Question, when is the price not really the price – answer, when you’re in a car dealership! For years one of the dirty little secrets in the automotive industry has been dealer fees. These fees are not mentioned when you are shopping whether in person or on-line, they only appear when you are signing the papers to buy the car. These fees are a way for the dealer to make additional money and they seldom provide you with any benefit or service.
These are fees that are seldom discussed outside of the auto industry’s inner circle until very recently. Surprisingly it is a car dealer in Florida who is bringing attention to these fees. This car dealer, Earl Stewart has gone to his state legislators to try and make the practice of charging dealer fees illegal in Florida. Unfortunately for the people of Florida, their state senators do not agree with Mr. Stewart and they have refused to legislate any consumer protection from the unfair, hidden fees dealers use to generate hundreds if not thousands of dollars from unsuspecting customers. The reason these Senators are reluctant to provide any consumer protection from dealer fees can be found by following the money. Most state Senators rely on large financial contributions from car dealers to get elected so they do not want to pass legislation that would take income away from their large campaign contributors!
As the Auto Insider I applaud Mr. Stewart. When I first started working in the auto industry I was much younger and naive. When I learned what dealer fees were I was shocked that this practice was legal. How could a dealer get away with charging customers fees that have no substance! I quickly learned the practice of charging these fees is not only legal, it condoned in most states. And these fees are not petty, I’ve heard of car dealers charging dealer fees that exceed $2,200! Imagine the nerve of a car dealer to put an extra charge of hundreds or thousands of dollars on top of their purchase price on every car they sell without providing any service or benefit to the customer in return for this charge. Couple the close relationship of politicians and car dealers with the fact that there is no consumer protection from dealer fees this situation reflects the very worst elements of both our political system and capitalist society.
These fees are simply wrong! Some dealers I know keep a separate bank account for these charges and use it to buy second homes, boats, sports cars and other luxury items. And when I’ve questioned them about these practices they acknowledge that these fees are nothing more than a tool to inflate their profits.
Remarkably virtually no one is immune to these pocket-emptying tactics. Dealers in virtually every state use these methods to increase their bottom-line. And like most things that are shady, car dealers use a variety of names for these fees. When you are shopping for a car be on the lookout for any of the following types of fees: dealer fees, prep fees or preparation fees, conveyance fees, loan origination fees, alarm fees, etching fees, environment fees just to name a few!
Of course there are fees a car dealer will charge you that are fair and appropriate like a documentation fee. When you buy a car there are many forms and documents that need to be generated and exchanged between lenders, manufacturers and government offices. If a dealer charges a reasonable fee for this service it is not outrageous or wrong. For instance in California a dealer can charge up to $45 for their document fee, Texas caps the charge at $50. In my opinion these fees are justifiable. These documents require addition manpower and skill to be generated and submitted properly. Additionally, it is not uncommon for there to be some fees incurred when certain documents are processed, especially government forms. When buying a car a customer should also expect to be charged Department of Motor Vehicle fees that the dealer must pay on your behalf. DMV fees cover items like registration, licensing and plate fees that vary by state.
Now you do have to be careful that a car dealer does not gouge you for when they charge you documentation or DMV fees. Documentation fees that cost hundreds of dollars do not make sense to me, and a dealer should be able to justify any fee they charge. Also check with your state’s DMV to determine all the necessary registration and licensing fees. I would expect your dealer to pass these fees along to you without additional expense. I know of many dealers that make a significant profit overcharging for DMV fees so be careful! Feel free to question any fee that doesn’t seem right and be prepared to press them on this issue. Car dealers do not like to lose the revenue stream they use to buy their big-boy toys!
Shop smart, ask the dealer to identify any and every fee when you are given a price for your car. Many car dealers are more than happy to provide you with the area’s lowest price knowing once you are signing the papers for your new car you will ignore or not even see the $2,000 dealer fee. That’s why sometimes the price really isn’t the price, when you’re dealing with a car dealer!