Friday, April 06, 2007

A LOOPHOLE IN THE DEALER FEE LAW

If you are a reader of my columns, you know all about the “dealer fee” scam perpetrated on car buyers in Florida and other states where it is still legal. This fee ranges from $495 to $995 and even higher. It is profit to the dealer but is printed on the buyer’s order, disguised as a “fee” meant to be confused with legitimate state, local, and federal fees, like sales tax and license fees.

Virtually every dealer in Florida adds a dealer fee to the price he quotes you on the car. In fact, when questioned, many dealers’ justification is that “all dealers in Florida charge a dealer fee”. Strange as it may seem, Florida law prohibits a dealer from removing the dealer fee from the price he gives a customer. If he charges one person a dealer fee, he must charge all people. This is also the rationale you might hear if you object which, is “Florida law will not allow me to remove the fee”. The way to counter this objection, when haggling about the dealer fee, is to tell the salesman to reduce the overall price by the amount of the dealer fee and leave the dealer fee alone.

The only control placed on dealer fees by Florida law is for advertised prices. This law says that an advertised price must include the dealer fee. Dealers get around this by advertising just one vehicle at an advertised price with “many more at similar savings”. If the one car that is advertised is already sold, the dealer can sell you one just like it and add back the dealer fee.

Unfortunately, I recently discovered that there is a loophole to this sole law to protect the car buyer from dealer fees. The loophole is that lease payments and prices advertised by multiple dealers in the same ad do not have to include the dealer fee. This means that if a manufacturer advertises a price on a new car listing several dealers, the dealer fee can be excluded. When I inquired about this, I was told that this is to permit manufacturers and distributors to advertise the same car priced from multiple dealerships. I was told that they cannot include the dealer fee because each dealer fee is usually different. That doesn’t sound like a very good excuse to me. Ads including multiple dealerships usually include the names, phone numbers, addresses, and Web site URL’s of each dealer. Why not list each dealer’s “dealer fee”? You know the answer as well as I…they don’t want you to know there is a dealer fee, much less the amount of the dealer fee.

The reason for the law requiring that advertised prices include the dealer fee is very clear. It is to prevent the consumer from being fooled into coming in on a low price and then charged a higher one. If that principle applies to one dealer’s ad, why doesn’t it apply to multiple dealers advertising in one ad? To comply with the same law applying to one dealer, all multiple dealer ads would have to say is “price plus tax, tag, and dealer fee” and beside each dealer’s name list his particular dealer fee. This would also encourage dealers to lower their dealer fees and even eliminate them entirely.

Because I don’t charge a dealer fee, when my dealership is included in an ad with seven other South Florida dealerships, I have the lowest price but the reader of the ad cannot know that. The ad says “plus tax, tag, and dealer fees” in the fine print at the bottom of the ad, but does not disclose the amount of the dealer fees for each dealer. The uninformed prospective car buyer can pay up to $995 more for that advertised car than he would pay at my dealership because the dealer fee amounts are not disclosed. Does that sound right to you?

60 comments:

  1. I am the General Manager of a dealership that you happen to compete with. You are misleading the public with the information that you are putting out there. There is nothing wrong with charging the dealer fee to the customer. Our profit margins on new cars have gotten smaller and smaller, year by year. The dealer fee is one of the only ways we are able to stay in business and make a decent profit. You are confusing the public because the only thing that really matters is the bottom line.

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    1. Hey, GM of a competitor.... Send your kids to college on your own dime, not on the price paid by hard working people.... Dealer Fee's ARE scams period, just like advertising fees added to the cost, or show room costs ... get the point. If all dealers were honest and weren't trying to scam, more people would be less hesitant about buying cars. you give dealers a bad name.

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    2. Amen to that, Anonymous.

      Guys like this dealership General Manager exist in "field of reality distortion" such that the believe their own nonsense.

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    3. Generally, I disliking dealers a whole lot. A more dishonest bunch I can't think of. But on this issue, if the fee is clearly stated BEFORE price negotiations then it's not an issue. I'd haggle my best price and then insist they lower it by the dealer fee. Or I'd walk. And I would walk if they balked.

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    4. It is not a "decent" profit when you add a hidden fee back to the cost. When I bought my first car in Florida, I was stunned by the dealer fee. It is one of the biggest scams I've ever seen, and he had the gall to say "we're entitled to a fair profit" -- I wondered about the unfair profits. Who says you are entitled to that, too?

      The same dealer bait & switched me from a price listed for last year's models which was not available from any dealer in the state. Any other state, it would be illegal to advertise a car that is not available.

      You find all of this out hours after you've been testing cars. It is disgraceful!

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    5. That is your option. As a consumer I would never pay this. This fee should
      be added to the actual sticker on the window so that everyone see this amount shown.

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    6. very easy fix. I always tell them to take off dealer fee and doc fee cost to be no more then $100. if they cant do it...walk out when paper work is about to be signed..if the still refuse, try another dealer. Have had 2 dealers meet my pricing to close sale. And I have left Fl. to GA. to buy car. and yes it was worth saving $1673.00

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  2. I disagree My dad has owned a dealership in New York for over 20 years and has made a very good living based on one principal - Honesty. The first time I went to a dealership in Florida I found a car I liked and the price was fair. I sat down to fill out the paperwork and noticed an extra $795. I asked what that was about and the guy told me "o thats just the dealer fee". To me it seemed sneeky and underhanded so I walked out. I found a different dealer that didnt charge this bogus fee and thats where my money went. I think by chrging a dealer fee you are continuing to prove the stigma that all car dealers are dishonest. Try changing your advertising stradegy to being an honest dealer that doesnt charge sneeky fees and I beat your sales will improve

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  3. Dear dealer's son,

    Thanks for your support. You and your Dad will be glad to know that the Florida Senate investigated the "dealer fee" that most Florida dealers are charging and sent a recommendation to the legislature that a law be considered capping or banning the fee.

    I met just last Saturday with Senator Jeff Atwater, soon to be the President of the Florida Senate, to discuss this legislation. I hope to have him appear on my radio talk show on Saturday, February 9. You can listen to it on Seaview AM 960, WSVU.

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  4. Hi Earl,

    My name is David Menten. I own Sawgrass Ford in Sunrise Florida. We have never charged a dealer fee. My advertising is centered around that fact. It has helped me to be one of the largest Ford dealers in the United States.We sold more expeditions last year than anyone in the country. Our honest approach to car sales is the reason why. I think the market place should be the judge of dealer fees. I don't think it is the governments job to legislate dealer profit. If consumers don't like dealer fees, let them buy from someone like you or me.

    Good selling,
    David

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  5. Dear David,

    Thanks very much for your posting to my blog article and how refreshing to have a comment from a car dealer that is not "anonymous"!

    I totally agree with you that it is not up to government to legislate dealers' profits and that it should be up to the market place.

    But I do think it is a function of our government to protect consumers against deception by businesses which takes away a consumer's ability to make a rational, intelligent choice.

    I think we both agree that the dealer fee deprives the marketplace from accurately determining the price of the dealers' products. If dealers wanted to allow car buyers to make a fair choice with respect to the price of their cars, they would simply include the dealer fee in their quoted and advertised prices, as we do.

    Good selling to you David and let's hope that what we are doing becomes popular with other fair minded dealers.

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  6. If by "bottom line" you mean the final price after all taxes and fees, that as a misconception. The only thing that matters is the subtotal price, after dealer fees. That subtotal price is what should be negotiated. Title and tag are non-negotiable, as well as the sales tax percentage, so why try to negotiate those numbers?

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  7. Here is a tip, always keep a spare set of keys in your pocket. Do not hand them over until the final paperwork is signed.

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  8. Its misdirection plan and simple. I also found your sales tactics a little pushy for my taste. I prefer all the fees be listed as opposed to just thrown into the price of the car. I want to see your cut! With the internet and a little research we know what you paid for the car and what the mark up is. Try the shell game on another sucker! No one is buying this three legged horse.

    S.P. Lake Worth

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  9. I am in the process of ourchasing a RAV4. One dealer charges $599 for dealer fee and the other $699. It is outrageous. It is additional profit to the dealer. Any suggestions of what to do with this"Bogus fee"

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  10. I recently purchased a car at west kendall toyota in Miami and after I signed the papers I realized that they charged me $895 dealer fee when the original fee was $650
    read very careful what you sign those guys in the dealership are a bunch of crooks

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  11. I walked away from Hyundai dealer yesterday cause of these $600 fee's and they wanted to charge $250 for tag transfer. Nuts.. I am going to out of FL or buy used. These guys are nuts with these BS Fees.. Shame on you Dealers trying rip off honest hardworking people.

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  12. Hi Earl
    I went yesterday to Holler Classic Dealer in Altamonte Springs, I was ready to buy a car and the sales person Randy was nice, he show me a power point presentation (make feel like I was buying a Time Share)explaining why they couldn't go lower in the price and told me they were giving me the lowest price in the car, i did my homework and it was over $300 more but I was getting a warranty and service was good. No one told me about the dealer fees! When I was ready to sign the contract I saw a charge of $599.00 I ask Randy and he said OH DON'T WORRY THAT IS JUST THE DEALER FEE! People work very hard, and this is an insult and a scam! I walk away from them and they didn't even care, not even an aproach to said IM SORRY I should it told you there was a fee!!!

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  13. My dealership only charges $295.00 for the dealer fee. It is pre-printed on our purchase sheet. We explain to the customer what the dealer fee is. We still get people saying that they are not willing to pay for it. We are not hiding the fee in the price. Either way, people are going to complain.

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  14. How do I say this without vulgarity? Dealer Fee?? What kind of idiot pays a dealer fee?? The next thing you know Wal Mart, CVS, etc will be charging a Retailer fee! Your grocery are $21.95 plus a $3 retailer fee.

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  15. Dealers pay 45% of BB at auctions, on top of Blue Book now being completely off and just a tool for dealers. Edmunds actually tracks trends and is much lowerer in dealer price comparison, and allows other then Excellent. Every dealer now acts like every car on there lot is "Excellent" ....less then 3% of cars are excellent.

    There is plenty of Profit with out charging Dealer Fees. Autoway Charges $799, can you believe that?

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  16. All I can say is wow... Try buying in VA if fees upset you. VA state laws cap processing fees at $250.00, however, it also requires the dealer to charge a processing fee.
    I tried to chalk up processing up to admin fees to help with overhead costs. It doesn't add up though. Some dealer fees in FL could pay for 30+ hours of office labor, and that is guessing that they pay their staff generously...
    Working on Aircraft by profession, I can understand a customer paying for paperwork. It is required, and as such, part of the labor expense. With that in mind, if an aircraft repair facility can process an aircraft in less than 3 hours,(someone dragging their feet) at 85 dollars an hour, (accounting for the paper changing hands and departments as needed) it totals a whopping 255 dollars per job. Can a car dealer process a car in 3 hours? If your dealership cannot, you may need to hire a new staff.
    I agree with VA, it is fair to all. It allows the dealer to charge a penny, or two hundred and fifty dollars. Giving them and the consumer options on a level field.
    I do not agree with the competition's statement that margins are tight and it is just about the bottom line. Dealers grow by volume. No-dealer advertises "the best bottom line in the tri-state area". I agree that relying on fees as a source of profit hurts the dealership in every way. More selection will net more customers, and the only dealers that can do that rely on volume. More sales, more cars, ect... Small lots will have more visits if the selection is constantly changing. Selling by volume ushers that change.
    Read it and tell yourself I'm just some uneducated consumer, "what does he know anyway". It will comfort you while waiting FOR your next customer, instead of waiting on them.

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  17. Why must these dealers be such scumbags?

    Now on top of a Dealer fee there is this Regional Advertising fee which is now added onto then price, $995.00 at Wallace Hyundai in Stuart. So now I must also negotiate. So it is $595 for the Dealer fee and $995. I thought the Advertiseing fee was supposed to be in the invoice, but the invoice has no price itemizations. So now they got added pinstriping which I can decline but these pushes a 15K car up to 18,600 before taxes and tag and transfer fees. I hate to go out of the Stuart area but these dealers simply unreasonable and dishonest.

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  18. SCUMBAG aka SCORPION

    In answer to "Why must these dealers be such scumbags?"..."Because it's their nature". I refer you to Aesop's parable (copied and pasted below) which tells a story demonstrating why true changes of character rarely happen.

    Thanks for bringing to my attention the $995 "Regional Advertising Fee" being charged by Wallace Hyundai in Stuart. True advertising assessed by the manufacturer or distributor are already included in the invoice and should not be added again to the price of the car.

    With that said, I know Bill Wallace and he is an honest man. However, I fault him for not being aware of deceptive practices like this occurring at one of his many dealerships. Hopefully this blog dialog will be called to his attention.


    The Scorpion and the Frog

    A scorpion and a frog meet on the bank of a stream and the
    scorpion asks the frog to carry him across on its back. The
    frog asks, "How do I know you won't sting me?" The scorpion
    says, "Because if I do, I will die too."

    The frog is satisfied, and they set out, but in midstream,
    the scorpion stings the frog. The frog feels the onset of
    paralysis and starts to sink, knowing they both will drown,
    but has just enough time to gasp "Why?"

    Replies the scorpion: "Its my nature..."

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  19. There really is no practical reason for the fee. It exists just to make a negotiated price look better than it really is and to confuse people who are comparing competitor prices.

    The money doesn't get allocated any differently just because a fee is written into a contract and that's why it's dishonest. Unfortunately this isn't where dishonesty ends at a lot of car dealerships anyway.

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  20. I congratulate you on summarizing so accurately and succinctly the "evilness" of the Dealer Fee. It's too bad none of Florida's legislators will acknowledge this and do something to protect the car buyers of Florida.

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  21. I`m 66 years old and have bought (17) New Vehicles in my Lifetime as well as several late model Used Cars. Back in the late 70`s and 80`s living in Massachusetts, most New Car Dealers added on anywhere from $100 to $250 extra dollars to the purchase price of the Vehicle calling it (then) Dealer Preparation Fee. The "buyer" was lead to believe that this "fee" was to have the selling Dealer wash, wax, make any necessary adjustments needed that the manufacturer failed to do at point of assembly. Oddly enough, the MSRP sticker on the vehicles window clearly stated that the Price listed (included) all necessary Dealer Preparation already! Needless to say, the Car got the "wash job" and the purchaser got the "hose job". I guess there was something for all concerned. And those fee`s I mentioned earlier I might add, were in "pre-inflation Dollars. Today, most New Car Dealerships have pre-printed on the Purchase Agreement Dealer Fee`s usually from $499 to $699 for essentially nothing other then adding additional mark up profit that they (claim) cannot be eliminated due to the "Law" making sure there is no discrimination and that (all) Buyer`s get equally "Sodomized". Mr Stewart is correct, the only way to avoid this extra cost is by haggling that "fee" off the negotiated price by either discounting the vehicle in the same amount or offering the same as additional Trade -In allowance. Otherwise, simply walk! For those reasons, I`ve lately become a Ford buyer because using Ford`s X Plan as a Ford Shareholder, I can order or purchase any Ford vehicle at Dealer Invoice and a small Administration Fee allowed by Ford limited to $125, period! The only hitch is the Trade In value and they will usually match CarMax which gives full Kelly Blue Book trade in values. Like the old saying goes, Buyer Beware!

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  22. Went to a Lexus dealership in New York to purchase a pre-owned car. Fees included $995. in dealership fees plus all other fees (DMV)etc. Is this really legal for them to charge this fee?

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  23. In New York, the legal limit on a dealer fee is $45. They call it a doc fee, but it's the same thing...profit to the dealer. It sounds like you are talking about the total of all fees including sales tax, 8.8% in NY, and your tag registration fee which would be about $75. Unless this Lexus dealer did something illegal (which is possible) it sounds like the biggest fee you paid was sales tax...8.8% is very high but it is legal. If you will fax me copies of your purchase papers (fax # 561 658-0746) I will be happy to examine them and let you know.

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  24. Hi Earl, I stumbled onto this column/blog excellent info, anyway I was doing research for new hyundai elantra limited, I was looking to buy.My employer has a pretty good auto purchase program and my price is slightly lower than on true car, kelly blue book, and also edmunds. the price the dealer came back was about the same but I see the 695 dealer fee added, what are my odds or bargaining chips to get that removed. I was going to throw in my 1998 nissan altima which unfortunately was on its last legs and barely runs. any suggestions would be greatly appreciated.

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  25. Thanks, Neal, for your posting.

    You said that your employer's price is lower than TrueCar.com which surprises me. TrueCar's price requires that all fees except government fees be included in the price. The $695 dealer fee must be included, so is that still lower than your employer's price? Do you mind me asking the name of your employer? I ask because many companies including AmEx, Consumer Reports, and GEICO use TrueCar.com prices.

    I would report the dealer to TrueCar if he insisted on adding his $695 dealer fee. TrueCar would cancel him as a TrueCar dealer if he refused to honor his contract.

    If you're employer's price is lower than TrueCar while still accounting for the dealer fee, you're still getting a good price. You can try telling the dealer to "leave on the dealer fee but reduce car price by $695" if he wants to keep your business.

    Another idea is to expand your TrueCar quotes by using zip codes over a wider area. You can get as many TrueCar prices as you want.

    Good luck

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  26. Dear Earl, First of all thank you for your quick response and excellent information. Yes I do work for Amex so their auto purchase program looks to be very competitive. In fact the Amex rate for the 2012 Elantra Limited is 20,700 100.00 less than the True Car price. The True car price as well as Amex covers the advertising fees of 212 and 760 for the destination fees, but apparently does not cover the dealer fee which is 695.00 I also called Amex purchase program and they stated the dealer fee is not included and there is no way around it. So it looks like the Amex price might be the best deal and of course I will take your advise and see if they can take the 695.00 off the base price and go from there.

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  27. Thanks, Neal.

    I should have mentioned that TrueCar.com has "two tier" pricing. The lower price goes to their "partner programs" like AmEx and Consumer Reports". Dealers are reqired to quote a lower price for partner programs than they post on the web for www.TrueCar.com. The prices are close as you found out.

    I'm surprised and disappointed that TrueCar told you there is "nothing the can do" about this dealer's $695 dealer fee. TrueCar's whole niche is supposed to be bringing the lowest market price with integrity to the consumer. How is that possible if they allow their charter dealers to spring a surprise dealer fee on the car buyer in addition to the TrueCar price? I intend to investigate this with TrueCar and I suggest that you raise this issue with American Express. They have more clout than both of us.

    Would you mind me using your name and the name of the dealer with TrueCar? If not, please email me at earl@estoyota.com.

    Thanks,

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  28. Earl,

    I am curious, is the dealer required to tell you what their fee is if you ask?

    Thanks,

    Terry

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  31. Terry,

    If you mean by "required" that the law says so, then the answer to your question is "yes". But practically speaking there is no enforcement of this law. In most cases you don't learn of the dealer fee until you see it on the buyer's order printed out by the computer in the business office. In many cases, you don't see it then but only when you get home. And some buyers never know that the dealer fee is just profit added to the price after you've been quoted.

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  32. PART ONE-Hi. I've been in car sales for 3 years now and at first (I am an eagle scout with morals and ethics strongly intact), I felt guilty when I would make full profit on a consumer. Sometimes that would pay me 1,000.00 in my pocket to help support my family of four. Which supports the economy to btw... Then my mgr asked me how long will that thousand dollars last me, a week? I said yes maybe two if I plan accordingly. How long do you think your client will use his new car, helping him get to work to make money to feed his family? Three maybe four years before they trade it in... Let me ask you these questions earl, and EVERYONE else: since when is profit a dirty word? And who wins in the long run in a car purchase transaction? Why can every other business in the UNITED STATES OF AMERICA Mark up their products 2 or 3 times the cost making houge profits (300%) while car dealerships make maybe 1-3% of a profit margin? I understand a car or a house is a big ticket item so they can be negotiated (so said somebody one day), but one day I would like to haggle for the price of a t-bone at Publix, or gasoline or underwear or shoes or suits or GROCERIES or the cell phone bill or the electric bill. Seems as if everything for sale that you and use to Live goes up in price doesn't it? Um, wouldn't it be nice to see the invoice price of oil and bargain for gas? I think I made my point.

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  33. PART TWO-I work 60 hours a week selling a quality product, New or preowned, and I get paid by commission only. Most new car shoppers research the invoice price, market price, kbb price, blah blah blah. I understand that price is important as I am on a budget just like you... but what about the person that spent 2.5 hours presenting, explaining, and demonstrating the vehicles' features and how they will benefit YOU? Do you not see the VALUE in that salesperson's time? Isn't he/shemance allowed to make a decent wage for working hard for YOU? Nope and nope. Why? "Because car salespeople are scumbags and are trying to screw over every hardworking person. How can they live with themselves and make a profit? How dare THEY?" Dealer fees are profit, but it's very little in the grand scheme of things. The state of Florida makes more on cars than the dealership does about 80% of the time.

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  34. PART THREE-Since the internet changed the car business years ago to help the consumer get a fair deal (a couple hundred bucks over invoice), dealer fees came out to help keep dealerships open by making a DECENT profit and provide a service to the community helping people find what they want to go be mobile to have FREEDOM TO DO WHAT THEY WANT TO DO. nice huh? Again, profit is not a dirty word. We are providing a service and there is nothing wrong with getting paid for working.
    I'll end this diatribe with an interesting fact: we say "Buyers are liars." It's kinda funny that 90% of people who are pointing a FINGER at car salespeople calling us scumbags are the ones who lie and treat us with disrespect and disregard us as human beings. My granddad told me a long time ago, "johnny, if you point your finger at someone remember that there are three of your own pointing back at you."

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  35. FINAL PART-I hope the day comes that the dealer fee goes away and EVERYONE pays MSRP. or EVERYTHING can be bargained for. Including gasoline. Unfortunately neither will happen so I can only hope that everyone I meet will end up liking me, my service, my product, and the VALUE of the car I am helping someone purchase, and that value exceeds the PRICE for which they will pay. Good Luck to you all, Godspeed, and try to treat us car guys with a little dignity. Come in well armed with.your pricing sheets and if we work hard enough, decide what percentage of profit we should make if we help you find the right car for your needs and if you received a world class experience. Think of it as a tip. Like a server in a restaurant, which I used to be... Carrabbas btw. Yum! A good server can make 20-29% of total sales in a tip for an hour worth of work. And good car salesman can work up to four hours helping people find a car, and not make a dime when the customer walks out because we didn't lower our price by 130.00. Wtf? Think about that. We put our pants on one leg at a time like you. And we go to work to put up with your bull. So just be cool.

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  36. One more thing. Where does a business get the money to pay its employees? From their profits of course. Dealer fees are.profit but it does eventually get distributed to pay the detailers, the lot porters, the office ladies, the receptionist, the mechanics, the parts dept, the electric bill, the gas we put in your car when you purchase it, the overhead, etc. Just another business trying to keep people employed to help spend money to keep our dragging economy from crumbling. Blame the oil companies and Starbucks. 6.00 for a cup of .30 coffee? Who are the ripoff artists now?

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  37. You aren't seriously asking rational human beings to accept the dealer fee because "it goes to the hard working employees of the dealership"? The dealer fee goes straight into the dealers' pockets. In fact, most dealers do not pay their salespeople any commission on the dealer fee. He's tricking this customers and robbing his salespeople. What dealership do you work for, Mr. Anonymous?

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    Replies
    1. I do not know why we still have dealers anyway, this 2012, what is with the middle man, why cannot car companies, open their own factory outlets and eliminate the middle man, it would be nice to be able to buy a vehicle without feeling you just had root cannal.

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  38. Anonymous. Give me a break. You created this monster with your sneaky tactics. I will never ever pay a dealer fee. How much profit is enough? Seems that if a dealer can make $5-700 hundred per car for a hour of work, that's a pretty fair deal for both parties. But we know this isn't the case because most people don't research the prices. I would never ever buy a car at your dealership. Shame on you.

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  39. Hey Club 977- its anonymous. I never created the dealer fee. And I don't have sneaky tactics. I am a man that works harder than you. I work 60+hours a week because WE are full commission salesmen. We don't make anything else. Why don't you try to work for free on a car lot and see how long you last. Stay in your cubicle and pay no dealer fee and buy a crappy car from a buy here pay here lot that will cause you nothing but mechanical trouble. Remember, you get what you pay for. And when was the last time you bought a car? It doesn't only take an hour of work... Again, step out of.your cubicle and step on a car lot. Then you tell me how long it takes to sell a car. On average its about three hours. Sure dealerships make their money, but it's the hardworking salesmen that get hosed because of people like you. Shame on YOU. And most people do research their prices. Do you research first before you assume and make an ass out of yourself.

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  40. I'm sure that you work hard and I understand that you are paid only on commission. I admire and respect car sales people who work hard and treat the customers with courtesy, respect, and INTEGRITY.

    Most car sales people are against the dealer fee for two good reasons. The first is that they have to explain to most customers why the dealer charges is it which is difficult to do, especially if you tell them the truth...it's pure profit to the dealer. The second is that the dealer fee comes out of the salesman's pocket too. If you are paid a 25% commission of the profit on the car, the dealer fee is not included in that profit. If the dealer fee is $800, it costs you $200 because most dealers don't pay their salesmen anything on the dealer fee. If they included the profit from the dealer fee in the price of the car like they should, you would make $200 more on every car sale.

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    Replies
    1. You are exactly correct. I do not get paid one penny on dealer fee as a sales person. Also, if we make a price concession to offset all or part of a dealer fee to appease a customer concern, that lowers my commission while the dealer still pockets their dealer fee. If we were allowed to reduce the dealer fee, believe me your salesperson would love to because it does not cost them one penny.

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  41. Hi,

    As a buyer, I have no problem paying dealer fees IF I see an ad saying that the price is, say, 20000 and dealer fee is, say, 2000. However if the ad says that the price is 20000 but when I have already test driven the car, I am being told that there would be 20 $ fee, I 'll call it dishonesty.

    I know exactly what I am supposed to pay on the cash register when I pick up a t-bone from a Publix' aisle. I don't know what amount I'll write down on the payment check for the car that I am driving. If that is not sneaky, please name it.

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  42. Two questions I always ask dealers who argue to defend their dealer fees are, "Why charge a dealer fee at all? Why not just include that profit you make in your dealer fee in the asking price of your cars?"

    They won't answer that question. They squirm just like a politician on “Meet the Press” when asked a question they are afraid to answer truthfully but can't think of an answer that won't either perjure themselves or sound stupid.

    Of course the truthful answer is "We separate the dealer fee profit to trick the customer into believing the price of the car is lower than it really is."

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  43. It's not just car dealers that play the dealer fee game, it's motorcycle dealers too. Went to CycleTrader.com and found a good price on a motorcycle I want to buy. Contacted the dealer to arrange the purchase and found there was a $900 dealer fee and a $700 freight fee. I'm still shopping.......

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  44. I totally agree with Earl. He made a good point when he said the sales person would be loosing out if the dealer doesn't add the dealer fee into price of the car. You other dealers that charge a dealer fee are ripping off your own employees. Why not put the dealer fee into the price of the car? You rather the sales person go out their way and feel ashamed of their dishonesty all because you rather keep that dealer fee to yourself. That's just selfish if you ask me.

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  45. Taken advantage ofMarch 04, 2013 6:14 AM

    I recently purchased a vehicle in Florida from out-of-state. After reviewing the sales contract I had a question about the HIGH $479 charge on the contract for Title, License and registration fee. In NC a vehicle registration fee when transferring plates from another vehicle is approx. $40.00. which is exactly what I was doing. The salesman stated that any difference between what I was charged on the contract and the actual charge would be refunded after the title/registration was completed. I believed him. A little over a month later I received a check in the mail but it was short by $125.00 (I double checked with NCDMV re: fee costs) When I inquired with the dealer to the reason why I was told that they (dealer) charged a $125 fee to register the vehicle (send paperwork etc.) to the DMV. My question is this legitimate? At NO time verbally, by email or on any documention is this FEE disclosed or mentioned.
    **I also paid a $589 Pre-Delivery fee so is this not suppose to cover handling, paperwork, documentation, licensing, etc. of the vehicle??? I was also charged a $24. electronic filing fee??
    I generally purchase a vehicle once a year and have never run into being charged an "EXTRA FEE" on top of the legitimate state Title, License and Registration fees to license a new vehicle. I just purchased another new vehicle out-of-state 3 months ago and was charged the actual cost of registering the vehicle in my state. No more. No "extra" dealer fee added.
    To say the least this has put a bad taste in my mouth about purchasing another vehicle in Florida. Not only will they lose my money on the purchase of the vehicle but also any money I would have spent on Hotels, food, gas etc.
    Signed,
    Seymour Good



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  46. Dear Seymour,

    I'm very sorry that you were victimized by this dealer. I'll cut to the chase, as you describe the dealer's actions, what he did was illegal.

    Florida law requires that all charges not required by government agencies, federal, state, and local, be disclosed on the buyer's order as follows:

    "This charge represents costs and profit to the
    dealer for items such as inspecting, cleaning,
    and adjusting vehicles and preparing
    documents related to the sale."

    You also mention an "electronic filing fee" charge. This should have been included in the "dealer fee" disclosure. This $24 represents a marked up cost the dealer incurred by paying an outside company to prepare the tag and registration for your car. His cost is less than $24 and he marked it up to make more profit on you.

    Here's a link that more clearly explains the law in Florida regarding these kinds of fees, http://archive.flsenate.gov/data/Publications/2008/Senate/reports/interim_reports/pdf/2008-107cm.pdf. You can cut and paste this link in your brower.

    Lastly, I don't know if you bought this car in response to an advertisement, but if you did the all of the "dealer fees" are required by law to be included in the advertised price.

    I suggest you contact the local Florida Department of Motor Vehicle office nearest your dealer and file a complaint.

    If you would like more specific information on this, please email or fax me copies of your buyer's order. My email is earl@estoyota.com and my fax is 561 658-0746.

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  47. HI EARL,WHEN BYING A NEW VEHICLE IS THE DEALERSHIP SUPPOSED TO JUST WASH THE CAR OR PUT A COAT OF WAX ON IT. I WAS TOLD BY MY SALES PERSON THAT THE NEW CAR WILL BE WASHED AND WAXED. DURING THE DELIVERY I COULD NOT FELL THE WAX ON THE CAR LIKE THE ONES ON THE SHOWROOM FLOOR.I COMPLAINED TO THE SALES MANAGER AND HE GAVE ME A CHECK FOR 40 DOLLARS,BUT I BELIEVE THEY JUST TRY TO NICKLE AND DIME YOU MOST OF THE TIME.

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  48. As a salesman currently in the business and living in FL, there is a lot of valid information on this page. The way each salesperson gets paid will depend on the dealership, but as far as I'm aware, I don't know any other person (who is regular sales and not management) that makes ANY money off the dealer fee. Trust me, it is hard to validly explain the dealer fee to customers and it is also hard to accept it knowing that I will not make any money from it. One of the posts was correct stating that profits are very low on new cars, at least in our area where we have several dealerships of the same brand so competition is very aggressive, which when working for a dealership that pays on gross, doesn't make the job too easy.

    For those of us in the business who work solely as a means of income to support our familes during rough economic times, I would gladly accept an ammended price that dismissed the dealer fee. I don't particularly enjoy the look of bewilderment or anger on some customers faces when they see that fee, but we are at least completely up front about it at my dealership along with all other prices.

    The amount of money some people here think a salesman makes per car is insane. I work 60-70 hours a week, give up watching my son grow-up, in the hopes that some time I will earn enough to give him a better life and my CSI's from customers will paint a flattering image of my honesty. If I made $500 per new car (or used for that matter) that I sold, I would be overjoyed. The prices are so aggressive here and people are so well informed, salesman are lucky to hold that much gross in a car. Unless the dealership pays 40% or something, as mine only pays 20%.


    Lastly, the bottom line is the bottom line. I know people like to say "Well tell them to take it off or I'll walk." I've NEVER seen them remove the dealer fee since I've been here and we average 2-350 cars per month (depending on the time of year). There is only so negative a dealership will go, and the OP who started this knows it. If a dealership is trying to hit a goal for a month, I can see taking a couple of $3k or more loser deals, but to sell your cars constantly with negative profits will not do well by your store or the salesmans wallet...unless of course he thinks he can live off minis or his pay plan rewards numbers and not gross.

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  49. You’re correct that most car sales people are not paid any commission on the dealer fees and, in fact, usually managers are not either. Usually the dealer fee goes right in the dealer’s pocket. There has been talk of sales people banding together in class action suit against car dealers because their compensation agreements with dealers is to be paid a percent of the profit on each sale, typically 25%. If a dealer has a $1,000 dealer fee, the sales person is being short changed on his commission by $250 on every sale. In my opinion, this would be a successful lawsuit and I’m surprised that car sales people have not organized to do this.

    It’s refreshing to me to know that you recognize the fact that the dealer fee is something that offends your customers and that you feel bad about it. Many car sales people feel as you do and it tells me that you have a conscience. As you say, when you have a family to support during tough economic times, sometimes you have to do things you would prefer not to.

    You say that your dealer pays only 20% commission but some car dealers pay 40%. The chances are that your dealer does not really pay 20% nor do other car dealers pay 40% of the real profit they make on their cars. There are hidden holdbacks, phony advertising fees, and secret dealer cash incentives from the manufacturers, not to mention dealer fees. The dealer pockets this money and doesn’t pay the salesman on it.

    Telling the customer to “Take it off or I’ll walk” will work only in market where some dealers don’t have a dealer fee. In my market in Palm Beach County there are four Toyota dealers, two have dealer fees of over $1,079…Royal Palm Toyota and Palm Beach Toyota. They are both owned by the Penske Automotive Group. The other two dealers, Earl Stewart Toyota (my dealership) and Delray Toyota (Owned by Ed Morse) do not charge dealer fees. CarMax, the largest used car retailer in the world has a store in Palm Beach County, does not charge dealer fees anymore. Mullinax Ford does not charge dealer fees, but the other three Ford dealers do. I was the dealer who first dropped the dealer fee 15 years ago and it’s having a domino effect. It could happen in your market too, but somebody has to go first.

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  50. What can I say, that hasn't already been said... Dealer fees are a scam and deceptive. One Anonymous dealer above said that the dealer fee is "pre-printed on our purchase sheet". That's says it all... it's thrown in after negotiations on price and you're sitting to purchase. That, plain and simple is a tactic. A tactic that doesn't work for me, either... but, a tactic.

    I have no problem with anyone allowing the market to dictate price and a free economy to allow for profit, high or low... Just because a dealer makes a large profit on a good product or service is not wrong in and of itself...

    However, when the industry as a whole (not everyone, mind you... but an accepted majority) employs deceptive/dishonest practices and attempts to game the free economy (by legislating that a dealer fee has to be for all or none... or they all get together and silently set a normal fee, etc).... that is anti-trust.

    Take a look at the case of Westinghouse and GE in 1920's... they created a silent monopoly, gaming the electric generator market.

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  51. I've been retail automobile sales since 1978 and recently move to Florida from Texas. The only fees Texas dealers charge are documentary fees which are no more than $200.00 and most dealers charge $149.00.

    I was surprised by this blantant fee to rip off customers. My philosophy is if your sales, finance and management teams are inept to make the dealer profit than the dealer needs to get out of the.business. How dare they charge me a fee for purchasing a vehicle.

    Take your hard earned money elsewhere to a reputable dealer. Why negotiate a fee that should be outlawed?

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  52. We are business owners. Every business has fees. If its included in mark up or not. The business needs to survive.Im a dealer and if you want honesty here it is. Dealers that advertise no dealer fee has some profit somewhere in that deal. I wont do it. If you dont want to pay the fee then go to big bobs down the street. I don't do this for fun ya know. I have had plenty of deals where all I made was the dealer fee. And thats not all pocket money. I got a staff to pay and cars to replenish. Im not a "volunteer" dealer. Every business needs to survive. My dealer fee is lower than some church memberships

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