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Why Those Car Awards in Auto Ads Are Totally Bogus

Car commercials are littered with awards — prizes assuring a vehicle’s quality, dependability and performance that come from familiar names like Consumer Digest, Kelley Blue Book and J.D. Power.

But these commercials almost always gloss over the actual details of these awards, leaving consumers to wonder what exactly makes these cars award-worthy — and whether or not they should buy into the hype of car awards. You may be surprised to learn the criteria these companies use when creating their award lists — and how these awards make publications money.

What Companies Pay for Car Awards

Unless you go looking for it, you probably won’t see any disclosure about the kinds of financial incentives that publications request from companies that want to use their awards in advertising.

And there are occasional serious conflicts of interest, as well. Take, for example, the U.S. Global Quality Research System (or GQRS), an initial-quality survey that compared the quality and safety of leading car brands. The report was conducted a few times between 2007 and 2011, and each time Ford placed at the top, leading competitors Toyota and Honda by a significant margin. Ford went on to tout the findings in their marketing campaigns at the time.

What Ford didn’t mention — and some auto publications at the time also glossed over — was that the study, while conducted by an independent research and development group, was commissioned by Ford.

Ford — along with the R&D group that carried out the study — also never released the full report, only highlights.

How You Can Identify Legitimate Car Awards

In the world of car awards, there are possible conflicts of interest that make some awards less trustworthy than others. But it is possible to determine whether or not an award may be misleading, or if it is an independent accolade. If possible, you can look for obvious conflicts of interest or instances where a company charges certain brands to enter.

Consumer Digest, for example, charges companies that want to advertise their award around $25,000 to $35,000 per award. Consumer Reports (no relation) estimated that GM, which had 15 cars place on Consumer Digest’s Best Buy List in 2010, paid around $385,000 to Consumer Digest.

Others, like J.D. Power & Associates, offer car companies a service designed to improve their car’s award rankings. J.D. Power also charges a fee for companies wanting to use their awards to advertise a car.

These payments aren’t necessarily a conflict of interest — J.D. Power says that the company maintains strict boundaries between its licensing and consulting divisions — and serve as a way for these companies to make money off of brand comparisons and end-of-year best of lists. These fees do however, raise some questions — like whether or not a list can be fully independent when it benefits from big brands winning, or if the process is fair to smaller brands who may not be able to afford the costs.

All of this isn’t to say that there aren’t legitimate ads floating around. Some organizations take their editorial independence seriously, and operate in a way that minimizes the chance of a conflict of interest.

Motor Trend, which once awarded the BMW Series 5 with the title of Import Car of the Year, doesn’t charge a fee to advertisers. Consumer Reports doesn’t even allow companies to use their awards in advertisements.

Other trustworthy awards may include those won by BMW, like the World Car of the Year award, which is selected by a jury of 82 independent car journalists from around the world. Other forms of recognition featured on local TV ads, like Years of Service or Dealer of the Year, may simply show professionalism among car businesses and are very unlikely to be fabricated for exposure.

The Good and the Bad of Car Awards

Car award advertising isn’t always free from conflicts of interest. Many publications producing end-of-year lists expect companies to pay to use their awards in advertising — and some even offer services designed to improve a brand’s rating on their own lists.

But there are car awards that don’t take fees from car companies and take their editorial independence seriously.

Separating out the good from the bad may, however, take a bit of research.

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4 Tips for Starting a Used Car Dealership

The passion for starting your own business is something that many people can relate to. Being the boss over something you’re passionate about that helps your community is invigorating.

If you have a passion for BMWs and the desire to start and run a successful business, you should consider starting a used car dealership. Channel your passion into your full-time job and develop your skills as a business owner at the same time.

Read on to learn five essential tips for starting a used car dealership. With the right knowledge and preparation, you’ll shift into the role of a business owner without any bumps in the road.

1. Set Up Your First Steps

The first steps to starting your used car business may seem obvious, but don’t let them get overlooked. First, you’ll need to choose a location for your business. This may be where you live or in a separate city.

Look around a few areas to see what land is for sale or if there are any businesses that are closing. Compare the costs of starting with a couple of fresh acres or using an existing building.

Next, you’ll have to choose a name for your dealership. This may need to follow guidelines provided by BMW, so reach out to a corporate representative to talk further about the specifics. They may have a procedure set in place to help new dealership owners.

After you’ve chosen your dealership’s name, you’ll need to secure a domain name that will be your business’ permanent web address. Be aware that there are upfront fees to claiming the domain name, even if you don’t immediately start building the website. You may also have to pay a yearly fee to maintain ownership of your domain, depending on which company you register with.

Last, you’ll have to think of the logistics. What is your target market? Think of the age range of the people in the area where you’ll set up your dealership. Who is already there and would want a BMW and who do you want to win over? Start with your practical market and make a plan that will grow your business from there.

Don’t worry if this all sounds like a new language to you. Take these steps slowly to get used to the process. You can also consider taking a few business classes or earning a diploma to make you a more successful business manager.

2. Determine Your Breakeven Point

That will help you figure out the initial costs of starting your business and compare it to when you’ll break even. The average used car dealership sells 87 cars per month, but it’s safe to bet that your dealership will sell a little less to nearly equal the amount per month in your first year. You’ll need time to market your business and make it a familiar place that people are willing to trust.

Be prepared for your dealership to not break even the first month. As time goes on, you’ll see a gradual return on your initial investment. Talk with a CPA or calculate your breakeven point to determine what numbers you need to pull to make your first profit.

3. Get Your Business in Order

Before you start construction or open your front doors, you’ll need to obtain a dealer’s business license to legally make a profit off of selling cars that aren’t titled in your name. Your local DMV will help you figure out how to get this license where you live. You’ll have to meet certain requirements, which may include things like:

  • Providing proof of business insurance
  • Passing a background check
  • Registering your business
  • Signing up for a pre-licensing seminar

You should also apply for an Employer ID, also known as a Federal Tax Identification number. It’s how the IRS recognizes your dealership as a business and processes your taxes accordingly. The good news is that it’s free to apply and once you’re approved, you’ll get that number immediately.

After you have your Employer ID, you can register for taxes with a local CPA. They’ll fill you in on any other loose ends that need to be tied up in order for you to be compliant with tax laws. Discuss whether or not your business should be a Limited Liability Corporation (LLC) or an S corporation (S Corp), which may provide better tax breaks depending on where you live.

The next local office you’ll have to call is your city’s business license department. Talk about how you should get your business license and contact the city’s zoning department to double-check that the land you’ll use for your dealership is zoned for that purpose.

It’s crucial to then get the insurance your dealership will need to succeed. You’ll need comprehensive general liability insurance to sign your eventual lease and any client contracts. It’s also what will protect you from lawsuits related to customer injuries or damages.

Once you have everything lined up, open a business bank account specifically for your dealership. This will make filing your taxes and reporting your income much simpler. Stick with the bank you trust for your personal finances or ask around to see which banks offer a better solution to your needs.

4. Review the Law

One of the most important things you can do for your used car dealership is review the laws that your business must abide by. Specifically, used car dealerships of any brand fall under the Federal Trade Commission’s (FTC’s) Used Car Rule. It states that any car dealers who move five cars or more off the lot each year have to follow each guideline and regulation in order to remain open.

Use care dealerships also have to maintain and display the Buyer’s Guide, as explained in the Used Car Rule. The guide explains any warranties attached to the car and where to get information on possible future recalls.

If your dealership does not comply with either of these laws, it’s liable for large fines that meet or exceed $43,000. Check your state laws to see if your state is the one to reinforce these laws and if they have any additional rules you should be aware of as the dealership owner.

Ask for Help

Starting any kind of used car dealership isn’t something you can do overnight. There may be steps that are new to you, but don’t feel like you have to do everything alone. BMW representatives, your CPA and your state offices are there to help with any questions you may have. Asking for help along the way will help your dealership open up sooner and stay on the path to success.