Friday, April 06, 2007

CLASS ACTION SUES S.C. DEALERS ABOUT DEALER FEE

The Tallahassee law firm of Myers & Fuller is representing several car dealers that have been named as defendants in a class action suit along with almost every other new car dealer in the state of South Carolina related to the charging of dealer fees aka documentary fees, dealer prep, etc.

The plaintiff’s lawyers representing the class of consumers who are bringing the lawsuit claim that “the placement of such fees on a dealer’s buyer’s order or invoice is deceptive in that it implies that the fee is separate and distinct from the general overhead that car buyers expected to be included in the sale price for a car and that such placement suggest that the fee is mandatory”.

Readers of this column have seen several articles I have written about or mentioned dealer fees. Virtually every car dealer in Florida charges a dealer fee although it may carry some other label, like documentary fee or dealer prep fee. Several states have made this illegal and it looks like South Carolina may be next.

A particularly onerous part of the dealer fee is that dealers are legally required to “charge every customer this fee if he charges just one customer”. I supposed the lawmakers were well intentioned when they made this ruling, but like so many other well intended lawmakers, they inadvertently “bit the car buyer right in the butt”. I think their reasoning when they passed this law was to prevent car dealers from discriminating against the less informed and sophisticated buyers. In hindsight we can see how stupid this law is because it allows the car dealer to charge everybody the dealer fee, including the informed, sophisticated buyer.

Because virtually all car dealers in Florida charge this fee (My dealership is the only one I know that doesn’t), the car dealer overcomes objections to the dealer fee by saying “this is a fee that all Florida car dealers charge”. What is a car buyer to say? He has been told that everybody charges it and that it is illegal for the dealer to take it off his buyer’s order or invoice.

Florida did pass one law to protect the consumer against the dealer fee. This law says that the dealer must include the dealer fee in advertised prices (The price a salesman quotes you is not considered an “advertised price”). Many dealers don’t know about the law or simply ignore it. You can pick up the PB Post any weekend and find several car ads with prices that do not include the dealer fee. In the fine print at the bottom of the ad, it will say “plus dealer fees” or in some cases tell you the amount of the dealer fee. Florida law also provides a loophole in this law, which was the subject of my last column. The loophole is that dealer group ads don’t have to abide by the law!

Dealers who do understand the law and wish to abide by it have figured out a way to get around it. They simply pick one car of a particular model and advertise that price including the dealer fee. You don’t know that there is only one car available with the dealer fee included in the price. The only disclosure is a number along side the car like #2668A which is supposed to let you know that this is the only car available with the dealer fee included in the price. That innocuous number is the stock number of that particular car. There is usually another “gotcha” which is “price good on date of publication only” in the fine print. The ad often says something like “25 others available and similar savings”. The reason it says “similar” and not the “same” is because they add the dealer fee to the prices of the others. The chances are that the car they advertised is not the right color and equipment for you and, even if it were, the chances that they will have it there when you arrive are slim and none. If the odds aren’t already stacked totally against you, the sales people are often not paid any commission or a very small commission on all advertised cars. How easy do you think it will be to buy that advertised car from a salesman who can make a lot more money by selling you one without the dealer fee included?

The class action suit in South Carolina is symptomatic of the rising consumer awareness around the country. Today’s consumers are more educated and sophisticated than ever before. They are also less tolerant of being taken advantage of. Call me a “cockeyed optimist”, but I think it won’t be long before we see a law in Florida to protect car buyers from the dealer fee.

1 comment:

  1. I have only been in the car business for six years. I have been the butt of jokes from friends and strangers. We run an honest and straight forward business. However, we bear the burdon of car dealers of old when back in the day, turning back odometers and many other practices were just the way of business. That being said, almost everything the government does is meant to cut the legs out from under the dealer. I have not seen one instance in six years where the state sided in a law against the consumer. Just talk to someone that runs a buy here/pay here lot like we do and ask them about customers filing bankruptcy and watch them turn red. Document fees were a way of helping overcome overhead and try to be profitable now that wholesale prices of cars and trucks have reached an all time high. My friends just shake their heads when I tell them stories of my business and my customers.

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