OPEN LETTER TO FLORIDA CAR DEALERS

SUBJECT: 

ELIMINATE HIDDEN FEES
Dear fellow Florida car dealer, I started in the retail auto business in 1968, about 52 years ago, and I have seen a lot of changes in the way we dealers sell cars and the expectations of our customers. My remarks in this column are made sincerely and with a positive intent toward you and your customers. I’m not trying to tell you how to run your business; I’m suggesting a change that will reward both you and your customers.

Virtually every car dealer in Florida adds a multiple, hidden charges to the price of the cars he sells, variously referred to as a “dealer fee”, “doc fee”, “dealer prep fee”, “tag agency fee”, “electronic filing fee”, dealer services fee”, etc.. This extra charge is printed on your buyer’s orders and is programmed into your computers. It has been regulated and minimized in many states including California. Florida has virtually no regulation and no regulation that is enforced. You charge these hidden fees to every customer and it ranges from a few hundred dollars tothousands. Florida law requires that you disclose in writing on the vehicle buyer’s order that these charges represent profit to the dealer. Florida law also requires that you include these fees in all advertised prices. You almost never do this, and another way that you get around the law by limiting the number of advertised vehicles (typically one).

The argument that I hear from most car dealers when I raise this issue is that the hidden fees are fully disclosed to the buyer on the vehicle buyer’s order. But most car buyers are totally unaware that they are paying this. Usually they negotiate the car purchase on your “worksheet” which is not a legal document. The legal buyer’s order is only “revealed” in the finance office when it’s spit out of the computer with dozens of other documents the buyer must sign. Who reads all the voluminous paperwork associated with buying a car? The few who notice it assume it’s an “official” fee like state sales tax or license and registration fee. Those few astute buyers who do question the fee are often told that your dealership must charge this fee on very car, which is untrue. These astute buyers are also told that all other car dealers charge similar fees. This is almost true, but, as you know, my dealership does not.

The reason you charge this fee is simply to increase the price of the car and your profit in such a manner that it’shidden from your customer. This is just plain wrong. Dealers will admit this to me in private conversations and some will admit that they have considered eliminating the fee as I did but are afraid of the drastic negative impact to their bottom line. By being able to count on an extra $500 to $3,000 in profit that the customer is not aware of or believes is an “official fee”, you can advertise and quote prices below cost and end up making a big profit. Or, if the price you quote the customer does pay you a nice profit, you can increase that profit by several hundred or thousands of dollars.

This “extra, unseen” profit is even better for you, because you don’t pay your salesmen a commission on it. That’s being unfair to your employees as well as your customers. When the rare, astute buyer objects to the hidden fees, the you can simply decrease the quoted price of the car by the amount of the hidden fees. This would have the same net effect of removing it. The salesman won’t do this because he’ll lose his commission (typically 25%) on the decrease in his commissionable gross profit.

If you don’t know me, I should tell you that I don’t profess to be some “holier than thou” car dealer who was always perfect. Although, I never did anything illegal, when I look at some of my advertising and sales tactics 30+ years ago, I’m not always proud. But I have evolved as my customers have evolved. My customers’ expectations, level of education, and sophistication are much higher today. Your customers are no different. As I began treating my customers, and employees, better I discovered that they began treating me better. Yes, I used to charge a dealer fee ($495), and when I stopped charging it many years ago, it was scary. But I did it because I could no longer, in good conscious, mislead my customers. Just because everybody else was doing the same thing did not make it right.

Now here’s the good news. My profit per car did drop by about the amount of the dealer fee when I stopped charging it. But when my customers realized that I was now giving them a fair shake and quoting the completeout-the-door price with no “surprises” the word spread. My volume began to rise rapidly. Sure, I was making hundreds of dollars less per car, but I was selling a lot more cars! I was, and I am, selling a lot of your former customers. My bottom line is far better than it was when I was charging a dealer fee. You can do the same!

Why am I writing this letter? I’m not going to tell you that I think of myself as the new Marshal that has come to “clean up Dodge”. In fact, I understand this letter is to some extent self-serving. Lots of people will read this letter to you and learn why they should buy a car from me, not you. And, I’m also aware that most dealers who read this will either get angry and ignore it or not have the courage to follow my lead. But maybe you will be the exception. If you have any interest in following my lead, call me anytime. I don’t have a secretary and I don’t screen any of my phone calls. I would love to chat with you about this. My personal cell phone number is 561 358-1474.

Sincerely,



Earl Stewart

Why Do Car Dealers Lie about their Prices?

You probably already know that you can’t buy a new or used car for the advertised price; the out-the-door price always ends up thousands of dollars higher. Car dealers are the only retailers that routinely trick their customers like this, at least to the degree that car prices are understated.

Have you ever wondered why virtually all car dealers do this? Imagine that you owned a Ford, Honda, Chevrolet, or Toyota dealership in Southeast Florida. Each of these car brands has as many as 20 dealers and no fewer than 12 selling the IDENTICAL product. Toyota has 19 car dealerships between Ft. Pierce and Key West. Every Toyota dealer pays Toyota the exact same price for their cars; but Toyota dealers don’t sell those cars to their customers for the exact same price. They mark up each car as much as they can…the highest price that the customer will pay. If a Honda dealer sells 25 identical Honda Accords in a given month, the likelihood is that each sold for a different price; the typical variation in profits on the identical vehicle can range from a few hundred to a few thousand dollars.

Let’s say you owned a Honda dealership. The Honda manufacturer gives you a quota…a minimum number of Hondas you must sell monthly and annually to fulfill your contract allowing you to sell Hondas and often to receive volume cash bonuses. The only way you can do this is to price your Hondas “competitively”. But, you also must maintain a high enough markup on each Honda, so that your dealership remains profitable. This is the “Catch 22” and dilemma of all car dealers. A South Florida Honda dealer has EIGHTEEN other Honda dealers advertising the same cars he sells. If you advertise a Honda Accord for a higher price than most other Honda dealers, you won’t sell enough to meet your quota; if you advertise that Honda Accord for a lower price you’ll sell lots of Accords, but you’ll lose money on every car.

Therefore, all Honda dealers and all car dealers of all makes see only one viable course of action. Advertise their cars at a very low price, lower than their competition (and lower than they can or will sell the car for), so that the customers will come in to buy. Once the customer is in the dealership, the “games begin” to raise the advertised price to a price as profitable to the dealer as he can negotiate. The tools the dealers use to accomplish this are many…hidden profits (aka dealer fees) disguised as government fees, dealer pre-installed accessories, and switching the customer to a different vehicle or a lease rather than a purchase.

Car dealers see themselves as having no choice but to sell cars this way if they’re to remain in business. They blame their actions on the auto franchise system and there is some truth to this. Apple sells you iPhones directly, but Toyota cannot sell you a Toyota directly; car manufacturers MUST sell through their dealers. This system is mandated and entrenched by state law in all 50 states. The manufacturers created the dealer franchise system in the early twentieth century because they couldn’t sell their cars fast enough directly. Once a critical mass of dealers was created by the auto manufacturers, the dealers organized and lobbied their state legislatures to created laws protecting their franchises from the manufacturers. The main reason they did this was because the manufacturers were granting franchise agreements to too many dealers…” over-dealering”. Too many car dealers selling the same car in a market creates too much competition because it drives the prices down. Unfortunately for the dealers, there were (and are) already too many. Today, car dealers are overprotected, enjoying exclusive markets with state laws making it almost impossible to control, much less, eliminate even the most “problem” car dealers.

The auto franchise system is over 100 years old and obsolete, but it’s entrenched and will remain for the foreseeable future. New vehicles will, one day, be sold online directly by the manufacturers and maybe even through Amazon or Walmart. Vehicles will be built to order and delivered within a week. The price you see will be the price you pay, and you will be able to return the car for a full cash refund if you change your mind. Service, maintenance, and repairs on modern vehicles is minimal. Separate service centers will still exist to handle this need. Service centers will also have new vehicles of each model for you to inspect and test drive. Tesla is doing today exactly what I described, except for the one-week delivery time and unconditional moneyback guarantee.

But there’s a larger reason why car dealers get away with their deceptions. That is “because they can”. Auto manufacturers realize they’re stuck with the dealer franchise system and “if you can’t beat ‘em, join ‘em”. Auto manufacturers have huge political lobbying clout and, when you add the car dealers and their associations’ money, state and federal politicians have no choice but to “play ball”. There are about 17,000 franchised car dealers. They have enormous lobbying power nationally through NADA, the National Auto Dealers Association, and they also have enormous lobbying power in all 50 state legislatures. The political donations that Big Auto and Car Dealers give politicians make the NRA look small by comparison.

ATTORNEY GENERAL ASHLEY MOODY: ENFORCE FLORIDA’S LAWS REGARDING ADVERTISING HONEST CAR PRICES

Attorney General Moody, as the top-ranking law enforcement officer of Florida, I ask you to investigate a sampling of new vehicle advertisements by Florida car dealers. These are readily available to you in Tallahassee, online from your home and office PC and your smart phone.

If your investigator indicates an interest in buying one of these advertised cars from that car dealer, they will discover that they cannot buy it at the advertised price “including all fees or charges that the customer must pay” according to Florida statute 501.976*.
You may have heard of me. I’ve been a car dealer in Florida for over 50 years. In those latter years I’ve evolved into a consumer advocate helping car buyers from being taken advantage of by car dealers. I’ve been doing a weekly radio show on this subject for 17+ years. Each week we mystery shop a South Florida car dealer. http://www.mysteryshoppingreports.com is the link to my archives of these reports. Our typical report involves responding to an online, TV, direct mail, or newspaper advertisement. We send a mystery shopper in who pretends to want to buy the advertised vehicle at the advertised price. In virtually all mystery shops (over 600), there are additional, hidden charges, including “non-governmental” fees, added to the advertised price. As an attorney and Florida’s top law enforcement officer, you should appreciate the fact that I’ve never been sued by a car dealer based on charges I’ve made regarding his violation the Florida Unfair and Deceptive Trade Practices Act and I’ve made hundreds of such charges. As an attorney, you know that the perfect defense against libel and slander is the truth.

When I raised this issue with your AG predecessors, Bill McCollum and Pam Bondi, I was told that the AG’s office didn’t have a significant number of complaints from Florida car buyers on this issue. I believe the reason that Florida car dealers have been violating this law for so long is because the law has never been enforced, and that car buyers have become “accustomed to being deceived”. They may not know about the law. They may think that filing a complaint is not worth the effort because 99% of all car dealers are adding hidden fees to the advertised price, and car buyers consider it the norm.

Floridians spend more money on automobiles than anything except housing, and they need your protection from being over charged millions of dollars annually by hidden charges violating Florida Statute 501.976.

* Florida Statutes


TITLE XXXIII

REGULATION OF TRADE, COMMERCE, INVESTMENTS AND SOLICITATIONS

CHAPTER 501 CONSUMER PROTECTION

501.976 Actionable, unfair, or deceptive acts or practices. —It is an unfair or deceptive act or practice, actionable under the Florida Deceptive and Unfair Trade Practices Act, for a dealer to:

(16) Advertise the price of a vehicle unless the vehicle is identified by year, make, model, and a commonly accepted trade, brand, or style name. The advertised price must include all fees or charges that the customer must pay, including freight or destination charge, dealer preparation charge, and charges for undercoating or rustproofing. State and local taxes, tags, registration fees, and title fees, unless otherwise required by local law or standard, need not be disclosed in the advertisement. When two or more dealers advertise jointly, with or without participation of the franchisor, the advertised price need not include fees and charges that are variable among the individual dealers cooperating in the advertisement, but the nature of all charges that are not included in the advertised price must be disclosed in the advertisement.

(17) Charge a customer for any predelivery service required by the manufacturer, distributor, or importer for which the dealer is reimbursed by the manufacturer, distributor, or importer.

(18) Charge a customer for any predelivery service without having printed on all documents that include a line item for predelivery service the following disclosure: “This charge represents costs and profit to the dealer for items such as inspecting, cleaning, and adjusting vehicles, and preparing documents related to the sale.”

Your Car’s Interior Can be as Coronavirus Resistant as the Cabin Interiors of Billionaires’ Private Jets

Warren Buffet sold all his commercial airline stock, more than $4 Billion, in reaction to the
Coronavirus pandemic. He sold none of his NetJets stock, the private jet company he controls

You probably know that the commercial airline business is in serious financial trouble, and many airlines are seeking government assistance to avoid bankruptcy or worse. People are afraid to fly for fear of contracting the Coronavirus. There isn’t the same fear when flying private aviation. NetJets, Wheels Up, Delta Private Jets, JetSuite and most other private aviation aren’t affected. Of course, one reason is that there are fewer people with less close contact in private jets.

Another reason I believe, is a biostatic agent, ClearCabin Barrier powered by PreventX, being used by almost all private jets to treat their cabins’ interiors. This product is sprayed on all exposed surfaces inside the airplane and is effective for at least 90 days. It dries quickly in 15-30 minutes, and isn’t harmful to leather, cloth, vinyl, or any other surface. It’s like a “ceramic coating” that kills viruses on contact and protects surfaces from being re-infected after it’s applied. Because ClearCabin is not a disinfectant, the airplanes are treated first with a good disinfectant; the ClearCabin is then applied to keep the plane virus free for at least 90 days.

I’ve researched this product and found that it’s widely used in hospitals, cancer/bone marrow and transplant wings. Professional sports uses ClearCabin in their locker rooms including the Miami Heat, Washington Redskins, Orlando Magic, Detroit Lions, and Minnesota Vikings. This germ virus inhibitor is even applied to products like New Balance shoes, Dr. Scholl’s inserts, Burlington socks, Wilson sporting goods, and Brillo Scrubbing Pads.

I’m so impressed with this product that I recently purchased some from The Leather Institute in Shrewsbury, New Jersey. I called them when I got an email from the CEO of Wheels Up (private aviation fractional ownership), Kenny Dichter, announcing that all Wheels Up airplanes were treated with ClearCabin. If you’re interested in this product you can contact The Leather Institute and they can direct you to a location near you that sells the product and/or can treat the interior of your car.

My Toyota dealership has just begun to use ClearCabin. We will first disinfect our vehicles with a certified disinfectant like Clorox or Lysol and then treat them with ClearCabin Barrier. This protects the car’s interior for at least 90 days even if a cough or a sneeze should temporarily re-infect a surface.

Unfortunately, at this time, there’s no product anyone knows of that will guarantee against contracting the Coronavirus. But I believe this two-step process of disinfecting the interior of your car and following up immediately with the application of ClearCabin is the very safest you can make the interior of your vehicle.