Monday, August 17, 2015

A Real Out-the-Door Price!

You’ve heard the term, “Out-the Door” price, many times and the chances are that you’ve used it yourself. There’s also the common phrase “Bottom-Line” price. In my dealership, I post all of my prices online and on my cars, but they really aren’t “Out-the-Door” prices because I don’t include the sales tax or the Florida state tag and registration fees. Although I’ve considered doing this, I haven’t for a few reasons…sales tax varies based on if there’s a trade-in and the value of the trade-in. Tax and registration vary depending on whether it’s a new tag or a transfer and the date of birth of the purchaser. I could assume the highest sales tax and tag and registration amounts, but this would make my price look higher than all other dealers who never include this in their advertising. 

What all of this means to you, the car buyer, is that NO ADVERTISED PRICE is an out-the-door price or a bottom line price. In fact, NO PRICE, VERBAL OR WRITTEN, is an out-the-door price. The danger is that almost all car dealers will tell you that the advertised price and the price they verbally quoted you is out-the-door or bottom-line. These terms have, unfortunately, become all too common, but they are very misleading. 

A prudent car buyer should shop and compare prices between competing dealers even if they a use a third party car buying service like TrueCar.com or Costco. Most car dealers do not want you to have an out-the-door price for this very reason. They do not want you to be able to shop and compare their price. The price that they advertise and “say is out-the-door” excludes, not only sales tax and tag/registration fees, but additional profit to them that are disguised as “official fees” and dealer installed accessories. 

The “Dealer Fee” (which is a generic term for additional dealer profit) goes by many other names and was created by dealers to trick you into paying them more profit than their advertised price. Unfortunately the dealer fee was made legal in Florida thanks to the strong lobbying power of car dealers and their associations like FADA, the Florida Auto Dealers Association. In fact, not only did the Florida legislature make this legal, but they also allow dealers to name the dealer fee anything they like and allow them to charge as much for it as they want. Some of the common names used by dealers are Administration Fee, Doc Fee, Dealer Prep Fee, Handling Fee, Pre-delivery Inspection Fee, E-Filing Fee, Electronic Filing Fee, Tag Agency Fee, Notary and Closing Fees, and Dealer Services Fee. Many dealers add more than one of these and the total dealer fees can exceed $2000! 

The E-Filing Fee, Electronic Filing Fee, and Tag Agency Fee are often included with the sales tax and tag and registration fees. These are the most deceptively named dealer fees of all. Dealers commonly do not disclose these as dealer fees as required by Florida law and some do not even charge sales tax on this profit which is another violation of Florida law. Sales people will usually tell customers that these fees are part of the tag and registration fees from the state, which is an outright lie. 

The other broad category of trick that dealers use to enhance their out-the-door price is “Dealer Installed Accessories”. They add these to all the cars they sell and they typically increase their “out-the-door” price by at least $1,000. These dealer installed accessories consist of products that cost the dealer virtually nothing with super-inflated prices. Some common examples are nitrogen in tires, window etch, pin stripes, paint sealant, fabric protection, and road-side assistance. A typical addendum sticker which list the dealer installed accessories for $1,500 would have an actual cost of less than $100…a 300% markup!

The “surprise” you get when you try to buy a car at the advertised or quoted price averages over $2,500, not including the government fees of tax and tag. Advertised prices are typically far below what the car dealer will sell you the car for and are sometimes below his true cost. Dealers know that his competition is advertising unrealistically low prices and they have to meet or beat those prices. Dealers feel that if they advertised an honest price, they would actually be driving business to his competition. 

Now comes the hard part…how can you persuade a car salesman to give you his true-out-the-door price? I’ve learned from experience that there are two ways that work the best. I learned these from years of sending mystery shoppers into car dealerships all over South Florida. Technique #1 is to tell your salesman that you must have an out-the-door price including tax and tag in writing. He will surely respond that he cannot do this unless you’re buying the car right now. He may even tell you the truth which is that he does not want you to shop his price with his competition. You then respond that you will compare his price with your competition and you might buy a car from them. But if he gives you a good enough price, there’s a chance that you will come back and buy from him. On the other hand, if he refuses to give you a price, you will leave and never come back and that means he has NO CHANCE that you will buy a car from him. 

The second ploy, technique #2, that works fairly well is a little devious, but sometimes you have to “fight fire with fire”. Tell the salesman that you have to have a signed copy of the buyer’s order/invoice of the car he’s selling you with the out-the-door price for your credit union or bank. The credit union or bank needs this so that they can issue you a check which you will return with when you take delivery of the car. You can also add that they will also advise you if this is a fair price. This works most of the time. 

Of course, when you do get the dealer’s out-the-door price by either of these methods, you should shop and compare this price with at least two more dealers. It’s a shame that car buyers have to go to all this trouble to get an honest out-the-door price, but car dealerships are an anachronism, doing business the same way they did half a century ago. They are changing, albeit slowly, because of the Internet, the educated consumers of the 21st century and companies like TrueCar.com and Costco’s auto buying program.

6 comments:

  1. What about the salesman that runs the dealership trying get you all the information just so he/she can earn less $200 in commission IF THE DEAL HAPPENS.. All new car dealers get their vehicles for the same price and they can sell them for the same price. Do your research online (TrueCar or whatever) but don't waste people's time.

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  2. Thank you so much for this article. Being a single female having to brave this horrible car buying process I appreciate your refreshingly honest advice!!

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  3. can a dealership not honor OTD price given by one of their salesman?

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  4. Gaston, unfortunately the answer is "YES" especially if the "OTD price" is given verbally. Even when giving in writing, dealership's fine print on contracts say that all prices must be approved by the signature of a manager. There's also the question of what "out-the-door" price means. Some interpret that as excluding tax and tax and some even look at it excluding dealer fees (which to me is absurd). Finally, when a salesman gives you an OTD price verbally, it's your word against his. That's why I always recommend that you never go car shopping alone.

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  5. I got his offer I email he sent with his dealership email tag

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  6. Gaston, I'm assuming they are refusing to honor the offer. My suggestion is to bring you dispute to the attention of the owner of the dealership or the General Manager. Legally, I'm not convinced that you have a case, but you might. It's always better to resolve these things without a lawyer.

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