Monday, November 10, 2008

Cleansing the Political Palate

Spent the last couple of days using other parts of my brain than the Political Lobe. A friend of mine hired me to pull the cylinder head of his 1989 Nissan Sentra to determine the damage caused by the disintegration of the stationary timing chain guide and the subsequent loss of the proper relationship between the cam and crankshaft.

Not following along? My friend's engine went boom. My job was to determine the size of the boom. It was a pretty good boom (four bent exhaust valves and some correspondingly dented pistons) but not Armageddon. The question now is whether to fix what broke and leave the rest of the very-high-mileage bits in place or do we pull the whole engine and rebuild it? Either option is not conventionally cost-effective.

So why even bother repairing an almost 20-year-old car? Why not punt and buy a newer Nissan with more pizazz? Who uses the word "pizazz anymore? People who like words with three "Zs" but I digress. Some people would rather spend money fixing their old cars than spend ten seconds with a car salesman.

The automobile sales business has very little to do with automobiles. It's all about separating you from as much of your money as possible using cars as bait. Most people are clueless when it comes to buying cars. They don't realize the entire industry probes its constituents for every little psychological weakness. You, the consumer, are the rat in a B.F. Skinner experiment.

For instance, the great majority of car buyers care only about two things; how much down and how much per month. As long as the dealership gets close to those figures, they're happy. I've never seen people so happy to pay thousands more than the sticker price for a Toyota or Chevy or Ford that won't be worth what they owe until about ten minutes before their last bloated payment. This is the rule rather than the exception. People leave the lot overjoyed because they think they got "my price" on their new Honda. Well, if folks bothered to do a little arithmetic or even bring a calculator, they would add up all those monthly payments plus the up-front whip-out and realize their price was thousands higher than the factory sticker.

Here's how it works. The average sticker price markup for a new car is about 15 percent for the base and 17 percent for the options. GM, Ford and Chrysler are slightly higher while the Japanese manufacturers are a little lower. That doesn't seem like much, does it? If you think that's fair, then you also think most auto dealers buy their cars at wholesale and sell them for retail. Sorry, but most dealers floorplan their fleets. The manufacturer "loans" them the new car. The dealer owes only the interest on the loan until the car leaves the lot. If a new Subaru sits on the dealer's lot for two months, that might be $400.

Now comes Mr & Mrs Down-and-Monthly. They don't know it but they just paid three thousand over a sticker price already marked up by 15 and 17 percent. Plus, the dealer hits them for an "extended warranty" costing $1200 for which the dealer pays about $200. Most new cars are capable of a quarter million miles with any kind of care, yet the dealer makes it sound like the engine will blow up tomorrow like a hand grenade and kill your kids. The "Finance Manager" convinces them their credit is poor because they paid their cable bill two seconds late, not to mention running their credit once for each dealer in their 250-dealer network to lower their score. That's good for an extra point on their interest, plus the "fee" for writing the loan in the first place.

So for an investment of a mere $400, The dealer makes about five grand. Mr & Mrs Down-and-Monthly are delirious because they got the Subaru for the payment they wanted. Would you like to make five large on a $400 investment? Multiply that by 200 cars or more a month.

One would think the sales force makes a killing. Nah. Average pay for a car salesman in this country is about 28 grand a year. The majority of cars are sold by people who will be out of the business completely after six months or less. Dealers overhire sales staff, pay a minimum wage base, expect a 60-hour week, then scam their way out of paying full commission. When I sold cars, not one of my managers could explain the commission structure to my satisfaction or even repeat it the same way twice. "Well, Jerry, this month your kilograms-per-donut ratio overflatulated, so that eats up part of your check." Uh-huh.

My Sales Manager wants blood so at 10:30 one evening (our store closed at 11:00 pm even on Sunday nights). I convince a young man to buy a used Honda Accord Coupe from me for three thousand dollars more than the already exorbitant asking price by focusing him on down-and-monthly. Meanwhile, the buyer thinks he broke me down. The Finance Manager sells him a warranty (cha-ching), then falsifies his income so he qualifies for a loan. Suffice to say, it's not a discount loan.

Since the young man is "only looking," he neglects to bring his checkbook. Therefore, I borrow a used Nissan off the lot and follow him 35 miles to his house. There I wait for a half hour in a dark garage with two growling pit bulls while this guy makes himself a snack. Check in hand, I blister back to my house by 3:30am. The dealer wants the check immediately so I wake up at 7:30am on my day off to get it there. Six weeks later, I wonder what happened to my $650 commission.

"Oh we had to take that car back. The kid couldn't even make the first payment. We had to "unwind" him. Grabbed his old car just before it got auctioned off. It's your own fault. You should've known he didn't qualify."

This is auto dealer treatment in a nutshell and I'm on their team. It's why I teach people how to buy cars without jeopardizing their kid's college educations. It's also why my friend wants his car repaired.

NOS factory short block: $395.
Rebuilt cylinder head: $230.
No monthly payment: Priceless.

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