Hidden Profit Charge on Your Auto Service Invoice

The last time you paid your bill for your car’s maintenance or repair, there was about a 99% chance that there was an extra charge at the bottom of the invoice. This extra charge was not for the parts used or labor performed on your car. If you noticed it at all, it was hidden at the bottom of the invoice near the line for sales tax.


This service charge is the “little brother” of the infamous Dealer Fee, the arbitrary charge which is added to the bottom of the bill of sale when you buy a car. Just like the dealer fee, this service charge is not really a fee at all, rather it's pure profit to the dealership or independent service facility. Just like the dealer fee, it too goes by many different names: "Sundry Supplies Fee", "Miscellaneous Fee", "Hazardous Waste Disposal Fee", "Waste Oil Disposal Fee", etc... Unfortunately, charging any arbitrary extra amount onto the price of auto service is completely legal in Florida! There is also no law requiring consistency in naming this extra charge or even in limiting the amount of that charge.


The size of this bogus fee is calculated as a percentage of the total legitimate parts and service charge you incurred, and varies from as little as 5% to 10% and higher. Typically there is a self-imposed “cap” on this phony charge so that you don’t notice it when you pay your bill at the cashier. Caps also vary from about $25 to $50. Remember that most people service their cars about every 6 months or 5,000 miles and keep their cars 6.5 years. If your average “hidden charge for service” was $15, over the course of ownership you would pay $195 for work that was never performed on your car! The average dealer fee in Florida may be about $800, but a car dealer makes his money on the bogus service charge with volume. A car dealer may sell a few cars each day, but he or she may service dozens. Therefore a car dealer “steals” far more money from his service customer than he does his car buying customers.


Auto service companies and car dealers know that this is wrong and expect some of their customers (those that are alert enough to catch it) to react angrily. A call from one of these customers yesterday is what inspired me to write this column. The caller was a regular reader of my column and called me to ask what the “sundry supply fee” for about $30 at the bottom of his service invoice at Sunrise Ford in Fort Pierce was. I explained it to him. By reacting angrily and threatening to take his service business elsewhere, he was able to have his $30 refunded.


This is my recommendation to you: always inspect the service invoice before you pay. If there is any charge on the invoice that you cannot recognize, ask for a complete explanation. The explanation you are likely to hear is that these are for “miscellaneous” supplies and costs the dealer incurs in repairing the average car, probably not yours. They will talk about nuts and bolts, screws, fasteners, grease solvent, and maybe even “soap to wash the mechanic’s hands”. Of course these are just normal overhead costs of doing business. They might just as well be charging you for their power and water bill or salary to their mechanics. You tell them that their costs of doing business should have been included in the price you were quoted for the labor and parts on your repair order, not sneakily tacked onto the bottom of the invoice when you were paying the cashier.

Dealer Pre-Installed Accessories: Avoid them like the Plague

When I talk about unfair and deceptive sales practices by car dealers, number ONE on the list are pre-installed dealer accessories. Number two on that list is the Dealer Fee. Both of these common practices are the essence of how car dealers “bait and switch” you from the advertised car with the low price to the car they really want to sell you with the high price.

There are a lot of car dealers that represent each make sold, especially in Florida. Dealers advertise more than almost any other retailer because selling cars is intensely competitive. If you live in Florida, the chances are that there are at least 3 car dealers selling the make you want to buy within a short driving distance. If a car dealer advertises a price on a car higher than his competitors, you will probably not buy that car from him. Therefore, most car dealers do everything possible to make their prices appear to be lower. Statistics for all makes prove that the average transaction price on cars purchased is hundreds (and even thousands) of dollars more than the advertised prices. Virtually all advertised car prices are lower than the price that the dealer can profitably sell the car for.

You’ve heard the old saying that “necessity is the mother of invention” and the previous paragraph explains the necessity for the invention of the pre-installed dealer accessories (and the dealer fee). The pre-installed dealer accessories are products that dealers install (or claim to install) on all of their cars in their inventory. These accessories have a very low cost to the dealer and the dealer marks their retail price up to you by several hundred or even a thousand percent. Some examples of dealer installed accessories are nitrogen in the tires, pin stripe decals, paint sealant, fabric protection, emergency road service, glass etch theft protection, LoJack, etc. A “basket” of items like this can cost the car dealer under $100 but he will mark that up to $1,000, $2,000 or higher. When he adds this plus his dealer fee of $800 to $2,000 to the advertised price, the great price you thought you had, disappears into a high price with a large profit to the dealer.

My advice to you is simply to refuse to allow any pre-installed dealer accessory to be added to the advertise price of the car you want to buy. If the dealer won’t comply turn around and walk out. If in fact he has installed all of those overpriced accessories to all of his cars, he can obtain a car without them by trading cars with another dealer or ordering one from the factory. The same thing holds true for his dealer fee. It’s best to make it clear from the get-go that you will not visit a car dealer without an “out-the-door” price plus government fees only. Any “fee” by any name that is added to your out-the-door price must be one paid by the dealer to the state or local government…license place/registration and sales tax.

If you want an accessory that the car dealer can install, it can be installed after the fact and after you’ve had ample opportunity to verify its value and price. The best rule of thumb is to buy only accessories sold and installed by the manufacturer. These are usually high quality with a fair markup, and they are covered by the factory warranty. When you’re considering manufacturer’s accessories, be sure that they are from the manufacturer and not the distributor for that manufacturer. Distributor or port installed accessories usually carry much higher markups than factory installed.

Holdback or Holdup?

Back in 1968 when I first went into the retail car business with my father, I can remember asking him, “What is holdback?” I was learning the business and had been studying the invoices on new Pontiacs that General Motors sent us when they shipped a new car that we had ordered. We had to pay the invoice immediately when it was issued, sometimes even before the car arrived at our dealership. Actually, in most cases, it was our bank or GMAC who paid GM and we borrowed the money from them to pay for the car. 

My father’s answer to my question about holdback was that it was an increase in the amount of the invoice that we paid General Motors which was not really part of the price of the car. It was just an extra amount added to the real price of the car and included in the invoice. At that time it was 2% of the MSRP [suggested retail], so if a new Pontiac Bonneville had an MSRP of $10,000 and a true cost of $9,000, the factory invoice would be $9,200. I asked my father, “When do we get the $200 back?” He said, “At the end of the year”. I asked him if they paid us interest on our money and I can remember him laughing loudly and saying no.

Of course my next question was why they do that. He told me that the reason they gave him was to be help dealers sell their cars for more money so that they didn’t go broke. He said that because they didn’t get their holdback money for such a long period of time, they began to think of their invoice as being the actual cost of the car. General Motors felt that many dealers were such poor businessmen that they might sell their cars so cheaply that they would go out of business. Now, because GM was kind enough to hold back hundreds of thousands of dollars of the dealers’ money [and pay them no interest on it] but return the money to them once a year, they could help the dealers make a bigger profit and maintain adequate working capital.

At that time I thought this was the biggest bunch of boloney I had ever heard and I was sure that this was a scheme by the manufacturers to keep a free float of millions of dollars of their dealers’ money under the guise of helping the dealers. I asked my father why the dealers didn’t strongly object to this and he said that most dealers actually “liked” the idea of holdback. When I heard that, I thought that maybe GM and the manufacturers were right about the dealers not being smart enough to sell their cars for a reasonable profit.

It took me a few more years in the business before I understood what was really going on with holdback. It was a “no brainer” as to why the manufacturers liked it but at last I understood its attraction to us dealers. Because we had to pay an extra amount over the true price of the car and not see that money for up to a year, we began to think of the invoice as the true price, even though it was actually inflated by hundreds of dollars. Because all manufacturers added holdback to all dealers invoices, the net effect was to raise the price of all cars to all buyers by the amount of this holdback. I know this is a dirty word, but it is price fixing on the grandest of scales. This might have been something that Henry Ford, Alfred Sloan, and Walter Chrysler concocted while playing golf at Bloomfield Hills Country Club outside of Detroit.

Another neat thing about holdback for us dealers is being able to tell our customers that we are only charging them “X dollars” over invoice. Or, we can tell them that we will sell them this car at invoice with no profit to us at all! [There’s a sucker born every minute] Dealers often have “invoice sales” with copies of the invoice pasted on the car windows. Who doesn’t believe that an invoice is the cost of the car? The truth is in the semantic skullduggery …”Mr. Customer, I solemnly swear to you that this the exact price that I paid the factory for this car. In fact, here’s a copy of the invoice.” That’s what the dealer “paid” the factory all right, but it’s not what the he paid the factory after he got his holdback check in the mail.

You might be thinking, so we’re talking about $200 more or less on a $10,000 car. Who cares? Don’t forget, that was almost 50 years ago. Holdbacks have expanded considerably and now instead of several hundred dollars we’re talking several thousand. Also, dealers no longer have to wait a year to get their hold back money back. Now they get it back monthly. Manufacturers even changed the names of these monies they hold back. These are innocuous names so that, if you see them on the invoice, you will have no suspicion…names like floorplan assistance, advertising, PDI, Administrative or DAP. Of course there are also cash rebates to dealers that don’t even show on the invoice. I estimate the average car invoice today includes $3,000 to $4,000 in hidden holdbacks to the dealer. Holdbacks are also applied to factory or distributor accessories like “protection packages” [wax, undercoat, window etch, roadside assistance], floor mats, window tint, etc.

The bottom line is that you don’t rely on the dealer’s factory invoice to determine the price you are willing to pay for a car. And be especially suspicions when the dealer quotes you a price of “X dollars over invoice” or actually shows you the invoice. You’ve heard the old joke, “How can you tell when a politician is lying?” Answer: When his lips are moving. “How can you tell when a car dealer is lying?” Answer: When he shows you the invoice.

Open Letter to Auto Manufacturers: Require Your Dealers to Obey the Law

Dear USA auto manufacturer,

My last blog was about the fact that most car dealers’ advertisements violate the Federal Trade Commission’s rule that “advertisers cannot use fine print to contradict other statements in an ad or to clear up misrepresentations the ad would otherwise leave.” The FTC states that any disclaimer regarding a price or a payment must be “CLEARLY AND CONSPICUOUSLY DISPLAYED”. You can read my last blog at http://oncars.blogspot.com/2016/02/the-federal-trade-commission-most-car.html.

I’m not telling you anything that you don’t already know. You see the TV, print and Internet advertisements of your franchised dealers and those of the other US auto manufacturers. In fact, I suspect that the reason you haven’t done anything about this before is because “everybody else does it!”, including YOU. Every auto manufacturer uses fine print in most of their advertising that “contradicts other statements” especially lease and purchase payments and selling prices. Your dealers are simply following your example. Some of your dealers might not even know that they are breaking the law because you are advertising just like them. I’m not a lawyer, but I’m confident that “everybody else does it” is not a very good defense when you break the law.

My opinion as to how we reached this sad state where almost every manufacturer and car dealer is violating the FTC regulations is that everyone felt they had to do so to remain competitive. Each manufacturer and dealer believes that if his competitors advertise prices and payments that are perceived to be lower than his, he will lose sales to his competitors. Each feels like he has no choice even if he feels bad about misleading his customers.

All of this begs the questions “Why doesn’t the Federal Trade Commission” enforce their laws better? I’m not positive about why that is but I’m guessing that it has to do with lots of things like insufficient budget, low priority, heavy lobbying by large corporations like GM, Ford, Chrysler, and Toyota and not enough consumer complaints. By the way, I believe that the reason more consumers don’t complain is that most don’t know that concealing important information in the fine print is illegal. Educating the public and the car dealers might be the first step toward resolving this serious issue. In fact, this blog is my small contribution to that education.

But, the most effective thing that you, the auto manufacturer, can do is set the example for your dealers. After you have begun to follow the law, require the same of your franchised dealers. I would begin by including a clause in your dealers’ franchise agreements that they must “obey all federal, state, and local laws”. If they do not, there should be penalties up to and including the cancelation of their franchise agreement. Furthermore you could include the same language in your advertising covenants, contractual agreements that you dealers must sign regarding ethical and honest advertising. I’ve heard it said that it’s difficult for you to know when you or one of your dealers advertises in a manner that is unfair, deceptive, illegal, and/or unethical. This brings to mind the famous quotation by the former Associate Justice of the US Supreme Court, Potter Stewart, (no relation)…” I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description ["hard-core pornography"], and perhaps I could never succeed in intelligibly doing so. But I know it when I see it…”

Finally, I respectfully suggest that you use the following language in your contracts with your dealers, the advertising covenants and franchise agreements, “Any additional payment required of the customer in order to obtain the advertised payment or price, except government fees or taxes, must be conspicuously displayed immediately adjacent to the price or payment and in the same font size, style, and color.”

When most dealers and manufacturers are abiding by the law, we will have reached the tipping point so that the outliers will be obvious and the FTC can easily enforce the law so that everybody does so. With almost all advertising being honest and transparent, no manufacturer or car dealer will have a competitive advantage based solely on deception. The car buyers will be free to choose the best price by shopping and comparing with different dealers and manufacturers the way the free marketplace is supposed to work. The lowest price or monthly payment they see advertised will really be the lowest. This will raise the image of car manufacturers and car dealers and it will increase their sales and profits.

The Federal Trade Commission: Most Car Ads are ILLEGAL

To read FTC's disclosure regulations click here

Can you remember reading, seeing or hearing a car dealer’s advertisement that had no fine print? The TV advertisements are especially egregious because, even with HD, it’s literally impossible to read the fine print. If the print were large enough, it’s not displayed on the screen long enough for you to completely read it. You’ve all heard the radio “fine print”. The advertisers are experts at making it incomprehensible. One trick is to put the disclosure at the beginning of the ad so that it appears not to be a part of the advertisement. They will use a different voice, which speaks very softly and very fast. I believe that they record the disclosure at normal speed and electronically increase the speed of the recording to an incomprehensible level. The fine print in newspapers and direct mail is the only fine print that is even possible to read and it often takes a magnifying glass to do so. Some tricks to make it even more unreadable are to make the color of the print blend with the background color of the paper (dark blue print on a dark red background), obfuscate the message by mixing in some legitimate, irrelevant disclosures like “Dodge is a copyrighted brand name of Chrysler Corporation, and they usually locate the fine print as far away from their false claims as possible.

Of course fine print deception is not limited to car dealer advertisements. Car manufacturers, pharmaceutical companies, and most other retailers take advantage of their customers in this manner too.

The Federal Trade Commission says that advertisers are not allowed to “contradict other statements in an ad or to clear up the misimpressions the ad would otherwise leave.” The FTC also says that “Accurate information in a footnote or a dense block of text likely will not remedy a deceptive representation conveyed by a headline or other prominent selling message because reasonable consumers may not read the footnote.”

Car dealer leasing ads and car manufacturer leasing ads commonly advertise low lease payments with large down payments, often obfuscated as “capital cost reductions”. You’ll see a new BMW advertised for $399 per month but when you take in consideration the $8,000 down payment which is impossible to read on the TV screen, the payment might actually be $899 per month.

You see a lot of “100% Guaranteed Credit Approval Ads”, but the fine print says that your credit score will affect the terms and down payment. Interpreted, this means if you have bad credit, you will have to make a down payment up to 100% of the price of the car and the financing terms could be as short as one month. The disclaimer in the fine print is a total contradiction of the headline, bold print claim of the ad and a violation of Federal law.

A popular deception by many car dealers is to advertise a very low price in the headline of the ad with the fine print totally contradicting the ad price. This is done by the fine print saying that the “price excludes dealer installed accessories” which can total thousands of dollars. The fine print also often says “customer must qualify for all rebates and incentives”. These are impossible for any one person to qualify for such as military rebate, college rebate, loyalty rebate, and conquest rebate. To qualify for all the rebates one would have to be on active duty in the military, a graduate of a 4 year accredited college within the past 6 months, drive the same make car as is advertised, and drive a specific competitive make car at the same time.

Another fine print scam is “Lowest Price Guaranteed or We Pay You $1,000”. There’s even one dealer who says he’ll give you the car free if he can’t beat his competitor’s price. The fine print says the dealer reserves the right to buy the other car from his competitor at the lower price. Now, what are the odds that your car dealer’s competitor will agree to that? The fine print also says that you must bring him a buyer’s order signed by the other dealer to verify the lower price. Have you ever asked a car dealer to give you a signed copy of a buyer’s order without actually buying the car from him? He won’t give it to you for the simple reason he doesn’t want to allow his competitor to see it and beat his price.

Florida law requires that dealer fees be included in the advertised price of all cars. Most dealers do not to this but instead disclose the dealer fee in the fine print. Often times they do not even disclose the amount of the dealer fee but simply say “plus dealer fee” or “plus fees”. Florida law does not put a cap on dealer fees as many states do. In theory, a dealer could have a $10,000 or higher dealer fee. Many have dealer fees over $1,000 now. This practice is a clear violation of the Federal Trade Commission’s rules.

I read in the newspaper last week that Governor Rick Scott had just signed 8 more bills into law. This week we have 8 more laws than we did last week. What our state and our country need are not more laws, its more enforcement of the laws we already have on the books.