2012 was the most profitable year EVER for auto dealers, according to an annual study by the National Automobile Dealers Association. The study found that profits at the average U.S. dealership rose to over $2,036,000 in today’s dollars. — Automotive News, July 8, 2012
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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.
Car dealership service departments “hostile to women”
According to a study commissioned by the National Automobile Dealers Association, women hold only 21% of all dealership positions. Women account for even fewer service advisor positions, at 16%, and just 6% of service managers.
The president of the consulting firm that conducted the study, DeltaTrends, explained that dealership “service departments can have a culture that’s ‘frankly hostile toward women.’ ” — Automotive News, May 6, 2013
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.
Car dealers sue to keep car buyers captive, attack Tesla
Ever wonder why you can’t just order a new car over the internet, directly from the manufacturer? Then pick it up at the factory, or a local showroom, like people do in Europe? It’s because U.S. auto dealers have used their political muscle to get laws passed in all 50 states that give them a special monopoly. Those state franchise laws insulate them from having to compete with manufacturers for your business.
Car dealers got the laws enacted because they know that, given a choice, most car buyers would never subject themselves to the typical car-buying experience.
Car dealers are now attacking electric car manufacturer Tesla in court and in state legislatures, seeking to bar the company from selling its highly-praised electric vehicles directly to the public. Tesla is wise to be wary of auto dealers. As a group, auto dealers are throwbacks to the era of horse-trading. They have been among the most aggressive opponents of advances in fuel economy standards. They also have a long history of opposing mandates to produce electric vehicles.
Car dealers repeatedly sued the U.S. Environmental Protection Agency, seeking to block higher fuel economy standards. They waged all-out war against improved fuel economy in Congress. The end result, of course, was that when the price of gas rose, the value of their gas-guzzling products tanked, leaving their customers upside down in their overpriced loans. Then we bailed them out, at taxpayer expense, including the $3 billion they got from “Cash for Clunkers.”
Plus auto dealers commonly engage in a laundry list of shady or downright illegal practices that add billions onto the price of financing cars — hard-earned money that could be spent to get a newer, safer, cleaner car.
Think you might like to have the freedom to buy directly from a manufacturer someday? Now it’s only a pipe dream for car buyers in most states — unless you’re willing to travel to Europe — but someday it may become reality here in the U.S.
Read more: National Public Radio report
Hurricane Sandy Flood Cars Showing up on Used Car Lots
Ever wonder what happened to all those cars submerged in water from Hurricane Sandy? ABC News tracked one down — and found it in another state. What they found may surprise you.
ABC News report: Sandy Flood Cars
Good news for car buyers — Richard Cordray Confirmed!!
At last, in a huge, sweet victory for struggling consumers, Richard Cordray has been confirmed as Director of the Consumer Financial Protection Bureau. The CFPB, first envisioned by now-Senator Elizabeth Warren, was created to be a watchdog for consumers in the financial marketplace.
Democratic legislators in Congress created the agency when they voted for the Dodd-Frank Wall Street Reform Act, in the wake of the largest financial meltdown since the great Depression.
Since then, Republicans in Congress have tried repeatedly to weaken the agency and put it under their thumbs. That way, they could tie it in knots and keep it from doing its job. Republican senators had blocked Cordray’s nomination for years, and relented only when Democratic Senators forced their hand, by threatening to change the filibuster rules that had allowed the Republican minority, at the behest of powerful, unscrupulous special interests, to block a vote on Cordray’s nomination and other nominations to vitally important posts that directly affect the lives of ordinary Americans.
Cordray’s confirmation is a huge victory for President Obama, US Senator Elizabeth Warren, the consumer and labor movements and allied groups, and other pro-consumer forces who joined together to form Americans for Financial Reform. And for all the individual consumers who petitioned Congress and spoke up for letting the agency do its job.
Republican members of Congress, and some Democratic members, led by US Rep. Gary Peters of Michigan, granted auto dealers a special exemption from the Consumer Financial Protection Bureau’s authority, under the false claims that they don’t engage in lending themselves (they do), and that they’re not traded on Wall Street (many of them are).
However, the CFPB does have authority to police auto lending. It may also act to curb lenders from taking away consumers’ Constitutional rights when they purchase a car, trapping them with “arbitration” clauses that keep them captive to a secret, private “arbitration” system that the lenders control.
This is welcome news indeed for the car-buying public. The agency has already issued a warning to auto lenders not to keep engaging in discriminatory lending practices that result in minority car buyers paying more for financing — not based on their creditworthiness, but on race.
The agency may also issue rules to curb auto dealer markups on interest rates, that cost car buyers over $25.8 billion annually in excessive interest charges pocketed by dealers and lenders — money that could be spent on technology that saves lives and helps clean the air and slow climate change.
If you have a complaint about auto lending, here’s where to complain at the CFPB:
Consumer Financial Protection Bureau–file a complaint here
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.
Survey finds car buyers want clearer pricing on cars
According to Edmunds.com, one of the top websites for car shopping, “54% of car shoppers say they want more clarity on the exact price of a car rather than haggling with dealers.” — Detroit News, June 8, 2013
Car Dealers Brag about Attack against Workers’ Rights
According to Automotive News, auto “Dealers have moved to the front lines of opposition against legislation that would make it easier to workers to join unions. The practice is commonly called card-check.”
“Dealers…are claiming some success in slowing momentum of the bill, which is a top priority of organized labor and key Democratic leaders.” — Automotive News, March 23, 2009
That was in 2009. Since then, dealers and their business allies have succeeded in blocking enactment of the legislation.
Dealers like to be able to fire employees at will, sometimes pressuring them to cheat customers, under threat of losing their jobs.
Auto dealers are overwhelmingly conservative. Their political giving, predictably, follows the same pattern. Auto dealers donated tens of millions of dollars to right-wing politicians like former President George Bush, Presidential Candidate John McCain, and Presidential candidate Mitt Romney..
Car Dealers Rake in Billions
Auto dealers like to pose as “Main Street” “mom and pop” businesses, in order to get concessions from legislators and regulators. But according to Automotive News, “The $1 billion club for 2012 includes 34 [dealership] groups, including 13 with more than $2 billion.”
Increasingly, auto dealerships are consolidating and thousands are publicly traded on Wall Street. Microsoft’s Bill Gates is one of the largest investors in the nation’s largest auto dealership chain, AutoNation, which reportedly grossed $15,668,8000,000 last year.*
*Automotive News, “Top 125 dealership groups in the U.S.” – March, 2013.
Dealer ordered to pay off loans on traded-in vehicles
In response to dozens of complaints from consumers who were stuck struggling to make payments on vehicles they had traded in, plus the cars they bought, Washington State’s Attorney General ordered dealerships owned by Mark Gilbert to pay off the liens on the traded-in vehicles.
Washington state law requires auto dealers to pay off the remaining balance consumers owe on traded-in vehicles within two days after they make a new purchase. Typically, the amount owed on the trade-in — known as “negative equity” — is added onto the price of the newly purchased car.
According to the Attorney General’s office, “The Walla Walla County Superior Court..entered a preliminary injunction, ordering several Northwest auto dealerships owned by Mark Gilbert to comply with Washington dealer and consumer protection laws, requiring prompt payoff of customers’ trade-in vehicles.”
The Attorney General’s legal case involved car dealerships Gilbert owned that sold new Honda, Jeep, Dodge, Chrysler, Nissan, and Ford vehicles.
How can you protect yourself from this scam? The safest thing to do is to wait to buy your next car until you have paid off the loan on the car you are currently driving. Otherwise, you risk having both cars repossessed if the dealer fails to pay off the loan on the car you trade in. Plus you sink deeper into debt. And — always insist on seeing the title to the car BEFORE you buy. If the dealer doesn’t have the title, the lender for the prior owner can repossess your newly purchased car — even if you are making all the payments in full and on time to your lender.
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