McClatchy/Tribune
Published on: 03/21/08
From the mailbag: A reader asked about "dealer fees" when buying a car. He has noticed — and it is hard not to — that in the past 10 years or so, more and more dealers are adding these moderately esoteric fees to the purchase of a car or truck, and the reader wanted to know what they were, where they came from, and how to treat their presence.
It's an excellent question. And I'll admit to changing my position on dealer fees. More about that in a moment.
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First, as to what they are: Let's see how they are defined by some experts in the field.
Terry Jackson, columnist for Bankrate.com: "So-called dealer fees are simply a way to disguise added profit that should be negotiable as part of the sales process. While it's becoming commonplace for dealers in a city or region to try to charge these fees, you're definitely within your rights to demand that the fee be eliminated or you're walking away from the deal."
From the Yahoo.com Autos glossary: A dealer fee is "an amount of money a dealership might use to mark up a vehicle, giving them room to negotiate with customers and still show a profit."
From Edmunds.com: Dealer fees are "charged by the dealer to recoup business costs. These fees may be negotiable or avoidable."
Or they may not. While some states don't allow such dealer fees, some do. There are, of course, legitimate fees involved in the transaction process for a new vehicle. Most all vehicles have a "transportation fee" added to the sticker price, and that's the cost of sending the vehicle from the factory to your dealer. But the "dealer fees" we're talking about here typically range from about $400 to almost $1,000, though they are seldom such a flat number — a figure like $678 seems a lot more official than, say, $700.
Ask a dealer what the fee is for, and you can expect a variety of answers: To cover advertising costs, administrative costs, preparation costs, documentation costs, notary costs, yard work, janitorial services, coffee in the waiting room, you name it: You will, of course, have to pay sales taxes and a fee to get your license plate, but all those other fees — well, they are less easy to logically quantify.
But you know what? I don't care. There was a time when I wrote that I'd simply walk away from a dealer that charged simple "dealer markup" as disclosed on a supplemental sticker on the window, and I also said I'd walk away from a dealer who charges dealer fees. These fees might not be disclosed until you are sitting down with the dealership's F&I manager, the "finance and insurance" guy who takes up where the sales people leave off, and talks gap insurance, extended warranties, undercoating, overcoating, dealer-involved financing and, oh yes, there are dealer fees here on the contract, but they look so official that they really aren't worth discussing, are they?
No, they aren't. I'll happily pay a dealer fee. Three hundred bucks? Fine. Or $1,000, or $2,000 — doesn't bother me. Same with the dealer's add-on markup sticker. $5,000? Fine.
And here's why.
I do my homework. I check and see what the dealer paid for the vehicle I'm buying, probably by going to Edmunds.com and KBB.com. I check those sites for rebates. I do a little more online research to see if there are any "dealer rebates," which are rebates the manufacturer gives to the dealer, not you, to distribute how the dealer sees fit: The 2008 Honda Ridgeline, for example, has no customer rebate, just an offer of low-interest financing. But my research tells me that Honda is rebating $3,500 per Ridgeline to the dealer. When I walk in the door, I know the dealer has $3,500 to play with. I want some of it. If I were buying a 2008 Mercedes-Benz SL, I'd know there's a $12,000 dealer rebate. A 2008 Cadillac Escalade, $2,000. A 2008 BMW 7-series, $5,000.
So when I go to the dealer, I have a figure in mind. I want the dealer to make a fair profit, and that figure I arrive at gives the dealer a profit.
Let's say I want a Ford F-150 pickup — I'm just using it as an example because it's the most popular vehicle — and I have decided that it is worth $18,000, plus tax, title and license. That's what I'll pay.
I am not saying I'll pay $18,000, plus a $678 dealer fee and a $1,000 supplemental sticker markup. But if it makes the dealer feel better to charge me $16,322 for the truck, then add on $678 and $1,000, thus totaling $18,000, what do I care?
If a dealer wants to sell me a truck, and getting the price down to my $18,000 involves absorbing that fee, fine.
And what if that dealer won't meet my price?
Then I go to the next one.
And the next one.
And the next one. And if nobody will bite, I know I'll have to revise my $18,000 upward.
But in the end, if it takes me two hours of extra shopping to save $500, then I've been working that day for $250 an hour. I'd love to make $250 an hour. Figure out how much your time is worth, and that's how willing you'll likely be to shop around.

