Monday, December 10, 2018
Anatomy of the Dealer Fee: Car Dealers’ Dirty Little Secret
Car dealers hide virtually all the profit they make when they advertise or quote you a price on a car.
By adding a phony fee (usually disguised as a government fee) after you’ve committed to buy the vehicle, they can advertise or quote you a price lower than they or another dealer can afford to sell the car for…usually below their true cost. The term “Dealer Fee” has become generic like Kleenex for tissue. Car dealers began changing the name from “dealer fee” to less recognizable names, as you’ll see in the example below. Some car dealers are even advertising “We Do Not Charge A Dealer Fee” because they’ve changed the name to Electronic Filing Fee, Tag Agency Fee, Doc Fee, etc.
Last week on my radio show we mystery shopped a Honda dealer in Pompano, Florida. My shopper responded to an online advertisement for a 2009 Honda Civic for $6,998. The salesman informed the shopper that there were some additional “fees” he must pay including a “Dealer Administrative Fee” of $799, “UCI” (Used Car Inspection Fee) of $1,495 and unnamed “Taxable Fees” of $200.50. The dealership increased the advertised price by $2,499.50.
The Florida law addressing dealer fees and the regulation and enforcement are “jokes”. The current Florida Attorney General, Pam Bondi, “looks the other way”. Governor Rick Scott also does not consider this massive deception of Florida car buyers an issue. Hopefully the newly elected AG, Asley Moody and Governor, Ron DeSantis will do the right thing by strengthening and enforcing the laws of Florida addressing the blatant car dealer deception.
Meanwhile my advice to Florida car buyers is this: Be aware that all car dealers (except me) charge hidden fees by various names. The only legitimate fees that should be added to the price of a car are Florida sales tax and Florida license tag and registration. These are government fees paid to the state of Florida. With this awareness, demand an out-the-door price from your car dealer which includes all charges except GOVERNMENT FEES. Compare this price with at least two of that dealers’ competitors. Be sure you’re comparing “apples and apples” …same year, make, model, accessories and the same MSRP. NEVER be switched to a different vehicle. This is car dealers’ favorite trick, so they can raise their price. Also, never be switched from a purchase to a lease; or from a lease to a purchase. If you prefer a lease, in addition to comparing “apples and apples’, be sure your down payment, all up-front out-of-pocket cash requirements, length of lease, and annual mileage allowance are identical when comparing lease payments.