Thursday, November 20, 2008

Get Ready for Round II

Round 2 has just started in my fight to make the dealer fee illegal in Florida. Last Thursday, I received a call from Carl Domino, House Representative from district 83 asking me to draft a dealer fee bill for him to consider sponsoring. He needs to have this by this January. My next step will be to get someone to sponsor the bill in the senate and I plan to ask Jeff Atwater who was just named president of the senate. Jeff Atwater was outwardly supportive of my position last year. Below are my comments when I testified before the Senate Commerce Committee last year. I will likely be making another appearance before this committee and the House committee soon

Comments to Florida Senate Commerce CommitteeTuesday, March 4, 2008, 2:30 PM, Tallahassee

My name is Earl Stewart. I was born in Ft. Lauderdale, FL in 1940. I graduated from PBHS in 1958, University of Florida in 1963, BS Physics, and Purdue University, 1964, MSIA. I worked for Westinghouse for four years as an Electronics Engineer. I jointed my father in business in 1968. He founded Stewart Pontiac in West Palm Beach in 1937. I’ve been primarily in the retail automobile business for the last 40 years. I’m currently the sole owner and general manager of Earl Stewart Toyota in North Palm Beach and have been in the same location for the last 33 years. My three sons are employed in my business and my wife, Nancy, is also involved part time.

I’ve been a member of the SFADA and the FADA for my entire career and have serviced as a director for both organizations and on the Executive committee of FADA. I am currently chairman of the board of FLADCO, a Florida dealer-owned cooperative buying company.
(1) What’s bad about the dealer fee?

(a) In most cases the customer either does not know he paid the dealer fee or believes it is some kind of federal, state, or local “official fee”.
(b) In practice dealers do not include the dealer fee in the price of the car that is quoted to the customer. It isn’t included in Internet quotes and also not in verbal quotes over the telephone or in person.
(c) Although Florida law says that the dealer fee must be included in the advertised price, this is not happening in most cases. In the first place, there is virtually no enforcement of this part of the law. I’ve shown Senators Jeff Atwater and Alex Diaz de la Portilla copies of auto classified ads flagrantly violating this part of the law addressing dealer fees. Those dealers who do technically comply, get around it in practice by what I call “the old stock number trick” [Explain].
(d) There is no cap on the dealer fee and each dealer chooses whatever fee he likes. There is no one name for the fee. The Senate Investigative Report discovered 22 names and they only scratched the surface.

(2) Why the Dealer Fee Law is a Bad Law?

(a) It is written in such a way that dealers’ legal counsel have advised them “If you charge one customer a dealer fee, you must charge all customers the same fee”. Now, when the rare very astute consumer questions the legitimacy of the dealer fee, the sales person is instructed to reply, “All dealers charge this fee” and “We are required by law to charge everybody this same fee”.
(b) There is a provision that a “group ad” does not have to include the dealer fee in the advertised price. The argument for the exception to this part of the law on advertised prices is that it would be “too confusing” to list all of the different prices resulting from different dealer fees by different dealers.
(c) The law does not address ads which show discounts from MSRP instead of an actual price. Because the MSRP is standardized, a discount from MSRP is no different than a quoted price.
(d) The law allows dealers to advertise just one car at the advertised price. Dealers don’t disclose this by using an obscure alpha numeric code, usually included along with all of the listed options and accessories. This, unknown to the reader of the ad, is a “stock number” which means that the dealer is advertising only this one car at the price which includes the dealer fee. A typical stock number looks like this…#A23554B. The ads often also say, “12 more models available at this price”. But the other models are not the advertised car and now the dealer can add the dealer fee on top of the advertised price. Car salesmen are not paid a commission on this advertised car. Car salesmen work on 100% commission and have no incentive to sell an advertised car. In fact, their incentive is to be sure that you buy a different car. The odds of a customer actually being able to buy an advertised car are “slim and none”.
(3) What is my true motivation for opposing the Dealer Fee?

(a) I strongly believe that I’m doing the right thing. The dealer fee is a profit to the dealer…pure and simple. The law alludes to it covering certain costs of the dealer and requires that the dealer so state next to his dealer fee, but this is fallacious. When a customer pays me a sum to cover one of my expenses, she is increasing my profits. Saying that a customer should pay for a dealers cost of paperwork or preparation of the car is no different than saying the customer should pay the salesman’s commission, the dealer’s advertising, or part of his power bill. Any business’s overhead costs should be priced into the price of its product…not passed along to their customer separately from the pricing of their product.
(b) Because all car dealers have different dealer fees and some range up to at least $1,000, we cannot compete fairly on a level playing field. I am unable to advertise prices because those dealers who have dealer fees can understate their real price, knowing that they can add their dealer fee on at the last minute. For example, a Toyota Yaris with an MSRP of $15,145 has a profit to the dealer of only $584. Al Hendrickson Toyota in Coconut Creek, FL has a $999 dealer fee. This dealer can advertise a new Yaris for below his cost and make better profit than I can if I advertised and sold the car at MSRP.
(c) Our customers should have the right to shop and compare prices of cars just like they do TV’s, refrigerators, computers, or any other product. The Monroney label made a standardized MSRP the law for new car manufacturers over 50 years ago. The purpose for this law was to give the consumer the ability to accurately compare prices between different car dealers. If a car buyer is considering a Chevrolet Impala with a specific MSRP, he can shop for the dealer who gives him the biggest discount. Now, with virtually every dealer adding a dealer fee of a different amount, the intent of this federal law is circumvented.
(d) I would be less than honest if I didn’t confess that I’m benefiting from the positive publicity I get by opposing the dealer fee. If I’m not successful, I’m still a winner because the car buyers of Florida do agree with me. Any dealer could achieve the same status as I by unilaterally giving up the dealer fee.
(e) Car dealers rank among the most vilified businesses and professions. Along with lawyers and politicians, we are commonly ridiculed by comedians like Jay Leno and David Letterman. My sons will take over my business one day and I have four grandchildren who may continue it even further. My oldest son, Earl III, told me something a few years ago that I will never forget. He said that he enjoyed working for me and he enjoyed his job very much but what was most important to him was that he was proud to tell his son, Jake, my grandson, what he did for a living.

6 comments:

  1. Well done sir. I recently moved from GA to florida 2 weeks ago and was looking to buy a vehicle (Honda) in town here. I negotitaed a price which was acceptable to me and I was happy about it. From all the research I had done I kne that the dealership was making a profit, the saleaman even said that it was good deal but that they were making a profit.
    Got approved for the loan and was presented the order which included a "DOC PREP./HANDLING" fee of $200 and a "dealer fee" of $699 dollars. I was uvery upset, virtually the good deal had turned into a bad one and it tipped evrything over, I did not sign the order and had to walk away, the only paper I signed was 1 paper which authorized the offer, and not the buyer's order. What you are doing is honorable, a quality which is hard to find these days anywhere, let alone in dealerships/salespersons, I commend you for your efforts.

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  2. Anonymous November 29, 2008 8:57 AM, I agree with your comment and second it.

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  3. Excellent work. I thank you on behalf of all of us "little people" out there. I just wish that you would PLEASE DO THIS ON THE NATIONAL LEVEL, as I am not fortunate enough to live in Florida. If anyone has any suggestions as to how to avoid paying huge dealer fees in Massachusetts, please post.

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  4. Dear "NO DEALER FEES ON A NATIONAL LEVEL",

    Thanks very much for your compliments on my efforts to ban dealer fees.

    As far as how to go about banning them nationally [and in Massachusetts], the answer is to increase public awareness. Of course this is easier said than done.

    One of my biggest obstacles has been the lack of media support. Local newspapers are especially reluctant to write stories about the dealer fee because of the large percentage of their advertising they get from car dealers. TV and radio are also timid about this. I met with the publisher of my local paper and he actually told me that his paper could not "afford" to back my position against the dealer fee for loss of car dealer ad revenues.

    These trying ecomomic times we are going through may serve to shake things up, both for car dealers and the media. Newspapers are experiencing almost as much financial pain as car dealers. When the smoke settles, we may see a different attitude and awareness from the survivors of both businesses. But then again, I'm a perpetual optimist.

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  5. Well put. I have learned more about how to shop for a new car from you than in all my 45 years of purchasing new and used vehicles combined! I do not know a person that looks forward to purchasing a new car. What continues to amaze me is the salesperson's parting comments to me after I sign and take posession of a new vehicle are "congratulations"! For what? leaving money on the table? I like to consider myself an informed consumer and always shop, educate and do whatever possible to make myself aware before going into a dealership. I never feel I made a good deal regardless of the negotiations.

    I am a past customer of Earl Stewart and will purchase my next vehicle from you as well.Keep up the pressure and thanks for all your efforts.

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  6. Thanks for the compliments, Carl.

    And thanks for being my customer.

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