Monday, December 08, 2014

Dealing With the Dealer Fee - Earl Stewart's User Guide

Hopefully by now, all but my newest readers know about the infamous “Dealer Fee”. If you don’t know, it’s a hidden price increase on the car you purchase disguised to look like a federal, state, or local tax or fee. It’s actually 100% profit to the dealer. “Dealer Fee” is the most common name for this disguised profit, but it goes by many names such as doc fee, dealer prep fee, service fee, administrative fee, electronic filing fee, e-filing fee, tag agency fee, pre-delivery fee, etc. The names are only limited by car dealers’ imaginations. Almost all car dealers in Florida charge a Dealer Fee. The dealer fees range from around $700 to as high as $2,000!

This is the Florida law that is supposed to regulate the Dealer Fee: “The advertised price must include all fees or charges that the customer must pay excluding state and local taxes.” The law also requires that the Dealer Fee must be disclosed to the buyer as follows: “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.”

This law is very weak and almost never enforced. When enforced, it isn’t enforced by the letter of the law; it is done so as to “accommodate” the car dealers. The law is “weak” because it requires only that the dealer fee be included in the “advertised” price. The word “advertised” is narrowly interpreted to mean a specific car shown in a newspaper, TV, radio, or online ad, but, what about when you get a price on the phone, online, or from the salesman? You don’t find out about the Dealer Fee until you’re in the business office signing a bunch of papers. The dealers get around advertisements very easily by including a “number” in the fine print. This number is their stock number that designates one specific car. When you respond to the ad, this car is no longer available (sales people are usually not paid a commission for selling the “ad car). The advertisement might say “many more identical cars are available.” It’s true that identical cars are available for sale, but they are not available for sale at the sale price because they are not the advertised stock number car. If you buy one of those “exact same cars” you will pay from $700 to $2,000 more. 

The reason I’m told that the law is rarely enforced is that the Florida Attorney General’s office is understaffed and too busy enforcing other Florida laws. I’m also told that Florida car buyers don’t file very many complaints against car dealers for violating the Dealer Fee law. I don’t believe that there can be too many other infractions of the law that take more money annually from consumers than dealer fees take from car buyers. Just one car dealer selling 1,000 cars a year and charging a $1,000 dealer fee is taking a $1 million annually from car buyers. Most car dealers in South Florida well a lot more than 1,000 cars annually and many charge more than $1,000 dealer fee. I believe that the reason more complaints aren’t filed on the dealer fee is because most car buyers don’t know that they are being duped. They either don’t notice the fee or assume it’s an official federal or state fee. Dealer often tell their customers that all dealers charge it and that it’s required by law. 

The Attorney General also “accommodates” the dealers by not interpreting the law the way it was intended. For example, the law says that the dealer fee must be included in the advertised price. The Florida Senate has ruled that the law requires that the fee be “included” rather than “specifically delineated.” But the Attorney General allows car dealers to advertise car prices without including their dealer fee in the price if they mention their dealer fee in the fine print. They also allow car dealers to simply state in the fine print that they have a Dealer Fee but not even mention the amount. To me they are simply allowing the car dealers to break the law. 

Lastly, the required disclosure of the Dealer Fee on the vehicle buyer’s order or invoice is confusing, misleading, and incorrect: “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.” It should not say “costs” because any cost that you pass along to the customer in the price of a product is pure profit. A dealer can pass along his utility bills, sales commissions and advertising if he wants to and call it a “dealer fee”. It should not say “inspecting, cleaning, and adjusting vehicles” because all car dealers are reimbursed by the manufacturer for “inspecting, cleaning, and adjusting vehicles”. 

So, what should you do when you are confronted by a car dealer with the “Dealer Fee”? Besides “LEAVE”, here are some suggestions that may help you:

(1) Make it clear from the very beginning that all prices you discuss must be “out-the-door” prices. This way you don’t care if the dealer fee added up front because you will shop and compare their bottom line price with at least 3 competing car dealers. Ideally you should require that they include tax and tag in that price. If you don’t they might try to slip in something they call the “electronic filing fee” or “e filing fee” and trick you into believing it’s part of the license tag and registration. 

(2) The dealer will often tell you that all car dealers charge Dealer Fees and that they are required by law to add the dealer fee on every car they sell. Simply tell them that you know this is not true and you can cite me and other car dealers like Mullinax Ford who do not charge a dealer fee. Print out a copy of this article, show it to them, and tell them that you know that there is no law that says he must charge you a dealer fee. 

(3) As long as you and the dealer understand that the out-the-door price is the price you will shop and compare with his competition, you don’t need to be concerned whether there is a dealer fee showing on the vehicle buyer’s order. To be competitive, the dealer can simply reduce the price by the amount of his Dealer Fee and the bottom line is what you are comparing. 

(4) Be aware that dealers usually do not pay their sales people a commission on the amount of their dealer fee. In fact, dealers often misinform their sales people just like they do their customers. The salesman who tells you that the all dealers charge Dealer Fees and that the law requires everyone pay a dealer fee may actually believe it. Sale people who understand that the Dealer Fee is simply profit to the dealer will be resentful of not being paid their 25% commission on it. A $1,000 dealer fee costs the salesman $250 in commission.

(5) When you respond to an advertisement at a specific price for a specific model car, object when the dealer adds the dealer fee. Unfortunately, the law allows him the loophole of claiming that the ad car is a different stock number, but you might be able to shame him into taking off the dealer fee. If you raise a “big enough stink”, the dealer would be smart to take off the dealer fee than claim that technicality, especially if you were to advise the local TV station or newspaper. 

I hope that these suggestions help you and I hope that you will file a complaint with the Florida Attorney General, Pam Bondi. If enough consumers (who are also voters) let our elected officials know how they feel about the Dealer Fee, it will bring positive results.


  1. Some dealers argue that they disclose their dealer fee (extra profit) on the sales contract, and because it is pre-printed on the sales contact that "by law" they have to charge it to everyone. They also argue that dealers such as yourself that advertise "no dealer fee" and have a non-negotiated posted price for both new and used vehicles, generally charge the same or more for comparative vehicles as they do. How do you respond to that, please? Also, many of us have complained long and loud to our state representatives about "dealer fees", but apparently Florida's auto lobby has a louder and more influential voice than us voters. The majority of your industry, at least in Florida, that charge "dealer fees" apparently feel no shame that they are the only retail industry that charges more than the advertised price for its goods and (shop fee) services. SB, Boca Raton, an Earl Stuart customer.

    1. Anonymous: can't you figure out the answers yourself? Here they are: 1. Just because a dealer "argues" something doesn't make it true. But if you are duped, then it is true for you, for you are playing the fool. Author's not responsible for fools being a fool. 2. The legislature is YOUR problem, not the dealer's. The legislature takes money to service dealers' interests. Do YOU offer money to your legislators? If not, that's your choice, not the dealer's. 3. The guy's industry feels no shame. Well, obviously. Your point?

    2. Earl, thank you for doing this article! Hope no dealers shoot you for it!

    3. Dear anonymous,

      Please excuse my late reply. I will answer your question second question which is if I charge as much, or more for cars as dealers charging a dealer fee. My answer is “NO”. Anyone who does not take my word for this, please feel free to contact me anytime for official documentation and proof on this. My average prices for new vehicles are lower than dealers who charge dealer fees. That's not to say that my prices are lower 100% of the time. On some occasions my price on a particular car might be higher. I post my lowest price on all of my new and used vehicles and give that price out online, over the phone, and in person to anyone who asks. Prospective customers can take my price to as many other dealers as they like to see if they can find a lower price. Sometimes they do, but most of the time they can't. This is why I'm the largest volume car dealer between Orlando and Ft. Lauderdale. Dealers who say that they have to charge a dealer fee "by law" to everyone because they have it printed on their buyers' orders are either confused or liars. There is no such law; it’s just another way to deceive a customer. You’re absolutely right that state politicians and regulators that are appointed by those politicians have "absolutely no shame". It's all about getting elected and money "talks". The FADA, Florida Auto Dealers Association, is a powerful lobbying group and they are well funded by car dealers.

  2. You are not the largest volume dealer between Orlando and Ft. Lauderdale so please stop lying, or bragging as it may be. Those dealers down south sell hundreds of cars a month more than you and they charge thousands in fees. You make your money other ways. Your service labor rate PER HOUR is over $40 higher than surrounding dealers. You should be ashamed that bashing other dealers in order to draw in customers is your way of representing yourself.

    1. What dealership ur at. I'm in ft Lauderdale n I'm looking for a car

    2. Lillian, my dealership is Earl Stewart Toyota of North Palm Beach. Take I95 north to exit 77, Northlake Blvd, go East to US1 and turn right at the traffic light. Going south you will see my dealership Toyota sign on the left. For information you can call my son, Jason, on his cell phone 561 358-9133. Thanks for considering us for your purchase.

  3. Dear anonymous car salesman,

    This will be my last reply to you because you haven’t the courage to accept my challenge to discuss our issues face-to-face or appear with me live on my radio talk show to air our differences in public. I will challenge you once more to address the false allegations that I am not the largest volume car dealer between Orlando and Ft. Lauderdale and that my service labor rate is higher than other car dealers. I will submit proof that my claims are true to a certified arbitration panel; you will do likewise. You will determine the amount of money that you would like to wager on the issues and whatever amount you say is agreeable to me. We will both deposit this amount in escrow with the certified arbitrator. If I win, the money will be given to the Big Dog Ranch Rescue; of course if you win, you may do with the funds as your choose. If you do not accept this challenge, which I doubt, this will be the end of our dialog which is wasting my time and the time of the readers of my blog.

  4. I'm not going to bet you anything and I certainly will not go on the radio with you. It has nothing to do with courage, just business sense. I don't need you disparaging me and my business practices in front of an audience. You're very good at twisting what we do and making yourself look good and everyone else look bad. My whole point is "buyer beware" because if you are old enough to enter into a business contract, you should be smart enough to understand the terms. Goodbye.

  5. Tom Elder, thanks for your support; I hope no dealers get violent too, because I know some of them are very angry.


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