Friday, November 02, 2007

Results of Florida Senate Dealer Fee Investigation

An attorney, Renee Gordon, from the committee formed by Senator Ken Pruitt to investigate fees that car dealers add to the prices of their cars in Florida sent me a copy of this study last week. You can access this study directly by clicking on this Web link, http://www.earlstewart.com/ and then “Results of Florida Senate Dealer Fee Investigation” in red.

(1) The report defines these dealer fees as a “discretionary charge that represents costs and profit to the dealer for items such as inspecting, cleaning, and adjusting vehicles, and preparing documents related to the sale.” My argument with this definition is that when a business charges a customer for a business expense/cost, that charge becomes a profit to the business. Why is it necessary to use the phrase “costs for items such as inspecting, cleaning, and adjusting vehicles, and preparing documents related to the sale?” Once a customer pays the business for these costs, that payment becomes profit to the dealer. This profit is no different than the markup included in the price of the product the business is selling. And this is exactly where the dealer fee should be, included in the price of the car as part of the profit margin.
(2) All new car manufacturers that I know of reimburse the dealers for “such items as inspecting, cleaning, and adjusting new vehicles”. Charging the customers for this doubles the profit to the dealer for these items. This senate study notes that Florida law “prohibits dealers from charging customers for any pre-delivery service required by the manufacturer, distributor, or importer, for which they are reimbursed by the manufacturer, distributor, or importer.” Since all new cars dealers are reimbursed, why is this part of the disclosure that the dealer must print on his buyer’s order?
(3) The study says that the dealer fee varies among customers of the same dealership. And in a footnote, the study says “as with all charges imposed by the dealer, this fee may be negotiable.” This contradicts my understanding of the regulations on dealer fees. My understanding is that if the dealer elects to charge a dealer fee, he must charge every customer the exact same dealer fee. It is my understanding that if he removes the dealer fee from one transaction, he exposes himself to the liability of having to refund the dealer fee to all of his past customers. The way a dealer can get around this is to lower the price of the car by the amount of the dealer fee, but leave the dealer fee on the buyer’s order.
(4) The Florida Automobile Dealers Association is quoted in the study as saying that the dealer fee must be included in all advertising. This is not being done and, in fact, the rules leave “what is advertising” up to subjective interpretation. For example, prices on the Internet do not have to include dealer fees. Take a look at any South Florida newspaper, read the fine print, and you will see many ads excluding dealer fees from the advertised prices.
(5) FADA, the Florida Automobile Dealers Association spokesman told this study that a reason for the dealer fee was because manufacturers had reduced dealers’ profit margins. The fact is that manufacturers have no say so as to a dealer’s profit margin. A dealer may charge his customer any price he decides for a new car. A manufacturer can set the suggested retail price of a car, but it’s exactly that…suggested. In the first place most dealers would be thrilled to sell all of their cars at the MSRP and many dealers add price addendums beside the Monroney label marking the MSRP up.
(6) The study said that the state had no record of complaints on the dealer fee because they don’t separately categorize such complaints! This kind of makes me wonder how they do categorize complaints or do the sort them at all! There are two reasons why there aren’t more complaints. The first is that many car buyers don’t even know that they did pay a dealer fee and the second is that almost all dealers charge a dealer fee and tell the customers that they cannot remove the charge by Florida law.
(7) The study says that dealer fees in Florida range from $189 to $699. This is based on a very small sample (67 responses) from well over 1,000 car dealers in Florida. I know of several car dealers in Palm Beach County that charge over $699 in fees. At least one local dealer charges two fees…a $699 dealer fee and a $199 doc fee totaling $898. My guess is that the dealers with the higher dealer fees opted not to fill out and return the survey.

I was encouraged by these statements by the senate committee: “There is enough ambiguity in current law to allow that the consumers may not be specifically aware that the pre-delivery service fee is imposed, and the amount of the fee, prior to receipt of the Buyer’s Order. The law requires the fee to be “included” rather than “specifically delineated” in the advertised price. Furthermore, the fee is not required to be delineated on the dealer window sticker.”

Also, “Should the Legislature choose to address the issues identified in this report, it may consider expanding the notice requirements for the dealer imposed pre-delivery service fee, or, as other states have done, impose a cap on such fees.”

The ball is in your court now. You are the car buyers and you are the ones that are being deprived of full information on the prices of the cars you are buying. You are being lured into car dealerships by a car advertised at one price and when you come in, you are told that that car is no longer available but there are several more “just like it”. The only problem is that Florida law now allows the dealer to add their dealer fee to those cars “just like” the advertised car because they were not advertised. This is “bait and switch” pure and simple. No dealer in Florida should be allowed to quote a price on a car to any customer unless it is an “out the door price” plus tax and tag only.

If you agree with me, call, write or email your legislator and tell him so. If you remain silent, the chances are the Florida legislature will do nothing.

3 comments:

  1. What an eye-opener! I'm sorry to say that I don't have much faith that the the Florida Legislature will do anything. The dealer lobby is too powerful. I'll keep buying my cars from Earl Stewart.

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  2. I must commend you Mr. Stewart for your intelligent brand of marketing. Since you have commanded the moral/ethical high ground, you have found a way to serve the consumer's interests and your own. That is very good business, sir.

    I am enjoying reading the comments from your detractors (read "competitors"). You must know you are doing something right!

    I'm not a customer yet, but I'm sure I'll pay you a visit in the future. Continued success, sir :)

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  3. Earl Stewart is full of it. He doesn't want the dealer fee outlawed because he would lose his competitive advantage! That said, I am very happy to take advantage of his competitive advantage. I will buy my next Toyota from him and not pay that outrageous dealer fee!!!!!!!

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