The Idiocy of Dealer Fees

Last night I was at Tri-Star Imports in Ellisville MO, a Mercedes-Benz dealership where a friend was buying a 1998 SL500 (review forthcoming). After negotiating on the phone for weeks and coming in a few times to check for rust, driveline issues, and other old-car maladies, a price agreement was reached at $10,000.

The saleswoman, Jill, was a pleasure to work with; she was patient, helpful and honest about the car’s history (last owner had it for eight years) and generous with her time.

However, once we sat down to hand over the cash and purchase the car, she mentioned there was a $199 dealer fee.

Dealer fees are nothing new, but it’s something we ought to object to. My friend said to her “I brought exactly ten thousand dollars cash from the bank because I thought that was the price we agreed to.” She explained that the fee covers paperwork and administrative costs and asked if we could charge the fee to a debit or credit card.

I then replied, “It’s a matter of principle.”

She went to her manager and they agreed to waive the fee by reducing the sale price of the car by $200.

This isn’t a slight on her in any way, nor was she ever dishonest since these large fees at franchised dealers have become the norm. Like going to Target and paying sales tax, car buyers have come to expect and unfortunately accept dealer fees with little or no objection. Some dealers charge over $600 for so-called “paperwork” that requires little more than 15 minutes to process.

These additional costs are presented in a somewhat underhanded way to the consumer. They call it a “fee,” as if it carries the legal weight of sales tax or inspection costs. Then, they explain that it covers the cost of paperwork and processing. To lend legitimacy, dealer fees are listed right under state-required sales tax, licensing, temp tag, and title costs.

Bear in mind that In Missouri, you still have to take the papers to your local DMV to register the car and pay sales tax and you have to visit the assessor’s office for a property tax receipt. The dealer doesn’t do any of this for you. If they did, a $50-100 convenience fee could be justified.

And since when was paperwork and administration an extra cost to the consumer? Like fuel surcharges levied by freight carriers, it opens the door to charging the customer for everything from the salesman’s commission to the electricity bill. If the car is sold at a large profit, why should the customer be charged for the cost of doing business? Shouldn’t the profit built into the price of the vehicle cover that cost?

For example, in my line of work I store large volumes of inventory for resale. I cannot charge my customers specific fees for rent, warehousing, or the hourly labor to operate a forklift. Medical offices build their administrative fees into their hourly rates, and your local restaurant doesn’t add an extra charge to your dining bill for wear and tear on silverware and plates. It’s built into their profit, as it ought to be.

For the outrageous $200-$700 that dealers tend to charge for signing and mailing a few papers, you don’t get floor mats, detailing, a tank of gas, or an oil change. It directly benefits the dealer’s bottom line and you get nothing for it. Additionally, retail values of used cars are already priced far above private party values because of overhead. Vehicle valuation guides compensate quite generously for retail operating costs.

If Jill had returned to her cubicle and informed us that the fee could not be waived, we were prepared to take our wad of cash and politely walk out. All of her time and energy would have gone to waste over an artificial profit-booster levied at sucker consumers unaware of their right to object.

Again, it isn’t her fault. Her management has chosen to charge the fee to customers and as a sales consultant, she is compelled to ask the customer to pay it. Otherwise, the sales experience at Tri-Star was outstanding.

The solution to this problem will not come from state intervention. The appropriate remedy is for us, the consumer, to exercise freedom of choice and become informed. Ask about dealer fees prior to conducting the transaction (and prior to negotiation) and if it seems high, let them know exactly why you’re declining to do business with them.

In the words of Nancy Reagan, “Just say no.”

One Response to The Idiocy of Dealer Fees

  1. Jeff says:

    Dealer fees suck, and I would have certainly walked away too if they wouldn’t waive it. However, if a price was negotiated to the point you brought cash in, the closing fee should have already been discussed. She should have informed you prior to that point of the fee.

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