Monday, May 22, 2017

Dealing with the Dealer Fee: Earl Stewart’s User’s 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 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 stocknumber 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:

  • 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 that it’s part of the license tag and registration.
  • 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, and Earl Stewart Toyota that 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.
  • If 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.
  • 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 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.
  • 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. Thanks for this blog! Many years ago I worked at a bank in the installment loan department and was fully aware of all fees required by the state of FL. But things change and I've been away from that for many years. So today when we found a vehicle we love and began crunching numbers, I was shocked at all the add-on fees, especially the $1250 "doc fees" on an $18,000 purchase. I always thought doc fees were for Real property like real estate. So I came home and started researching. I found something online that said that a buyer pays .35 per $100 on a vehicle when a promissory note is involved. But I see no mention in your article above regarding a legal "doc fee' of any kind, financing or paying cash? And my figures based on the above rate would be about $60! The doc fees on our paperwork were $1250!! So I'm ready to return tomorrow (haven't signed anything yet) and FIGHT - but I want to be sure I understand - Does the state of FL require any doc stamps on financing a motor vehicle? Thanks so much for this blog!!!

  2. Dear Kim, the $1,250 "doc fee" you were charge was pure extra profit to the car dealer. Documentary stamps are charged by states on real estate purchase, NOT ON CAR PURCHASES. The dealer uses the language "doc fees" to trick customers into believing the $1,250 charge is a legitimate government fee which it is not. I'm sorry you were tricked. Unfortunately, Florida's laws don't prohibit adding a dealer fee BY ANY NAME. The law only requires that this fee be INCLUDED in the advertised price of the car. You would only have a legal argument if you bought your car from an advertised price which did not include the $1,250 doc fee.

  3. Earl, I have a question on the Documentary Stamps. :/ I have just received loan quotes from several different entities - credit union, and a bank - well known entities - who said that the rates they offered us did not include the DOCUMENTARY STAMP for the State of Florida "which they are required to collect and pay to the State of Florida" of $140.70. :/ Are you saying this is a totally bogus fee?

    Thanks for your help and the service you provide.

  4. Documentary stamps are legitimate fees on real estate in Florida and most other states. They are government fees levied as taxes on all real estate transactions within the state. There's no such thing as documentary charges on automobile sales. Car dealers use this to trick buyers into thinking the additional profit they are charging you are state taxes.

    1. But Earl, these are the LENDERS who are telling me this. Nothing to with the dealers. These are auto loans I applied for privately. One of them sent me this after they approved me: "A Florida documentary stamp tax, which we are required to collect and pay to the State of Florida, on your behalf, for $140.70 will be added to your loan amount. This will increase your monthly payment slightly. You will see this spelled out in the Disclosures section of your loan agreement." So are the lenders themselves also charging these bogus fees? And should I just refuse to pay it? Thanks again Earl.

    2. I wrote to the Florida Department of Revenue in Tallahassee. This was their response: "The Department has received your e-mail regarding auto loans.

      Per Rule 12B-4.053 (13) “Banks, Savings and Loan Associations: Notes or other written obligations to pay money executed by national or state banks and state or federal chartered savings and loan associations are subject to tax.”

      Therefore, an auto loan is a written obligation to pay money and is subject to documentary stamp tax."

      So the lenders are allowed to charge this fee.

      If I'm understanding it correctly, I'm thinking dealerships can/should charge this fee IF and only if you finance through them,, but they should not be charging it otherwise.

    3. Car dealers are not banks or lending institutions many people think they are lending the money when they finance a car for you, but they are only handling the paperwork for the bank. The bank pays dealers "kickback" for sending them the loan. The bank includes all of its costs including doc stamps in the interest they charge you. So even if you finance your car through the dealer, he should not charge you for doc stamps or Doc fees or anything else except sales tax and license.


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