Don’t Get Thrown Under the Bus

In a time when the profit margins in most sales industries are decreasing there is an increased interest in other ways to improve the bottom line.  One industry that has found a way to increase their margins is the used and new car industry.

The internet has leveled the playing field in many ways for the used and new car industry.  Small car lots such as ours in a very small town can show their vehicles on-line next to the new car stores in large cities. 

When we place our cars on-line and advertise our pricing it is seen next to the larger dealers and smaller ones depending on the search a customer chooses for locating a vehicle in their area, price range, and other criteria important to them.  This provides us the opportunity to show our vehicles to an audience we didn’t have ten years ago. 

Our car lot has a price advantage in some ways because we have low overhead compared to larger dealerships.  We do not have a showroom of salespeople staring out the window or roaming the lot waiting for a customer to stop on the lot.  We have one person responsible for buying and selling on our lot, my husband, who if not busy selling or buying cars, is busy fixing them.  He is also a mechanic.  Each of our employees are flexible in their abilities and job descriptions.

How in a difficult financial and very competitive time do you increase your profits when everyone is busy trying to undercut the competitor?  The answer is the backend.  In the used and new car industry the front end of the deal is the cost of the vehicle, transfer fees, document fees, and sales tax.  This is pretty standard from lot to lot and state to state.  It will vary between the sales tax rate in different states and the cost of registration from state to state.

After you think you have made your deal and you know all the up front costs for your vehicle you are generally sent to the F & I guy in the sales department.  It is this person’s job to sell you more stuff.  The salesperson did a great job of selling you on the car you are purchasing. 

It is the F & I guy’s job to take your peace of mind that you had about purchasing your vehicle and take it a way one piece at a time.  They will then try to sell your peace of mind back to you one piece at at time in the way of added stuff for your vehicle. 

The Finance and Insurance guy will try to sell you glass protectant, fabric protectant, service contracts, gap insurance, extended warranties and rust protectant for your new or used vehicle.  This is where the profit comes in.  These are added on to your previously agreed upon price.  They will try to sell you on it by saying it will only cost you so much per month on your car loan to add this or that to your purchase price.  It doesn’t sound like much but over the life of a loan it can be a lot.  We don’t sell any of this add-on stuff at our lot and don’t recommend you buy it.

Most of the things they want to sell you are unnecessary.  Rarely will you be able to collect on a repair from a service contract because there are so many criteria that you must meet to collect or the company has gone out of business before you can collect.  The dealer will get to keep a very large percentage of your service contract money right away so it is in their interest to sell the stuff whether you need it or not.  It could be the item that will  determine whether they will make a profit on the sale of the vehicle or not.  The F & I guys are paid well to do their job and they are great at it.

A very important fact to keep in mind if you do buy all the add-on stuff for your car you could end up owing more than the car is worth right away.  This might not be as  important if you keep the car the entire time of your loan period and pay it off.  If you end up trading the vehicle off before the end of your loan period or have an accident that totals out your vehicle before the end of your loan period, this is very important because you will be “Upside Down” in your vehicle.  This means that you still owe more money on your loan  than what a dealer, private party, or insurance company will give you for your vehicle. 

 The insurance company or dealer will give you only what your vehicle is worth not  your remaining loan amount.  You will have to come up with the difference to pay off your loan to the bank when the insurance company settles or you trade in your vehicle.  This is the only time that gap insurance makes sense.  If you have bought all the other add-ons offered by the F & I guy then you should buy the gap insurance unless you have money in your savings account to cover the difference.

The best thing to do is to not buy any of the add-ons offered by F & I guy, they are rarely worth it.  You are money ahead to put something away in a savings account each month for car repairs than buying a service contract and find a trustworthy service garage.  Putting aside money each month for maintenance is important.  Rarely does $50.00 a month budget cover it in a year’s time but if that is all you have to put aside, do it.  At least you will have a start and won’t have to put repairs and maintenance on a credit card.  Just a set of tires for a car can set you back $500 or more and that wouldn’t be covered by a service contract.

Remember, when you made the deal for your vehicle you had peace of mind about your new purchase…Don’t get thrown under the bus by the F & I guys!  Be smart!

 

The Cobbler’s Children Have No Shoes

I’m married to a mechanic.  A very smart mechanic.  He is great at diagnosing problems that others spend hours trying to figure out unsuccessfully.

This is what the dash on my car looks like this evening.

I apologize for the lack of clarity in my photo.

Just about every light is on tonight.  Three of the lights are all tied to one problem, a broken wire on a wheel bearing.  It is intermittent but when it decides to act up all three lights come on.  The car is still safe he assures me but driving with all the lights on is a bit disconcerting.

One light is due to a crack in a plastic piece on the top of the motor that creates a very tiny vacuum leak hence the little light is turned on.  It doesn’t cause any problems for the operation of the car, it just turns the light on.

I have to confess that I am responsible for the low fuel light.  I am breaking my rule about never running the gas tank less than 1/4.  The bell is dinging telling me its time to stop at the gas station which is where I took this picture.

My car is a 1999 Olds Intrigue with 216,000 mile on it.  It’s been a good and faithful car.  Never once leaving me sitting at the side of the road.  I could drive better but as long as it fits my need which is transportation from point A to point B I will continue to drive my Olds at least until my two daughters finish  college.

Over the years my car has been an organ donor of sorts.  We have had customers with car issues that needed parts we didn’t have in stock.  To get our customers on the road quickly and cheaply my husband has robbed parts from my car.  He eventually replaces them as the parts we ordered come in.  At least he’s never taken the radio from my car.  Now, for that , I would be up for a battle.

It’s universal.  People, whatever their profession, rarely want to come home to work on their own things that need fixing.  Carpenters have homes that are 99.95% finished.  It’s tough to tackle that .05% at the end of a long day.  My brother’s, the carpenter, home is just that way.  I was a prep cook for an Italian restaurant.  I can cook just about anything but the last thing I want to do is cook after cooking all day.  Give me a few days off from work of doing nothing and I’m really to cook at home for fun.

Maybe my goal for 2011 will be to finish some of my own .05% projects that I need to finish before throwing any more stones. 

Where ‘s the fun in that?

Starting new projects is so much more fun!

 

A Bad Day or Good: It’s a Matter of Perspective

At 5:20 pm yesterday I was busy cleaning up my work area when my brother-in-law paged me to say that I had a phone call on line 2.   I picked up and my youngest son was on the line.  I asked him how it was going and he said, “Not so great.”  I asked him what the problem was and he said that his motor blew up on his car and he was stranded in a parking lot about 90 miles from where I was and about 20 miles from his home.  I asked him what he would like to do and we came up with the plan.  

I would load my car on the flatbed at the shop and would unload it at his car.  Then we would load his car on the flatbed and I would follow him to his home where we needed to stop and pickup a used motor that he had for his truck which was sitting at my home with a bad motor.  If you are counting as I am writing the total count of my son’s cars with bad motors are two.  He’s not hard on cars,  just driving old vehicles with a lot of miles.

I began executing our plan by taking out the flatbed truck, a Ford F-650, filling my car with gas because it needed it, and then loading my car on the truck.  I was off for an evening of driving  alone for approximately five hours , loading and unloading of cars in the mix.   My husband had a school board meeting he couldn’t miss with an upcoming referendum so I was driving solo this evening.

When I was driving home last evening my husband called me and said,  “You must be exhausted, how soon will you be home?  I said, “In about a half hour”  After I got off the phone I started thinking about perspectives. 

All the way home I was feeling sorry for my son that he was having trouble with his car.  He doesn’t have money to buy a new and better car.  He just bought his first home last fall and is trying to make all the finances work out with home ownership.  He bought wisely within his budget but there are always things to spend money on when you are 24.  He has a lot of varied interests. 

His car is old.  It’s a Mercury Sable with over 250, 000 miles on it.  He just finished working on the front end of the car a couple of weeks ago and replaced a few parts.  He was trying to decide whether to fix his car with a used engine or get a different used car.  He was feeling defeated and down at the thought of the work.

After my husband’s phone call I started thinking differently.  It wasn’t anything he said on the phone that started that process, I just started to look at things differently.  I thought about my son again.  He is a very capable young man.  Because of our family business he has a learned a trade that will benefit him this week outside of his job as a Mechanical Designer, he is a mechanic. 

He has the ability to take his old motor out of his car and replace it with a used motor.  It will take him many hours to do it but he won’t have to pay anyone else to do it.  Also , because of our family business,  he has access to a flatbed truck to haul his vehicle and a fully equipped shop to work on his car. 

There are a lot of other young men and women that if they were in the same situation would be spending a lot of money to remedy the situation instead of the time he will need to spend to fix his car.  He may think yesterday was a bad day but when you look how it ended, I think it was good.  He is able to get up this morning and drive to work, business as usual. 

His evenings will be full this week but we got one thing accomplished last evening we were talking about for weeks and that was when would we have time to come with the truck to get the used motor for his truck.  Mission accomplished, not quite how he had imagined it.

 It may take a while for him to come around to my way of thinking, if ever.