It was the Saturday after Thanksgiving. It was started last year by American Express. The theme was to remind people that local businesses are the lifeblood and backbone of every town, particularly smaller sized towns. Local businesses employ your friends and neighbors. The businesses and their employees give of their time and money to clubs, organizations, churches, charities, and many other things. Studies have shown that every dollar spent in your town will circulate 7 times before it leaves. That’s certainly true of the Birdnow Dealerships. We hire local for the most part, and we buy local as much as we possibly can. When you spend your money in the big stores, or corporate owned dealerships (referring to my business) you’re supporting the tax base and people base of another town. So I think the theme that is being promoted is that whenever possible, spend your money in your own town. At least, give them a try. I’ve compared prices many times at our local hardware store, grocery store, lumber store, farm store, etc. and found them to be very competitive overall. And in cases where there appears to be a better price at a big box store, that might be only on certain items they price to lure you in, expecting that you’ll buy other things while there. And of course, shopping local takes less gas, wear and tear on your vehicle, and your time, etc.

Finally, using my own businesses as an example, local businesses are far more concerned with your being a satisfied and happy customer. Our reputation is our most important asset! Big dealers and big box stores draw from such a large area they aren’t nearly as concerned about taking care of dissatisfied customers as your local business will be.

The other big difference between most dealers and the Birdnow Dealerships is that we really try hard to keep our customers coming back. We do that by being easy to work with, and customers can always talk to a manager, or me, that will help them with any problem. By the way, my home phone is in the phone book, it’s 319-827-1355, see if you can find other dealers personal phone numbers in the book! Also, overall our employees have been with us for quite a while, we have little turn over. In fact, we just had an employee retire that had worked for our store for 50 years! Customers like seeing familiar faces when they come in.

Then there’s the notion that a big dealer somehow gets a better price given to him when he buys new cars from the manufacturer. That’s simply not true. Saying that they buy for less from the manufacturer is an outright lie, saying that no one pays less is a half truth which I was brought up to think is a lie as well.

Finally, I love to tell folks that we have the best of both dealer worlds. We are big enough to have large vehicle inventories to offer and also to buy used vehicles in volume. We also offer the trade in vehicles we get through all of our outlets. Since we have six locations and usually turn our inventory more quickly, we can allow more for trades. We also have lower overhead because we buy things like insurance, advertising, even the shirts we wear in volume. So that’s why we advertise that we’re small enough to know you, but big enough to take care of you.

Mark Birdnow

Here are some of the advertising schemes and themes you should be aware of:

There’s a dealer who continuously advertises that no dealer in America pays less for (his new brand). That’s a half truth. Back in the 50’s dealers were so flagrantly playing with what was supposed to be the list price on new vehicles laws were passed that require the familiar window sticker you see on all new vehicles. The window sticker is only the suggested list price, what a dealer sells, or offers for sale, their vehicles for either above or below that list price is up to them. The law says that the sticker has to stay in place until the vehicle is sold. Part of those rules include that all dealers pay the same for their new vehicles. There are no special discounts, kickbacks, or other incentives for big dealers, or any dealer for that matter. Simply put, if it were not for those rules, there wouldn’t be any smaller dealers left, you’d have no choice but to go to metro dealers and pay their price. It’s kind of like the TV business. Years ago there was a TV dealer in almost every town. There are none now, and appliances are much the same. The big box retailers have taken over almost all of that business because they buy TV’s and appliances by the train load so they get a better price.

There are other dealers who have “push pull drag” sales. They routinely raise their price before the sale to compensate for their “special” trade allowance. We’ve done such a sale twice. In both instances we used the regular retail price to start with, not a discounted price. We have an added advantage, we have a salvage yard that needs those vehicles whether they run or not so they really are worth more to us than other dealers.

Some dealers advertise that they’ll pay off all of your credit card debt with the purchase of a car. Essentially they want you to think that they can add the balance to your car loan. However, since that’s a banking function dealers aren’t allowed by law to do so. So what they do is lower your trade value to cover the difference. Bottom line is you usually come out on the short end of the stick. Your monthly payments might be less, but you’ll end up paying a lot longer. Plus you have to have perfect credit to get good enough financing terms to make it work.

Dealers often send out coupons good for $500 or more off on any deal. It always says that you have to present the coupon upon arrival. Well, guess what, they adjust the trade in value if you have a trade or the normal discount you’d get, to compensate for that coupon. Our way of doing this is that we charge the value of the coupon as advertising expense. That means our coupon is really worth what it says it’s worth.

Dealers often advertise that they’re selling vehicles for X amount of dollars under invoice. Invoice is what we paid the factory for the vehicle. But, on almost every vehicle there is a rebate, and often there is also what is called “dealer cash” which is essentially a secret rebate direct to the dealer. Again, it’s the same for all dealers so any dealer still has the same bottom line cost. So if a dealer is advertising a below invoice sale, even if they state that you get all rebates, there’s still other incentives involved that would be available at any dealer. Remember also that most dealers, especially the large ones, count on making money on the finance package to compensate for low profit on the actual sale. (see my 9/14/2010 post)

You might realize that auto dealers were recently excluded from the financial reform law that congress passed. The reason dealers were excluded were that we only facilitate the arrangement of financing between a lender and a customer. Since we sell the loan to lenders that are governed by the new federal agency, regulating dealers would be redundant.

However, there was a lot of discussion about what was called deceptive practices by auto dealers. First, let me explain how we help customers with their financing needs. We have approximately 20 lenders that we are under contract with. This allows us to shop them for a better finance package than what a consumer can arrange at their local bank or credit union. We present the options and let the consumer make the choice that best fits them. I’ve told people many many times over the years that they should check with their lender before making a decision to go with what we may offer. In fact, many times a customer has used our proposal to negotiate a better deal with their own lender.

Some of the deceptive practices to watch for are:

Spot delivery or a yo-yo. That’s where the dealer has you sign a set of documents that indicate a better finance rate or other terms and later, sometimes as long as two weeks, call and say that the original finance package didn’t go through. They would then ask you to return and sign new documents. We occasionally have to call a customer back to resign documents but almost always it’s because we got them an even better deal on the finance package.

% Rate advertising. Some dealers advertise a rate that almost no one will qualify for. We would advertise (following the law in Iowa) a rate that most people with reasonably good credit would qualify for.

Unneeded extras. Some dealers sell you on a payment , not the price. In doing so, they generally have added extra items and then try to sell you on them, or worse yet, and we’ve seen examples of this, they put it on the contract and don’t tell the customer. These items are things like an extended warranty, credit insurance (makes the payments if you’re disabled) Gap insurance (pays the difference if your vehicle is totaled and you owe more on it than it’s worth) plus other various items. We believe that extended warranty, gap and credit insurance, and other products we offer can be a valuable option. However, we tell you about them and help you determine what’s best to fit your needs.

We do indeed make some money on the financing package, but after all we spend a considerable amount of time and effort as well as expense in order to get you a better package and have more choices.

In conclusion, deceptive practices are already illegal. We hope that dealers that follow that path get caught and penalized. A good way to explain why dealers were excluded from the financial reform bill is that there didn’t need to be more regulators, they just need to enforce the rules/laws that are already in place.

What does the 4th of July mean to you? You should think about it.

About 27 years ago when I first owned my Jesup dealership I noticed an employee heading out the door with a pan of old gasoline. I asked him what he was doing and he indicated he was going to dump it outside on the gravel lot. I told him to never do that. We put it in a barrel and when full we paid to have it properly disposed of. When we began our body shop, we contracted with Safety Kleen to properly dispose of old solvents and paints. We also comply with the emission rules for painting operations.

Even before it was required, we bought an oil filter crusher and began crushing used oil filters. At first we burned the used oil in a waste oil heater. I paid nearly twice the cheapest price for a heater in order to get one that more thoroughly and efficiently burned the oil so as to create less pollution. For the last several years though, we’ve had the used oil from them and from our oil changing operations picked up by a licensed recycler. We paid to have the crushed filters properly recycled also.  For years we’ve properly disposed of oil rags, wipes, and floor dry products as well as mercury switches and fluorescent lighting tubes. We also pay to have used tires hauled away for recycling.

As the years have gone by, most everything that we’d been doing became required, or the law in most cases.

How do we pay for all of this? We put a small percent charge on each repair ticket with a max cap. This money goes into a bookkeeping account and all recycling fees, and charges are put against that. So far we’re pretty close to even.

When it’s all said and done, though, if we all do our part, we’ll leave a better place for those who follow us.

I’ve been in the auto business for over 35 years and have to chuckle at those ads. I’d suggest the idea that, since the first thing they ask for when you call is money, you should avoid them. Only in circumstances where the credit card company thinks that they’ll lose everything will they negotiate with you. The key point there being, they’ll negotiate with YOU. What I’ve seen of the credit repair companies is that they either suggest things that are illegal, or they put you on a path that you can get the same advice for, for free.

First of all, the one thing that lenders dislike the most are debtors that won’t communicate with them. If you are unable to make your payment, or the whole payment, contact the lender. The second  thing to do is first learn what your score is and also get a copy of your credit report. If your score is less than 650 you need to work on it. Things you can do is pay your bills on time. Especially your loans, credit cards, and rent or house payment. If you have any judgements against you, you should contact the holder of the judgement and try to work out a settlement, or payments if they’ll indicate that on your credit report. You not only need to make your credit card payments, you need to try to whittle the principal down.  Another thing that I’ve seen that’s helped folks with poor credit is to get a car loan somehow. (bear in mind, I’m an auto dealer, that’s where my experience comes from) You can get that loan by saving a large downpayment, or getting a co-signer to the loan, or in some cases the dealer might help you. If you can secure that loan, make the payments exactly as agreed. And, of course, you have to have a plan to fix the other problems you have on your credit report.

In summary, your credit score and history are really important.  It can cause you a lot of extra expense on future car loans, home loans, and in many cases cause you to not qualify for any loan at all.

There is a guide that every new vehicle dealer is required by law to furnish you a copy of that compares insurance ratings of new vehicles. The government compiles this book using accident data from most accidents. The rating that a particular vehicle has can greatly affect the premium you’ll pay for collision insurance. Remember that if you finance your vehicle you’ll be required by the lender to have collision and comprehensive insurance coverage. Even if you’re not financing you should have those coverages if your vehicle is worth more than you can afford to lose if it was totaled.

So here’s how it works. A police report says that the driver was going 35 miles per hour and hit a parked vehicle. The insurance company pays the claim to fix the vehicles. That data is compiled along with possibly a million other accident claims each year and the circumstances of the accident. They are then able to spot trends where one vehicle costs more to fix in a similar accident than another. This happens because of the way some vehicles are engineered or built and also because of the cost of repair parts. A large percentage of accidents result in the insurance company paying to have the damaged vehicle repaired so they are very interested in the cost to fix a vehicle.

We once had a Mitsubishi traded in. The customer said they couldn’t afford the insurance, it was three times higher than the same size class and value Chevy we sold them. Recently we found a dash assembly required (because the air bags had deployed in an accident) to fix a Chevy was slightly more than $400.00 and a dash assembly for a similar competitive make vehicle was $3,800.00. That’s why insurance premiums can vary so much from one vehicle to another. Remember that if in a certain accident one car costs $5,000 to repair and a different vehicle costs $8,000 to repair, the insurance company is going to charge a higher premium for the second example.

Finally, when there are safety recalls, that can increase your premiums because it’s not always easy to prove if a vehicles system failed that caused an accident.

So, here are some things to consider:

Does the dealer offer free loaners? The Birdnow Dealerships do for as long as you own a vehicle that was purchased from us. A customer told me the other day that he had to rent a vehicle while he had his vehicle serviced at a metro dealer. The rent was $175.00 for the four days his car was in the shop.

What happens if there’s a recall? The average vehicle needs to be checked at a dealership four times and those numbers are basically the same for American brands as is for foreign brands. Most customers only hear of safety recalls such as is the case right now with millions of Toyota models. Many times there are what are called “campaigns” where the manufacturer sends you a card asking you to stop so a dealer can check something that might be a problem, that is different than a recall.

How much is the dealers labor rate? The Birdnow Dealerships offer just as good of service, with technicians that have the same levels of training, if not more, for a fraction of the labor charged by many other dealers.

In conclusion, here’s a story that I think will really drive home what I’m describing. One day a customer came in with a GMC truck that was a year old and still under warranty. He wanted to trade for a new Chevy. Trading every year isn’t unusual, but his reason was a bit unusual. He’d become angry at the treatment he’d received at the GMC dealer he’d bought his truck from. He left angry, telling them he’d never be back. When he got home, he opened the phone book to look in the yellow page for another GMC dealer. He was unpleasantly surprised to see that the closest one was 45 miles away!

2/1/2010 UPDATE:

WOW! I just listened to the president of Toyota beat around the bush for ten minutes on the Today Show about the problems that over half the Toyotas have with accelerators that stick. This problem has been happening for around ten years. He wouldn’t guarantee that the repair they’ve come up with would fix the problem. Also, does anyone else wonder how a problem they’ve been aware of for ten years can all of a sudden be fixed with a washer under the pedal and that they’ve come up with this in less than a week? He referred to this as a rare problem….I hope no one I know experiences that rare problem!

From the St. Louis Post-Dispatch:

US Fidelis suspends sales of service contracts