I was very pleased to see a news article in this week’s Automotive News entitled “Dealer is a lone voice on invoice prices in ads”. At first, I thought “Oh Boy! We have another dealer - Jack Fitzgerald, a Maryland car dealer - who is willing to stand up and be counted when it comes to unfair and deceptive advertising by car dealers.
But, after I read the Automotive News article, I realized that the only thing Jack Fitzgerald was concerned about was losing his right to advertise cars at invoice. Fitzgerald is sponsoring a bill in the Maryland legislature to prevent manufacturers from withholding benefits such as advertising co-op funds if a dealer advertises invoice prices.
For those of you who read my blog, my column in the Hometown News, or my Saturday morning radio show on Seaview you know that I consider advertising a car at or below dealer invoice unfair and deceptive advertising. This is because many consumers think of the invoice of a product as being what the store pays the manufacturer or distributor. They think its true cost, but the invoice of a new car actually includes a relative large profit to the dealer with thousands of dollars of holdbacks, advertising costs, floor plan costs, and rebates included.
Some manufacturers do discourage dealers from advertising at or below invoice prices by financially penalizing them. Most manufacturers do not. Honda does and Toyota has restrictions on language used that refers to the cost of the vehicle. Honda’s motivation is clearly to support the retail selling price of Hondas. I quote from the article, Chris Martin a spokesman for American Honda Motor Co., “Encouraging shoppers to focus on the cheapest price could undermine a vehicle’s resale value and hurt the brand image.” I believe that the manufacturer has no business meddling with what their dealers can sell their cars for. In fact, I question the legality of this. However, I do believe that the manufacturers should “meddle” with unfair and deceptive advertising by its dealers and this is what Jack Fitzgerald and lots of dealers who like to advertise at or below invoice are guilty of.
In this Automotive News article, Jack says “The Federal Trade Commission tells consumers to determine the factory invoice price when they are shopping for a car to protect themselves against overpaying.” He says “That’s why I put the factory invoice price on my Web site.” I would love to see that document from the FTC that tells potential car buyers that a dealer invoice is an accurate representation of the true cost of the vehicle to the dealer. I don’t believe that such a document exists but, if it does it should be immediately rescinded. The real reason that Jack likes to show his customers the invoice on his cars is because he knows that the customer thinks it is his true cost. His customers don’t know that the typical car invoice includes thousands of dollars in profit to the dealer.
I’m writing this column on Monday, March 29, and I’m looking at an ad in today’s Palm Beach Post by Arrigo-Dodge-Chrysler-Jeep. The headline is “BELOW INVOICE PRICING”. Unfortunately there are still lots of people who will read this ad and believe that they are getting the “buy of lifetime”. Sadly they may be almost right. It will be the “sale of a lifetime” for the salesman and the dealer if you pay their asking “below invoice” price.