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Now browsing: Hometown News > Business Columns > Earl Stewart

Earl Stewart
This Week | Archive

Survival of the fittest
Rating: 1.95 / 5 (20 votes)  
Posted: 2013 Feb 15 - 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.

Buying, leasing, or servicing a car is in an "evolutionary time warp" compared with most other retail transactions.

Buying an iPhone from an Apple store, a TV set from Target, or a dress from Macy's is actually a pleasant experience. People shop in modern stores as a form of pleasurable recreation without any intention of buying anything. My wife, Nancy, and I go to Costco often on Saturdays, not because we have a lot to buy, but because it's a pleasurable way to spend an hour or two.

Contrast this with buying a car, which many compare to having a root canal or a colonoscopy.

Flash back about 75 years in the retail evolutionary tree, and you have the "21st century" car-buying experience. Everybody you deal with is paid a commission on whatever you buy -- a car, service for your car, parts for your car, or financing or insurance for your car. This commission is directly proportional to how high a price they can coerce you into paying for the car, part, service, finance or insurance.

Furthermore, everybody pays a different price for everything they buy. You might buy a new 2013 Jeep Wrangler Sahara today for one price and find out that your next door neighbor paid $2,000 less the following day from the same Jeep dealer you bought yours from.

The difference in price is also affected by the skill, ethics and integrity of the car salesman and manager you dealt with.

Car salesmen, on the average, earn about 25 percent of the profit they make when they sell or lease you a car. The average profit on a new car is about $2,000, but this average is made up of wild variations from "zero profit" to $20,000 and even higher.

"Why would a car salesman sell a car for zero profit if he's paid on commission?" you ask.

There are two reasons. First, some cars are "real dogs," very hard to sell and may have sat on the dealers lot for months or even years. Salesmen are paid what is called a "flat commission" to sell these "dogs," anywhere from $100 to $1,000.

The second reason is that manufacturers often pay big bonus money to dealers for hitting a monthly objective.

Toward the end of the month, dealers will also pay flat commission to salesmen so that they can hit their volume objective.

"How could a dealer possibly make a $20,000 profit on a car?" you may also ask.

The most common way is by leasing a car, and tricking the customer into thinking he is buying the car. A large down payment or trade in added to the normal profit on a lease can be gigantic, and the monthly payment is reduced so much by the down payment that the unsuspecting lessor is not suspicious.

Sometimes people are talked into leasing by the salesman promising them that they can return the car at any time, just as if it was a daily rental.

The same wild variation in price for the same products or services also applies to what you pay for service, parts, finance and insurance. Your neighbor, who was smart enough to finance his car with his credit union, can easily save $3,000 over what you paid in the dealer's finance and insurance department if you weren't careful.

If you allowed the "assistant service manager" or "service advisor," who is really a commissioned service salesman, to sell you unneeded services, you also paid more than your more careful, prepared neighbor.

As most regular readers of my blog, newspaper column and listeners to my radio show know, my mission is to educate you so that you will be the winner in the contest between the car salesman, service salesman and finance and insurance salesman. My frustration is that you're probably already "survivors."

In other words, I'm "preaching to the choir" in a sense.

Last week, I received a call from an 82-year-old man who thought he had bought a new 2013 Hyundai Santa Fe, but found out when he drove it home he had signed a lease, not a purchase contract.

The dealer made at least a $15,000 profit and the salesman made about a $3,750 commission. When he realized what they had done to him, he brought the car back and offered the dealer $1,000 to take back the Hyundai Santa Fe and return his trade-in, a 2010 Santa Fe. They refused, saying "You signed the paper and you've leased a car."

I'm working with the elderly man now to try and help any way I can. I've spoken to the general manager of the Hyundai store, and am trying to get him to do the right thing. At this point, things don't look too promising.

The problem is that there's a group in our society that are, unfortunately, natural victims.

They're too trusting, not well enough educated, very young (first car purchase), mental faculties failing (maybe the last car purchase), or language impaired (immigrants).

Unscrupulous car dealers and salesmen lay in wait for these victims, just like a lion lays in wait on the Serengeti plains for a young or injured antelope.

That's why I used "survival of the fittest" in my title.

You can easily recognize the advertisements that are aimed at the victims. You'll see or hear phrases like "We'll match your down payment," "We'll allow you $8,000 over book for your trade-in," "We guarantee the lowest price," "Bad credit or no credit is no problem" or "$7,000 discounts on all new cars."

Because I don't advertise this way, I rarely see "victims" in my Toyota dealership. My customers are mostly well-informed consumers and lucky for me, there are a lot of them and they are growing in numbers.

However, I must say that as a businessman and a humanitarian, I'm very sorry that I cannot sell cars to those who suffer the most, the victims of our society.

But, I'm the proverbial optimist, and believe that through better education and smarter, more compassionate regulation, we will see the victims of our society minimized over the next few years.

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