Monday, December 05, 2011

Status of the Dealer Fee As of December 2011


A local attorney emailed me yesterday morning, asking me to send him the various articles I’d written on the infamous Dealer Fee. He is trying a case in Akron, Ohio and wanted to research this issue.  I've written so many articles over the years that I sent him seven and also my blog address, www.EarlStewartOnCars.com, so that he could read all of them if he chose.  Later that afternoon, I received a call from a young couple in Ft. Lauderdale who had just discovered they had paid $1,248 in dealer fees after they bought a new Toyota and drove it home.  They wanted to know what they could do about it. They asked if they had any legal recourse. They had not responded to an advertisement on a specific car, which is the case with most buyers, so they had no legal recourse. They had recently moved to Florida from California (where they do have a good dealer fee law) and were amazed how Florida had such a weak law and that even that was not regulated.

These two occurrences made me realize that I can’t be quiet on this subject, just because things have gotten better in my local market. The number of dealers in my market charging the dealer fee has abated by four…Royal Palm Toyota in the Wellington area, Palm Beach Toyota in West Palm Beach, Treasure Coast Toyota in Stuart, and Delray Toyota have all eliminated their dealer fees. I call this the “domino effect” taken from Dwight D Eisenhower’s famous quote, “Finally, you have broader considerations that might follow what you would call the 'falling domino' principle. You have a row of dominoes set up, you knock over the first one, and what will happen to the last one is the certainty that it will go over very quickly. So you could have a beginning of a disintegration that would have the most profound influences.

Why only Toyota dealers? That’s because of the economic impact that my dealership, which does not charge a dealer fee, has had on each of them. I’ve grown from the second smallest Toyota dealership in Palm Beach, Martin, and St. Lucie Counties to the number one, by far. My dealership is in Lake Park which has a population of only 9,000. In fact I advertise being in North Palm Beach (on the border with Lake Park) because most people don’t know where Lake Park is. The only way I was able to grow Earl Stewart Toyota to number one was to sell into the other Toyota dealers’ markets.

 The 21st century consumer is far more intelligent and discriminating than most dealers give them credit for. If you arm the consumer with information, they usually make the right buying decision. I’ve done a good job of arming the Toyota buyers in my market with that information, but I can’t quit now. The word must be spread throughout Florida and the other states in the USA that still have ineffective consumer laws and regulation. This blog is read on the Internet all over the world. National news stories have been written and talked about my battle against the dealer fee. It’s been reported on CNN, Fox, ABC, the Wall Street Journal, NY Times, USA Today and many other national media.

The reason the dealer fee is such a bad thing lies in one undisputable and fundamental right of the consumer. That is the right to be told the true and full price of any product or service before committing to purchase it. I recently bought a Samsung refrigerator from Lowe’s. I researched it in Consumer Reports and it was the #1 ranked side-by-side refrigerator. Consumer Reports also indicated what I could expect to pay for this model. I expected to and did, in fact, but it for slightly less than Consumer Reports suggested and Lowe’s advertised.  Of course I did have to add sales tax but even the delivery and installation were both included in the advertised price. If I had bought a car in Florida, the chances are about 99% that there would be a “surprise charge” anywhere between $500 and $2,500 (or maybe higher).

Our Florida law on this subject restricts the dealer to not advertising a price that does not include the dealer fee. First of all, the law is not enforced at all. On any given day I can show you many examples of car dealers who simply ignore this law. Some totally ignore it, some simply note in the fine print that the price quote in the large print is plus a dealer fee and do state the amount. Some don’t even state the amount. Many display a small innocuous number by the price, like STK#123B. This means that there is only one car advertised at this price. STK# stands for stock number. Your chances of buying this one car when you arrive are slim and none. What you can buy is another stock # car which may be exactly the same, but, because it wasn’t the specific advertised car, the dealer can legally add any amount to the price that he calls his dealer fee. Florida law calls for no cap to the amount of a dealer fee…it’s left up to the dealers’ gall and imagination.

Of course the name “Dealer Fee” is just the most common one. There are dozens of different names because Florida law also does not specify one. This would make it too easy for the consumer. Dealer Prep, Doc Fee, Notary Fee, Pre-Delivery Fee, and Administrative Fee are just a few. Sometimes the dealers will have two or three “dealer fees”. A popular one now is to mark up the electronic filing fee. This costs the dealer $12 and the dealers can mark that up as much as he wants to. The law says that this should be disclosed because it is considered a dealer fee, but many just ignore that. The legal disclosure on the buyer’s order should be: “This charge represents costs and profits to the dealer for items such as inspecting, cleaning, and adjusting vehicles and preparing documents related to the sale”.

What happens most of the time to customers is that they don’t have a chance to learn about the dealer fee until they get into the F&I office also known as the finance office or business office. This is when the dealer tries to make another profit by selling you products like warranties and marking up the bank’s interest rate. Let me be clear, a fair profit is a good thing and you should consider buying warranties or letting the dealer sell you a warranty if he is competitive in his pricing. But, what else happens in the F&I office is that you are confronted by a large number of documents with lots of fine print that you must sign. On one of these, if you’re lucky, you will finally learn of the marked up electronic filing fee, doc fee, dealer prep fee, or whatever else the dealer decides to call it and how much he decides to charge you. As often as not, you will believe these fees are legitimate federal, state or local taxes or fees. You may not even notice them at all until you get home when it’s too late. Or you may believe that you have to pay these fees and everybody charges them so what’s the harm?

Help me spread the word. Just say no to the dealer fee! Always get a competitive out-the-door price and shop and compare. If the dealer insists on adding a dealer fee, just be sure it’s included in the out-the-door price and compare it with at least two other dealers’ prices. Write your legislator and tell him how you feel about the dealer fee. Call your local newspaper and TV station and tell them the same thing. We need laws like they have in California that keep the dealer fee under control. It’s limited to $65 and every dealer calls it by the same name and charges the same thing. The California car buyer know what’s he’s paying for the car before he commits. 

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