The ‘best deal’ doesn’t matter on a car purchase, it’s about comparing the best out-the-door prices. Ethan always thought buying a new car was about getting the ‘best deal’. He experienced a painful lesson and now knows better.
California DMV fees
Ethan sat down in the finance manager’s office. “Pleasure to meet you. My name is Jacob. I’m going to help you with the rest of your paperwork.” Things were going well until Ethan saw the Purchase and Sales agreement stating a total of $12,974.
Ethan had written a check in his mind for about $10,700. He had gotten a fabulous Internet price of $9,740 thousand and expected to pay sales tax of about another $760. “Why is it so much?” he asked.
Jacob leaned over his desk and used his pen as a pointer to go through the numbers on the Purchase and Sales Agreement line-item-by-line-item. “This shows the selling price of your new car, $9,740 thousand.
Next you have $290 ‘Cash Price Accessories’ – remember, you really wanted your windows tinted! You’re still following me, right?
“Sure” Ethan responds upset.
Next we’re looking at $45 in documentation fees. “Isn’t that cool? We’ll take care of all the DMV paperwork on your behalf” Jacob add with a big artificial smile in his face.
Here a few more ‘peanuts’: $15 smog fee, $15.25 for the charge of the hybrid battery, $760 in sales tax, $1,646 for the extended protection plan, $450 for the GAP insurance, $150 contract cancellation option, $145 in vehicle licensing fees and $8.25 for the smog certificate.
“Only $12,974 for such an awesome ride” Jacob summarizes excitedly.
“I get that I decided to purchase the extra coverage, but I had no idea about all the other fees” Ethan thought out loud. He felt sick to his stomach.
Why dealers hide out-the-door prices
“You know, Ethan, I hear that all the time” Jacob emphasized: “didn’t you read the small print? Our prices don’t include DMV fees and other charges.”
(When dealers want to convince you to proceed with a purchase although they feel resistance, they use an approach called feel-felt-found)
“I understand how you feel Ethan. I’ve actually felt that way before. What I found was the following: … if we didn’t advertise the way we do, then we would go out of business. Think about it. If you saw your new vehicle listed with all the fees, you wouldn’t have come here” Jacob proceeded expecting Ethan to violently agree.
Consumers indeed compare prices on the Internet, the aggregators and the dealer websites and call the seemingly ‘best deals’ first. “That’s why we have to show them as cheap as possible, and in some way hide our out-the-door prices. We need to be consistent with the market or everybody thinks our vehicles are overpriced. Level playing field, you know what I mean?” Jacob observes.
Dealers have some discretion around how much they want to charge for which fee. Not unexpected, dealers tend to charge as much as they can: “we all charge pretty much the same fees. Does that make sense?” Jacob asked Ethan while nodding his own head, hoping to influence the way Ethan thinks.
Ethan was silent for a moment. It made sense, but he didn’t like it. It felt deceptive.