Auto Manufacturers Don’t Want to Know How Much Their Dealers Charge You for a New Car

As you know, car dealers have sold virtually all their new cars at thousands of dollars above MSRP over the last three years. The prices were so high that car dealers made record profits over that time despite selling relatively few new cars because of manufacturing constraints. Most auto manufacturers also made record profits because, they too, raised their prices to the dealer by stopping dealer incentives and raising their prices to the dealers.

In a recent auto dealer and manufacturer trade journal, Automotive News, an article said that only 18% of new cars being sold in 2024 were above MSRP. While it’s true that new car prices have dropped precipitously since 2022, I assure you that nowhere near 18% of the actual transaction prices this year are below MSRP, (Manufacturer’s Suggested Retail Price).

Auto News and the manufacturers are making this false assumption because their dealers are discounting prices below MSRP, but their dealers are also hiding thousands of dollars in junk fees and dealer preinstalled accessories that do not show on their financial statements in the price of the car. Their dealers hide this additional car markup and dealer profit under false headings like “miscellaneous income”. By doing this, the dealers also avoid having to pay their salespeople and managers a percentage of this additional new vehicle profit. The salespeople know this and are even more reluctant to remove junk fee from those added to the advertised price of the vehicle because it reduces their sales commission. To reduce price, the dealer does not allow the removal of junk fees. He allows only the reduction of the commissionable price of the car.

 
The true selling prices of new cars are readily available to the manufacturer and almost anybody if they truly want to know. “Transaction Prices” are a matter of public record when every car is sold. The profit/markup on a car is simply the difference between the true cost of the car paid by the dealer to the manufacturer and the delivery price, less government fees. The oft touted “dealer invoice” is a misnomer and contains thousands of dollars in hidden kickbacks to the dealer.

 
If the Federal Trade Commission wanted to make a simple rule that would solve almost all dealer deception, it would be that the out-the-door selling price, aka transaction price, must match the advertised or quoted price plus government fees only.

Help a Friend Buy a Car

www.EarlsVigilantes.com

You're reading this column now, and that tells me that you're probably an educated consumer. You hope to pick up a tip or two on how to buy or lease a car without getting ripped off by a car dealer. This is what educated consumers do. They read, listen to podcasts, watch videos, and communicate with others who share information.

As the old expression goes, "I'm preaching to the choir." Those who need this information the most are consumers who don't read columns like this or avail themselves of other sources of consumer information. I'll bet that the percentage of those who subscribe to Consumer Reports who are victimized by car dealers is very, very low.

This is why I'm asking you to share your expertise with others less fortunate than you. Those who are taken advantage of by unscrupulous car dealers are those who are very young, very old, or lacking in education, and those whose first language is not English. It also includes people who are simply too trusting, and not sophisticated in legalities or the art of negotiation. We all know people like this because they comprise most consumers and are all "fish in a barrel" for car dealers.

To thank you for joining Earl's Vigilantes, I'll send you a vigilante cap with the logo when you fill out the application at www.EarlsVigilantes.com.

Autonomous Cars Shouldn't Require a Driver's License

Seventeen years ago, I wrote a blog entitled "Grandma and Grandpa's Freedom Machine." I was 66 years old then and first began thinking of myself as a "senior citizen" aka "old guy." The gist of this article was inspired by my late "Uncle Charlie," who refused to give up his old Cadillac. He'd retired from operating his gas station in West Palm Beach, and his 20-year-old Cadillac sat in his driveway for 10 years after he could no longer drive it. He and Aunt Marion could see it from their living room rocking chairs, sitting on its flat tires. It made Uncle Charlie happy to think about driving it in past years on Sundays to "visit" friends and family, including my mother, father, sister, and me. They'd go to church first, all dressed up (Uncle Charlie always wore a Fedora hat).

As a car dealer, I sometimes must talk to my elder customers' children who intervene when their parents want to buy another car or drive it in for service. This is one of the most difficult times for a family to face. One could say, "One of the happiest moments in my life was when I got my driver's license and first car; one of the saddest was when they took them away from me."

This year U.S. Representatives Brian Mast from Florida and Greg Stanton from Arizona introduced a bipartisan Autonomous Vehicle Accessibility Act to help people with disabilities better access the mobility and independence benefits of autonomous vehicles. The elderly, of course, represent a high percentage of those with disabilities because this is part of aging.

We seniors think a lot about losing our driver's licenses when our sight, hearing, and other senses begin to fail us. Contemplating taking written tests and driving tests is scary. What if we don't pass? Doctors tell us that many of their elderly patients don't have current drivers' licenses. They continue to drive with expired licenses because they're afraid to take the driving tests. This is not just dangerous for them, but for everybody else on the road.

Call me a "cockeyed optimist," but I believe if we seniors can hang on a little while longer, we'll never have to give up our "freedom machines." We can buy an autonomous vehicle or buy a timeshare in one. We'll be able to summon our vehicle to pick us up in front of our residence and tell it to take us to Walgreens or Taco Bell. The big bonus to "time share" is we pay only for the time we use the vehicle. Today, our vehicle sits in the garage or out front of our homes 80% of the time... but we still must pay for all that idle time.

The Most Important Part of Your Car For Maintenance, Expense & Safety

Automotive technology has been advancing at warp speed for the past 20 years. Today’s new automobile is far superior in safety, comfort, ease of operation, maintenance, mechanical repair cost, and longevity. It seems like yesterday that we were all driving combustion engine cars that got 12 mpg and were well worn out at 50,000 to 100,000 miles. By today’s standards, they were “death traps” in an auto accident. Today, we’ve evolved to hybrid cars and are on the way to all-electric. Maintenance is almost non-existent, and we’re not that far away from fully autonomous cars.

Sadly, our cars’ tires got stuck in a time warp about twenty years ago and are pretty much the same tires you’ve always had on your car…just a lot more expensive. I’m not sure why this is because there’s nothing more dangerous than a tire blowing out at high speed, and there’s no other part of a car that has to be regularly replaced, repaired, and maintained like tires.

We used to have to have our oil changed, transmission-radiator-battery fluid levels checked and replaced regularly…no more. Now you can change your oil just once a year. The only good thing about all the other necessary maintenance back in the day was that your tires could also be checked, but checking your tires only once a year is very dangerous and can be very expensive.

Here are a few guidelines to keep you safe and save you money with your tires:

• Inspect your tires at least monthly for inflation psi and uneven wear or road hazard debris like screws and nails.

• Inflate your tires higher than the auto manufacturer’s recommendation but below the tire manufacturer’s recommendation (smoothest ride). The car manufacturer has the psi on the door jamb and/or owner’s manual, and the tire manufacturer has it stamped on the sidewall (maximum inflation) of your tire.

• Have your tires rotated and balanced based on the manufacturer’s recommendation or anytime you experience a vibration or pull while driving.

• Have all four wheels alignment checked whenever you have them otherwise checked. Almost all service departments will check your alignment free and provide you with a computer printout of the results.

• Also, have your alignment checked whenever you notice a pull on your steering wheel, to the left or right.

• Buy the best tire for your driving and environment based on Consumer Reports testing reports (See the February issue of CR or go online to www.CR.org). Do not buy tires because of the brand name. Some well-known tires are very good, but some aren’t. You’ll be surprised to find the best tires recommended by Consumer Reports are brands you haven’t heard about.

• Finally, shop the price when buying tires and not what Consumer Reports says is fair. Be careful when buying tires to get the full price including mounting and balancing and “junk fees”. If you’re near a Costco warehouse, there’s no better place to buy new tires. Do not waste money adding “nitrogen” to our tires, but Costco inflates them with nitrogen at no charge. I think that this is because so many people are fooled into believing nitrogen is good to have in tires. It’s not unless you’re a NASCAR driver or an airline pilot.

Insider Car Buying Tips for the “Hardcore” Negotiator

Disclaimer: I advise 99% of car buyers not to negotiate for the lowest price when buying or leasing a car.

This column is for that 1% who are skilled at and enjoy the game and art of negotiation. Lawyers are often excellent negotiators, having been trained in law school to deal with judges, opposing lawyers, district attorneys, and the police. A few non-lawyers are good negotiators; it’s something they were born with and enjoy. My wife and partner, Nancy Stewart, loves to negotiate and is very good at it. Therefore, 99% of those reading this column should not attempt to negotiate with a car dealer. If you try, you're "playing his game" and are like someone who sits down at a poker table in Las Vegas. If you find yourself looking at each person around the table, wondering if there's a “sucker” playing in that game… YOU ARE THE SUCKER. Never play the other person's game; you will lose control. Follow my advice in my hundreds of other columns and use the Internet to buy online, using aids like Costco, Consumer Reports, and TrueCar.

FOR HARDCORE NEGOTIATORS ONLY:

1. Decide exactly what year, make, model, and MSRP car you want and never deviate from that choice.

2. Bring a friend along with you. Never car shop alone. Your friend can take notes for you, remind you about details, and there’s strength in numbers, both psychologically and legally.

3. Do not tell the dealer that you will trade in your old car, even if you plan to. You remove the dealer's ability to increase profit on the car you're buying and force him to negotiate on the price of the specific car you're buying. It's easier to sell your old car today at a higher price than ever before.

4. Tell the dealer that you're financing your car through him, even if you aren't, and probably shouldn't. Why? Historically, car dealers make more money on financing than on the markup of the car they sell. When they believe a profit opportunity exists, they're more likely to lower the car price because they can make up for it (and then some) on finance profit.

5. When you believe you've reached the lowest price you sought, ensure to get it in writing and ensure it includes all charges except government fees, namely sales tax and registration paid to the state government. To be perfectly safe, verify the “fees” listed do not have sales tax calculated on them. Government fees are non-taxable.

6. Make it clear that, even if they meet your price, you'll shop it with their competition. If they tell you the price is good only for today, tell them that’s too bad because you're going to compare it anyway. Don’t worry; if they would have sold you the car today for that price, they will tomorrow too.

7. If you get bogged down in negotiations, stand up, walk out the door, get in your car, and begin to drive away. Most of the time, the salesman and even his manager will intercept you before you get on the highway with a lower price than you have.

When, How, and Who? Complaining at a Car Dealership

The chances are that if you buy a car or have yours serviced by a car dealer, you’ll have something to complain about. For the past 50 years, the Gallup Annual Poll on Ethics and Honesty in Professions has ranked car dealers at, or very near, the bottom of all companies and professions.

The trick is knowing how to complain effectively so that the likely bad treatment you'll receive can be corrected. Car dealers will only pursue aggressive, unethical, and dishonest tactics when they believe that it's working to make more money on your purchase of a car or service. Once they believe that they’re dealing with an educated consumer who can't be scammed, they'll probably back off, become transparent, and do what they realize they must to make the sale, or even avoid being sued.

Complain only to the person who is authorized to correct the wrongs you’ve incurred. This is a real manager in charge of the department with which you’re dealing—new car, used car, service. I underlined "real" because rank-and-file salespeople will often claim to be managers. A true manager is identified on the dealership's website and on his business card (don’t settle for an assistant manager).

Speak to the highest-ranking manager you can find, ideally the General Manager of the entire dealership or the owner. These "higher-ups" often don't even know about the shenanigans going on at lower levels, but if they do, by speaking to you, they lose "deniability". This means they can't claim they didn’t know about all the dishonest and unethical behavior by their subordinates.

Speak calmly, politely, but firmly, and never raise your voice. Don’t come across as accusatory and threatening. Refer to the issues that caused you to complain as misunderstandings or mistakes, not dishonesty or deception (even if you suspect them).

Let it be known that you will be confirming this issue in writing via email, text, or letter. Tell them this is just to be sure you’ve clearly and completely stated your case, not because you're going to sue them (even though this is exactly why you should do this).

Include the auto dealer's manufacturer in the written summary of your complaint. If it’s a serious matter, also include your state's Department of Motor Vehicles.

Be sure to obtain the cell phone number of the person you’ve complained to. This is a good habit to have with all dealership personnel you meet. You’d be surprised, or may already know, how difficult it is to get responses on promises made to you in car dealerships. Phone calls, texts, and emails are not answered. Most everyone in a car dealership is paid on commission, and once that’s "in their pocket," there’s no time for returning phone calls.

Ways to Avoid Common (and costly) Mistakes Made Serving Your Car

It's easy to make a mistake and agree to services for your car that you just might not need. Arm yourself with this information and you can forget about making these costly errors:

• You are not required to take your car to the dealer from whom you bought your car for service. Any dealer franchised for your make of car can perform warranty work and all other work.

• Buy your next car from the dealer with the best price and service it with the dealer that offers the best service.

• You are required only to have warranty work done at a dealer for your make of car. All other repairs and maintenance can be performed by any qualified mechanic or service company. Always save receipts for the work performed when you have work done by someone other than a franchised dealer for your make.

• Always get at least two bids on any service or repair that’s costly, or you aren’t sure is necessary.

• Always get a written estimate of the cost of a service or repair. Many states, including Florida, require that the dealer remain within 10% of the written estimated cost.

• My rule of thumb on an extended warranty or service contract is not to buy one. Assuming you bought a reliable car and maintained it properly, the odds are against you saving money on repairs by buying a warranty or service contract. The fine print in these contracts excludes most of the more likely and expensive repairs. The only valid reason for buying one is for "peace of mind," which is a psychological issue that only you can decide.

• Ask for a more qualified technician to be assigned to work on your car, even if you must wait a little longer. One of my favorite jokes is, "What do they call the doctor who graduated last in his medical school class? A Doctor." Ensure your technician is ASE (Automotive Service Excellence) certified in the skills required to work on your car, such as transmission, engine, air-conditioning, etc.

• Be sure to have all the manufacturer’s recommended maintenance done, according to their time schedule, and don’t buy anything else recommended only by the dealer. The service advisors are commissioned service salespeople. The more they can sell you, the more money they make. Today’s cars are far ahead of the cars you bought 10-15 years ago in terms of maintenance requirements. Most manufacturers offer free maintenance for periods of time, and the required maintenance is negligible—mainly tires and oil changes. Many dealer’s service departments will try to sell you more maintenance than you need to make money.

• Be sure that the service advisor, or, even better, the technician, road tests your car with you before and after the repair or service. One of the most common problems in service departments is telling the customer the service was done or the problem was fixed when it wasn’t. This often happens because the service salesman didn’t understand the problem, or the technician didn’t understand the service salesman.