Car dealers: “no love for liberals”

Keith Crain, publisher of Automotive News, the auto industry’s leading trade publication, knows the auto industry inside out. His response to auto dealers’ vitriolic reaction to Hillary Clinton’s being invited to address the National Automobile Dealers Association:

“If anyone doubted that Hillary Clinton is a polarizing figure, all he had to do was look at the brouhaha caused by the National Automobile Dealers Association’s selection of her as a keynote speaker at its convention next year in New Orleans…

The episode did demonstrate that the American new-vehicle dealer, who I’ve always felt is the last of the entrepreneurs in North America, basically has no love for liberals…”

Sales of service contracts pad auto dealer profits

High-cost service contracts are major profit centers for auto dealers.  One dealer told Automotive News that in 2005 his gross profit per extended service contract was $436.  By the end of last year, it had skyrocketed to $1,178.  (Automotive News, March 11, 2013)

Consumers anxious to avoid unexpected, costly repairs often buy them without realizing they are usually full of loopholes and exclusions that allow companies to deny coverage. For example, they usually fail to cover prior damage, even if that’s the cause of the problem.

Some auto dealers pressure their finance managers to meet a quota of service contract sales, or be fired. Others have tried to sell service contracts at lower, more competitive prices, but then faced litigation by the companies that offer them.

Some dealers mislead car buyers into thinking that they have to buy a service contract in order to get financing. Legal experts say that such deception is illegal, but can be difficult to prove.

CARS recommends that, instead of getting a service contract, it’s smarter to spend about $000 for a thorough inspection before you buy.  Then if the car has major problems, you can decide if you still want it, or take your business somewhere else.  Also — beware of dealers who try to sell you service contracts that kick in at the same time as the warranty, and expire just when you might need them.

 

Dealers Diss Hillary

Angry auto dealers are threatening to boycott the National Auto Dealers Association’s annual convention in New Orleans next January, thanks to the NADA’s decision to invite Hillary Clinton to keynote the event.

In comments posted on the Automotive News website, dealers are sounding off, unleashing an angry tirade. One commenter writes:

         “Re: Shrillary…have we forgotten the nefarious Rose Law Firm, Vincent Foster, “Travelgate”, cattle futures, White Water, the seizing of FBI files of conservatives…all before the Benghazi 3:00am phone call.    “Phony scandals” don’t come home in body bags !!”

Other comments:

     “NADA moves one giant step closer to irrelevance with the selection of Clinton as a speaker. What part of political neutrality do they not understand? Every dealer I know is outraged….”

     “This hag needs to emigrate – now that would make me VERY happy.”

According to the report in Automotive News, “a Georgia dealer consultant who writes columns for auto industry publications, says he was deluged by profane responses to his Facebook post asking people what they thought of NADA’s pick.”  (Automotive News, July 29, 2013)

According to Open Secrets, auto dealers have a history of lavish donations to political candidates and parties –predominantly to Republicans.  During the 2011- 2012 campaign cycle, auto dealers gave $1,473,925 to Romney, but only a relatively paltry $118,394 to Obama.

Ironically, during the Clinton presidency, auto sales burgeoned and car dealers flourished. In stark contrast, George Bush’s economic policies proved disastrous for the entire auto industry, resulting in the bankruptcies of GM and Chrysler, and record numbers of dealer closings.

Gallup Poll — Car Salespeople rank at rock bottom in public esteem

The prestigious Gallup Poll announced that once again car salespersons rank at the bottom in terms of public esteem. As in the past, nurses rank at the top.

As a measure of how low car salespersons stand in the public’s mind, they fall below even members of Congress, who are at an all-time, historic low.

Gallup Poll of Honesty / Ethics in Professions

“check engine” light woes

You’re a smart consumer. So before you buy that used car, you take it for a test drive.  You notice that there are no warning lights on the dashboard. You think everything is fine, and you buy the car.

But — shortly after you drive it home, the “check engine” light comes on. This spells trouble. BIG trouble. This scenario is playing out all over the country. It’s become a frequent complaint among used car buyers. “I just bought it and now the ‘check engine’ light is on.”  Adding to the woes experienced by consumers who are victims of “check engine-itis” — the repairs to get that pesky light to go off can cost $3,000 — $4,000 or more.

Margie Y of Hawthorne, CA contacted CARS and said she bought a used Toyota for her daughter, as a present for her 21st birthday, from a local dealership. Within a day, the “check engine” light came on. Then the alternator blew up, and the car caught on fire. When she had the partly charred Toyota towed to a mechanic, he said it needed a new alternator, catalytic converter, and solenoid — at an estimated cost of over $2400.  Money she didn’t have, since she had paid $6200 cash for the Flaming Toyota, and also traded in a vehicle that was running fine, plus had paid $300 for the tow.

Unfortunately, this story is all too familiar. So — what’s happening?  According to automotive experts, unscrupulous dealers buy “scan tools” over the internet that allow them to simply wipe out the error codes that trigger the “check engine” light. Then they sell the car.  As soon as it’s driven a short distance, the error codes register and — on goes the dashboard warning light.  Some dealers don’t bother to buy the scan tools. They just disconnect the battery, erasing the error codes and getting the “check engine” light to go off just long enough to foist the car off onto an unsuspecting used car buyer.

Not only are the dealers cheating their customers, they’re also falsifying smog test results and polluting the air. They know that chances are good their customers won’t be able to pay for the expensive repairs, and will end up driving the car despite the fact it doesn’t meet emissions standards.  The day of reckoning may come when the hapless consumer tries to register it, and it won’t pass the smog test. But by then, the dealer figures it will be too late for the consumer to take them to court.

What can you do to avoid becoming a victim of “check engine-itis”?  The most effective single thing you can do is to insist on getting your own trusted mechanic to inspect the car before you buy. They should be able to detect the fact the error codes have been wiped clean, and also do a check of the emissions system that will turn up the problems.  Where can you find a good, reliable mechanic?  Car Talk’s Mechanics Files is a terrific resource, where you can find the best mechanics in your area, based on reviews written by their own customers.

Check Car Talk’s Mechanics Files to find a reliable mechanic — before you buy

Tell the seller that you want them to take the car to YOUR mechanic before you’ll agree to buy.  If they balk at that, or try to talk you out of it, well, that’s why God gave you feet — so you can walk away from there. Pronto.  There are plenty of good used cars for sale.You don’t need to get stuck with one that will cause you hassles and headaches.

Auto dealers granted special exemption from Dodd-Frank based on lies

Auto dealers are directly responsible for writing up the lion’s share of the $850 billion auto lending market. Like home mortgages, most of those loans are then packaged, securitized and sold on Wall Street to investors — spreading the risk around. New and used car dealers are also the leading source of consumer complaints to state and local consumer protection agencies and the Better Business Bureau.  They played a major role in the collapse of the economy and the recession.

Despite years of being warned by economic analysts that their predatory practices were a “house of cards” that would inevitably collapse, they failed to rein in their abuses. Instead, their practices went from bad to worse — including falsifying loan applications and forging signatures on documents, and selling cars they didn’t even own — massively defrauding the public, banks, and other dealerships.

So why aren’t they regulated under the Dodd-Frank Wall Street Reform Act?

Simple. It’s because they were granted a special exemption, by Congress. The claim that dealers made, to rationalize this special treatment, was that auto dealers are supposedly “Main Street, not Wall Street.” This talking point became their oft-repeated refrain with members of Congress and the press.  Never mind that it was laughably false.

Former U.S. Senator Sam Brownback (R-Kansas) presented the amendment to give the special exemption from Dodd-Frank to auto dealers, on the Senate Floor. Not surprisingly, he merely mouthed the car dealer line about their not being part of Wall Street.  He claimed that car dealers

“are the quintessential Main Street business throughout the country. There’s not a single auto dealer on Wall Street. None of them. Not a one. You can go up there today and try to buy a car and you can’t get one. These are Main Street businesses.”

Too bad what Sen. Brownback told his Senate colleagues was totally false.  A simple check of readily available public filings would have revealed that actually over 1,000 dealerships are owned by huge automotive dealership chains that are indeed traded on Wall Street.

Exhibit A: the behemoth AutoNation, based in Florida, which owns more than 215 dealerships, and took in over $13 billion during 2011. Bill Gates is one of the major investors who owns shares of AutoNation. Hardly most people’s idea of Main Street.

Here’s a link to Brownback’s floor speech, recorded by C-Span and posted on the U.S. Senate website. Sen. Brownback’s speech appears approximately 2 hours and 53 minutes after the recording starts:

May 24, 2010 Floor Debate over Dodd-Frank Wall Street Reform Act

Reality check:  Among the leading auto dealership chains that are publicly traded on Wall Street (revenue based on figures from Automotive News, March 12, 2012 — for the year 2011):

AutoNation — 215 dealerships, over $13 billion in revenue

AutoNation’s filings with the Securities and Exchange Commission

Penske Automotive Group — 145 dealerships, over $11 billion in revenue

Penke’s filings with the SEC

Sonic Automotive — 119 dealerships, over $7 billion in revenue

Sonic’s filings with the SEC

Asbury Automotive Group — 79 dealerships, over $4 billion in revenue

Asbury’s filings with SEC

Apparently Sen. Brownback was so gullible, he believed what the auto dealers told him and fell for their line about being Main Street, not Wall Street, without bothering to check the facts.  You can draw your own conclusions about his intelligence, or motives. Let’s just say that if you’re buying a car, he’s probably not someone you would want to ask for advice on how to get a good deal.

So — if you’re ripped off by an auto dealer, who would otherwise be policed by the new Consumer Financial Protection Bureau, created under Dodd-Frank, who do you have to blame?  Well, the dealer, of course. Plus former Sen. Brownback, who is now the Republican Governor of Kansas. Plus all the members of Congress who failed to stand up to the auto dealer lobby, whether because they were so ignorant about the business, or gullible, or just plain corrupted by auto dealer cash. Interestingly, all the Republicans voted to exempt the car dealers, who are among their biggest sources of campaign cash. Most Democrats voted against the exemption, which was opposed personally by President Obama.

And if you’re ripped off by an AutoNation dealership, you can blame one of their largest shareholders, who profits from their billions in revenue — Bill Gates.