Toyota Dealer Frauds
Dealing with Dealers
Toyota Dealership Operation
Toyota has no honor. I just discovered this simple yet revealing fact. I have always been a big believer in Toyota, but that's from 20 years ago and the company has apparently changed completely. Maybe honor has no place in a global economy, and an 'honest automotive dealer' has always been a misnomer at best.
The automotive business thrives on surreptitious and predatory sales practices solely designed to extract maximum dollar value from each and every customer. This results in the deck being stacked against the consumer, and it is not the result of an accidental business evolution. Think of a dealership as you would a casino.
All dealerships subscribe to a common business model which they vary to suit their individual styles. The basic model ensures that everyone employed by a given dealership be well trained and well motivated. This wouldn’t be a bad thing if some of that training and motivation were geared toward delivering good service and value, but it isn’t devoted to anything but extracting dollars per transaction.
"Most people become angry when they find out their $800 paint protection is just silicone wax; when they find out that the service department charged them for warranty work that was covered in the standard warranty; or that the $1,860 Extended Warranty they purchased is not worth the paper it is written on when they really need it." R.P.
Let’s examine some areas of the basic dealer business model:
Dealership motivation can be summed up in one word: incentives. Everything works via incentives. The port, zone, region, etc. provides incentives to their respective dealers in many ways. For example, most dealerships do not own the vehicles they have in stock. These vehicles are provided under agreement by the port, region, or zone the dealer is associated with, and the dealer can ONLY get his vehicles from the designated source. This gives the manufacturer a very effective method for maintaining a high level of control over their dealers.
If a dealer does well, the port, zone, or region can reward them by giving them faster selling inventory, giving them what they ask for, and by providing training and cash sales incentives. If a dealer does not do well, the port, zone, or region can punish them by giving them slower selling inventory, shipping vehicles without items like air conditioning and then further refusing to sell the a/c units to the dealer separately where they could be installed on site.
Manufacturers use incentives to keep dealers productive. Manufacturers will turn a blind eye to many complaints against a dealer who makes them money. That’s a fact in almost every corner of the business world, not just the automotive business.
On the dealer level, incentives take many forms, all linked to productivity.
Almost everyone at a dealership is paid by commission, so there is absolutely nothing inherent in the dealer’s sales-service system that stands to even remotely benefit the consumer, only a constant and compelling incentive for each employee to extract everything they can from everyone who comes in the door irregardless of the consumer’s needs, wants, or ability to pay.
Nobody on commission wants to see a car or customer come back that’s not going to spend money. Any customer with a problem will quickly become a pariah because just about everyone that works there is looking for their next paycheck.
During the sales phase of a new car transaction, car salespeople are trained to do everything they can to find out where your vulnerabilities lie. That is why dealers almost universally use the Four Square style sales sheet when dealing with customers.
Four squares allow the salesperson to home in on where you are vulnerable and surreptitiously take you to the cleaner, while providing all the drama of your salesperson fighting diligently with his sales manager for your benefit. Don’t buy into either deceptive practice, because that is exactly what they are, deceptions well-practiced.
Some consumers are partial to their trade ins, some consumers want to know the cash price of the vehicle they want to buy, almost no one wants to know the lease terms but there’s a reason they include that data in the four square, and the sweet spot of the four square is the monthly payment area.
Most people get hypnotized when they see the monthly payment area of the four square after it’s been filled in by the sales manager, usually in bold colored marker for effect. It is these persons who most easily get taken for great amounts, because they are now dealing in terms the dealer can easily obfuscate and maximize profit using your own information against you.
An example would be a consumer telling the salesman that he can’t afford the high monthly payment always shown on the first round of the four square. It’s designed to elicit a reaction. The first thing the salesman will ask if you home in on this is, “What can you afford to pay monthly?”, and then you have no chance for a fair deal after revealing that information.
The car you were looking at and maybe could have bought for $220 a month with $3,000 down will now cost $WhateverYouSaidYouCouldAffordMonthly with $3,000 down.
This is the beauty of the four square. And it is very, very effective.
My point is that dealers operate not unlike casinos; they certainly are not your friend. Dealers have an agenda and require a certain volume of business on a monthly basis just to give everyone a paycheck. Every customer in the door needs to contribute something each time they visit.
Most people don’t really understand how much profit there is in selling a new vehicle to a consumer. Most people become angry when they find out their $800 paint protection is just silicone wax; when they find out that the service department charged them for warranty work that was covered in the standard warranty; or that the $1,860 Extended Warranty they purchased is not worth the paper it is written on when they really need it.
There are many things to look out for when buying a car from a dealership. I will, over time, provide as much information as I can to help consumers avoid the pitfalls of car shopping. This is and will continue to be a work in progress committed to fairness and honesty for all car buyers.