Is a "processing fee" legitimate or a rip-off?
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Joined: Jan 2001
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From: Austin
Careful dave22, you sound awefully like a dealer coming in here anonymously and promoting that fee...
Like WPS, I always negotiate the final price out of the door. Pay attention also to the "shell game" where you spend all your efforts on one end of the deal (such as the new car price, or the trade-in price) and not on the other parts. If you know all the dealer income sources from a deal, and work it so that they get a reasonable profit from the whole deal (not just the new car price), they will work with you and you can get a reasonable deal.
I've heard too many stories about someone getting a below-invoice price on a new car, or getting way above markey price for their tradein while paying a premium on their new car. Most dealerships will sell you a car for thousands under invoice if they make up the money elsewhere, like in the trade-in or on options or "processing fees".
A good salesman works the deal so that the customer thinks he ripped the dealership off. Do that, while making the money you need off the customer, and both sides walk away happy.
www.carbuyingtips.com goes into detail on some of the nastier stuff some (note that I say "some", not "all) dealerships do. Read it if you like to be really paranoid next time you buy a car!
Like WPS, I always negotiate the final price out of the door. Pay attention also to the "shell game" where you spend all your efforts on one end of the deal (such as the new car price, or the trade-in price) and not on the other parts. If you know all the dealer income sources from a deal, and work it so that they get a reasonable profit from the whole deal (not just the new car price), they will work with you and you can get a reasonable deal.
I've heard too many stories about someone getting a below-invoice price on a new car, or getting way above markey price for their tradein while paying a premium on their new car. Most dealerships will sell you a car for thousands under invoice if they make up the money elsewhere, like in the trade-in or on options or "processing fees".
A good salesman works the deal so that the customer thinks he ripped the dealership off. Do that, while making the money you need off the customer, and both sides walk away happy.
www.carbuyingtips.com goes into detail on some of the nastier stuff some (note that I say "some", not "all) dealerships do. Read it if you like to be really paranoid next time you buy a car!
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Joined: Feb 2002
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From: Virginia Beach, VA
Originally posted by hoof
Careful dave22, you sound awefully like a dealer coming in here anonymously and promoting that fee...
Careful dave22, you sound awefully like a dealer coming in here anonymously and promoting that fee...
Joined: Mar 2001
Posts: 37,305
Likes: 18
Originally posted by WPS
always negotiate the final price out the door
always negotiate the final price out the door
Let THEM dick around with all the numbers "above" the bottom line. This is the only way you can compare one dealer's price with another. I always say, "What's your DRIVE AWAY price? I give you the money, you give me the car and that's the end of it."
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Joined: Jan 2001
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From: Austin
Poindexter is absolutely right. If a dealership does not make profit (profit being money made on a package deal minus costs), the dealership will go out of business. If we want cars to buy, then we need to be willing to pay *some* profit.
This is why I always factor a "reasonable" amount of profit when buying a car. The trouble is, it's hard to know the real amount of profit a particular sale price will yield (and for obvious reasons the dealership won't tell you). However, throw a trade-in in the mix, or finance at the dealership, and it becomes much harder to balance dealer profit with a good deal. This is why I usually buy bone-stock cars (no options), get outside financing, and never trade-in. To use a mathematical term, that reduced the number of degrees of freedom to one (the selling price of the car).
I'm definitely not opposed to a dealership making some money on something I buy. Heck everything I buy in life makes money for someone. I find it ironic that this country is so anti-tax, yet we all willingly pay sizable premiums (and thus big profits) for the stuff we buy. How much profit did a restaurant make on that meal you ate last night?
However, since a "mere" thousand or so extra on a car deal means such a huge difference for a dealership (due to their slim profit margins on each car, even at MSRP), the incentive is huge to try to pull one over on customers, or do anything they can to make just a little more on the deal. And, IMO, that's what makes the whole thing scummy in some cases. And that's where this "processing fee" idea comes from. It's much easier to sell that kind of extra profit and stay competitive than by increasing the price of cars sold. That extra $250 can make a huge difference on the viability of the dealership.
IMO, there must be a better approach. I wish there was a way that dealers could sell cars where an extra thousand dollars on the selling price didn't make such a huge difference on their per-deal money made. Ah well, wishful thinking.
Hmmm. I guess now I'm sounding like a car dealer
No, I make computer games for a living. And that is another ball of wax
This is why I always factor a "reasonable" amount of profit when buying a car. The trouble is, it's hard to know the real amount of profit a particular sale price will yield (and for obvious reasons the dealership won't tell you). However, throw a trade-in in the mix, or finance at the dealership, and it becomes much harder to balance dealer profit with a good deal. This is why I usually buy bone-stock cars (no options), get outside financing, and never trade-in. To use a mathematical term, that reduced the number of degrees of freedom to one (the selling price of the car).
I'm definitely not opposed to a dealership making some money on something I buy. Heck everything I buy in life makes money for someone. I find it ironic that this country is so anti-tax, yet we all willingly pay sizable premiums (and thus big profits) for the stuff we buy. How much profit did a restaurant make on that meal you ate last night?
However, since a "mere" thousand or so extra on a car deal means such a huge difference for a dealership (due to their slim profit margins on each car, even at MSRP), the incentive is huge to try to pull one over on customers, or do anything they can to make just a little more on the deal. And, IMO, that's what makes the whole thing scummy in some cases. And that's where this "processing fee" idea comes from. It's much easier to sell that kind of extra profit and stay competitive than by increasing the price of cars sold. That extra $250 can make a huge difference on the viability of the dealership.
IMO, there must be a better approach. I wish there was a way that dealers could sell cars where an extra thousand dollars on the selling price didn't make such a huge difference on their per-deal money made. Ah well, wishful thinking.
Hmmm. I guess now I'm sounding like a car dealer
No, I make computer games for a living. And that is another ball of wax
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Joined: Oct 2002
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From: va beach
well like poindexter said. if it is charged one person, it has to be charged to another. its a non negotiating item.
with that in mind processing fee was developed so that when a customer comes in and says...
i will buy this brand new civic at invoice right now... the dealer can sell the car at invoice, charge a "processing fee" and still pay its employees and keep its doors open.
now because the civic dealer charged the Pfee to the civic customer and made basically NOTHING on the deal. it also must be charged to the person that paid full sticker for the honda s2000 inwhich the dealership just made not only 3 grand on the car but $289 on a processing fee.
customers created the Pfee, by wanting to GET OVER ON THE DEALER and keep ALL money out of there pocket. something with profit had to be added ie. the Pfee
with that in mind processing fee was developed so that when a customer comes in and says...
i will buy this brand new civic at invoice right now... the dealer can sell the car at invoice, charge a "processing fee" and still pay its employees and keep its doors open.
now because the civic dealer charged the Pfee to the civic customer and made basically NOTHING on the deal. it also must be charged to the person that paid full sticker for the honda s2000 inwhich the dealership just made not only 3 grand on the car but $289 on a processing fee.
customers created the Pfee, by wanting to GET OVER ON THE DEALER and keep ALL money out of there pocket. something with profit had to be added ie. the Pfee