When I bought my '04, I refused to pay it...they said they "couldn't take it off" but they would reduce the cost of the car by that amount - so basically they did take it off, just shuffled the numbers a little -

See, they earned their processing fee with mine...

 

As a FORMER car dealer I can tell you that Dave22 said it well. The thing is to just know it's there and part of the profit and work your deal from there. The last new car I bought was a Toyota Avalon. Most dealers here charge about $295 for a processing fee. The car carries a holdback of about $500. I decided $800 was a fair profit for the dealer so I held out for invoice. Had to work at it and try several dealers but eventually got it at invoice. Of course they tried to slip in a $200 charge for "theftguard glass etching" at the last minute but I caught it. Just do your homework.

 

Today I made the deal on my new car - We had agreed on a price a while back, but I forgot the inevitable processing fee. I never have and never will pay it - I always make them disco the car by the same amount. Get this - my dealer "only" packs a $189 fee (I have seen lots higher), and when I said, sure, but's let drop the selling price by $189, they got a bit huffy and I had to threaten to walk before they relented . I mean, how stupid is that to walk away from a $2k profit over such an amount? People are funny - I have always heard that this part of the sales price goes straight into the dealership owner's pocket. Less all applicable Federal, state, and local taxes, right? Right.....

 

*rant*
Anyone who owns a business or is part of a company that sells products will know the importance of profit. No matter how great or small, someone will complain. The difference is how the "markup" is positioned. The profit margins on some items can be hidden better than others. Because of the internet, we tend to know how much a dealer purchases the car for, how much they can sell it for, and all those hidden fees. We see what part of the sales is going to the dealer and we don't like it. If we saw how much those electronic stores take for proft, or the Gap stores, we would never buy electronics or clothing.

Companies need to make money to stay in business. That profit partly goes to the employees, who in turn will make the income to spend on other items that will fuel the economy. If you want to purchase something without spending more than you have to, you can try Ebay.

If you think the processing fee is a ripoff, you shouldn't tip waiters either. Since by your definition, they have already been paid by the restaurant. *rant*

 

I would like to comment on the clothing/electronics profit argument.

Purchasing a sweater for $40 is a minor purchase. If consumers are concerned about profit margins on minor purchases they become very conciensious of coupons and sales. Clothing is easily replaceable and shelf life isn't nearly as big of a concern as the reliability/lifespan of a car.

An automobile is a major purchase, it costs slightly more than a sweater. If a sweater gets a hole in it your life isn't impacted nearly as much as if your automobile breaks down. It is ridiculous to compare elephants to grapes.

The auto sales market is inherently based on negotiation. Consumers have every right to reject the dealer's price, just as dealers have every right to reject the demands of consumers. This is why we have markets. Consumers and dealers meet and reach a deal. At that point if the consumer is unhappy with the deal it is their own fault. Dealers will continue to find ways to increase profits and consumers will continue to negotiate until they are content with the purchase.

 

dkhl, I think that you've completely missed the point. Sure, they should be able to sell cars and make a profit. That's what they're in business for. But, what we're talking about here is an unethical business practice that is designed to deceive people. These types of fees were created so that after a price has been agreed to, they can raise the price of the car by the fee amount in the finance office. This is done knowing that the vast majority of people will not even notice it. The vast majority of the remaining customers that do notice will get mad, but won't walk away from a deal because of it.

Your waiter analogy is not a good one. When you go in to a restaurant, you know up front that, provided you're a decent person, you will tip the waiter based on the service that has been provided and the amount of the bill. When you go and buy a car, they are rarely up front about the "processing" fee. So much so that most people that are even smart enough to even notice, don't find out until after they have already nenegociatedhe price of the car that there is an additional charge. Now, if a wawaiterresented you with a bill that had a processing fee (that wasn't on the menu and he didn't tell you about, for taking the order and presenting you with the bill), then yes, it would be a good analogy. Also, FYI, while waiters are paid by the restaurant that they work for, they are paid an hourly wage that is below the normal minimum wage. Most of their restaurant paid wages are used to pay taxes. They make the lions share of their earning off of tips.

 

that is not entirely true. When i walk in to a restaurant, nowhere does it say that if i buy a steak for 20 bucks, i have to give the guy 3 bucks. That is more than i saw in the menu. So the tip comes in after i "negotiated" the price of my meal.

When i walk into my local car dealers, all of them have the price of the processing fee posted. I don't know if it is required by law or what, but it is posted.

If the longevity of the product is in question, than we should be able to negotiate the price of our houses down to dirt cheap. Why don't we just tell the dealer tell me what material you need to build the house and add 3% and that is what i want to pay for the house. i doubt you will find any builder that is willing to do that. I haven't bought a house yet, so i don't know what the profit margin is on those.

 

That is pretty much how contractors already do it.

 

[QUOTE]Originally posted by dkhl

When i walk into my local car dealers, all of them have the price of the processing fee posted.

 

Supply and Demand, its as simple as that. There aren't any shortages of automobiles in this country. Again you are comparing apples and oranges. Real estate (what I do for a living) and automobiles do have some similarities, like financing, but one appreciates while the other depreciates and that is a completely different sport. In this case the markets have very different characteristics.

Take Northern VA for example once all the land is developed and you can't build up anymore you have far more demand than supply(see Arlington). Prices adjust to move the market to equilibrium, prices increase and people still buy houses. When my parents first moved to Woodbridge they paid less than $190k for an average house on 3.5 acres. Today that house is valued at $384k. How many average cars that have been used for 15 years have doubled in value? But that is an old house. When buying an old house the seller sees profit in the form of appreciation.

Profit margins on new houses today are outrageous. Developers buy lots in bulk then they sell the lots to builders. Both see extremely generous amounts of profit. New construction in Prince William County has a profit margin of 30-40+%. A $400k house in Woodbridge would cost the exact same amount of money to build in Lynchburg, but the price would be a lot cheaper in Lynchburg because the market wouldn't bear it.

Boys and girls our next lesson will be Pre-construction pricing.