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 am not trying to tell you how to run your business; I am suggesting a change that will reward both you and your customers.
Virtually every car dealer in Florida adds several charges to the price of the cars he sells, variously referred to as a “tag agency fee”, “do fee”, “dealer prep fee”, electronic filing fee etc. These extra charges are printed on your buyer’s orders and programmed into your computers. It’s regulated in many states including California. You charge this fee to every customer and it ranges from a few hundred dollars to several thousand. Florida law requires that you disclose in writing on the buyer’s order that this charge represents profit to the dealer. Florida law also requires that you include this fee in all advertised prices. You rarely, if ever, do this.
The argument that I hear from most car dealers when I raise this issue is that the dealer fee is fully disclosed to the buyer on his buyer’s order. But most car buyers are totally unaware that they are paying this. 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 told that your dealership must charge this fee on very car which is not true. 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. When my dealership is mentioned, many of your salesmen say that “Earl Stewart hides his fees in the price of the car he advertises”. Of course, we charge no such fees but, if we did, they would be included in our advertised and quoted prices. This gives our customers the ability to shop and compare our honest, total, out-the-door price. You sneak your dealer hidden fees in after the your customer buys the car.
The reason you charge these fees is simply to increase the cost of the car and your profit in such a manner that it is not noticed by 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 have, but are afraid of the drastic effect to their bottom line. By being able to count on an extra $999 in profit that the customer is not aware of or believes is an “official fee”, you can quote a price below cost and end up making a profit. Or, if the price you quote the customer does pay you a nice profit, you can increase that by several hundred 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 dealer fee, the right thing to do would be to decrease the quoted price of the car by the amount of the dealer fee. This would have the same net effect of removing it. The salesman won’t permit this because he will 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 20+ years ago and more, I am not always proud. But I’ve 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 a few 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 is 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 complete out-the-door price with no “surprises” the word spread. My volume began to rise rapidly. Sure, I was making a few hundred dollars less per car, but I was selling a lot more cars! I was, and 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 Marshall that has come to “clean up Dodge”. In fact, I’m aware that 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 and not you. And, I am 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 cell phone number is 561 358-1474. (Do you have the courage to give your personal cell phone number to your customers and the public?)