The Dealer Fee... “Whatever?”

My column this week is a reaction to an article that appeared in this week’s edition of The Automotive News. For those of you “not in the business”, The Automotive News is the premier trade publication for the automobile industry. It is read by manufacturers, distributors, dealers, and everyone else associated with the car business.

The headline of the article, “Document Fee Began with a Lie, ‘Inventor’ Says,” grabbed my attention (to say the least). However, the neutral stance toward the nefarious “doc fee” that the publication seemed to take is what prompted my reply.

Below is the text of my email to the author, Edward Lapham, followed by the original article printed in the Automotive News.

Good morning, Ed. J

I was very surprised to read your commentary in this morning’s Automotive News, but I enjoyed it very much.

You may have heard of me. I’m the dealer in Florida who is championing making the doc fee (aka dealer fee, prep fee, etc.) illegal. I’m one of the few dealers who don’t charge such a fee which has grown enormously since Mr. Fashjian “invented” this concept in 1967. There’s a Mazda dealer in Delray, FL and a Nissan dealer in Ft. Pierce who charge $1,549 for dealer fees. The average fee in my market is over $750.

You can check me out on my website, www.earlstewarttoyota.com or my blog www.EarlStewartOnCars.com.

In your article, you say:

“We know that consumer advocates, assistant attorneys general and investigative reporters from TV networks consider the "doc fee" to be a consummate evil that some dealers use to gouge a little more profit out of poor, defenseless, unsuspecting customers. Dealers, who have had their gross margins eroded by factory pricing and Internet-savvy consumers, consider the doc fee to be manna from heaven that lets them squeeze a little more profit out of every deal. Whatever. “
I guess “whatever” means that Automotive News takes no editorial position on this. I can certainly understand why since most car dealers, the vast majority of your subscribers and advertisers, engage in this “questionable” practice.

I’m guessing that you consider this a “whatever” because there’s a split on opinion between consumer advocates, assistant attorneys general and investigative reporters from TV networks and car dealers. Have you wondered how car buyers feel about it? Why doesn’t Automotive News engage a pollster to measure the sentiments of car owners and prospective car buyers about doc fees/dealer fees?

Since you consider the current status this a draw (whatever), maybe the customer can be the tie breaker.

Sincerely,

Earl Stewart



EDWARD LAPHAM
Document fee began with a lie, 'inventor' says
Edward Lapham Automotive News -- February 15, 2010 - 12:01 am ET
COMMENTARY

Edward Lapham is executive editor of Automotive News.

I had an intriguing conversation with John Fashjian last week. He told me that three years ago, he sold his Framingham Chrysler dealership in Framingham, Mass., and moved to Florida.

More significantly, Fashjian matter-of-factly said he's the guy who invented the document fee.Of course, there is a difference of opinion about the add-on charge.We know that consumer advocates, assistant attorneys general and investigative reporters from TV networks consider the "doc fee" to be a consummate evil that some dealers use to gouge a little more profit out of poor, defenseless, unsuspecting customers.

Dealers, who have had their gross margins eroded by factory pricing and Internet-savvy consumers, consider the doc fee to be manna from heaven that lets them squeeze a little more profit out of every deal.

Whatever.

Here's how Fashjian said it started. In 1967 he was sales manager at Bancroft Motors in Worcester, Mass., selling Datsuns for next to no profit. For example, he remembers that the Datsun B1200 stickered at $1,962.50, and customers tried to get him down to $1,900. The way Fashjian told it, he decided that bumping the price up to a rounder number would help with negotiations and -- since he wasn't a math major -- would make figuring the 3 percent Massachusetts sales tax easier because there were no personal computers or pocket calculators back then. So he arbitrarily added $12.50 to every sticker, which bumped the price to $1,975. Then Fashjian told customers that since Datsuns are imported, the fee was to cover the cost of going to the port and taking care of the documentation.

And they bought it!

That $12.50 seems anemic by today's doc fees, which Fashjian said net some dealers up to $1,000 or more. It's a great tale. And, you know, I thought about running Fashjian's picture with this column. But the next thing you know, somebody might put it up in the post office. Or the Automotive Hall of Fame.