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Now browsing: Hometown News > Business Columns > Earl Stewart

Earl Stewart
This Week | Archive


Top 10 auto ad scams outlined
Rating: 2.58 / 5 (12 votes)  
Posted: 2013 Feb 08 - 08:53

Earl Stewart is the owner and general manager of Earl Stewart Toyota in North Palm Beach. The dealership is located at 1215 N. Federal Highway in Lake Park. Contact him at www.earlstewarttoyota.com, call (561) 358-1474, fax (561) 658-0746 or email earl@estoyota.com. Listen to him on Seaview AM 960, FM 95.9 and FM 106.9, which can be streamed at www.SeaviewRadio.com every Saturday morning between 9 a.m. and 10 a.m.

I could write an article on the top 50 auto ad scams, because the ingenuity for deception in "getting car buyers in the door" is virtually limitless.

However, I chose to concentrate on the 10 most popular with South Florida dealers. Just beware that there are many more schemes than these.

o Discount from dealer list. Anytime you read or see a car advertised with a large discount, determine whether that discount is from the manufacturer's suggested retail price or the dealer's retail price. An all too common practice is for a dealer to mark up his cars thousands over MSRP and call it "dealer list" so that he can show huge discounts that aren't real.

o Prices exclude "impossible" rebates. Manufacturers often offer cash rebates to customers who qualify for special reasons. Some of these are being on active duty in the U.S. military. This rebate can be as much as $1,500. If you graduated from an accredited university within the past six months, you can qualify for $500 to $1000 from some manufacturers. There is a customer "loyalty" rebate which affords you $1,000 or more if you own the same make of car that you are buying. There's a similar option for lease customers. There's even a farm bureau rebate which qualifies you for $500 if you are a farmer.

Dealers are actually combining all of these rebates and deducting them from advertised prices of their cars. Of course, what are the odds that any customer would simultaneously qualify for all of these rebates? The average reader of these ads qualifies for none of the rebates.

o Lease payments based on large down payments. Virtually every lease payment advertised requires a large down payment, which is concealed in the fine print. Most people lease because they want to lay out as little cash as possible. If they had $4,000 cash to spend, they would probably opt for a purchase. Those who fall for this trick often end up leasing the car at the full retail. Leasing companies allow dealers to lease cars for "only" up to 110 percent of capitalized cost. When you make a down payment, this reduces the net capitalized cost, which allows the dealer to sell your contract to the leasing company.

o Lowest price guarantee. This guarantee is absolutely worthless. If you read the fine print, you will note that it says that "the dealer reserves the right to buy the car from the other car dealer (his competitor) at the same price his competitor quoted you."

No car dealer is going to accommodate his competition so that they can steal away his customer. Of course the other fact that makes this guarantee worthless is that it requires that you prove the lower price by presenting a buyers' order from the other dealer signed by a manager.

I know of no car dealer (besides me) who will give a signed copy of the vehicle buyers' order to a customer, unless they drive the car home or make a substantial, non-refundable deposit.

o Only one car available at ad price. When you are reading a newspaper ad, you will often see a strange number next to the advertised car. If you are watching the ad on TV or listening on radio, the number will be unreadable or undecipherable, as is the fine print. An example is STK #T91832. This is the stock number of the car and means it is the only car of that model and accessories you can buy at the advertised price.

They don't say "only one car available at this price" because you would realize the chances of that car being there (or sold to you if it is there) are very slim.

Don't be misled if the ad also says "many more identical models available at this price." Florida law requires that dealers include the dealer fee in their advertised price. But if that specific stock number car is unavailable, they can add their dealer fee to the price of an identical car.

This scam is why I continue to lobby Tallahassee to require that all profits to the dealers be included in all prices whether advertised, verbal or on the Internet.

o Advertised price is "plus dealer installed accessories." All this means is that the price you see is not the price you get.

Dealers love to add their accessories to their cars because they can set any price they want and drastically increase their profit margins. A dealer charging you $299 for pin stripes and floor mats would have a real cost of about $100, allowing him a 300 percent margin.

o Lease payment based on unrealistically low mileage allowance. All leasing companies limit the number of miles you can put on their car without paying a penalty. This is because the higher the mileage, the lower the resale value and the leasing company has to sell their car at the end of the lease.

The average American drives her car 15,000 miles per year. It's very common to see mileage limits of 10,000 and even 7,500 miles per year with penalties of 25 cents per mile. For an average driver in a four year lease that would be a penalty of $7,500. The dealers don't get this money, the leasing company does, but the dealers do this so that they can advertise an unrealistically low lease payment.

o Lifetime warranty. A lot of dealers are advertising these "lifetime warranties" on every car they sell. This is a very limited warranty, which applies only to the car's power train. The term power train has different definitions as to which parts of the car it consists of. It typically means only those parts of the engine, transmission, drive shaft and rear axle that are lubricated. These parts virtually never fail, as long as you change your oil as prescribed by the manufacturer or by the issuer of the warranty policy.

If you fail to change your oil as prescribed, the warranty is null and void. It's a win-win for the car dealer. You have to come in to have your car serviced regularly so that he can make more profit and, if you do comply with this, there will never be a claim. Dealers do pay outside warranty companies for these warranties, but the cost to the dealer is minuscule, around $25. The low price the dealer pays the warranty issuer is further proof that the warranty is worthless.

o Purchase payments include "balloon payment." How would you like to buy a new BMW 2009 328i for just $339 per month only to discover that your last payment was $12,983! Oh, and you also had to make an upfront down payment of $2,500. Always read the fine print.

o Internet quotes exclude dealer fee. The average dealer fee in South Florida is about $850. About 25 percent of car buyers are using the Internet to buy cars today. Almost 90 percent used the Internet for information about buying their car before going to the dealership. Virtually every car dealer in Florida charges a dealer fee and they all exclude that from the price you are quoted on the Internet.

I spoke to a woman just the other day, who drove all the way from Lakeland to West Palm Beach to pick up the new Infiniti that she had purchased on the Internet. When she got to the dealer, he added an additional $695 for his dealer fee.




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