The Car Dealers’ Dirty Little Secret

When the Palm Beach Post broke the news of my lawsuit against Ed Morse Honda a little over a week ago [a very small article buried in the “Metro Report”], the reporter who wrote the story used the phrase “dirty little secret” to describe the dealer fee. That reporter’s phrase stuck with me because she hit it right on the head about the dealer fee. The fact that it’s a secret is what makes it so effective for the dealers and dangerous for the car buyers.

In fact, if it wasn’t a secret it would be totally useless to the dealers. This is why, when the FADA with their lobbyists and politicians approach me to discuss a compromise law that will give “complete disclosure” to the car buyer of the dealer fee, I know they can’t be sincere. Think about it. (1) Car dealers admit that the dealer fee is pure profit [they also refer to it as recapture of costs but that is synonymous with profit]. (2) All the rest of the dealers’ profit is included in the price he quotes you on the car. (3) Common sense and “Accounting 101” says that businesses should include all of their costs/profits in the price of their product or service. (4) What reason can there be for a car dealer electing to remove a portion of his profit from the price he quotes you on a car, renaming it “dealer fee” [or one of at least 22 other nebulous names according to the Florida Senate Investigation of the Dealer Fee] and then adding that profit back in when you sign your paperwork upon the delivery of your car? I submit that there can be only one answer to that question. That answer is that the car dealer wants you to think that the price he quoted you includes all of his profit and is the complete out-the-door price of the car. When I debate the dealer fee with car dealers I often say that if they can satisfactorily answer that one question, I will drop my opposition to the dealer fee. So far, I’ve found no one who can satisfactorily answer that question without admitting that the dealer fee is an unfair and deceptive trade practice.

Since the dealer fee could not exist if it were not a “dirty little secret”, you have to wonder why it has not been exposed before now. Why haven’t our legislators jumped to the defense of the consumer? What about the newspapers, TV, and radio…the media? You would think that the dealer fee would make a great campaign issue for a politician, wouldn’t you? I don’t know what percent of Florida registered voters have bought cars in Florida and paid a dealer fee but I’m sure it would be over 99%. You would think that a politician seeking reelection would jump on the “dealer fee bandwagon”. Making it illegal to quote a price on a car without including all of your profit in that price would save consumers of Florida hundreds of millions of dollars! You would also think that a newspaper or TV station would jump all over this! What a story!

We have over 1,000 car dealerships in Florida. These are relatively large businesses employing tens of thousands of Floridians and paying millions of dollars in taxes. The average price of a new car now is over $25,000. The Florida sales tax on one average car is $1,500! Car dealers are one of the largest advertisers in the state, spending hundreds of millions annually with newspapers, TV, and radio. Car dealers are very well organized. Virtually every larger dealership and most smaller ones are members of the Florida Automobile Dealers Association, FADA, headquartered in Tallahassee. You might wonder why the FADA would locate their headquarters in Tallahassee and not Orlando which is centrally located. That’s because FADA’s main function is to lobby Florida’s legislature. The FADA is a political lobbying group who gives strong financial support to all senators and legislators who “play ball” with FADA.

Are you beginning to get the picture? I’ve been told “off the record by politicians that they will not go against the FADA because their support is too important to their reelection and because without their support you cannot get a bill passed into law. I’ve been told by reporters who tried to run stories about the “dirty little secret” of the dealer fee that their editors “killed the story”.

You have heard or read the homily, “Money is the Mother’s Milk of Politics” and this is true. Well, advertising revenue is the Mother’s Milk of the media. Newspapers are suffering especially, losing ad revenue to the Internet and other media. They cannot afford to offend car dealers in their editorial or news departments because car dealers are either the largest or the second largest advertiser in most newspapers.

Just as I won’t paint all car dealers with the same brush, I won’t paint all of the media. Hometown News has run my weekly column for over two years. I know that it has cost them some advertising from car dealers but their publisher, Steve Erlanger, has the courage of his convictions. He is a journalist with the highest ethical standards for both his editorial and news departments. Radio station Seaview AM 960 airs my weekly talk show every Saturday morning between 9 and 10. This is a live call-in talk show where I expose unethical and illegal activities of some car dealers. For a long time no car dealer would advertise on Seaview AM 960, but there station has gained such good ratings recently that a lot of car dealers are now advertising with them in spite of my talk show. I congratulate Chet Tart, Seaview AM 960 General Manager, for his integrity and high journalistic standards, just as I do Steve Erlanger.

My lawsuit against Ed Morse Honda is not for publicity as car dealers have accused. The court is the only alternative I have when politicians have been silenced by FADA and the media has been silenced by car dealers’ threats of advertising boycotts. The court won’t remain silent when the jury returns their verdict. Every juror who has bought a car in Florida and paid a dealer fee [most, if not all, of the jury] will positively render a verdict for me after they discover the “dirty little secret”.