish a deal in that time...doubtful). What do you say...wanna be my gun for hire. To get a feel for who I am please go to my Facebook pages at, Starbarks Pet Rescue or my personal page, Melinda Nina Wood Nelson. Thank you for taking the time to read my very long message Sir. Have a great day.
Melinda, I won't accept payment but I would be happy to help you lease the car of your choice at a fair price. I suggest you go to www.TrueCar.com. Choose the exact car you want and you will be given 3 dealers with the best prices. Contact the dealer of your choice but don't sign anything until you call me, cell phone 561 358-1474. I will advise you at no charge if it is a good deal and, if not advise you what to do.
You are wonderful. Thank you, I will do that. It is hard to admit fault but I am honest and can admit my weakness...car buying
Good morning, Melinda. You’re very welcome and don’t feel bad about admitting your difficulty buying a car. Most people have the same difficulty, and it’s not your or their fault; it’s the anachronistic, unethical and often illegal way most car dealers sell cars today. I would like to ask a favor of you. I write a weekly blog, advising car buyers just as I am advising you now. May I use our Facebook dialog in my blog, www.EarlStewartOnCars.com this week? If you prefer, I could redact your name. Please let me know this morning, if possible. Because your situation is so typical, I believe your real life story would greatly benefit many others. If you agree, we can follow up next week with how you fared followed my advice. Thanks very much. :)
yes, you may use my name and my message. I appreciate all you do for folks like me. Thank you :)
When I hear back from Melinda as to how her TrueCar purchase experience went, I will relate it to you in an upcoming column.
Posted by Earl Stewart at 12:38 PM
Monday, July 07, 2014
I've written other articles on this. I've talked about it on my radio show. I’m participating in a class action suit against insurance companies for this practice. I've contacted Jeff Atwater, the Florida CFO, who presides over the Department of Insurance and reported this practice to them. I've filed a complaint with NHTSA, the National Highway Traffic Safety Association. I've contacted reporters from the newspapers and TV. But so far, I've been unable to get anybody to do anything about it. .
Federal law clearly states that all parts used for body repair of vehicles must be at least as safe as the parts made by the original equipment manufacturer (OEM). The Federal Code actually states that we may not alter or make inoperative a device or element of design that is in compliance with an applicable safety standard. My contention is that using untested, non-OEM parts is altering the design of the vehicle……
Title 49, Chapter 301 Sub-chapter II Sec. 30122 "Making Safety Devices and Elements Inoperative"
a. DEFINITION In this section, "motor vehicle repair business" means a person holding itself out to the public to repair for compensation a motor vehicle or motor vehicle equipment.A hood, fender, or bumper that has never been subjected to, and passed, federal crash tests is highly likely to make an airbag “inoperative” as one example. This is why I’m so amazed that NHTSA, the Florida Office of Insurance Regulation, the media, or SOMEBODY hasn't taken any action against any insurance company when they consistently, flagrantly are breaking the law!
b. PROHIBITION A manufacturer, distributor, dealer, or motor vehicle repair business may not knowingly make inoperative any part of a device or element of design installed on or in a motor vehicle or motor vehicle equipment in compliance with an applicable motor vehicle safety standard prescribed under this chapter unless the manufacturer, distributor, dealer, or repair business reasonably believes the vehicle or equipment will not be used (except for testing or a similar purpose during maintenance or repair) when the device or element is inoperative.
All I can do is what I’m doing. I’ll continue to write about it, talk about it, tell the media about it, and pursue my lawsuits. I sometimes feel like one of these crazy conspiracy theorists. I don’t think I’m crazy. If I am crazy, I wish someone would address this and take the necessary steps to get me psychological help. If I’m libeling or slandering insurance companies, I invite them to sue me. If you’re reading this article, I would really appreciate hearing your opinion on why no regulators, federal or state, have taken any action against the insurance companies for breaking the law and endangering the lives of millions of Americans. I also implore you to ask your federal and state legislators this question.
If you've been in an auto accident and had your collision repair paid for by an insurance company, there’s a very good probability that crash parts used were not OEM and never safety tested. If you are involved in an accident in the future, I advise you to insist on OEM parts. If your insurance company refuses, ask them to show you documented evidence that the parts they are recommending have passed federal crash test standards.
Posted by Earl Stewart at 11:43 AM
Monday, June 30, 2014
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:
I wasn’t able to get any pre-owned cars from the auction. Get in touch with
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
I will honor this offer through June 30, 2014.
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.
Posted by Earl Stewart at 11:14 AM
Monday, June 23, 2014
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.
Monday, June 16, 2014
I say all this, not to brag (or maybe just a little). It might surprise you that I am not deluged with phone calls. I get quite a few, but considering I sell 400-500 cars a month and service thousands of cars each month, I doubt if I average more than 25 calls per day. Most of them are positive, complimentary calls. I believe one reason for this is that my employees are motivated to work harder to satisfy my customers because they know, if they don’t, I’m going to hear about it very quickly. Another reason is that my customers are remarkably respectful of the fact that they can call me and do not take advantage of it. Frankly, my wife, Nancy, was very nervous about this when I first started passing out my business card with my home telephone number. Would you believe that I don’t get more than 5 or 6 home calls a week? When you extend your trust to people, they almost always respect that and do not take advantage.
Of course, you are not going to find a lot of car dealers who do what I do. But here is how you can improve your communications in other ways that will allow you to get problems solved and promises kept. Always ask for the business card of every person you deal with. If they don’t have a card, be sure to get their name. This improves your service right away because the person is no longer anonymous. Ask the person for his cell phone number. There was a time when it was considered wrong to call someone on his cell phone, but that was before cell phone rates became so cheap and the cell phone became universal. If this is a critical person you are dealing with, ask for his home telephone number too. Here is a little trick that I use when I do this. I always start out by giving them my cell phone and my home phone number. Then I say “and may I have yours?” I can’t remember ever having been refused. If someone you are doing business with refuses to give you his cell or home phone number, maybe you should wonder why.
Also, make it a point to be introduced to this person’s manager. Get the manager’s business card and as many contact numbers as he is willing to share with you. When you do this, you have put the salesman or service advisor on notice that if he doesn’t return your phone calls you will be calling his boss. If you really want to have an edge, ask to meet the general manager and/or owner of the dealership. Get his telephone numbers. Now you will have everybody’s attention when you come into the dealership to transact business.
If you are a “computer person”, collect email addresses from everybody you deal with. Email is not as timely as a telephone, but it has the advantage over the telephone because it is “on the record”. When you make a request of a person by email, he can’t deny it because you have a copy of the message. I know that with Microsoft Outlook email, I get an acknowledgement every time somebody opens an email that I sent them. Furthermore you can copy as many people as you like with an email. You can send copies that the primary recipient knows about or make them blind copies that he can’t tell were sent. Someone is a lot more likely to act on your request when he knows that it is a matter of record and his boss was copied with the email.
If you can force yourself into the habit of getting names, telephone numbers, and email addresses from everybody you deal with and their managers, conducting business with your car dealer (or any other business) will be much smoother and trouble free.
Monday, June 09, 2014
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.
Posted by Earl Stewart at 12:08 PM