By on December 29, 2015

Imagine the following scenario: You’re a Buick salesman. An elderly woman comes into your showroom to inquire about a replacement for her Regal. You decide that she’s a great candidate for an Encore, and since you have some previous-year Encore stock you decide that she’s a great candidate for a 2015 Encore instead of the new model. There’s a $149/month lease deal available from GM Financial. What kind of deal do you make for this woman?

If your answer is, “I’d charge her over sticker for the vehicle, switch the lease company to make some back-end money, and add nearly a thousand dollars of profit in fees above that,” then you might just be the salesman that Buick GMC of Beachwood, OH needs.

When my old pal Rodney’s grandmother went to Buick GMC of Beachwood, the sales team decided to take advantage of her age and relative lack of knowledge concerning car-buying in order to take a considerable amount of money. How much money? Well, that’s the most amazing part. It’s laid out in the video at the top of this article, but here’s the deal in a nutshell:

The Encore in question is a 2015 “Leather FWD” model with a sticker of $30,765. According to TrueCar, there’s approximately $600 of markup in this vehicle. There’s also about $923 of holdback, bringing the total to $1,523. Given that this car is last year’s vehicle, there could be as much as five percent of additional factory-to-dealer incentive, which would bring the total profit to $3,060.

That would be nice, wouldn’t it? But this dealership actually capitalized the vehicle at $31,347. This means $582 of additional markup is added, bringing the profit to $3,642. How did they do that? Well, there’s no law that says you can’t pay over sticker for a vehicle, and the dealership relied on Rodney’s grandmother to not understand the meaning of “gross capitalized cost”.

GM Financial, if they are anything like every “captive finance source” with whom I’ve ever worked, won’t finance a vehicle over sticker. But there are plenty of alternative sources that will, particularly when the customer in question has an outstanding credit rating. Wells Fargo was the bank of choice for this deal. They wrote the lease in such a manner as to maximize profit while adhering to the $297/month rate on which Rodney’s grandmother was sold. There’s a fair amount of profit for Wells Fargo built into this lease, including a termination fee at the end of the lease.

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There’s also profit for the dealership. There’s a kickback for sending the business to Wells Fargo instead of GM Financial. The precise amount is not something we can know, but it wouldn’t be stretching things to assign a value of $250 to that kickback, bringing us up to $3,892. That’s an impressive amount of profit on a vehicle that typically sells for well below invoice. But the dealership also charges a $250 “doc fee”, bringing us up to $4,142. There’s also a $595 “acquisition fee”, which might go to Wells Fargo but which also might be returned in whole or part to the dealership for a possible $4,737.

Another way to look at it is this: How much more will Rodney’s grandmother pay in total than she would have paid had the dealer just given her the standard GM Financial deal? The simplest answer is that she paid about $1100 more up front than the standard deal, and she’ll pay about $110 a month more during the first 24 months. That’s $2,640 for a total of $3,740. But there’s more damage than that, because she’s committed to the car for an addition fifteen months. If you assume that there would be a similar deal in the future on another Encore, then you can add $1,500 of unnecessary payments for a total of $5,240 over what a savvy shopper would pay.

Okay. So an 86-year-old woman paid $5,000 too much for a car. So what? In the immortal words of our next President, what difference does it make? I’d suggest that it’s significant for two reasons. The first is that this deal demonstrates the continued existence of ethics-challenged dealerships, even among major new-car franchises, even in 2015.

The second is this: I have always believed that we only discover our true character when we have others in our power. When we can benefit from the weakness or ignorance of others. When we have a chance to improve our situation by taking advantage of others. In those moments, you understand who you are. The people at Buick GMC of Beachwood who wrote this deal can now say that their true character is apparent both to themselves… and to all of you.

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258 Comments on “How An 86-Year-Old African-American Woman Was Charged Over Sticker For Last Year’s Buick...”


  • avatar
    banerjba

    Did you follow up with the dealership management and GM?

    A few years ago a local Mazda dealership did this. I think a lady paid over $40K for a Mazda 6. It hit the local paper (actually a huge metropolitan newspaper, the Toronto Star). They are no longer Mazda dealers and the head office made it right.

  • avatar
    Eggshen2013

    So if your friend were Italian the title of this article would be “How An 86-Year-Old Italian-American Woman Was Charged Over Sticker For Last Year’s Buick”?

    I am just wondering how race factored into this story.

    • 0 avatar
      kvndoom

      #Blackoctogenarianlivesmatter

    • 0 avatar
      CoreyDL

      No, it would have said “White Cracker Lady.”

    • 0 avatar
      Jack Baruth

      I have about as little patience for the #BlackLivesMatter crowd as you can possibly imagine — but I will say that during my time selling cars I regularly saw African-Americans treated with contempt in the dealership environment. When I sold Infinitis I was the only guy on the lot who would actually go out and talk to black people. Everybody else managed to be on the phone.

      • 0 avatar
        S2k Chris

        That may be, but still not seeing why race is relevant here. Taking advantage of the elderly is still a common scam, whether the elderly in question are black, white, or purple.

        • 0 avatar
          morbo

          Race is relevant here, in the sense that black folks are treated like schiatt at dealers. This poor woman got the triple whammy of Old, Black, Female. Negotiating over the phone/email with my classic English name does wonders for me, until they see my face and ‘remember’ some damned fee or ‘mistakenly’ sent me an incorrect price. I get so sick of these slimy dealers.

          Good on you Jack for trying to help out. Hope you get her out of this BS deal.

          • 0 avatar

            One of my first legal jobs, lady comes in. She was in her 60s worked as an office cleaner-an immigrant from the Caribbean. The sort of person who works very hard for little money, and is honest to a fault…….
            Client goes to the Mitsu dealer, and gets the smallest car at the time. Interest rates were high but she paid almost 18% on a long term note. The total was over 25k. I was, at the time, looking at a 944 with the same price. Of course, there was every possible upsell and “pack” on the sales sheet. Rust proof, seat treatments, etc etc etc. She was totally sold on the monthly payment.

            She started off proud she’d bought the car without her husband, her first time….he read the contract and came to us.

            We returned the car to the dealer, with a letter discussing the recission of sale. After contacting the lender (and notably BEFORE she made a payment) we were able to cancel this debacle.

            The dealer told her “just make a payment or two and we’ll work things out” Never do that….you cannot then challenge things….

            Car dealers are a very tough legal target, but because the deal was fresh, and we reached out to the lender, we fixed her problem. I was very happy with my job that day.

      • 0 avatar
        Dave M.

        Preach, Jack. I help perhaps a dozen people a year with their car purchases as a hobby. I’ve been doing so for the past 30+ year, ever since I was royally screwed on my first new car purchase (out of my ignorance). I swore it would happen again for anyone interested in my help.

        As a car shopper, there are numerous strikes against you walking into a dealership, but the big three are female, minority and/or elderly. It’s pathetic. As the buyer’s ‘agent’, I certainly want you to make a reasonable profit, but beyond that, no – especially with all the “add-ones” these days (protectant, nitrogen, extended warranty, etc).

        I think Toyota dealers nationally all have the additional ‘port charges’, like various protectant packages. Just let me know when you’ll get that model in without additional items added. Negotiation always starts at msrp.

        One of the most egregious examples of a bad deal was at Bill Heard Chevrolet (RIP jackasses) – one of our lower paid aides traded in her Malibu for a newer one, paid msrp, low balled on trade, then they did the credit call 3 days later to let her know they couldn’t finance her st the agreed rate and she had to come in and re-sign papers for a higher rate. This is where I was brought into the loop (I would never have recommended a Malibu but that’s another story.

        This woman had just had a quad-bypass 6 months earlier. We went back to Heard for a meeting regarding the new deal. I read over the paperwork and was appalled. After discussing with her, we decided the deal was off and we asked for her trade back. Her trade had already been sold (uh huh). After 2 hours and pointing out the 14 questionable and possibly/probably illicit maneuvers they had committed, we left in a new Impala at the original deal price and rate.

        I’m not a hero or superman…but I feel horribly that so many people are completely screwed on some many levels for so many reasons.

    • 0 avatar
      dantes_inferno

      >I am just wondering how race factored into this story.

      It didn’t. Until you brought it up in your post.

      Jack was just stating the facts. If the fact that the words “African American” was enough to ruffle your feathers, perhaps you should ask yourself why.

      Facts are facts. If you’re uncomfortable with this, perhaps you would be interested in an article from the arena of fiction.

      • 0 avatar
        Eggshen2013

        Did you not read the title of Jacks post?
        Asking how race factored into this story with race featured prominently in the title equates to ruffled feathers?

        You have no idea from my post if my feathers were ruffled or not.

        • 0 avatar
          cheezman88

          The human mind works in funny ways, we tend to associate things with each other when they are routinely seen together. The point being made here is that if you constantly tie a certain race of people to certain topics, people will subconsciously tie those two things together without even thinking. If every night you turn on the TV and saw “X race guy arrested for blab blah blah” eventually you’ll meet an X race guy in real life and assume he was arrested for something previously.

          • 0 avatar
            healthy skeptic

            The world being what it is, I don’t doubt that minorities get taken advantage of more and treated less well overall at car dealers. However, barring direct evidence to the contrary, it’s difficult to point at any one case and say “Race was a factor here.”

            Actually, I think that it’s more likely she got taken advantage of because she’s elderly and female, not so much because she’s black.

        • 0 avatar
          pragmatist

          Agreed. If it were mentioned casually in the article, it would be different. An article title is presumed to be distilled to salient information.

    • 0 avatar
      MrGreenMan

      In the video starting about 8:49 into it, Rodney appeared to be fine with this description to the point that he appears to think that all three points (age, race, sex) matter, and both the decorations visible and described (an African obelisk; like an Earth, Wind, & Fire stage set) really suggested that she’s proud of who she is – so, admitting that I stopped at around the 10 minute mark in the video, I would guess it’s how she would self-describe, at least up to permutation on the specific term.

      If you’ve been to enough car dealerships and sat there long enough, you know that black people get screwed when they come out to a “suburban” dealership, and you know that white people don’t drive into the “urban” dealership for a great deal. Beachwood sure looks like a suburb to me.

      Mychal Massie, who is pretty famous for saying “black lives apparently do not matter” if you look at things like deaths in Chicago, and also pretty famous for being pretty darn right-wing, has also said on many an occasion that he was happy to be identified for who and what he was (he explained that he doesn’t like black; his word as Afro-American; he says it’s a generational thing, as his grandmother had a different term she preferred – he had a whole column about the pride inherent in the use of the correct descriptive term). I assume this means you’re being offended on her behalf but that she is not offended.

  • avatar
    kvndoom

    Cue Ruggles, “that’s the way the system is supposed to work.”

  • avatar
    kvndoom

    I think elderly folks get screwed because they want to feel independent and be able to say they did it all by themselves. That part, I can understand. I mean Rodney used to sell cars, so why wouldn’t she want his help otherwise?

    And of course “the sales man, he was SUCH A NICE YOUNG MAN.”

    • 0 avatar
      CoreyDL

      One time I watched an older lady convince her husband to buy the Audi I was selling because I was sweet and “looked like her grandson.”

      It worked.

      • 0 avatar
        DeadWeight

        Off topic, but I’m getting the bug for an Audi and may need an intervention from/by you to stop me.

        I’ve held out for many years (decades?) and don’t want to do something as economically & mentally irrational as purchasing a vehicle based only on its interior & exterior design, feel and aesthetics.

        Please help me, Corey.

        • 0 avatar
          CoreyDL

          “don’t want to do something as economically & mentally irrational as purchasing a vehicle based only on its interior & exterior design, feel and aesthetics.”

          If I did this, I’d be driving an Alfa 164 (because http://s1.cdn.autoevolution.com/images/gallery/ALFAROMEO164-738_8.jpg). Or a late Saab 9000.

          But yes they are beautiful and solid. And yes they make you feel special when you drive them, and if you get a big enough one, people move out of the way.

          But they break. Things break which shouldn’t. There’s parts supply issues on 10 year old ones. They’ve got electrical problems which grow and grow like the fungus.

          The fungus in your AC system because the drains are clogged. Or the sunroof drains are clogged.

          Or the fuel sending unit went bad (plastic disk) or a clip under the engine broke (plastic) or the battery strands you and you can’t get to it without a tool kit (under rear seat). Or the locks don’t work because vacuum lines. Or it won’t idle properly because vacuum lines. And it needs a new set of o2 sensors. And an EGR. And a MAF. And what’s that thunk from 2-1 when you’re decelerating? Is it the non-rebuildable transmission? Or perhaps just another ball joint going bad.

          But you feel special when you sit at your indie mechanic having a coffee.

          • 0 avatar
            Dave M.

            God you just reminded me why I rolled my 5000 into the Nissan dealership many years ago and screamed “See ya, suckers!”. But it was beautiful and I did live driving it. When it ran.

        • 0 avatar
          bball40dtw

          DeadWeight, didn’t you own a B6 Passat?

          • 0 avatar
            DeadWeight

            My then girlfriend had a CC; yep.

            It was a painful & vindictive daily driver & I helped force VW NA to buy it back.

          • 0 avatar
            bball40dtw

            Just remember all of those feelings when you go look at Audis. I make sure to do that when the GTI calls my name. I remember you VW of America. I remember how vapor lock was a feature of my R32 and not at all a flaw.

        • 0 avatar
          TOTitan

          DW I did something similar 2 1/2 years ago. I had been craving the massive torque and fuel economy of the BMW 335d ever since they came out so I found a CPO car with just 34,000 miles and got it for 28K. It now has 90,000 miles, has been trouble free, and is the most amazing road trip car Ive ever owned. My advice…find a CPO car, buy it for 50 cents on the dollar, and enjoy it. You only live once.

          • 0 avatar
            DeadWeight

            You hold out promise of having cake AND eating said cake, too!

            Seductress!

          • 0 avatar
            TOTitan

            DW….one more thing as Peter Falk/Columbo used to say…..Once I took the plunge on the CPO 335d I made a point of learning everything I could about the car. Since the E90 was already a well sorted out platform all I really needed to learn was the M57 diesel engine. The biggest problem is the engine is so under worked in a 3 series that carbon buildup occurs when the car is used mainly for short trips and/or is not driven hard. With that in mind I never use it for in town short trips and I regularly let its 425 ft lbs+ loose on the road. I also change the oil at 6K instead of 12K and use a additive to keep the injectors clean, increase lubricity, and increase cetane. I think the results speak for themselves…89,000+ miles and no issues.

        • 0 avatar
          dal20402

          Go look at pictures of Allroad 2.7T or 4.2 service.

          Look at them again.

          Realize that you would be responsible for keeping a vehicle designed by the same people in running order.

          Go buy a Lexus or even a Mercedes and pat yourself on the back.

        • 0 avatar
          tresmonos

          How Audi attaches roofs (I’m guessing hot braze or some crazy body sealer with a skived in top sealer) coupled with their belt / character lines are reason enough to make an irrational emotional decision. My parents are shopping for a replacement to their Solstice (I regret their selling their early VIN production unit, along with it’s terrible fascia fit from bad supplier quality), and have been looking at a new Mazda Miata. We cross shopped a TT and I kid you not, they were about to jump on it after I looked over how clean and perfect the paint and fit and finish of the unit was. It looks like they wet sand the damned things.

          In the end, they will probably go with the Miata due to it’s 25k price differential, but man, Audi is one luxury marque that I can’t critique sans their parent company, the MQB bones and the unreasonable price. If they would only have more meat under the hood of that TT, I bet that show room TT would be parked in my parents’ garage.

        • 0 avatar
          28-Cars-Later

          @DW

          You’re going to lose all credibility as a Cadillac commentator if we see you in zee Audi.

        • 0 avatar

          All my local mechanics sing the chorus

          Lease, don’t buy….

      • 0 avatar
        Kevin Jaeger

        Oh please spare us and buy a Corolla or C-Max. There are car guys who can appreciate an S5 but I’m pretty sure you wouldn’t be one of them.

  • avatar
    CoreyDL

    I’m glad you exposed this sort of abuse of the elderly, which I’m sure happens across the nation each and every day. The retirement planning industry had to develop suitability guidelines for this very same reason. Sleazy agents switching their elder customers in and out of products consistently to rack up greater commissions for themselves (aka churning), while simultaneously costing the client money with surrender fees.

    Don’t know that I’d place much blame on WF, they’re just a bank doing a loan, and don’t know the deal beyond the dollars requested and the credit score of the customer.

    • 0 avatar
      Erikstrawn

      Wells Fargo was told how much the car that’s being purchased is worth. They have a vested interest in the buyer not being upside-down in the loan. It is not, as unfortunate as it may be, in their purview to tell the dealership they’re not being ethical.

      My question is, would this article have been published if the purchaser were a 25 year old manual laborer who doesn’t understand contracts?

      I worked at two dealerships, one whom would not have made such a “profitable” deal, and the other that demanded this kind of deal on every vehicle sold. I still have respect for the former dealership chain, that is now out of business, but will never buy from the latter dealership chain that has expanded nation wide. In all fairness I should also admit I still have employee-purchase stock from the latter and I still need to get rid of it.

      • 0 avatar
        bball40dtw

        Wells Fargo doesn’t care if the vehicle is upside down as long as they get the sweet, sweet monthly payments. This is a lease anyway, it will most likely always be upside down.

      • 0 avatar
        CoreyDL

        When you sell your employee stock you’ll have to pay long-term capital gains tax on the amount over the initial share value when purchased. So be prepared.

    • 0 avatar
      Lack Thereof

      Wells Fargo has one hell of a reputation as being unusually predatory and exploitative in their lending practices, especially in low income / subprime communities.

      Even if they don’t deserve any particular blame in this instance, their involvement coupled with their reputation certainly raises some eyebrows.

  • avatar
    Pch101

    Car dealers are dirtbags. But to be fair, they’ll screw anyone who they can, whenever they can.

    What we could use are some consumer protection laws that include standardized simple paperwork and allowances for a cooling-off period (with the paperwork, not with the car) so that people can understand what they’re signing. Of course, dealerships would hate that sort of transparency, which only proves that it really is a good idea.

    • 0 avatar
      CoreyDL

      People get excited to buy, as well. Such a tangible thing as a shiny car you can see sitting 20 feet away, and keys on the desk waiting for you. Rush rush, sign away.

      • 0 avatar
        DeadWeight

        “Car dealers are dirtbags. But to be fair, they’ll screw anyone who they can, whenever they can.”

        Pch101 and I sometimes agree, and sometimes not, but this statement above really is no exaggeration, and sums things up nicely.

        I have never and will never return to any dealership post-warranty. And I’m actually VERY ASTUTE & AGGRESSIVE, and know how to effectively deal even the most unscrupulous people.

    • 0 avatar
      Speed3

      We need direct consumer auto sale laws and cut out the middlemen.

      • 0 avatar
        Pch101

        Direct auto sales means less competition among stores, which would result in higher prices. No thanks.

      • 0 avatar
        sportyaccordy

        No, that won’t work.

        • 0 avatar
          joeaverage

          Yes it would. Let the customers who want to buy from the dealer do so. Let the rest of us go to the factory door and buy directly.

          Its done in Europe already and has been for decades.

          That would force the dealers to be a value additive function in the car buying process. If they didn’t teach us something or somehow earn their keep people would buy from the factory.

      • 0 avatar
        mchan1

        Auto dealership laws are based on state laws and have a massive lobbying group to make sure that the arcane auto dealership network stays in place.

        Direct auto sales doesn’t necessarily mean higher prices but selling vehicles would be a problem from a sales and logistics point of view without dealerships.

        • 0 avatar
          Pch101

          Retailers compete against each other, which reduces prices.

          Tesla sells everything at MSRP. You can’t haggle with Tesla. Think about why that is.

          • 0 avatar
            DeadWeight

            It could just be that if Feels were forced to sell to franchisees versus directly to the public, that their vehicles would actually cost more to the end consumer on average than they do now, though.

          • 0 avatar
            Pch101

            Tesla is already charging as much as it can, and it is stuck with high sales costs because of its need to carry the costs of the direct sales model.

            Tesla doesn’t produce enough volume to support a franchise system. But more importantly, it doesn’t want its retailers to offer competing inventory — Tesla needs a sales force that is dedicated to evangelizing EVs, and doesn’t want its sales lot to be a gateway for some other guy to sell used BMWs.

            So Tesla has good reasons to sell direct, but that results in higher prices to the consumer. There is no opportunity to pit Tesla retailers against each other, nor does Tesla want to damage its brand by appearing to be a discounter.

  • avatar
    GermanReliabilityMyth

    Thank you for the photographic proof, Jack. I honestly thought Rodney was a Hunter S. Thompson-esque prop in the last story he was mentioned in. Sorry, Rodney, my apologies. Maybe Steve Lehto will pipe in, even though he’s not licensed in OH. I wonder if there’s any avenue or obscure loophole for unraveling the deal.

    Time for the obligatory “Old GM, meet New GM. New GM, Old GM,” to which both GMs curtly reply they already met in the coatroom.

  • avatar
    bball40dtw

    “Ruggles oh Ruggles
    Hear our call for you to save us
    Over time, over sea
    Like a wave you come
    Our guardian angel”

    Buick GMC of Beechwood is summoning him right now…

  • avatar
    Speed3

    This predatory behavior is reprehensible. Far too many innocent customers get screwed at dealerships.

    In 2008 the Orem, Utah Mazda dealership tried to sell me a repossessed Speed3 with 2,500 miles on it as new AND with a 5k markup. Never mind that any vehicle that has been titled or registered cannot be sold as new in Utah. Thankfully the Mazda dealer about 25 miles away did not add any markup and it was legitimately brand new – less than 30 miles if I recall.

    This behavior REALLY makes me support Tesla’s push for direct to consumer auto sales. By some estimates, up to 30% of a vehicles cost is from its distribution. Obviously not all of that is going to dealerships, but consumers would certainly be better off with direct to consumer sales. I don’t think 5% savings would be unrealistic.

    Shame on this dealership.

  • avatar
    Arthur Dailey

    Jack,
    Thanks for exposing this dealership to public ridicule.
    As @bannerjba wrote in the Toronto Area an ‘ex’- Mazda dealership was exposed for conducting this sort of deal.

    You wrote: “I have always believed that we only discover our true character when we have others in our power. When we can benefit from the weakness or ignorance of others. When we have a chance to improve our situation by taking advantage of others.”

    That is to a large degree the definition of ‘class’. When one treats those who cannot help them with as much or more respect than they treat those who do have power over them or the ability to help them.

    As for such business practices still existing. This is another reason to change the current automobile retail practices that are a remnant of another century. Those with more inside knowledge than me can provide more insightful comments and recommendations regarding this.

    • 0 avatar
      GermanReliabilityMyth

      But what will undeserving, self-entitled, jackass small town douchebags inherit if they can’t become the next owner/manager of the local stealership solely because of their last name (regardless of talent or lack thereof)? Think of the underachieving, affluenza-stricken jerks.

    • 0 avatar
      ClutchCarGo

      Yet this story is a fine example of the free market capitalist system that is worshiped in the Western world. 2 adversaries met and the stronger party took the spoils. Ayn Rand would be proud.

      • 0 avatar

        It’s hardly an example of a free market. Buying a car is one of the more regulated purchases one can make.

        • 0 avatar
          ClutchCarGo

          Did any of that regulation prevent the dealership from taking Rodney’s mom to the cleaners? Not very much, largely due to the fact that car dealers have made sure that the regulations fail to make the dealer act in a way that most people would consider ethical.

          • 0 avatar
            Pch101

            Of course it’s a free market. Buyer and seller can participate in a transaction that is pretty much unregulated. The government requires that the seller post a suggested price and overt discrimination against protected groups isn’t permitted, but the parties are otherwise free to negotiate or not negotiate, buy/sell or not buy/sell.

            And no, a franchise agreement is not an example of a market not being free. Companies have trademark rights — it’s not as if Burger King or your neighborhood taco stand can just start selling Big Macs if they feel like it.

      • 0 avatar
        VolandoBajo

        @pch101 I second what DeadWeight said. You and I may disagree on a lot of things, most of them political more so than automotive, but this comment of yours is precisely what is needed.

        And while it applies to another segment of financial wheeling-dealing, everyon on here who wishes to better understand how the American public systematically gets screwed over every five to ten years (S&L crisis/bailout, mortgage loan crisis/bailout, etc.) be sure to see the movie The Big Short.

        Having worked on Wall Street as a quant, to the extent of having met and worked with some of the characters named in the movie, I can testify that it both an entertaining movie and an extremely educational one.

        Should be shown in every HS in the country as part of their civics/government class.

        The lack of regulation of auto sales practices is just one more symptom of what happens when the government looks the other way while businesses and industries systematically screw over the public. And in the end, it is difficult to impossible to claim that this is the fault of just one party. It is the fault of the inside-the-Beltway mentality politicians and regulators, along with voters who fail to rebel and say “I’m mad as hell and I’m not going to take it any more!” at the ballot box.

        The reduction in paperwork and regulation that was initiated largely in the Reagan era, has been taken to such an extreme that regulators are mostly so in bed with the regulated that for all intents and purposes regulation is non-existent.

        And these economy-wide pump & dump failures and bailouts happen decade after decade, with never a word, even in the press, until after the bait has been loaded, the trap has been set, and all that remains is the massive disgorgement of taxpayer dollars to allegedly “save” our economy, while systematically saddling especially the middle class with more and more debt and debt service in the national budget.

        And it happens on grand scales, such as mortgage bonds, and in the trenches, such as the lack of transparency in auto sales and leasing documents.

        And for those who point out all the paperwork that is required, if it is so confusing that the average person cannot understand when they are getting hosed, compared to market price, then it is really no effective regulation whatsoever.

        Over the years, my wife, who has an accounting background, has convinced me to think as bball40dtw suggests, but about all shiny new, supposedly new and improved cars. For years we have bought used cars still with lots of miles left, and in good condition, and have skipped loan interest and the increased cost of mandatory collision insurance.

        When I see now how this has contributed to a relatively comfortable retirement, and relative freedom from catastrophic economic slowdowns, as in 2008, I realize that I have still driven some decent and enjoyable vehicles, while saving tons of money.

        Plus, I got the urge to drive “new and shiny” out of my system while I was a younger man.

        If you feel you have to have a new car, and are willing to pay through the nose to keep up with, or be ahead of, the Joneses, go right ahead, be my guest.

        I like driving a solid reliable car and having an additional bank account with the money I have saved by resisting the urge to take repeated economic baths via those extra costs, especially the massive drop in value that occurs the moment you drive a new car off the lot.

      • 0 avatar
        VolandoBajo

        That is a complete misrepresentation of Ayn Rand’s Objectivism philosophy. In Atlas Shrugged, the adversary to be conquered was a rigged oligopolistic system that used its ability to force regulations that would limit or eliminate competition, thereby harming consumers.

        The heroes of that novel were not struggling to make money off of those who were weaker…they were struggling to eliminate the inevitable economic surcharge that an oligopoly was able to impose on the public.

        Did you ever read Ayn Rand, or just some online article comparing her to those “heartless” Republicans who want to promote business competition unfettered by needless costly regulation.

        I am not saying that that describes all Republicans, or that there are no Democrats who share those ideals. But that is the way it usually plays out, with a minority these days crying out for a true free market system.

        The rest of our “leaders” are busy sucking up to the big buck contributors who maintain their profitable perches thanks in large part to a rigged system. You need look no further than the Internet to see why internet access cost to the average home has jumped from fifteen to thirty dollars a month to seventy five to one hundred plus dollars, as the phone companies systematically destroy DSL, and all that remains is phone company fiber and cable TV fiber as the only high speed alternatives.

        And as a result, we have some of the slowest average access of the entire developed part of the world, and we have a good rate of connectivity only if you count internet access through the tiny porthole of a smartphone screen as high speed internet access. But try looking at a spreadsheet on a smartphone screen before you tell me that there is no difference between that and access on a laptop or desktop system.

        What Ayn Rand espoused may or may not be your cup of tea, but it is not the root cause of oligopolistic rigged economic systems, where the power of elected officials is used to maintain an uneven playing field.

        • 0 avatar
          ClutchCarGo

          Yes, I slogged my way through both The Fountainhead and Atlas Shrugged, though it has been many years since I did. My reference to Rand was a call-back to my memory (perhaps faded) of Dagny and a lover (Reardon?) telling each other that despite their personal relationship, they would both seek to utterly conquer the other when doing business. I think of this whenever I hear tales, like Jack’s here, of rampant self-interest running roughshod over human decency. Though Rand’s heroes didn’t generally seek to prey on the weak, her philosophy was clearly that each individual should seek to maximize their gains by any means necessary. It’s this separation of the pursuit of profit from ethical concerns that troubles me as it seems to be the basis of our current economic system. I agree, having read The Big Short, that no one is left acting as a brake on human greed, and I fear that it may not be possible to restore any such control given the Supreme Court’s equating of money with speech.

  • avatar
    319583076

    Elderly customer overcharged by local dealership = outrage.

    All customers overcharged by national chain dealership = smug sense of self-satisfaction and outrage at any who disagree.

    • 0 avatar
      GermanReliabilityMyth

      Think of the children! And the elderly! And the hell with anyone inbetween.

    • 0 avatar
      sportyaccordy

      Not really comparable at all. I mean off the rip, Steven Lang != Jack Baruth, and there was hardly consensus in that article.

      2 charged articles loosely centered around the same topic = silly bad analogies

    • 0 avatar
      S2k Chris

      “All customers overcharged by national chain dealership = smug sense of self-satisfaction and outrage at any who disagree.”

      Isn’t it basically common knowledge these days that one is paying a little more at Carmax in return for a transparent, supposedly easy buying process on a product that has a little more of a guarantee than your average used car? I think those factors are of value and I have no beef with charging those who are willing to pay for them. No different from a 20oz soda costing nearly $2 from a convenience store when a case of them is $5-6 at Costco.

      • 0 avatar
        319583076

        I don’t begrudge anyone’s choice to do business with Carmax. I do, however, take exception to those people claiming value. The math is objective and rather elementary.

        I have yet to buy a car from a dealership that DIDN’T try to tack on some additional money somewhere or “fudge” the numbers in their favor. That’s what dealerships do, they profit from the majority of people who can’t do the math or are too timid to confront the dealer’s business practices.

        Citizens have responsibilities, caveat emptor and all that. But it’s insulting when irresponsible citizens shamelessly claim their ignorance as some form of virtue.

        • 0 avatar
          Dave M.

          I have to disagree. How often does one buy a car? Why must the four-square insistently be used? Why like nearly any other business can’t reasonable profit be achieved without people suspecting they got screwed on the way out when they should be enthralled with their new purchase?

        • 0 avatar
          sportyaccordy

          Who claimed shopping at Carmax makes them virtuous? Strawman much? Some people just don’t want to deal with typical used car salesmen… and who can blame them? Buying from Carmax is a much nicer experience folks are willing to pay a premium for. Get off your high horse, you sound ridiculous.

  • avatar
    RideHeight

    I like Ruggles every bit as much as I like Baruth and I’m eagerly awaiting the gender adaptation of his standard dismissal for anyone who gets hosed:

    “Those guys stepped on their own dicks”.

  • avatar
    TonyJZX

    btw, why would anyone pay $30k for an Encore. I had to google it. Its a Korean slash Opel EU jacked up subcompact CUV thing. Its barely suitable for a small family with one kid.

  • avatar
    econobiker

    And this situation surprises us how?

    I still love the “doc fees” which are equivalent of phone service providers “government compliance recovery fees”- i.e. total bovine excrement hiding “profit”.

    • 0 avatar
      JohnTaurus_3.0_AX4N

      Yes. I once bid on and “won” a used Acur

      • 0 avatar
        JohnTaurus_3.0_AX4N

        I thought didnt post that, that I just closed the screen. Anyway, so it was an Acura Integra 3 door, early 90s, 5 speed at a Suzuki dealership near Atlanta. I went down and tried to pay for and pick up my Teg, but they wanted an additional $500 “document fee” for processing the paper work. Obviously, I protested and they said Id be in violation of eBay rules if I didnt pay, and they would put negative feedback. I told them eBay says I have to pay what the final bid was, not including any fee. We argued and finally they agreed to take no action and I wouldnt either. No, I didnt get the car because they refused to forget the fee and I was not in a position to pay it, nor would I even if I had Bill Gates debit card in my pocket.

        Oh, for my budget, they showed me a beater 1992 Taurus L with no bumpers and a trashed interior. I said no thanks. It was a decent deal for the Integra as it was in good condition, but it was crazy high for that $400 Taurus. I ended up buying a 93 Taurus from a lady in downtown Atlanta a few days later for about 1/2 the price, and it was in far better condition with more options than the dealer’s Taurus (although it did have more miles, maybe, as both odometers were 5 digit).

  • avatar
    mason

    It’s more about the area she chose to shop in than her age (and especially her race).

    Go shopping at any outlet store or out to eat at virtually any restaurant in the Beachwood area and get ready for some sticker shock. It’s an affluent community, at least for the riff raff saturated Cleveland area. You gotta pay to play in Beachwood.

    That’s not to say she couldn’t have gotten a better deal if she would have been in the know, but I seriously doubt they marked the car up the second she stepped on the lot.

  • avatar
    Steve_S

    This is why people hate dealing with car dealers. Some coworkers of mine, tech savy and in their 30’s almost overpaid about $2k on a car purchase before I stuck my nose in their business, they were happy I did.

    Other than trade-ins, test drives and warranty repairs dealers are worthless IMO.

    I’d love to buy direct from the manufacturer for the real cost the dealers pay.

    • 0 avatar
      bball40dtw

      You probably don’t buy enough cars to purchase a vehicle for the real cost that dealers pay. Also, when you buy a Silverado, you don’t have to buy a Sonic too.

      • 0 avatar
        S2k Chris

        But I also don’t have to fund a huge building and lot, large staff, carrying costs on inventory, etc etc etc. If I’m buying a $20k car, it’s not unthinkable that the dealer paid $17k, has $2500 of overhead and $500 of profit. I’d be happy paying $17.5k to the manufacturer. And yes, before you ask, the service department is likely self-supporting so I’d have no problem going to a locally owned Honda-branded service center that doesn’t have to carry a sales organization for maintenance and warranty work.

        • 0 avatar
          bball40dtw

          Oh I know that the service department is self supporting.

          The manufacturer isn’t going to sell you that car for $17.5 though. They would have overhead and additional costs dealing with the general public instead of dealerships. Your transaction price could very will be more than you pay now.

          • 0 avatar
            See 7 up

            I don’t think anyone is under the delusion manufacturers could sell to the public at the prices they give to dealers (given bulk purchases and single financial source), but to say that a oem couldn’t remove some costs is disingenuous. To say it’s impossible is just lying.

            Here is a question. If an oem like GM opened a dealership, could they not undercut normal dealers in the area? Why not?

          • 0 avatar
            bball40dtw

            Ford did have OEM owned dealerships and they were routinely undercut by franchise stores nearby.

          • 0 avatar
            S2k Chris

            “They would have overhead and additional costs dealing with the general public instead of dealerships. Your transaction price could very will be more than you pay now.”

            In theory they wouldn’t have to have much else. They’d have to make allowances for people to test drive vehicles, and they would have to have a finance “closer guy” to oversee the paperwork, but much of it could be done online. Additionally, they could just adapt their current dealer ordering system, pretty it up a little, and open it up to consumers.

          • 0 avatar
            Pch101

            Mercedes has been reducing its direct sales business in Germany because their stores have a higher cost structure than the franchisees. Those stores are just a drag on their stock value, as they depress the company’s overall margins.

            Car retailing is a low-margin business, and a company that knows how to build cars is not necessarily going to be good at retailing them.

            The reason to control the channel is for brand building, not to discount pricing. Companies usually build brands so that they can charge higher prices; a solid brand reduces the need for price competition.

          • 0 avatar
            See 7 up

            So if ford had the dealerships that were undercut by franchises I guess that must always be the case for all time. Got it.

            What I am arguing against is the law that prevents direct sales.
            If dealerships are so wonderful for all parties, they will survive. No law needed. But as of now, the people arguing that dealers help the consumer and oem apparently need the protection of law. What works for one company vs another is also completely different. Someone like ferrari or rolls royce may be able to easily do direct sales, while another oem may find it not beneficial to their bottom line.

          • 0 avatar
            bball40dtw

            I never said that. I just gave a recent example of an OEM in the US trying to get into the retail business of selling cars. It was a bloodbath for Ford financially and produced ill will from the businesses that actually buy their product. GM also tried direct sales and it didn’t work for them either. I don’t think that the franchise dealer model is perfect, but assuming that buying direct from an OEM will save consumers money and make prices lower isn’t reasonable.

            I don’t think there should be laws that prevent OEMs from selling vehicles directly. If Tesla wants to do that, they should be able to.

        • 0 avatar
          danio3834

          “If I’m buying a $20k car, it’s not unthinkable that the dealer paid $17k, has $2500 of overhead and $500 of profit.”

          If you could consistently gross $3k on a $20k unit, you’d be a tremendously successful dealer.

          • 0 avatar
            bball40dtw

            Aren’t most dealerships netting 1%-2% per vehicle? A $20K vehicle isn’t going to have much profit in it anyway. That’s what $40K vehicles are for.

          • 0 avatar
            Pch101

            Dealers make most of their money on new car sales through leverage.

            Getting the car onto the lot might cost a couple hundred bucks. Sell it fast enough, and the holdback will pay the floorplan, plus provide a bit of profit. Pushing volume will generate more total dollar profit but it won’t produce much margin. Levered returns are high, but unlevered returns are low.

            The suckers who overpay are equivalent to those who pay full fare to fly — they provide margin that is needed to carry the store, but there aren’t enough of those customers to completely support the dealership. On the whole, dealerships are low-margin business, but the margins are not equally distributed across the customer base.

          • 0 avatar
            S2k Chris

            So my numbers are wrong, but my point is, what you and I pay = wholesale + OH + dealer profit.

            If I could buy direct, in theory, I’d pay wholesale, and I’m willing to pay dealer profit (to the manufacturer, since it’s a small #), and I’d still save on OH. I wouldn’t save ALL of the OH, because some would be born by the manufacturer, but they’ve got to be able to do it more efficiently than each individual dealer doing it on their own.

          • 0 avatar
            Pch101

            “If I could buy direct, in theory, I’d pay wholesale”

            No, you wouldn’t.

      • 0 avatar
        See 7 up

        What?
        Are you saying dealers can somehow offload Sonics that aren’t apparently wanted for lower prices than chevy can? And are you also saying that dealers allow chevy to make more silverados?

        About the only thing dealers do for manufacturers is provide a place to absorb excess inventory because of poor production planning. But even that really doesn’t make sense as most oem’s have large lots for holding inventory because of this.

        • 0 avatar
          Pch101

          The point is that dealers are forced to buy inventory that they don’t want in order to get inventory that they do want.

          • 0 avatar
            See 7 up

            Apparently you didnt catch the tongue in cheek. But have yiu ever ask why an oem dies that? Poor production planning and the oem wanting money now. Not because the sonic won’t ultimately sell.

            If the public buys 100 items of A and 20 of B, nobody needs to force anyone to buy them together if 1) production planning is done correctly and 2) one is not trying go accrue costs into a given year.

          • 0 avatar
            Pch101

            From the dealer’s standpoint, that doesn’t matter. He’s still stuck with the burden of buying inventory that he doesn’t want in order to get the inventory that he does want, which was the point that Bball was making.

            As a consumer, you can pick and choose what you want. The dealership doesn’t have that luxury.

          • 0 avatar
            MBella

            The laws do need to be updated though. If a car could be sold through different channels it wouldn’t hurt anyone. Let the market decide, and not dealers who are forced into the system. If independent dealers are as neccessary and provide cars cheaper than other sources, they won’t have an issue keeping their business going.

  • avatar
    John

    Disgusting on the part of the dealership. Perhaps Rodney might have accompanied his mom? He does live with her. From what I understand, he does have experience selling cars.

    • 0 avatar
      bball40dtw

      Jack wrote why Rodney didn’t go with her in a previous article. Rodney and his mother don’t live in the nicest part of town. The Somali refugees that make up a significant portion of their neighborhood have a proclivity to break into people’s homes/apartments while they are away and strip everything.

      https://www.thetruthaboutcars.com/2015/12/comes-chinese-buicks-im-not-ready-deal/#more-1242177

  • avatar
    gearhead77

    I wonder how many times this happens with people of any age, let alone the elderly? While I was in the Chevy store, there was a frail looking old lady who was being lead around the dealership by the salesman, looking for something “small”. She just had a look of bewilderment and confusion, kind of raggedly dressed. She could have been wealthy, you don’t really know of course, but I didn’t get that sense. But I can only imagine the “deal” she got, if one at all. And I was at a “good” dealer, not the crooked Chevy store closer to me.

  • avatar
    -Nate

    ‘ Character ‘ is what you do when no one is looking .

    -Nate

  • avatar
    thelaine

    She totally deserved it. Grow up, you big baby. If you don’t like it, open your own gddmned dealership.

    – Ruggles

  • avatar
    jpolicke

    Everybody from Mary Barra on down will throw up their hands and say, “The dealer is an independent business and we have no control over their pricing policies…” The sad part is that everything they did to the lady is probably legal, although I’m not sure about the part where they omitted the interest rate.

    This is just more proof that the public gets no benefit from the franchise dealer business model. I would much rather see the franchise limited to parts and service and buy the car direct from the factory, whether from a regional brand’s sales center, or from what was formerly the dealer’s lot that was now being leased by the factory.

    FWIW, I don’t think the race/sex/age of Rodney’s relative played a part in this transaction. Dealers are equal opportunity parasites. If Rodney or his wife, his son, or his friend Jack showed up they would have gone after the same deal. The only discrimination that takes place is between the savvy and non-savvy.

    • 0 avatar
      Jack Baruth

      I’m going to disagree slightly. I’ve purchased nearly twenty new cars and nobody ever even thought to START me at $600 over sticker.

      • 0 avatar
        jpolicke

        Jack, nobody ever thought to start YOU at $600 over sticker. That’s because in the first 30 seconds of their conversation with you, they probably read you as being smarter than the average bear. It doesn’t mean they wouldn’t have if they thought they could get away with it.

        It would make an interesting experiment if you could get a young white male into that dealer who could convincingly play an uninformed lay-down shopper and see what kind of deal he was offered.

      • 0 avatar
        Truckducken

        Well, as a young white guy I once bought a new car at $3000 over sticker. Then again, I flipped it to an older white guy for $6K over sticker a couple months later, so happy ending.

        All I really wanna know is why this lady was out shopping by herself, when she evidently had no idea what she was doing. I’m guessing it relates to ‘wanting to be independent’, as suggested by other posters. Well, she proved she’s capable of being independent…but it came at a price. I have a mentally defective sibling who, thanks to compulsive neglect of maintenance, tears through vehicles at a prodigious rate. Despite repeated promises to seek competent assistance in the future, time and again she runs to the nearest dealer solo and cuts a deal remarkably similar to the little old lady of this article. I’m stashing Jack’s sad little story in the ‘lessons not learned’ file. By 86, one ought to have realized that, yes, everyone IS out to take your money.

  • avatar
    bucksfan123

    Wow. You 2 in your video are great with half truths. There is no such thing as top sticker. Msrp is the “sticker price”. The lower number youmentioned is before options. Also the bank charges the acq fee. The dealer has nothing to do with it

    Next- gm does not give a spiff to dealers for 2015 vehicles. Once again WRONG. ALSO, the 2016 encore didn’t even hit the market till mid December. So you again don’t know what you are talking about

    Finally and there are more holes. But I’ll stop here – ally doesn’t do any GM leases anymore. They are all through Gm financial. And backed by Wells Fargo. They did not skirt the bank as you alledge

    • 0 avatar
      Jack Baruth

      Top sticker is sticker before discounts, n00b. Go read a captive lease agreement carefully and see if you can find top sticker anywhere. In many cases it’s the base for the residual. It’s part of the reason the “PEP” system works the way it does.

      Are you seriously claiming that GM doesn’t spiff old cars? Who told you that?

      “Backed by Wells Fargo”. This is a Wells Fargo lease, not “backed by Wells Fargo”.

      • 0 avatar
        bucksfan123

        Well since I have worked at a GM dealership in the past year and in management I KNOW that GM does not spiff a dealer- or provide “dealer cash” on any of their vehicles.

        Do you have a source?

        there is no such term as “TOP Sticker” it’s a term you have made up. the sticker price- which is what a lease residiual is based off of- is the MSRP of the car. You may pay more or less…. but it’s the MSRP. If you don’t know how to read a window sticker- you shouldn’t be on here Just so we are all clear- the MSRP on this Encore is the $30,765. that is what the residual was based off of as well. so yes – she paid over $600 over sticker. However, I’m also willing to bet that she once never asked- what the price she was paying for the car. And if you want to blame that on the dealership- go ahead…

        Finally- I will be you any dollar amount that the lady makes her payment to GM Financial and that they hold the papers to her lease. Just wait and see where her bill comes from.

        • 0 avatar
          ajla

          “And if you want to blame that on the dealership- go ahead…”

          I am 100% okay with blaming the dealer for this.

          • 0 avatar
            Kevin Jaeger

            I’d be outraged at the way they took advantage of this lady if I ever expected better from them, but unfortunately there’s a reason the auto industry has the reputation it does. They’ve earned it.

            Just wait until she brings this car in for service. They’re just getting started.

        • 0 avatar
          Jack Baruth

          Again, n00b, there is such a thing as “top sticker” and if you worked at a dealership where they let “management” do something besides sign the stuff the F&I computer prints out you’d understand that.

          Top sticker is used by any number of financial institutions to set residual.

          Source: I’m a former employee of Ford Motor Credit Co and BMW Financial, I’ve sold multiple brands, and I’ve written more credit deals than your entire dealership did last year, even if it was Ricart .

        • 0 avatar
          danio3834

          “Well since I have worked at a GM dealership in the past year and in management I KNOW that GM does not spiff a dealer- or provide “dealer cash” on any of their vehicles.”

          All provide extra cash incentives to the dealer in a dizzying variety of ways, usually intensifying at the end of a model year. I’ve received several e-mails about such programs this week. Whether it’s a spiff on a specific model or a cash payout for rolling stock into a “loaner program” which they then put 500 miles on and sell, it most certainly exists.

          • 0 avatar
            bucksfan123

            Danio- yes, GM put out over $3,100 in rebates on this car- that was disclosed to the customer, and would be what you saw in an offer.

            Jack is talking about hidden cash- paid to the dealer that the customer doesn’t have to see.

            GM doesn’t do it- other manufacturers do.

  • avatar
    grandprix

    Why didn’t this grandmother take her “knowledgeable” grandson with her to the dealer?

  • avatar
    Stumpaster

    I think $440-$460/month is the going rate for a 36-38 month lease for old ladies. My mom just went out to the same Greenwich BMW where she bought her two prior cars and signed a 36 month lease on a 320xi. $444 over 36 months after all is said and done.

  • avatar
    axis20

    I this new math generated from an ax to grind? Race baiting aside, let’s start with the markup. At sticker (including HB), that’s roughly 5% gross profit on the car itself. How many of readers think they can make a business run on that let alone be successful. Secondly, we didn’t get all the pics…Gross Cap Cost DOES include the acquisition fee which DOES go to the leasing company, not the dealer. GM financial would have had a flat or kick-back as well, so the charge that switching lease companies holds no sway. How many miles per year did she get? The national lease add was predicated on having in the leasee’s possession a competitive qualifying lease, accept a 24m/10k lease, and have more than $2100 out of pocket on a roughly $24,900 1SB model. My math tells me she opted for a roughly $5800 more expensive ride. This is apples/oranges and the problem with throwing mud is you usually get your hands dirty. The mysterious 5% year end $ mentioned isn’t paid except as a final payment when GM quits writing incentives on given model years for a changeover…at that point the opportunity has long since been over to lease that said model. The two would never be available at the same time. No mention was given of the $3100CCR passed along. Let’s not spin to burn a dealer…you didn’t provide all the facts, nor were your definitions totally accurate.

    • 0 avatar
      Jack Baruth

      Gosh, you make being a new car dealer sound really hard.

      • 0 avatar
        bucksfan123

        great Comeback….. he basically tells you why you are wrong, and you go for the insult.

        He makes some great points. you are comparing what is advertised as a base model with no taxes, and a shorter lease, to a equipped car with all taxes and fees included.

        But god forbid a business make money. Should they have given the car away to her?

        I see you have ads on your website- do you just give them away to businesses?

        When your grandma goes to the grocery store- should the grocer just charge her wholesale cost?

        How about when she goes to her beauty salon? I bet that person makes a higher percentage markup than the car dealer did.

        • 0 avatar
          dal20402

          “Should they have given the car away?”

          Red herring. Read through the itemization in the article. Jack doesn’t begrudge them the normal amount of profit. We wouldn’t have an article if this deal had been based on MSRP (for the equipped car, not the base model) with GM Financial’s standard lease terms.

          You sound like Ruggles under a pen name. “We can’t feed our families unless we deceive customers!”

          • 0 avatar
            bucksfan123

            who ever told you that GM financial won’t approve a lease if it’s over MSRP?

            that’s a falsehood- they do it all the time. In fact- their guidelines based on credit say they will lease up to about 120% of MSRP.

          • 0 avatar
            Jack Baruth

            As a captive finance guy, I sent garbage like this back ALL THE TIME. It’s called “being ethical”

          • 0 avatar
            30-mile fetch

            bucksfan,
            I’m not an industry insider so I’ve got no professional experience in car sales, but I’ve seen in more than one article that nearly all of a new car dealership’s profits are generated by the service department and used car sales, not new car sales.

            Is this true? Rodney’s grandma also presumably had a trade-in that the dealer can gleen profit from both her and the next buyer.

          • 0 avatar
            bucksfan123

            Jack- you weren’t a captive finance guy because you would have been fired. you would have lost to much business. gross cap cost is over MSRP all the time, what if the customer had negative equity.

            30-mile- it’s clear from her lease paperwork that she did not have a trade. But you are correct, more profits are made from service/parts/used sales than new sales

          • 0 avatar
            Jack Baruth

            I bet I can prove my employment with Ford and BMW a lot more easily than you can prove the “average salary of $50k” in the car business

            hint: I have plaques.

          • 0 avatar
            DeadWeight

            Look at all the primordial ooze, slimy, pond scum, single cell microbes otherwise known as auto dealership employees (especially salesmen & F&I types) come out of their hidey holes to spout off nonsense!

      • 0 avatar
        axis20

        Maybe it is…as an admitted has-been it sounds like you have washed out. Not only did you merely spin the transaction based on the info you provided, but really didn’t give any good info to those who might go looking for new wheels. Also, Bucksfan123 is right, GMF does have a practice of approving both lease and finance deals over MRSP depending on the tier of the call. Also, they too have a disposition fee of $395 on current (Nov) lease contracts. Jack, you reached to far and sound too bitter. Maybe she didn’t get the best deal, but she didn’t get nearly the deal you represented to your readers. You haven’t proven the charge she even overpaid with the info provided.

        • 0 avatar
          Jack Baruth

          “an admitted has-been”

          Do they say that about people who don’t work as McDonald’s fry cooks, too? Because last time I checked, being a salesman in any system store paid about as much as being a fry cook.

          • 0 avatar
            axis20

            So you found something you like better…great. Learn to do it with the integrity you want those in the car business to have and write accurately. What you wrote is rubbish, not because of your desire for someones elderly grandmother to be treated rightly and fairly, but because you opined using illusion and falsehood to achieve a reaction from readers who should be able to trust you with your resume. I have yet to see you actually deal with anyone’s comments with much other than ‘nah-uhh’ ressponses…

          • 0 avatar
            bucksfan123

            being a “bad” salesman- yes.

            an average salesman will make at least $50K… a good one closer to $100K

          • 0 avatar
            Jack Baruth

            HAHAHAHAHA

            They were throwing those numbers around in 1995, back when 2 out of 3 deals weren’t minis, and they were just as fake back then.

            If you are selling twenty Benzes a month, I can see making $50k/year. But I’ve done a lot of credit apps for car salesmen and I know what they actually make, what’s on their 1040s. It’s not an average of $50k and closer to $100. It’s an average of $20-30k.

          • 0 avatar
            dwford

            Sold Hyundais and Fords for 7 years in Connecticut, never made less than $50k, and that was at 10 cars a month average, $70k at 15 cars. That included base pay, commissions, bonuses, and manufacturer spiffs. Obviously if you just took base pay divided by the 50-60 hours a week, that was a very low hourly rate, but that’s not the only pay.

          • 0 avatar
            ajla

            People in the auto sales industry are just the best.

            “We can hardly earn any money in today’s competitive environment! So we need doc fees and $200 pinstripes and $600 markups on 2015 Buicks”

            “An average salesman will earn at least $50k and $100k is not rare.”

  • avatar
    CincyDavid

    So, how long will the Buick last before the neighbors steal/strip the poor thing? Perhaps she should spend the money to get into a nicer neighborhood, not lease a new car.

  • avatar
    dwford

    It’s ironic that Jack and Rodney are complaining about the dealer making money off Grandma while at the same time smirking to themselves knowing how often they did that back in the day. Finding it hard to take this video seriously, especially since Rodney doesn’t care enough about Grandma to go with her to the dealer.

    This is the hazard of people going into a dealer as payment shoppers. If they pick a number that is too high (since people generally just pull a number out of thin air), then the dealer will structure the deal to make that number happen, and be happy to do it if it means padding the profits.

    No offense to Grandma, but the profit on her deal let the dealer take several no profit deals from more savvy shoppers. That’s just how it works. Sorry, not sorry

  • avatar
    PeriSoft

    Jack, Jack… just when I’m ready to be sick of the vague, back-handed politicization in some of your other articles, you pull out another one like this and make me love you again. Why you do me like you do do do?

    And more on-topic:

    “So an 86-year-old woman paid $5,000 too much for a car.”

    It’s worse than that, though, isn’t it, because it’s a lease – she paid $5k too much for a *third of a car*. Or were you extrapolating?

  • avatar
    Pch101

    Another car study by economists Ian Ayres and Peter Siegelman might have some answers. This survey of new-car dealerships revealed that merchants quoted lower prices to white males than to black (or female) test buyers. “In negotiations for more than 300 new cars, Chicago car dealers offered black and female testers significantly higher prices than the white males” even with identical bargaining strategies, they found.

    This is weird. Black families have lower average household income than white families. Why would dealers ask them to pay higher prices? Okay, maybe they’re just bigots. But maybe dealers aren’t making a judgment about their customers’ ability to pay; they’re making a judgment about their customers’ knowledge. (For a flip-side study, see this fascinating paper that found Lima, Peru, cab drivers consistently offer men higher rates — and also accept a higher share of female passengers — because they suspect men can pay more.)

    It’s possible that these dealers expected white men to be smarter about cars. So they offered a better price. It’s possible dealers thought blacks could be duped. So they offered a higher price. In fact, even in the haggling process, white men managed to eke out a better deal on the car. In the economists’ words: “Dealers were somewhat more likely to volunteer information about the cost of the car to white males than to the other testers, possibly because they believed that white males already had such information.”

    ______________

    http://www.theatlantic.com/business/archive/2013/06/the-price-is-racist-when-minorities-and-women-are-asked-to-pay-more/277174/

    Short version: Race and gender do matter, but not necessarily because of intentional bigotry or sexism, per se.

    • 0 avatar
      RideHeight

      There are as many race-tainted attitudes toward the American public as there are sales people. My experience as a racist retailer leads me to think that laziness trumps racism.

      IOW, blacks/hispanics/white trash enter your store, you think “Probably no sale and definitely not worth a moment’s extra effort”. So pitch them high and expect them to just shuffle on. If they bite, marvelous. If not, move over to the dominant paradigm couple eyeing something with a real markup.

      • 0 avatar
        Pch101

        “My experience as a racist retailer leads me to think that laziness trumps racism.”

        The purpose of a car salesman is to extract as much cash out of every buyer as possible. Part of their method is to size up each customer and to act accordingly.

        So if car salesmen have learned that blacks will pay more, then it is not surprising that the salesmen will make the effort to get more, as there is good reason for them to believe that the African-American customer will shell out more money and those salesmen are paid to get every customer to pay as much as he or she will tolerate.

        Part of this may also be due to credit. Those who have lower credit scores are right to believe that they have fewer options, so they may settle sooner in the belief that they have less negotiation leverage.

        In this particular case, I would expect legally mandated transparency to help more than other approaches, although it wouldn’t be a perfect fix.

    • 0 avatar
      danio3834

      Preconceptions matter. I know someone in the furniture business. He consistently gives away the best deals to people of East Indian/Asian descent because they have reputations as being grinders. He lies down on things like delivery fees where with people of other cultures pay the full charge, even after asking. For the most part, he’s spot on at reading his customers.

    • 0 avatar
      VoGo

      Thank you, PCH, for sharing the truth about dealerships which Jack’s story so aptly illustrates.

  • avatar
    rpol35

    And to make matters worse, all of this for a car that looks like one of the three little pigs on wheels.

    As for the immortal words of the supposed next president, I’d like to quote the late great Yogi Berra, “It ain’t over till it’s over” and that will matter.

  • avatar
    danio3834

    Greasy.

  • avatar
    bachewy

    Should any 86 year old person even be driving a car??

    • 0 avatar
      Kendahl

      It depends on the 86 year old. My father was driving competently at age 90 until a series of strokes took him off the road.

      The best counter example I know was Paul Frere. Frere was a racing driver in the 1950s and ’60s. He drove both Formula 1 and sports cars for major European teams. After retiring from racing, he switched to automotive journalism and was a regular contributor to Road & Track. At age 87, Audi invited him to drive the previous year’s winning car during practice for Le Mans. Frere’s speed at the end of the Mulsanne straight was 192 mph, only 3 mph slower than the team drivers who were a third his age.

  • avatar
    jacob_coulter

    It is scummy, and it seems like the car business are one of the few businesses where it’s simply expected that people will be taken advantage of if they don’t know any better.

    I will say though, I knew a white elderly guy that also paid about double what a used car should have been priced on a lot because nobody with any sense went with him to buy the car. I don’t think it has anything to do with race. Its all about sizing up an easy mark, a 19 year old male could also end up with the same fate. At the end of the day, anyone can “walk” and make a car dealer suddenly become honest about the transaction.

    I don’t know how you fix this with legislation, the Apple store makes far more profit per unit (as a %) than a car dealer does on the cars they sell. Also immoral? Or because everyone gets overcharged, it becomes fair? Where do you draw the line?

    • 0 avatar
      dal20402

      If a customer like this walks, the dealer probably won’t become honest about the transaction, but just disappear. They have too much to lose by admitting the magnitude of the deception they were trying to pull.

    • 0 avatar
      dwford

      Is it scummy that Apple charges double for the same essential computer components than a PC maker? Is it scummy that CVS charges a $1 more for that tube of toothpaste than Wal-Mart? Is it scummy for a real estate agent to tell a buyer that there is a higher offer to grind a higher price without telling that buyer what that higher price is, so that the buyer may end up offering substantially more than is necessary?

      In any negotiation or buying situation, some buyers will pay more than others. That’s just the way life works. If you don’t want to over pay, do your homework.

      • 0 avatar
        Pch101

        Apple is nice to its customers.

        Dealers project sleaziness and attitude. It’s easy to come away feeling that they are dishonest and cheesy…because they are.

        I personally couldn’t care less about this. I see car sales as a game, and I enjoy turning the game around on the supposed expert, as they usually aren’t nearly as good at it as they think. (It’s not exactly a business for brainiacs.)

        But there are many who don’t share my amusement, and I can’t completely blame them for disliking it (although I would encourage them to face reality and deal with it instead of fighting something that they cannot change.)

      • 0 avatar
        ajla

        “Apple is nice to its customers. Dealers project sleaziness and attitude.”

        That is it right there.

        Don’t those that work in the auto sales industry ever wonder why many people are willing to pay the OBSCENE MARKUPS they always bring up on groceries or jewelry or clothing or electronics and will buy a $200K+ house on one counter-offer but will fight and grind every last dollar out a car transaction?

        • 0 avatar
          dal20402

          “Dealers project sleaziness and attitude.” This is part of it.

          The other part is that Apple usually adds some sort of value for its high markup. You get (usually) engineering a cut or two better than the bargain basement sellers, pleasing design, and an easier, friendlier retail experience. You can debate whether this value is worth it for X or Y buyer, but at least it’s something.

          This dealer, like most dealers that overcharge in deceptive ways, added jack shit. At least with Carmax you get a true no-haggle price and (usually) friendlier service.

  • avatar
    r129

    I recently accompanied my 79 year old grandmother to shop for a new car lease. She walked away from an Encore lease at a negotiated price of $160/month because she thought that was too expensive. She ended up with a Cruze LT at $98/month. We went to two different dealers to shop for the Cruze. The first dealer quoted $149/month for the exact same Cruze with identical variables. I cringe to think what they might have quoted if I wasn’t there. In all cases, she was trading in a busted 2003 Malibu and using GM card points, $0 out of pocket.

  • avatar
    Big Al from Oz

    Jack,
    This is the best sentence in your whole story;
    “The second is this: I have always believed that we only discover our true character when we have others in our power. When we can benefit from the weakness or ignorance of others.”

    I do know when anyone is on a commission they are out to look after number one.

    So, paying a retainer, plus commission is the best way for a company to sell. This might not be necessarily true for the consumer.

    Judging by the age of the women and we don’t know what environment she lived her life in, ie, a “home mom” who biggest retail experience is collecting coupons to save a few dollars every week to go grocery shopping.

    The salesman and the company should give her back a fistful of dosh. The company could show some empathy and profit on this.

    I really don’t think this has anything to do with racism, it is only about pure greed as I mentioned designed into the methods to sell.

    I have had one bad experience with a car salesman. They had to keys to my trade in vehicle to check it out and wouldn’t give me my keys back until, as the salesman stated “we made a deal”. He was sitting on the opposite side of a circular 5′ wide table from myself. I didn’t realise it, but I tensed that much I literally rammed the table just under his rid cage and he went head first into the table. I got my keys back and I didn’t apologise or show one ounce of empathy to this saleman. He was the most fncked salesman I had encountered.

    As an aside, the car company was forced to closed down and sold several months later as they had used the same selling model on pensioners. This is when a consumer watchdog is necessary to protect those who need it.

  • avatar
    Kendahl

    To avoid being screwed by a greedy, unscrupulous dealer, shop around for the best deal. Buick dealers aren’t hard to find. Letting them know up front that you are doing so will cut down on the BS.

    • 0 avatar
      dal20402

      This. And do it by email, before you even go in person. Getting quotes by email has made it so much easier for me to identify the dealers I want to do business with. Both the quotes themselves and the approaches around them are very revealing. (Hint: You’re not going to get me to change my mind, and you’re likely to piss me off, by sending three-times-daily emails asking me whether I want to take your offer.)

      • 0 avatar
        Big Al from Oz

        dal20402,
        Remember the age of the women. I really mean when she was born a telephone was probably not popular.

        She might have been a “stay at home mom” which is highly probable.

        It’s easy to point the finger. The reality is check and balances must be in place to help the less fortunate and knowledgeable.

        The people who sold the car must be really proud of themselves.

        Sometimes we do need to put aside our aggressive personal greed and do something good.

        The salesman must be a sleazebag in day to day life.

        • 0 avatar
          dal20402

          I don’t disagree that this customer was unlikely to do comparison shopping by email. But it’s a helpful technique.

          As concerns “other checks and balances,” I don’t think it would be out of place for state law to create a rebuttable presumption that a sale where a new, common retail item sold for well over the higher of MSRP or typical sales price constitutes misrepresentation by the seller. Very few such transactions are defensible, and where they are there is usually an easily identifiable reason that would rebut the presumption.

          • 0 avatar
            CoreyDL

            By the way your avatar in my email notices is a bus, while it’s still your computer on here! I fear an impending avatar change soon, which will surely be rejected by the Counsel of Avatar.

          • 0 avatar
            dal20402

            No, the bus is from another WordPress blog. I’m not sure how or why they get confused. Banana is my avatar for the moment. 28 prevented me from having to carry out my threat to turn Banana red to maintain the blog’s color balance.

            The bus: I drove buses (including some almost exactly like the pictured one) for a living earlier in life.

  • avatar

    Oh my, where to start –

    RE: “The Encore in question is a 2015 “Leather FWD” model with a sticker of $30,765. According to TrueCar, there’s approximately $600 of markup in this vehicle. There’s also about $923 of holdback, bringing the total to $1,523. Given that this car is last year’s vehicle, there could be as much as five percent of additional factory-to-dealer incentive, which would bring the total profit to $3,060.

    That would be nice, wouldn’t it? But this dealership actually capitalized the vehicle at $31,347. This means $582 of additional markup is added, bringing the profit to $3,642. How did they do that? Well, there’s no law that says you can’t pay over sticker for a vehicle, and the dealership relied on Rodney’s grandmother to not understand the meaning of “gross capitalized cost”.

    GM Financial, if they are anything like every “captive finance source” with whom I’ve ever worked, won’t finance a vehicle over sticker.”

    This is just not true. It is VERY common for captives to advance over MSRP. In fact, it is typical.

    RE: “But there are plenty of alternative sources that will, particularly when the customer in question has an outstanding credit rating.”

    All true. But did I miss something here, like the customer in questions credit score? You seem to be operating under the assumption that it is 720 or over.

    RE: “Wells Fargo was the bank of choice for this deal. They wrote the lease in such a manner as to maximize profit while adhering to the $297/month rate on which Rodney’s grandmother was sold.”

    Who wrote the lease? Wells Fargo or the dealership? Who wouldn’t write a lease to maximize GROSS PROFIT? But rolling reserve into the back end does NOT maximize gross profit. If you don’t understand this you might want to take a refresher course in a dealership before expounding on these matters.

    RE: “There’s a fair amount of profit for Wells Fargo built into this lease, including a termination fee at the end of the lease.”

    Do you use the word “profit” to be inflammatory? Exactly how is a termination fee “profit?”

    RE: “The Encore in question is a 2015 “Leather FWD” model with a sticker of $30,765. According to TrueCar, there’s approximately $600 of markup in this vehicle.”

    Truecar is such a dependable source of information based on their record of transparency, right?

    RE: “There’s also about $923 of holdback, bringing the total to $1,523. Given that this car is last year’s vehicle, there could be as much as five percent of additional factory-to-dealer incentive, which would bring the total profit to $3,060.”

    Again, the use of the word “profit.” “As much as 5% of additional factory to dealer incentive?” Where do you get that? Are you guessing. There could be more. There could be less. Again, total “profit” of $3,060. What you’re talking about is “available markup,” unless your purpose is to be inflammatory.

    RE: That would be nice, wouldn’t it? But this dealership actually capitalized the vehicle at $31,347.”

    Do you know what “capitalized cost” includes?

    RE: “This means $582 of additional markup is added, bringing the profit to $3,642.”

    Where do you come up with that? Ohio seems to be a tax on the payment state. More on that later.

    RE: “How did they do that? Well, there’s no law that says you can’t pay over sticker for a vehicle, and the dealership relied on Rodney’s grandmother to not understand the meaning of “gross capitalized cost”.”

    It seems you don’t understand it either. THERE IS A LAW THAT STATES THAT THE PRICE CAN’T CHANGE FROM A NORMAL RETAIL SALE WHEN IT IS CONVERTED TO A LEASE. So if you have evidence that that happened you DO actually have something to nail the dealership with.

    RE: “There’s also profit for the dealership.”

    Its called “gross profit.”

    RE: “There’s a kickback for sending the business to Wells Fargo instead of GM Financial. The precise amount is not something we can know, but it wouldn’t be stretching things to assign a value of $250 to that kickback, bringing us up to $3,892.”

    Why the word “kickback?” Again, is it your purpose to be inflammatory? When you grocer sells eggs at retail, do you refer to the difference between his wholesale cost and retail as “kickback?” The precise amount IS knowable if you understand the business. But you seem to prefer guessing.

    RE: “That’s an impressive amount of profit on a vehicle that typically sells for well below invoice. But the dealership also charges a $250 “doc fee”, bringing us up to $4,142.”

    Its “gross profit.” I’m not a fan of DOC fees, but they are usually mandated by the state and cover the dealer’s costs of handling the paperwork, applying for title and registration, paying the sales tax, and taking care of other administrative matters. You can call it profit AFTER the dealer’s expenses are subtracted from “gross profit,” that is if your purpose is to be accurate instead of inflammatory.

    RE: “There’s also a $595 “acquisition fee”, which might go to Wells Fargo but which also might be returned in whole or part to the dealership for a possible $4,737.”

    Which “might” go to Wells Fargo? You really don’t know, do you. But you blithely add it in to “dealer profit” in the interest of what, accuracy or to be inflammatory?

    BTW, the profit for Wells Fargo is based on the interest they receive on the lease minus their cost of capital MINUS their expenses. Because its a lease, the have risk at lease maturity as well a credit risk. The have origination costs which the acquisition fee is supposed to cover. ALSO in the acquisition fee is the reserve to cover residual values that don’t come true in the market at lease end AND/OR residual value insurance, or a combination of the two. There are accounting advantages for the lessor under certain conditions. This advantage is referred to as “Like Kind Exchange” and works quite well as long as the lessor grows. In a down year a lessor gets hit with a triple whammy. First, they get hit with defaults. Second, they get hit with residual losses. Third, if they don’t grow in a down year they have to pay back some of the tax breaks they received in previous good years. But I guess if one is trying to be inflammatory, one only mentions the stuff that inflames, right?

    It sounds to me that YOU agree with our current and next President that everyone should be treated the same. We should fix prices so no one gets a better deal than anyone else.

    Now I’ve read and re-read this piece numerous times looking for mention of the fact that there is NO ACQUISITION fee listed on this “lease contract.” In fact, it is listed is N/A. But the elephant in the room is the “5091.23” capitalized cost reduction AND the upfront tax on it of $407.30. Its hard to make out those numbers. You haven’t even mentioned it. Was there a trade in? Or was the CCR her own cash? You say “There’s a $149/month lease deal available from GM Financial.” Yet, no info is provided to support that. What price vehicle is the $149. based on? How much CCR? “Acq fee” waived?

    What is clear is that you have taken a bunch of numbers you obviously don’t understand, and tried to create an inflammatory scenario out of it. One wonders why you would do that? Because of the CCR, the scenario MIGHT ACTUALLY BE MORE INFLAMMATORY than you are putting forward. Or it might not be inflammatory at all.

    I suggest you do some more research so you don’t have to guess at critical items. I would also ask you if you think it is righteous for some people to get a better deal than others, and if so, how might that loss of gross profit on a deal here and there get made up? If you want everyone to pay the same, you need to lobby the FTC to make that happen. There will be a public hearing on the issue Jan 19 in Washington DC. If you want to make a case you might want to be there. This “public hearing” is put on by a few staff members at FTC who don’t understand the market. They do NOT speak for the FTC. Who knows, they might some day. The FTC seems to be humoring them. You can access this information at the FTC site under the heading “The FTC Opens the Hood.” I tried to post a reply, but for some reason this transparent bunch of people didn’t want anyone to see it.

    • 0 avatar
      Jack Baruth

      Ruggles,

      There’s a $595 acquisition fee. It’s right there in the contract for you to see.

      Yes, captives will advance over MSRP — to clear a trade. And the deal has to be written in a way that makes it obvious. Very few captives will sign off on an over-sticker deal with no trade.

      If you are claiming that it is TYPICAL for captives to finance no-trade dealer over sticker, then I am going to do something called “giving you the lie direct”:

      You are a liar.

      • 0 avatar
        Big Al from Oz

        Jack,
        Don’t be to tough on Ruggles, remember he is a leader in the sleazy car selling racket.

        So, he must support what he preaches. Sleaze.

        • 0 avatar

          So tell us Al from Oz. What do YOU do for a living? And what pays for it? Taxes? Someone else’s production of gross profit? Or some source that doesn’t require the production of gross profit?

          • 0 avatar
            Big Al from Oz

            ruggles,
            You can apply your logic so far. I’m a believer in free market economies.

            But I do also believe that the consumer must come first.

            The problem with our world today is we have the socialist left protecting the small guy. This seems to be organised by small interest groups called unions. They only represent the selfish few.

            The same can be said of you. You represent a small interest group.

            The consumer is all. Each and everyone of us. We tend to forget if we can support the consumer first we support society as a whole, through profit and employment. Progress is more rapid. Once you have a system like you preach you can witness the results. Markets are stymied through less competition etc.

            Our whole system of government is there to protect big business interest and unions. Someone must lose out. It’s the consumer, all of us as we must pay taxes to pay for many grand schemes that fail, ie, EV/hybrid, motor vehicle manufacturing, agri industry, energy, and on and on.

            What if these institutions stood on there own two feet? How much in taxation would we be paying and everything that is done is done because it is a viable proposition.

            The greedy few, only in it for themselves.

            I’m what is termed an Economic Liberal. We don’t believe in monolpolies, ie, unions, big business etc. You support big business to the point where they can do no wrong as it is always for the greater good.

            Most anyone who obtains a commission for a sale will be a sleazebag. Sociopaths would probably be the best at this, as they always need to win.

            The reality is some in our society need protection, like this woman from sleazebag salesman. I wonder if he bragged to his counterparts about what he did?

            If you support this then you have real issues.

            As for my job, it’s an insurance policy for the country. Everyone who’s smart does insure.

      • 0 avatar
        CJinSD

        He also said that states mandate documentation fees; which isn’t the same thing as saying many states set limits for documentation fees; which wouldn’t have been a lie.

        http://www.edmunds.com/car-buying/what-fees-should-you-pay.html#chart

        • 0 avatar

          True, states do not mandate that a dealer charge a DOC fee. But if they do they mandate limits. And that is exactly what I meant. Illinois now mandates a limit of $168.43.

          • 0 avatar
            CJinSD

            How would telling the truth and saying that many states set limitations on how much dealers can charge in documentation fees have supported your argument against Jack?

      • 0 avatar
        bucksfan123

        2 things- 1 the Captives will advance over MSRP all the time, up to 120% if credit qualifies, regardless of if there is a trade or not

        2. Captives advance on NET cap cost, not GROSS. she had $3,100 in rebates, and $3,000 in Cash. so the captive didn’t advance anywhere close to 100% of MSRP.

        Please keep spewing lies and half-truths.

        • 0 avatar

          Tesla is selling direct in most states, so what laws are there on the books that forbid direct sales by manufacturers. There are some states that state new vehicle dealers have to also have service departments. There are laws in some states that say dealers can’t sell cars off of gravel lots. Is that what you’re talking about?

          Are you aware that what prohibits direct sales by auto OEMS are the Sales and Service Agreements entered into by those same OEMs that grant a dealer a sales territory? Once they found local business people wouldn’t invest money without some protections, they freely granted them. Besides, the OEMs and their dealers are partners. Why would an auto OEM want to undermine its own partners? Better yet, why would an OEM want to sell direct in the first place? Who would do the warranty work? Some states aren’t interested in having an entity sell new vehicles without there being someone responsible at the local level to repair them. Or are you recommending OEMs establish their own service network? If so, what do the dealers do with the facilities they own or have lease agreements on based on their agreements with their OEM? Are you advising the OEMs to go back on their own agreements? If so, you’ll make a batallion of attorneys quite happy.

        • 0 avatar

          You are certainly correct. Lenders express their advance policy in terms of percent over MSRP. The author probably should send his plaques back. Unless he was doing floor plan checks, doing collection, or customer service, he would know this. Anyone who ever “bought paper” knows how advance parameters are expressed by lenders.

          He failed to mention the CCR, preferring to intimate that the dealer kept incentives. It seems he added them into the dealer gross profit, which he refers to as “profit.” Most people who worked in retail or finance know the difference. But being accurate doesn’t seem to be his aim.

          He posted a variety of pictures of documents, but I couldn’t find any complete documents, only snips. On the one that leads his post it CLEARLY says N/A regarding Acquisition Fee. The Acquisition Fee was either absorbed by the lender OR the customer opted for a higher money factor in lieu of it. He then posted another form where an ACQ fee is shown. It appears he took bits and pieces of parious forms to create a false narrative. Or he just doesn’t know the difference.

          There is a difference between a RISC and a lease agreement. This woman got a $30K vehicle for a lease payment of less than $300. He mentions an available $149. payment, forgetting there is a paragraph full of stipulations to get to that payment LIKE A SUBSTANTIAL CCR.

          • 0 avatar

            We might also ask why you provided the form pic that heads your post that CLEARLY says N/A for Acquisition fee while also sending another form pic that shows one. There is no complete form shown with its proper heading so one knows what one is looking at. Did you do this on purpose or by accident?

          • 0 avatar
            Jack Baruth

            You should know that the whole form is too long for one photograph.

            It’s clearly shown in the video which illustrates the length of the form.

          • 0 avatar

            We might also ask why, out of my entire post, why you only responded to the acquisition fee and advance issues?

      • 0 avatar

        That is exactly what I am claiming. Advance on a lease, and most RISCs, is expressed based on percent over MSRP. It makes no difference if there is a trade or not. I won’t call you a liar. I’ll just call you ignorant of something you claim to be an expert on.

        I’ll be glad to send documentation.

        • 0 avatar
          Jack Baruth

          You send me documentation that shows that it is typical — which is to say, usual — for people to pay over sticker for cars and for captives to finance over-sticker deals without a trade, and I’ll devote a whole story on TTAC to your proof.

          But you and I both know that over-sticker deals without a trade are vanishingly rare at domestic dealerships.

    • 0 avatar
      28-Cars-Later

      @ruggles

      What this salesman did was wrong, he took advantage of the elderly and buried her in a sh*tty car while Wells Fargo was more than happy to provide a shovel. This man’s actions defames your profession and spits in the face of decent people in the industry. I would think as a man of integrity such as you would denounce such awful actions overall. Sure doc fees, state law, holdback, loan bonuses, overhead etc, some of this which just “is what it is” but to hear you defend all of it, it just really makes me lose respect for you. $600 origination or termination fees are stealing. Above 100% of MSRP is stealing. They played the 80/20 rule and got their 80 on the back of an old woman who may not be able to drive before the end of the lease contract. Seriously if you want to champion this go right ahead, it makes me want to throw up. Maybe they could get some mentally handicapped people in next for a new Regal?

      The offer posted below is for an MY16. Jack describes an MY15 meaning it has already depreciated enough to warrant a quick sale, depreciation now paid for on a note which should not have been written.

      This CA BPG is advertising $149 lease/10K per year with $2500 down + $1500 conquest cash or $4,000 down, so its a legit offer it seems.

      2016 Buick Encore
      Lease for $149/mo!*

      Expires on 01/04/2016

      *Closed-end lease for 2016 Buick Encore for $149 per month plus tax for 24 months on approved Tier A1 credit. $2,500 due at signing after application of $1,500 Conquest Lease Rebate** or $4,000 due at lease signing without rebate. Includes 1st payment & $0 security deposit. Excludes tax, license, and fees. Drive-off based on 8% tax rate and actual amount may vary. 10,000 miles per year, with $.25 per mile thereafter. **Must have a non-GM vehicle in the same household to qualify for $1,500 conquest offer from GM. Window tint is not included in advertised offer. Offer expires 1/4/16.

      http://www.normreevesbuickgmc.com/Special/new/2016-Buick-Encore-all-Lease_for_$149/mo!-Irvine-CA/51669100

      • 0 avatar
        CJinSD

        Well said.

      • 0 avatar

        You obviously don’t understand the numbers so you have no idea of what the deal actually was on the 2015.

        Did you notice your $149./mo example has no bearing on the 2015 deal? Do you know the differences? What were the miles allowed on the 2015. The 2016? What was the difference in equipment. The 2015 had leather and other equipment. The 2016 is a strippo. Do you understand Conquest Cash? The 2015 had $3100. in rebates, as I recall. The 2016 is a 24 month lease. I believe the 2015 was a 39. No one has mentioned the actual credit score of the consumer. So what we have here is someone making an accusation by cherry picking numbers, making gross misrepresentations, making false assumptions, conveniently leaving out salient details, to paint a particular picture. But its all red meat to you.

        • 0 avatar
          28-Cars-Later

          @Ruggles

          I.

          I was responding to your point here regarding the $149 and Jack’s lack of documentation on it:

          “You haven’t even mentioned it. Was there a trade in? Or was the CCR her own cash? You say “There’s a $149/month lease deal available from GM Financial.” Yet, no info is provided to support that. What price vehicle is the $149. based on? How much CCR? “Acq fee” waived?”

          Yes its true, the offer was on an MY16 not a MY15, so not only did she not get the “deal” but they buried her in an MY15 which has already begun depreciation and is already obsolete by December 2015. This is much worse than her not getting or not qualifying for the “deal”.

          Per the documentation I provided “**Must have a non-GM vehicle in the same household to qualify for $1,500 conquest offer from GM.” which is sort of lenient for “conquest cash” typically its must be lessee of competitor but under the definition given I would even qualify despite having two GM cars because I also own an antique Volvo. Jack does not elaborate on trade in the written article, nor does he define whatever down-payment the buyer in question was able to come up with, so we really don’t know if she would have qualified or not. Based on what I posted above, if the buyer came up with $4K in cash and trade, she would have been golden.

          II.

          I’m not you and no I do not have thirty years in the new car business but yes I understand the concepts of option packages, miles allowance, and conquest cash. Believe it or not I also understand the concepts of floorplan, a house pack, holdback, and factory to dealer incentives. I don’t begrudge the latter two as much as Jack because 1. dealer has to make money and 2. unless something changed the salesperson does not get a piece of holdback as it goes straight to the dealership. What I do take issue with is overcharging the customer on a model which is already out of date and then selling her off to a third party financier for a salesman’s finders fee especially if she would actually qualify for a better lease program as Jack alleges – which you seem to be approving. Oh so she qualified but it was a stripper model and she didn’t want it? A common tactic, fine so upsell her but do it on the correct model year and do it for the fricking sticker price. Maybe let her finance through Ally or explain if Wells Fargo has the better rate the difference in fees – ya know basically give a f*** about an old widow you just upsold. Oh, and this is just my personal request, put her in a model which isn’t a Korean sh*tbox. I know that’s a tough proposition these days at Guangzhou Motors, but the equally slow selling resale disaster Regal may have somehow come up with better numbers than $300/mo or whatever the note said. Jack mentioned in his video portion the residual at the end of the lease is $18K. I wouldn’t pay $18K for that POS brand new, but I digress. So if she didn’t qualify for the “deal” why not look at the other models? Maybe its a simple as we need to offload this MY15 ASAP so we need to put someone in it? Occam’s Razor applies well.

          III.

          Now this isn’t directed at you per se but I’m going to elaborate on just one more point which is especially important in lease contracts: mileage allowance. I worked the lanes and I’m here to tell you, mileage allowance is BULLSH*T, just another way to STEAL at the end of the contract. Let’s go to the 28CL archives for the tape:

          AUGUST 3, 2005. BAA (precursor to Manheim Pittsburgh) MMR Results

          http://postimg.org/image/azat2jil7/

          We have two leased 2002 Chrysler 300M Sedans with the same listed options which both sold for 10,500 + fees on the same day in the same lanes but one a had mileage disparity of 45,000 miles. Oh but wait, more mileage impacts resale so I have to pay 0.25/mile to compensate the leasing company? WRONG. You got ROBBED by the leasing company because you don’t know any better and in the lease contract THEY HOLD ALL THE CARDS. This is why you DO NOT LEASE cars unless it is a corporate tax deduction and even then it might make more sense to buy and deduct payments instead. Mileage does not matter, on newer cars valuation is primarily derived from the condition of the car as it runs through the block followed both other variables such as warranty, model year, supply vs demand, and ease of finance. Only as a car is much more aged would mileage come into the equation as a part of condition in a clean vs average or rough black book grade.

          http://postimg.org/image/3xi3toxkx/

          Happens in well used models too, on the same Wednesday:

          1997 Sunfire SE Coupe I4/auto, 122K, Power Locks, Power Window, Cruise Control, A/C: $2,800
          1996 Sunfire SE Coupe I4/auto, 69K, Manual Locks/Window, A/C: $2,500

          Yes one car was more loaded and one model year newer, yet it had nearly double the mileage. Why did it go for more and not less? We don’t know, but its possible the first one was front line ready so body cleaner, new tires, inspected already etc whereas the second one may have just been a recent trade some Chevy dealer dumped and needed reconditioning to be front line ready. For my shop, I’d rather buy the lower mileage car assuming it was in average condition and spend the money on reconditioning, but as a car ages this becomes a riskier proposition vs one which recond is already paid for when you pick it up.

          http://postimg.org/image/hu66vnlrz/

          Oh and some porn for my Lincoln-Mercury homies:

          2004 Town Car Sig, 2K otc: $24,8. But weren’t those like 40K new? Indeed…

          1956 Lincoln Premier: $8,0. Wish I saw it that day.

          Two 90s V6 Contis for $100.00 apiece? I saw those they had to be pushed in because they didn’t run!

          http://postimg.org/image/jjqt7qv6d/

          IV

          In closing I do not know what you do exactly, I picture you as Shelley “The Machine” Levene in “Glengarry Glen Ross” except instead of failing at the end you have already moved into a GM spot. Wonderful, kudos. I never liked retail sales because I don’t care for people’s bullsh*t and I also don’t care to f*ck them over because I can. I worked wholesale which I found to be much more exciting. In three words: its a hustle. But its the world of professionals, not “civilians” per se. Everybody knows the rules, everybody has some idea of data, and its as much a sales job as it is business management and a mathematics course rolled into one. I always flunked math but I was an idiot savant when it came to auction pricing data. I saved all of those printouts in order to do statistical modeling using an Access database in 2005/6. Black Book was very good but my figures were better because they were localized to BAA. That’s what I did, I swam with sharks and occasionally got bit. I wasn’t out robbing old ladies for my 80/20 like a scoundrel. Jack as author may have fudged some figures without accurate data in order to provide the “meat” for the piece, but the overall occurrence is crystal clear. If you think this is OK behavior to ding your customers in such a manner, you’ve got another think coming and this behavior impugns your profession.

          • 0 avatar
            bball40dtw

            Ah, Glengarry Glen Ross

            “What’s you name?”

          • 0 avatar
            28-Cars-Later

            You, Williamson, I’m talking to you, sh*thead. You just cost me $6,000. Six thousand dollars, and one Cadillac.

          • 0 avatar
            bball40dtw

            ABC

            Always Be Closing

            Alec Baldwin is only in that movie for what 10 minutes, maybe. I remember his performance in Glengarry Glen Ross more than anything else he’s ever done.

          • 0 avatar
            VolandoBajo

            Coffee’s for closers.

            The content of that essentially monologue is probably the most widely-known exchange of anything in any play that has been in mainstream American theater in the last fifty years or more.

            Even content from an iconic work like Death of a Salesman isn’t as widely recognized. And it is also far and away the best known segment of anything written by Mamet.

            You have to turn to either Shakespeare or the Godfather series to find dialog that is as well-known to such a wide segment of the American public.

            Second prize is a set of steak knives.

            I have run across (fortunately not too often), managers in the business end of IT consulting who considered Baldwin’s character to be somewhat of a training manual for success. Right down to the Rolex and the car, typically a 7-series BMW or an M-B 500SEC, back in their day.

          • 0 avatar
            28-Cars-Later

            BLAKE: That watch costs more than you car. I made $970,000 last year. How much’d you make? You see pal, that’s who I am, and you’re nothing. Nice guy? I don’t give a sh*t. Good father? F*ck you! Go home and play with your kids. You wanna work here – close! You think this is abuse? You think this is abuse, you c**ksucker? You can’t take this, how can you take the abuse you get on a sit? You don’t like it, leave. I can go out there tonight with the materials you’ve got and make myself $15,000. Tonight! In two hours! Can you? Can YOU? Go and do likewise. A-I-D-A. Get mad you son of a b*tches, get mad. You want to know what it takes to sell real estate? It takes BRASS BALLS to sell real estate. Go and do likewise gents. Money’s out there. You pick it up, it’s yours. You don’t, I got no sympathy for you. You wanna go out on those sits tonight and close, CLOSE. It’s yours. If not you’re gonna be shining my shoes. And you know what you’ll be saying – a bunch of losers sittin’ around in a bar. ‘Oh yeah. I used to be a salesman. It’s a tough racket.’ These are the new leads. These are the Glengarry leads. And to you they’re gold, and you don’t get them. Why? Because to give them to you is just throwing them away. They’re for closers. I’d wish you good luck but you wouldn’t know what to do with it if you got it. And to answer you question, pal, why am I here? I came here because Mitch and Murray asked me to. They asked me for a favor. I said the real favor, follow my advice and fire your f*cking ass because a loser is a loser.

          • 0 avatar
            RideHeight

            Ironic that for all its current adulation among a certain group of males, GGR was a money loooser for its studio.

            It was sort of an enthusiast’s car of the movie industry.

  • avatar
    sportyaccordy

    I really don’t understand the “manufacturer direct” thing. Most people don’t buy ANYTHING, even big stuff like furniture or appliances, factory direct. Likewise not shopping around = you will probably get hosed. Plus I’m certain manufacturers would pad prices to make up for the cost of the logistics of selling without dealerships. Lol @ people thinking “dealer cost” = factory cost. Day by day the term B&B becomes more and more satirical.

    • 0 avatar
      Pch101

      Many people wrongly assume that retailers only add markup.

      In practice, the opposite is often true. It’s not as if the cost of retailing for a producer is zero. A retailer who is good at retail will probably be more efficient and/or willing to accept lower margins on the retail component, adding less markup than a direct seller.

      • 0 avatar
        VoGo

        People have the right to believe that retailing is a high margin business. And I would urge them to make money off their insight by buying stock in such successful retailers as Circuit City, Radio Shack, J. C. Penney, Woolworth, and Linens & Things.

      • 0 avatar
        sportyaccordy

        I wouldn’t go that far. But I think beyond a very small scale the dealership model makes sense, especially given how people generally buy cars today. Nobody is walking in with order forms. They go to the lot, pick something out, get run through the F&I strainer and leave. Or more realistically, they come in with their tail between their legs and leave with whatever their credit affords them. Either way for a company like Honda, it just makes sense to have some kind of intermediary to handle the selling and servicing of millions of new cars a year.

        • 0 avatar
          Mr. K

          “sportyaccordy
          December 29th, 2015 at 6:13 pm

          I wouldn’t go that far. But I think beyond a very small scale the dealership model makes sense, especially given how people generally buy cars today. Nobody is walking in with order forms. They go to the lot, pick something out, get run through the F&I strainer and leave. Or more realistically, they come in with their tail between their legs and leave with whatever their credit affords them. Either way for a company like Honda, it just makes sense to have some kind of intermediary to handle the selling and servicing of millions of new cars a year.”

          The US has a ‘right now’ selling model.

          Like many folks here I used to sell cars, new and used. There are many tricks we use, the first is to land the customer on a specific unit, then build urgency to buy the car/truck/SUV/ whatever NOW.

          Special deals other consumers wanting the car, the way you like the shine on the lug nuts…

          In Europe people order exactly what they want at the dealer and either pick the car up at the factory center or a while later at the local dealer.

          http://www.bbc.com/news/technology-17634426

          When I worked in service at a good size Chevy dealer in the oughts I guess 15% or so of pick ups were custom, when I worked at a GMC place every car was from stock or dealer trade and pressure to BUY NOW was high.

          I see no reason why many people can’t buy exactly what they want if they would only wait a little while – up to the early 70’s a Toyota and Datsun (Nissan, yungins) only had the vehicles come one way and your choice was auto manual, air, no air, and color.

          In time the Japanese dealers became very high pressure and the same guys work Chevy yesterday Toyota today and VW tomorrow.

          • 0 avatar
            Pch101

            “In Europe people order exactly what they want at the dealer”

            And they pay a lot more because of that.

            European new car sales are driven by the company car market, which is essentially a form of tax avoidance that encourages leasing among a considerable percentage of the new car buying population. Leases get turned over at regular intervals, so people can plan for their next cars well ahead of time.

            The US does not have this and probably never will, as such a system is facilitated by high sales and income taxes that the US also doesn’t have, and I seriously doubt that the US will ever allow the average person to use a car lease to reduce income tax liability.

    • 0 avatar
      healthy skeptic

      @sporty

      Perhaps you are right, perhaps not. But why do we need laws on the books forbidding direct sales by manufacturers? If direct sales are really so awful, the marketplace won’t take long to figure it out.

      • 0 avatar
        Whittaker

        healthy sceptic said:
        “But why do we need laws on the books forbidding direct sales by manufacturers?”

        I believe this question was asked earlier.
        I have yet to hear a satisfactory answer from the B&B.

        • 0 avatar

          Tesla is selling direct in most states, so what laws are there on the books that forbid direct sales by manufacturers. There are some states that state new vehicle dealers have to also have service departments. There are laws in some states that say dealers can’t sell cars off of gravel lots. Is that what you’re talking about?

          Are you aware that what prohibits direct sales by auto OEMS are the Sales and Service Agreements entered into by those same OEMs that grant a dealer a sales territory? Once they found local business people wouldn’t invest money without some protections, they freely granted them. Besides, the OEMs and their dealers are partners. Why would an auto OEM want to undermine its own partners? Better yet, why would an OEM want to sell direct in the first place? Who would do the warranty work? Some states aren’t interested in having an entity sell new vehicles without there being someone responsible at the local level to repair them. Or are you recommending OEMs establish their own service network? If so, what do the dealers do with the facilities they own or have lease agreements on based on their agreements with their OEM? Are you advising the OEMs to go back on their own agreements? If so, you’ll make a batallion of attorneys quite happy.

          • 0 avatar
            Pch101

            “Tesla is selling direct in most states”

            Tesla doesn’t do business at all in many states.

          • 0 avatar

            RE: Tesla – Just because there might not be a so called Tesla Dealer in a state, doesn’t mean they can’t be purchased there. In Texas Tesla has showrooms. They call them galleries. They can’t sell cars from that location. But the consumer goes to the gallery to see the car, then contacts Tesla directly. There are Teslas all over Texas. I have a friend in Dallas who is leasing 6 of them a month.

            Following is a recent piece about what’s going on in TX. For the record, I’m fine with Tesla owning its own sales point UNLESS they don’t adhere to the same rules as other new vehicle dealers have to. If they state requires legacy dealers to maintain a service facility, Tesla should also have to.

            http://www.texastribune.org/2015/07/14/abbott-tesla-dealership-model-works-just-fine/

            As a practical matter, Tesla is NOT out of business in Texas OR any other states. After all, consumers can buy direct, right?

          • 0 avatar
            Pch101

            The reality is that Tesla can’t operate a store in Texas — the showroom can’t take money or deliver the product to the customer. Furthermore, Tesla can’t do that because it’s illegal for the company to engage in such activities directly.

            It really doesn’t help your case when you lie about it or try your best to parse it. I’m no cheerleader for Tesla or direct sales, but a fact is a fact.

      • 0 avatar

        Again, we don’t have laws on the books preventing direct sales by auto manufacturers. There may be exceptions in a couple of states. We have the agreements the auto manufacturers freely signed that induced business people to invest millions on their behalf. After they signed this agreement, it wouldn’t work to well for them to go back on their contract, because that’s what it is, a contract.

        • 0 avatar
          Pch101

          “we don’t have laws on the books preventing direct sales by auto manufacturers”

          Sure there are. It varies by state. Why are you being dishonest about this when this is easily verified?

          http://www.autonews.com/article/20140301/RETAIL/140229855/teslas-state-by-state-battle-with-dealers

          • 0 avatar

            Why did you leave out my “few exceptions” comment? If there are all of these laws on the books preventing OEMs from selling direct, exactly how is Tesla doing it?

          • 0 avatar

            Further, this is not a state to state battle with dealers. If a state has a law that prevents new car dealers from selling cars from a facility that lacks a service department, that is hardly a beef between dealers and the OEM that wants an exception carved out for itself. And as I have pointed out, even the states like Texas that allow galleries, but no test drives and/or pricing, can’t prevent consumers from contacting Tesla directly and buy one of their vehicles. If you’ve been to Texas recently you might have noticed Teslas all over the place with TX license plates on them. The cars are purchased directly from Tesla and shipped to the buyer. Texas can’t do a thing about that. What you have is a major beef stirred up by Elon Musk trying to gain publicity. It seems to be working. He has the whole country believing that it is state dealer laws preventing him from doing business in the few states, when it is probably more the fact that his business model doesn’t include having service facilities connected to his mall showrooms. I’m not familiar with all of the so called barriers in the few states where Tesla doesn’t have “working showrooms.” How can anyone say Tesla has been barred from TX when there are Teslas all over the place and galleries in the major metro area?

          • 0 avatar

            From the map at the link you posted, a state I know something about:

            “Tesla has no storefront in Iowa, but offered a three-day test drive event in Sept. 2014 that had to be cut short after state regulators and dealers indicated that such an act was illegal. According to the Iowa Automobile Dealers Association, a 1970 statute requires anyone engaged in the business of auto retailing (including test drives) to be licensed by the state. The Iowa Department of Transportation also says direct sales are not allowed.”

            I once tried to display cars at a mall in Iowa as an Iowa dealer. My competitors reported me to the state and I had to buy a special license to display off site. I am betting that is what Tesla failed to do. It is quite likely that Iowa WOULD bar direct sales. That doesn’t mean Tesla couldn’t get a dealer license and set up a facility like other dealers are required to do. It doesn’t mean Iowa residents can’t buy a Tesla. The fact is, cold weather states low population density and wide open spaces aren’t Tesla’s typical market. So Tesla would prefer to say they have been barred to generate publicity out of the deal. The people who are responsible for the laws in Iowa include the legislature, the Iowa Department of Transportation, AND the Iowa Auto Dealer Association. Keep in mind all of this began when auto OEMs needed the capital, experience, and local expertise of auto dealers. Without some protections, business people were reluctant to take a flier. After all, they were being asked to buy and pay for inventory the OEM would sell them as soon as a serial number was generated. They were required to have a way for the OEM to actually draft on their bank account at will. If a dealer wants to stop an OEM draft because the dealer didn’t order a particular car or cars, the OEM can put that dealer on “finance hold.” That means the dealer is on COD for everything including parts and special tools. If the situation goes on for too long, the OEM has the right to cancel the franchise. In addition, the dealer is required to provide a facility that meets OEM requirements. Now imagine a new dealer is required to build a Taj Mahal while dealers he/she competes against are selling off of gravel and a well used mobile home. OR like the Saab dealer in my college years, the guy was a new car dealer in OK selling Saabs out of his dorm room. OR, lets say someone decides to start direct selling Mahindras or Cherys from their house. Did new car dealers participate in the lobbying for such laws? Absolutely. What dealer running a real business wants to have to compete against someone selling from a no overhead facility. And the state has an interest in protecting its consumers from such antics. At the time, no one had any thoughts of a company called Tesla. These laws mostly came into being after the Japanese OEMs entered the country by signing up gas stations, gravel used car lots, and anyone they could. Until the bad dealers were weeded out, there was a lot of turnover and harmed consumers complaining to the state. The oil crisis of 1973 pretty much straighten things out as the Japanese brand car dealers made a lot of money quickly. This period of initial recruitment and turnover was late 1960s and into the 1970s. In Iowa the attorney who was instrumental in these laws being written was Al Kahl. I believe his assistant was Gary Thomas. Both were associated with the Iowa Auto Dealer Association as counsel. The head of the Iowa DOT was Carol Padgett. The purpose of these laws was to protect Iowa dealers from their OEMs and to protect Iowa consumers from unscrupulous dealers. Poorly capitalized dealers might have good intentions, but lack the financial heft to keep up their end of the bargain.

            Now that Tesla has raised all sorts of capital, they no longer should be regarded as a shaky startup, despite the fact that they haven’t made actual profit. They are obviously a real company. I don’t personally have a problem with Tesla selling direct as long as they have to follow the same rules as other dealers, in particular about having a service department connected to the showroom. They have to have state dealer licenses. They have to collect sales tax, and provide title and license plates. They have to facilitate the vehicle inspection required in the state. I frankly doubt that Tesla wants to spend the money in Iowa because of the issues I mentioned earlier. They can get more mileage out of complaining about the state laws they say prohibit them from doing business in the state when what they really want to do is not follow the Iowa statutes. I can easily imagine there might be some other states where the same thing is going on.

            Again, for the record, I have NO PROBLEM whatsoever with Tesla being allowed to sell direct. I’d even allow them to eschew service departments even though I can understand other dealers feeling that is an unfair advantage. Yea, I favor some EV exemptions. If you look at the map, you’ll some states with little population density and cold weather where it appears Tesla hasn’t made any efforts to do business. Yet, I’ll bet you’ll find residents there with Teslas in their garage.

          • 0 avatar

            https://www.facebook.com/TeslaOwnersOfTexas/

            How are all of these sales being prevented?

          • 0 avatar
            Pch101

            Tesla believes that current state franchise laws pose enough of a threat to its direct sale business model to have lobbyists who are attempting to change those laws.

            Dealer associations believe that changing those state franchise laws poses enough of a threat to their franchise business model to have lobbyists who oppose changing those laws.

            We all know what’s up, even if you claim not to.

    • 0 avatar

      Dell and Apple have done pretty well selling computers factory direct.

      I’m interested in factory direct sales less for potential cost savings and more for the ability of being able to customize a car online and have it shipped directly to me instead of buying what’s on the lot. (Sure, you can order a car, but dealers would much rather steer you to something in stock). Cars stocked by dealers tend to be the ones that are inoffensive – they aren’t going to stock bright colors or manuals or odd feature combinations. Letting people order directly would give manufacturers an incentive to offer more colors, options, ect, because they would be built for a buyer who wants them.

      • 0 avatar

        It might be a little difficult to package up your new SUV and mail it back when you need warranty work. If the direct to consumer model worked I’m sure the legacy auto OEMs would be rushing to do it. Wonder why they aren’t. GM could have done that with Saturn. Toyota could do it with SCION. Since those vehicles all sell for MSRP it would be simple to establish an online ordering setup, right? What’s stopping them? They already have a dealer network in place. All they’d have to do is to compensate the dealer in the market from where the online order came, and voila. Consumer gets the car, dealer delivers it, takes the trade in, and handles any financing and warranty work. I’m all for it. It is AGAIN time to prove that selling new cars the way consumers answer survey questions doesn’t work. Why not.

        • 0 avatar
          S2k Chris

          “It might be a little difficult to package up your new SUV and mail it back when you need warranty work.”

          Don’t be obtuse. There’s no reason why service and sales can’t be separated.

          “If the direct to consumer model worked I’m sure the legacy auto OEMs would be rushing to do it. Wonder why they aren’t.”

          Because in many places it’s illegal, primarily to protect the franchise agreements OEMs have with their dealerships. Honestly, I don’t necessarily object to that. What I do object to is NADA trying to force that same business model on carmakers like Tesla who have no agreements or franchised dealers.

          • 0 avatar
            heavy handle

            “It might be a little difficult to package up your new SUV and mail it back when you need warranty work.”

            That’s how it works in some parts of Europe. Independent garages are “BMW certified” (for instance) to provide factory-authorized service using OE parts, OE diagnostics equipment and OE tools. There’s no critical reason for sales and service facilities to have common ownership, or to share locations.

      • 0 avatar
        Pch101

        Apple charges high prices. Those who are claiming that direct sales strip some sort of costly middleman from the process do not understand how retailing works, nor do they understand the motivations that some producers have for selling direct. (It certainly isn’t intended to make things cheaper.)

  • avatar
    Spartan

    And yet people wonder why Carmax is getting so much business. The average Joe hates the dealership experience because there’s so much variance in prices, it’s ridiculous. Why should this little old lady pay more than some spring chicken 30 year old guy?

    The last dealership purchase I made was for my 2012 F-150. I used the USAA car buying service, went to the dealer, signed papers and picked up the truck at a fair price. Even that was aggravating because they wanted me to use Ford financing for obvious reasons. I’m sure there’s a kickback for them.

  • avatar
    HotPotato

    Yep. Similar for me. Used Costco service and Cap1 blank check–so, no opportunity for a ripoff, right? Wrong. Sales manager attempted to surreptitiously change the agreed-upon price, added on fees, lowballed the trade, etc. F&I guy gave the hard sell for useless add-ons, charged double the listed price for a useful one, required me to fill out a hard-pull credit app or he wouldn’t process the paperwork, and called the next day to say the Cap1 wouldn’t do the deal and I’d have to finance with the dealer at a higher rate — which (surprise!) was a lie; Cap1 offered to conference-in with me to tell the F&I crook so.

    There’s got to be a better way than the car stealership as we know it. Maybe something like CarMax? It pains me how much markup CarMax adds, but honestly, for most people most of the time, the deal will probably be no worse and maybe better than they’d get after the stealership got through with them…and a lot less hassle.

  • avatar
    Mr. K

    “So what? In the immortal words of our next President, what difference does it make? I’d suggest that it’s significant for two reasons. The first is that this deal demonstrates the continued existence of ethics-challenged dealerships, even among major new-car franchises, even in 2015.

    The second is this: I have always believed that we only discover our true character when we have others in our power.”

    Hum, rip off an old lady, throw in gratuitous, out of context snark about someone who you don’t agree with…

    What is the power of the media?

    By the by, Jack, while you are attacking Democrats in passing why not offer an opinion, naturally in passing, of Newt Gingrich, (presumably well) paid lobbyist for the AstroTurf US Consumer Coalition attacking the CFPB, a place Rodney could bring his gran’s case to?

    http://www.consumerfinance.gov/complaint/#vehicle

  • avatar
    JBF

    Jack,

    Your analysis although applicable for purchase is pretty much waste of ink for a lease. When you purchase a car you can benefit directly (dollar for dollar) from deal incentives, when leasing not so much since you are basically covering depreciation over lease period plus cost of administering lease (plus profits of course:).

    Leasing is simple, it all comes down to Total Cost (down payment plus total of 39 monthly payments). GM is offering $245/Mo for 39 Mo with $3.3K down for 2016 Encore Leather with MSRP of $31,105…, see the lease I pulled from Buick below. Factor in taxes, documentation, and title puts this lease near what she paid $297/Mo with $3100 due at signing. That being said she should have been able to negotiate an additional $1K-$1.5K down payment reduction or for the same price a 2016 Model.

    So, she didn’t get ripped off unless you think my well educated neighbor who paid $2800 more than I did for the same vehicle got suckered (and every one like him who trusted truecar for “best price”).

    From Buick Site:
    Ultra-Low-Mileage lease for Well-Qualified lessees. $245/month 39 month lease. $3,316 due at signing (after all offers). No security deposit required. Tax, title, license, dealer fees and optional equipment extra. Mileage charge of $0.25 per mile over 32,500 miles. Example based on survey. Each dealer sets own price. Your payments may vary. Payments are for a 2016 Buick Encore 1SN with an MSRP of $31,105. 39 monthly payments total $9,555. Option to purchase at lease end for an amount determined at lease signing, or turn in vehicle. Lessor must approve lease. Take delivery by 01-04-2016. Lessee pays for maintenance, repair, and excess wear. Payments may be higher in some states. Not available with other offers. Residency restrictions apply.

  • avatar
    Jeff S

    Maybe what the dealer did was legal but it is far from being fair or ethical. It is obvious that this elderly lady was an easy mark but that is no excuse to charge above MSRP. She would have been better off buying a 2016 Encore and not leasing. She probably could have gotten a CRV or RAV4 for less with 0 percent or 0.9% if she qualified. Most likely she had a Buick before and the sales person saw her as an easy mark. Not all dealers and sales people are this unethical but this does reinforce the stereotype of the sleazy and unethical salesperson and dealers. Many see car sales people as lower than pond scum and the only thing lower are politicians.

  • avatar

    There is lots more to this story, like the fact that the sales consultant is also African-American. Secondly, no one has ever contacted the dealership to express any dissatisfaction at all. Finally, I offered to speak to the client about this and am waiting to hear back. Obviously, if we did anything wrong, we will correct it immediately!!

    • 0 avatar
      wmba

      Funny that nobody picked up on the fact that you’re the dealer principal in this particular case.

      Or maybe I should say, everyone is off on their own particular high horse and couldn’t care less.

      Google Bernie Moreno, folks.

      • 0 avatar
        Jack Baruth

        In this case, the dealer principal seems to be unaware of a few extra things that happened in this deal. He should call his F&I person and find out what Rodney and I didn’t publicize. Hint: it’s at least as bad as what we did publicize.

    • 0 avatar
      CJinSD

      Is there going to be any follow up with the dealer?

  • avatar
    bucksfan123

    I watched your video again… you guys are complete morons, liars, and are just baiting here.

    1. Show me 1 lease that doesn’t have an acq fee
    2 show me a lease in Ohio that doesn’t have a document fee
    3. you claim this car is $2,000 more than the lease car. The 1SB is a $24,900 car. This car is over $30,000. that’s a lot more than $2,000- need me to do the math for you? or can you handle it?
    4. The GM lease includes a competitive lease. She didn’t have one. If she did- her rebate would be higher. $1,500 higher.
    5. SO that $6,500 difference between the lease she has, and the ad price. that’s a lot more than $18-$20 a month

    6. You claim GM didn’t give her the rebates- they did pass along the rebates along to her. she got $3,100 of rebates plus her $3,000 cash, which is how she had $6,100 due at least signing

    7. there are no “factory to dealer” incentives that you claim.

    Care you have a rebuttal?

    • 0 avatar
      Jack Baruth

      I don’t think you paid very much attention.

      1. Go to a VW dealer, they’ll show you one. They aren’t the only ones.

      2. An extra $250 doc fee? That’s the exception, not the rule.

      3. Rodney and I called around and confirmed that it was possible to do a $175 lease on Encores with stickers up to $28,275. The $149 lease requires 1SB.

      4. How relevant is that in this case? The dealer still took her to school either way.

      5. It was easy for us to find a deal that wasn’t more than $20 over the ad price for a better-equipped Encore.

      6. We don’t claim that and in fact the documentation shows they gave her the rebate.

      7. Or so you think, because you personally are also being taken for a ride by your shop. Don’t feel bad. System stores work their low-level people as hard as they work the marks.

      • 0 avatar
        bucksfan123

        1. WRONG- again. just went to the VW site- their advertisted lease, when you click on the fine print- includes acq fee of $625.

        2. WRONG again- go to any dealer in Ohio and see that the doc fee is

        3. you should know that when you call around a dealer will tell you anything to get you in the door.

        4. You are moving the goal posts here.

        5. See number 3

        6. You did claim it- 2-3 times in your video

        7. I have worked at other dealers- yes some dealers have dealer cash- others don’t. GM doesn’t. plain and simple

        We can go all day long- you will still be wrong, and proven wrong.

        • 0 avatar
          Jack Baruth

          1. You’re cherrypicking leases, just like you accuse me of doing.

          2. Negative — I paid $45 doc fee on my new Accord last year. I’ve bought more than 20 new cars in Ohio and never paid more than $50.

          3. We talked to the GM who used to employ us both.

          4. You’re comparing apples and oranges.

          5-6. Never do we claim that GM didn’t give her the rebate. We specifically mention the $3100 rebate. What we say is that she got none of the kickback.

          7. You’re just plain wrong.

          Does it make you feel good to sit there and defend a dealership that sold a year-old car to an old woman for $600 OVER STICKER?

          • 0 avatar
            bucksfan123

            I’m not defending them. I’m showing the world what an idiot and “fake” know it all.

            if anything- she paid $600 too much for the car

            END OF STORY

          • 0 avatar
            VolandoBajo

            From the couple of grammatically incomplete sentences you wrote, Bucky, it seems that you are trying to say that at most she overpaid by $600 above sticker for a prior MY car.

            Show me ANY example of anyone buying a car for full sticker, and when it is a year plus old, and the new models are in the showroom, being able to sell it back at the sticker price, even if never driven.

            When the car becomes a prior year model, its fair market value ALWAYS drops by a great deal. So while it might have been $600 over the sticker price, it was a hell of a lot more than its market value…several times what you assert she overpaid.

            So before you go around slinging comments about someone else being an idiot and a fake, you’d best look in the mirror, and see how ignorant you are of the market value of a prior MY vehicle.

            To assert that the introduction of a new MY doesn’t change the market value of the prior MY model AT ALL is what is idiotic.

          • 0 avatar
            28-Cars-Later

            … and got buried on a car which has already depreciated significantly due to the model year change.

          • 0 avatar
            Jack Baruth

            You’re acting as an active agent of the dealer here. Like an unpaid social media coordinator, tirelessly trying to restore their good reputation.

            I wish you luck. Maybe they’ll send you a Christmas card.

    • 0 avatar
      bball40dtw

      I’ve leased VW and Ford products without acquisition fees. VW Credit will get you on the back end with a termination fee though.

      • 0 avatar

        It isn’t uncommon for captives or banks to waive acquisition fees for a particular promotion. These are primarily “subventions” where the lessor/lender is charging these fees to the OEM, along with any charges for enhanced residual value and/or below market interest. (money factor)

        I think, however, you have termination fee and disposition fee confused.

      • 0 avatar

        RE: “You’re acting as an active agent of the dealer here. Like an unpaid social media coordinator, tirelessly trying to restore their good reputation.”

        I’m acting as a tireless agent of the truth. Everyone’s entitled to their opinion but facts are facts. And the fact is, your post includes a lot of misinformation in an effort to inflame, rather than to inform. Frankly, I don’t know where you feel authorized to put this woman’s business on the street in the first place. 5% carry over allowance? Acquisition fee a dealer keeps? Where was your explanation of where the CCR came from. It seems clear it was a combination of rebates and the customers capital cost reduction. On deals like this in states where the sales tax is on the payment, it is often common for any trades to be handled outside the lease. Was there a trade? Mentioning the so called $149. lease without any of the stipulations? What was your purpose there? Why no mention of the mileage restriction, and required CCR, and lease term, etc. if your intent was to be accurate and factual? The list goes on.

        Car dealers mostly do business with people who are lifetime employees. In fact, its generally a walk in the park to do business with another business person. Because of the lack of business knowledge of the average consumer, one wouldn’t expect them to understand how the business world works. Its not something a car salesperson would want to try to teach in 10 minutes or less even if the car salesperson had the knowledge himself.

        Was it you who thinks it is easy to run a car dealership? How easy is it to know how to put together the financing to buy and operate one?

  • avatar
    PrincipalDan

    This reminds me of a story one of my Dad’s friends (who was a car salesman) would tell about a little old lady who came into their Buick dealership seeking a Century. One caveat was that the car had to have a hood ornament because that was “how she centered the car within the lane”. Well unfortunately for her it was one of the years in which the Century didn’t have a hood ornament.

    Instead of offering to have the body shop install one (an easy enough task) the salesman talked her into buying a Park Avenue.

  • avatar
    Jeff S

    The Church also approves a Mafia killing if you confess and pay penance.

  • avatar

    RE: “Tesla believes that current state franchise laws pose enough of a threat to its direct sale business model to have lobbyists who are attempting to change those laws.”

    Yes they do and yes they are.

    RE: RE: “Dealer associations believe that changing those state franchise laws poses enough of a threat to their franchise business model to have lobbyists who oppose changing those laws.”

    Dealer associations believe that providing different rules for Tesla or other non franchise dealer business models give them an unfair advantage. There are many dealers who would like to have a Tesla franchise. I don’t know a SINGLE dealer who wants to have to deal with a Chinese direct sales dealer down the street selling new vehicles out of a mobile home on cement blocks on a gravel lot, with no service department. I don’t know a single new car dealer concerned that his/her OEM will try to begin selling direct. I DO know a few who hope they try.

    RE: “We all know what’s up, even if you claim not to.”

    I’m sure you think you do. You haven’t yet answered the question why there are so many Teslas on the road in Texas, where they are supposed to be banned. How about the galleries there? It all seems to be working out quite well for Tesla in Texas. Go to the gallery, pick you color, trim, and options, go online and buy. If they want to do test drives and take money at the “gallery,” they’d first have to establish a state approved service department and jump through some other hoops, same as Ford, GM, Chrysler, etc. The domestic OEMs all have factory owned stores in TX. Tesla is just stubborn and looking for their own deal.

    • 0 avatar
      DeadWeight

      Hey Ruffles, enough of your thick bullish!t.

      Answer one question: Do you support dismantling state-level legislation that makes it only possible for independent (of manufacturers) franchised dealerships to sell new vehicles?

      YES OR NO, RUGGLES?

      Quit your shilling for the corrupt, criminally sanctioned 50-state “franchised dealers only” legislation, Ruggie Bear.

  • avatar
    timotheus980

    Wells Fargo does not offer leases:

    http://www.autonews.com/article/20150109/FINANCE_AND_INSURANCE/150109877/gm-to-use-gm-financial-for-subsidized-leases-drop-ally-u.s.-bank

    Wells Fargo holds title but does not originate the lease.

    Why all the profit is a 4-letter word talk? If a middle aged white male walked into a car dealer unprepared and completely agreeable to whatever the salespeople tried to pull why would that be ok and this isn’t?

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