The Truth About Cars » car dealers http://www.thetruthaboutcars.com The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Fri, 11 Apr 2014 20:20:18 +0000 en-US hourly 1 http://wordpress.org/?v=3.8.1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars editors@ttac.com editors@ttac.com (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » car dealers http://www.thetruthaboutcars.com/wp-content/themes/ttac-theme/images/logo.gif http://www.thetruthaboutcars.com Dealer Groups Sue Tesla, State Agencies Over EV Maker’s Ohio Retail License http://www.thetruthaboutcars.com/2013/12/dealer-groups-sue-tesla-state-agencies-over-ev-makers-ohio-retail-license/ http://www.thetruthaboutcars.com/2013/12/dealer-groups-sue-tesla-state-agencies-over-ev-makers-ohio-retail-license/#comments Fri, 20 Dec 2013 11:00:15 +0000 http://www.thetruthaboutcars.com/?p=684530 Tesla retail store in Columbus, Ohio

Tesla retail store in Columbus, Ohio

Car dealers trying to head off Tesla Motors’ attempts to set up factory-direct showrooms in Ohio lost a round last month when a dealership licensing amendment that would have blocked Tesla from selling vehicles direct to retail customers in the state wasn’t voted upon in the state legislature. Now the dealers are trying the litigation route, suing Tesla and state agencies to have Tesla’s retail license voided. The defendants are Tesla, the Ohio Department of Public Safety and the Ohio Bureau of Motor Vehicles. The plaintiffs include Midwestern Auto Group in Dublin, Ohio, and Ricart Automotive Group, of Groveport, Ohio.

Earlier this month Tesla opened up its first Ohio store in a mall in Columbus, along with a service center in the same city, presumably to service the cars sold at the mall. The EV company says it will open a second store in Cincinnati by the end of the year. To bolster it’s case with the Ohio public, Tesla announced that the expansions will mean another 26 jobs and “add an initial $7 million in direct economic activity.”

James Chen, Tesla’s VP for regulatory affairs and the automaker’s associate general counsel, called the dealers’ actions “bullying”, using a current buzzword. “This is the same kind of bullying from the dealers we’ve faced in other states. The dealers, when they’re defeated in the court of public opinion, in the media and in the legislature, they then go to the courts.”

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The Continuing Saga Of The Consumer Financial Protection Bureau And Dealer Interest Rate Markup On Car Loans http://www.thetruthaboutcars.com/2013/12/the-continuing-saga-of-the-consumer-financial-protection-bureau-and-dealer-interest-rate-markup-on-car-loans/ http://www.thetruthaboutcars.com/2013/12/the-continuing-saga-of-the-consumer-financial-protection-bureau-and-dealer-interest-rate-markup-on-car-loans/#comments Wed, 04 Dec 2013 14:00:09 +0000 http://www.thetruthaboutcars.com/?p=669042 Click here to view the embedded video.

It is no surprise that U.S. automobile dealers have been in a tizzy the past few months as the Consumer Financial Protection Bureau (CFPB) has been rattling its swords threatening to ban them from marking up interest rates on car loans, a sacred profit center for dealerships. Using methodology that assumes a person’s race can be determined by their last name and their gender by their first name, the CFPB claims that certain protected classes are being discriminated against in terms of being charged higher interest rates and thus the practice must stop.

What is a surprise is that Congress is equally annoyed with the agency’s strategy and lack of transparency, and recently announced new regulations limiting their power. No matter the outcome, there is a real possibility that the unintended consequences of the CFPB’s actions will be higher car loan rates for you.

The three-year old CFPB faces several obstacles to reach their objective. The agency has been unable to produce a single example of a consumer complaint about this issue. They also have no authority over automobile dealerships, where cases of discrimination might exist, so their plan is to punish the banks for the actions of their dealers. Bear in my mind that lenders, be it a captive like Ford Motor Credit or a non-captive like Wells Fargo, never see the client, do not ask questions about race on credit applications, and pointedly do not ask for a copy of the buyer’s driver’s license until after the deal is done. Nonetheless, the agency has been demanding that banks produce data so they may study the customers’ first and last names and the rates they were charged.

Until three weeks ago the CFPB steadfastly refused to answer banks’ and Congress’s queries asking them to produce specifics of their strategy to uncover cases of discrimination. They were then summoned to a Senate hearing, where the CFPB chairman pledged to be more open and accountable. The House Financial Services Committee was not impressed and they imposed new measures on the regulator to insure they behave.

The CFPB then proposed an alternative method of compensating dealers: banks could pay them a flat fee for arranging consumers’ car loans as a substitute for rate participation. The problem with that scenario is that if Bank A approves a customer at 2.9% paying the dealer a $500 flat fee and Bank B approves the same customer at 3.9% with a $750 flat fee, the dealer will offer the latter to buyers. At which point the CFPB can produce another study and be outraged that people with certain first and last names were charged a higher rate.

Click here to view the embedded video.

The CFPB is not alone in their quest. The Department of Justice recently successfully prosecuted the type of case the CFPB is desperately trying to find. They fined a Korean-owned Los Angeles bank and a Korean-owned Mitsubishi dealership for discrimination for their charging Hispanics consumers higher interest rates than non-Hispanics. The CFPB has not acknowledged this case as it is not the type of racial discrimination they are seeking.  Let’s face it, a Chrysler Capital or U.S. Bank will be perceived as “white” and if their dealers are charged with discriminating against minorities, they will be shamed by the media and the CFPB will be the hero.

The State of California – always irritated when the Feds find a business practice to regulate before they do – just announced a 2014 ballot initiative to ban interest rate markup by automobile dealers. The proposal includes other new dealer regulations, one of which prohibits dealerships from hiring individuals who have been convicted of identity theft. No dealer in their right mind would knowingly employ such a person but the strategy is to have it on the ballot so voters can think, “Damn car dealers, they must stop hiring convicted felons!” Like the Feds, Sacramento legislators know anything they can do to discredit automobile dealers will be cheered by the press and the populace.

So our question to the Best And The Brightest is this: if you are in the business of profiting by buying a product at wholesale and selling it at retail – and an interest rate is a product – should the government have the power to stop you from doing just that?

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GM Expands Shop-Click-Drive Online Car Buying Program Nationally http://www.thetruthaboutcars.com/2013/10/gm-expands-shop-click-drive-online-car-buying-program-nationally/ http://www.thetruthaboutcars.com/2013/10/gm-expands-shop-click-drive-online-car-buying-program-nationally/#comments Tue, 08 Oct 2013 15:28:46 +0000 http://www.thetruthaboutcars.com/?p=614553 welcome

The way that the auto industry uses the traditional independent dealer sales channel and proposed alternatives to that process have prompted considerable debate here at TTAC recently. While industry followers watch Tesla’s attempt to change the way automobiles are retailed with their factory owned outlets, General Motors is doing its part to change the retail sales equation, or at least make the negotiating process a bit more user friendly. If buyers want to, they can now complete the entire car buying process and even take delivery without ever stepping foot in a traditional dealership. However, GM says that the program is there to complement the existing retail dealer sales channel, not replace it.  According to Automotive Newsby the end of 2013, GM will expand  the Shop-Click-Drive online shopping program nationally.

Shop-Click-Drive has been running as a pilot program in eight states since 2012. It allows car buyers to buy vehicles, from initial inquiry to arranging final delivery, all online. Dealers are part of the process since Shop-Click-Drive is accessed through their own websites, not GM’s, but it’s clear that one of the features of the program is eliminating the perceived hassle of negotiating with a dealer that some people experience when buying new cars.

GM spokesperson Ryndee Carney said that the program will be available by the end of the year at all of GM’s 4,300 U.S. dealers. “Consumers increasingly want to do some degree of car-buying online,” she said. Interestingly, very few of the customers using the pilot program opted for a completely dealer-free experience. While about 900 vehicles were sold through Shop-Click-Drive, only five buyers opted to do the complete process online and take delivery without visiting a dealer. For all the complaints consumers have about car dealers, some people apparently still prefer some human interaction in their commerce. “People still want a relationship,” Carney said.

The program  has five steps:

1. Check inventory and pick a car or truck.

2. Get your trade-in value appraised.

3. Apply for credit.

4. Select options and extended warranties.

5. Schedule delivery either at the buyer’s destination of choice or pick it up at the dealer.

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Editorial: Why Tesla Needs To Sell Cars Through The Franchised Dealer Network http://www.thetruthaboutcars.com/2013/09/editorial-why-tesla-needs-to-sell-cars-through-the-franchised-dealer-network/ http://www.thetruthaboutcars.com/2013/09/editorial-why-tesla-needs-to-sell-cars-through-the-franchised-dealer-network/#comments Fri, 27 Sep 2013 13:00:36 +0000 http://www.thetruthaboutcars.com/?p=529729  

 Red Tesla courtesy teslamotosclub.com

Tesla founder Elon Musk recently announced that it was feasible to build a giant vacuum tube from Los Angeles to San Francisco and transport people the 400 miles between the two cities in 35 minutes. There is a better chance of this so-called “Hyperloop” ever happening than Musk being allowed to sell his electric vehicles directly to the public through his own stores in more than a handful of states. Musk must face reality and stop trying to change franchise dealer laws if he wants Tesla to sell cars through a dealer network that has a true presence in the marketplace. He must embrace the current system and start signing up existing stores.

Let us be clear: we are rooting for Tesla to succeed. The $70,000 to $100,000 Model S electric car is a ground-breaking automobile and has won about every award extant today. Musk is the darling of the analysts and the media, and who wouldn’t root for a man who is a combination of P.T. Barnum, Soichiro Honda and Bill Gates, producing the most politically correct green machine ever, and hates car dealers? What’s not to love?

I am also not shilling for automobile dealers, I simply do not see an alternative. Musk is trying to overturns state laws that prohibit manufacturers from selling cars directly to customers. Other carmakers, including Porsche and Ford, have tried and failed at this mission in the United States. Say what you will about American car dealers, but they have lobbied for and won state laws that will be nearly impossible to change. Musk has other pressing problems to occupy his time - possible battery shortages, and a nationwide charging network to establish – and even if he could build a dealer body, it would cost a half a billion dollars to construct and staff 100 dealerships.

 

Musk Courtesy usatoday.com

 

Musk wants to sell 40,000 cars a year worldwide by 2015. We say he can sell 80,000 annually in the US alone through established dealers, particularly with the lower priced X Model arriving in 2014. As Tesla’s units in operation grow, customers will start to have problems that the salaried kid in the Tesla kiosk at the mall and his service center down the street and a voice on the phone from Fremont will not be able to solve. Transaction prices will certainly drop and the fickle public may move on to other brands. Crises will occur, like this week’s possible first sudden-acceleration claim against the company. What if Tesla’s bold promise of a guaranteed future value of their cars start costing them $10,000 a unit? You need experienced car dealers to help take care of these problems, nurture the customers and move the iron.

Tesla vehicles need to be on sold on showrooms alongside other luxury makes. The company could choose to hook up with select dealers of the same brand, preferably Lexus, BMW or Mercedes-Benz, or simply choose the best dealership in each market in terms of having genuine long-term success in customer satisfaction. Being a new car company, they could write a dealer agreement with teeth, as Lexus did back in 1989, mandating facility and client handling standards. Musk will certainly have to share some of his 25% markup with the chosen stores which will be painful at first, but better than a factory parking lot full of unsold Teslas.

Used Tesla courtesy autotrader.com

Word came this week that Tesla has been quietly selling vehicles to rental car companies Hertz and Enterprise, indicating their retail sales may be softening and thus the need for dealerships to be established sooner rather than later.

Elon Musk must concentrate on what he does best and let car dealers do what they do best. Without a dealer network, Tesla is setting themselves up to fall short in important areas like after-sales service and distribution. While Musk currently has the tech-obsessed media wrapped around his pinky with talk of “disruption” and emissions-free motoring, few have examined the downsides of forgoing the traditional franchise dealer model. It’s one worth exploring.

 


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Car Dealers Still Using Cheap Tricks http://www.thetruthaboutcars.com/2009/11/car-dealers-still-using-cheap-tricks/ http://www.thetruthaboutcars.com/2009/11/car-dealers-still-using-cheap-tricks/#comments Sun, 15 Nov 2009 15:56:51 +0000 http://www.thetruthaboutcars.com/?p=335496 (courtesy farm3.static.flickr.com/2049/2335051237_02e0eaf6ea.jpg)

You might have thunk that car dealers would stop being skunks, what with the economy going thunk and the end of cash for clunk. But noooooooo. If anything, tough times have seen an increase amount of the same old story, same old song and dance down at the car lot. “You pay what we pay is back!” Little Rhody’s Flood Automotive Group proclaimed, before switching to free tires for life. And what of this? WYTV in Ohio reports [breathlessly] that Greenwoods Hubbard Chevrolet brought in the punters by selling used cars for $5. “Denny Denoi, General Manager of Greenwoods Hubbard Chevrolet said, ‘It’s just something that we wanted to do instead of taking some of these older cars to the auction we decided we would just sell them to the people of the Valley.’” That said, “The catch with this $5 car sale is that there were only 3 cars for $5, and those 3 lucky people’s names were actually pulled from a box.” But that’s OK, right? “Denoi said the sale was a success, and that most of the customers left the dealership happy, even though they didn’t get to drive away with a car for $5. ‘There’s [sic] some people who walked away with some great deals and some people who needed some cars that got some good transportation, and for the most part, I think 95-percent of the people are thrilled today.’” I wonder if GM’s new Sales Maven Susan Docherty will take that one national.

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