Sunday

Sales and Fraud Seesaw

The Dayton Busines Journal, like many business publications, say that auto sales are slowing down. It's happening in Denver and nationwide, but what does it really mean for you?

We've noticed a consistent trend over the years, when it comes to manufacturer's quality. It doesn't mean slow sales at all. To understand it, though, you have to realize that new car sales are only a small part of the average dealer's income. "There's a hundred ways to make a buck," we heard a car dealer say once, and we believe it.

Car dealer operations are set up in departments. They make money from every department. New car sales, used car sales, parts, service, F&I, body shop, etc. Car dealers set up each department as a separate income source and then usually pay the manager of each department on a commission basis, in order to force each department to earn make its own profit. That way each department is its own "profit center."

So when sales slow down, what happens?

What we consistently have seen over the years is that when quality goes up, the dealer's service department income goes down. The dealer operator, used to seeing the overall operation earn a certain amount of money, puts pressure on the other departments. The result?

Things that might have been covered by your extended warranty, aren't covered in the service department. The extended warranty being sold in by F&I costs a little more. Your insurance company gets a body shop estimate that's a little higher than expected because of "hidden" damage. These costs are often hidden from the consumer in one way or another.

Instead, more customers start hearing about "negative trade in equity" and other scams that cost you money. But where do you see it most?

Well, usually when one department's income goes down, the pressure is on for another to go up. What we have often see over the years is that when new car sales go down (like right now), the fraud in the used car sales department goes up. Best example? Last week.

Last week we had three different consumers call us for help from different parts of Ohio and in each case they had been sold a wrecked car without knowing it. That's doesn't surprise us.

If you read in your local paper that new car sales are down, be careful. That's not the time for you to get a tune up at your dealer, no matter how much you trust them. That's not the time to go used car shopping either.

You have to be careful. Car dealers are out to make a buck and if they don't make it in the new car sales department, you can bet they're making it somewhere else. Don't let it be off you.