LIST PRICE & MSRP MIGHT NOT BE THE SAME

Just when I thought that I knew all the tricks that some car dealers play, I discovered a new one in Saturday’s Palm Beach Post.

The ad screamed “GET UP TO $12,000 OFF”. The new cars featured in the ad showed many discounts over $3,000 and $4,000. Then I found the gimmick. The discount was off of “List” price, not the manufacturer’s suggested retail, or MSRP. Most people, including me, use the terms list price and MSRP interchangeably. However, MSRP is a legal term deriving from a law sponsored by U.S. Senator Monroney, about 40 years ago. The Monroney label is required by law to be displayed on all new vehicles showing the manufacturer’s retail price, MSRP.

The purpose of this law was to offer the consumer some basis for comparison of prices between different car dealers. Before this law was passed, a car dealer could post any price he wished on the window of a new car. If he posted a price with a markup of $10,000, he could advertise a $5,000 discount and still make a $5,000 profit.

The ad I am referring to in Saturday’s Palm Beach Post shows discounts from “list” price, but defines it in the very fine print at the bottom of the ad as being “MSRP plus installed options”. There it is! The giveaway is “plus installed options”, if your eyes are good enough to read the fine print (I had to use my magnifying glass). By jacking up the MSRP with “installed options”, a car dealer has circumvented the law sponsored by Senator Monroney. This dealer can now advertise huge discounts, limited only by how high a markup he wants to put in his “installed options”. There is no law limiting the markup in an installed option. Dealers commonly install options with very low cost with high perceived value to the too trusting or careless customer. Some examples are undercoating, paint sealant, fabric protector, stripes, theft insurance, and rust proofing.

I came across another surprise in The Stuart News. If you have read my past columns, you know about “dealer fees” aka “dealer prep”, doc fees, and a few other misleading names. This charge is simply additional profit to the dealer disguised as a state or federal fee like sales tax or license and registration. The amounts range from $495 to $895. State law requires that this “fee” be included in all advertised prices and my surprise was that there are some dealers ignoring this law. The prices advertised in The Stuart News in the ads I am referring to disclosed in the very fine print “all prices plus tax tag & dealer fee”. This is a violation of state law. Unfortunately, it is impossible for the Attorney General’s office to police all of the car ads in the state every day.

Dealer fees, dealer prep, doc fees, etc. are bad enough even when they are included in the advertised price. The tactic employed by dealers to get around the law requiring that the dealer fee be included, it to switch the prospective buyer to another car. This is easily done by these means: (1) Pay the salesman no commission or a minimal commission on the advertised car. (2) Make the color and accessories of the advertised car very unattractive. (3) Have only 1 or 2 cars available at that advertised price. (4) Limit the time a buyer can buy that specific car by fine print saying “price good on date of publication only”. (4) Simply telling you that the car has already been sold. How are you to know? Many states like California make dealer fees illegal. In my opinion they should be made illegal in Florida. Please write your legislator on this issue.

Your best defense against this kind of thing is to choose the dealership you buy your car from with great care. Find a dealership that has a good reputation with the Better Business Bureau, Count Office of Consumer Affairs, and the Attorney General’s Office. Preferably choose a dealer who has been in business for a longer time. Ask friends, neighbors or relatives who may be driving a model that you are interested in how their experience was with that dealer.