Perhaps it was time to go on a bender. I could abandon my customers on the showroom and saddle up in the darkness of the tavern next door, where I’d stare at myself in the mirror behind the bottles and devise a plan. Maybe this plan would include taking Mustang Sally home, where she could tell me about the seventies. I could get a job bar backing and live the rest of my days in this dingy darkness, pretending to be involved in important matters. Receiving liquor shipments and ensuring all is accounted for. I’d eventually outrank the insurance salesman who peels off twenties like his pocket has some secret ATM inside. That son of a bitch. He doesn’t deserve such a wad, with his undone tie, his fancy jacket, his larger than life persona. It’s only a matter of time. Everyone has their time.
I was on the phone with my friend Elliot, and I couldn’t believe what I was hearing.
“He’s on TMZ. The guy from the Honda commercials.”
Elliot said the actor had shopped for the very same lease deal he pitches in those Honda TV spots. But the dealer wouldn’t give him the deal. Instead, they tried to rip him off.
I hung up the phone, excused myself from my customers, and yanked out my iPad in the alley behind work. He’d named the dealerships he visited in his letter to Honda, which made its way to TMZ.
The actor, Dennis Singletary, visited a dealership to get the exact lease deal he pitches in Honda’s TV spots. Even though the dealer didn’t have the car in stock, they informed him of his credit score (709, which qualifies for the lease). He called another dealer that had the car,and made the trip there. But this dealer told him they couldn’t give him the lease deal. Hiscredit score was only 663, they said.
Upset and confused, he called the first dealer who confirmed his score was indeed a 709. But the second dealer wouldn’t budge.
He ultimately went to a third Honda dealer who had the car he wanted. They gave him the lease deal he had, in fact, qualified for.
So, what happened with this second dealer?
First a little background: Credit scores can be pulled from three commonly used scoring bureaus. Honda uses one scoring bureau, but scores from the other two are usually higher or lower. To further complicate matters, different scoring “factors” can affect the numbers. For example, a consumer credit-factored score, the one any shopper can pull for themselves, usually comes out higher than their auto-factored score. So, citing your own report to confirmyour credit toward a lease doesn’t necessarily help. And it won’t protect you from what I’m about to tell you.
Honda dealers, at least those in California, are allowed to mark up Honda’s non-promotional rates. In fact, even though a dealer has to give you what you qualify for, they decide on their own which rate to give you: the qualifying promotional rate for your score or the non-promotional rate (which they can mark up) for your score.
See where this is going? The second dealer probably pulled all three bureaus’ scores, with the intention of using the lowest to explain why he didn’t qualify for the lease. “See for yourself, dear sir, your score is 663 and doesn’t qualify for the promotional lease.”
So, instead of $190, they quoted his payment at $272.
($190-$272= 82 * 36 = $2,952 more over the 3-year lease, an extra sliver of profit.)
They could easily pencil in a standard rate and mark it up as the customer’s new payment.The dealer doesn’t want to give him the promotional rate, because he wants to make more profit. Needless to say, that probably wouldn’t go over well. In fact, it’d never go over well. The main problem with this dealer’s plan is that the desk manager ran into a highly informed and inquisitive customer. And as the actor says in his letter to Honda, “If this is the way I am being treated how is everyone else being treated?” That’s an excellent question.
Now, if you’re wondering whether to avoid Honda based on this information, I’m about to make the world look just a little more evil. A little more full of son of a bitch insurance salesmen with wads of twenties. A few years ago, I worked at an Audi dealer. There, I was told they’re allowed to mark up promotional rates. I’d lose deal after deal to a competitor who’d beat my quotes, only to make up the extra profit loss through markup.
In another example, I once helped a friend get a BMW. I was proud of myself for finding the lowest price in town, until I noticed the lease rate was significantly marked up – resulting in an extra $7,000 in profit to the dealer. I didn’t even catch on until they threw in every extra accessory my friend requested – for free. If they were selling such a highly sought after car at cost, why would they be so eager to lose even more money? Once I noticed the lease rate, this eagerness made complete sense to me.
So, the Honda program actually has a little more protection built into it.
Is It Even a Dealer Issue?
In the end, it’s not the guideline, but rather the person desking the deal who determines whether you get marked up or not. Maybe it’s not even the Desk Manager’s fault, but rather the processes within the dealer he works for. This may be worth exploring on a deeper level. After all, it’s simple and easy to blame the dealer, but what about the lender? If a manufacturer’s lending arm allows dealers this discretion as a means to make profit, what’s that say about the relationship between franchises and manufacturers? Look, dear franchise, we aren’t going to pay you any real money to process all these loans with us. Instead, we’ll give you a great way to make extra profit by marking up rates.
If franchises aren’t able to make significant profits unless they engage in this practice (which drives down selling prices), does that mean manufacturers are contributing to an atmosphere that promotes a shady and financially punishing experience for customers?
Also, what criteria do dealers use to determine who gets the promotional rate and who getsthe marked up standard rate?
Since I work at a dealer, you’d think I’d know the answer to these questions – but I don’t. I can’t speak to the markup choices of desk managers. Nor have I heard their explanation ofthis actor’s car shopping experience. I have no contact with decision-makers who establish these dealer, customer, and manufacturer processes. But if I could – if I were somehow in charge of things – I’d strip away markups, enable customers to run their credit on the manufacturer’s site, and provide the customer with their actual approved rate. I’d give them the choice and tools to calculate a lease or purchase on their own. The only variable would bethe selling price the customers plug in, based on their own pricing research. I’d then boost the pay to the dealers for writing loans. The more you sell, the more you get. Heck, I’d even tie the pay to the customer experience in the finance office, in terms of clarity and expediency.
But would the dealers want this? Maybe those two dealers that didn’t rate bump the actor would, at least.