Published on Friday, 27 January 2012
Here’s a recent letter addressed to yours truly from a Toronto Star Wheels reader:
“What gives you (auto dealers) the right to think you can add an “administration fee” to a car deal? We all know that your mark-up in price should contain margin to cover this. It is my contention that it very definitely does, and the added-on fee is simply a rip-off of the consumer, some of whom are not apparently aware of this situation. It is not necessary for the buyer to pay for your operating expenses twice.
If you are in business, you cover your expenses in your asking price. I know I am not telling you anything you don’t already know. Quit being an apologist for such a shameful practice. I invite you to address this issue in your column.”
— John D.
John is upset about a common practice of including administration fees in the purchase price of vehicles.
His complaint, however, bears no relation to the column I wrote about double standards that exist for advertising among dealers and manufacturers (Wheels, Jan 14th). Nowhere in that column do I apologize for the practice of including what are called “admin” fees.
John either didn’t read the column, didn’t understand it, or (more likely) he purposely misconstrued it in order to make an accusation against car dealers. This is intellectually dishonest.
I’ll address John’s contention that dealers act unscrupulously by pretending that the fee is mandatory. Dealers do not make any such claims, and to suggest otherwise is wrong.
When a customer buys a vehicle from a franchised auto dealer, real costs are incurred in processing the transaction, including the licensing of vehicles, processing a loan or lease with a bank, arranging insurance documentation, conducting a history report on trade-ins, etc.
To license a vehicle requires that a staff member physically go to a licensing office. Not infrequently, unpaid traffic tickets or Hwy. 407 fees have to be paid before vehicle ownership can be transferred.
Most customers accept these additional fees because they are reasonable in light of the product or service that’s being provided. Admin fees in our industry are not a hidden markup and are transparent to purchasers on all bills of sale (more so than what they are accustomed to from other retailers).
John believes that all of this administrative work should be free of charge. I wonder if he levels the same criticism against banks, mutual fund companies, utility companies, airlines and ticketing agencies, all of which include admin fees on each transaction.
The part of John’s letter that is not only wrong, but insulting, is the contention that dealers deliberately deceive their customers. This is a classic default argument made by those who don’t understand (or don’t want to understand) the realities of the car business.
Unfortunately, car dealers are easy targets for those who are quick to criticize and spread false (and disparaging) information about our industry.
The retail car industry is the most heavily regulated industry in Canada. We are governed by the Ontario Motor Vehicle Dealers Act, the operating procedures mandated by our manufacturers, and the guidelines established by the Ontario Motor Vehicle Industry Council (OMVIC).
OMVIC has a stellar track record in dealing quickly and efficiently with any issues that arise, and they have zero tolerance for dealers that do not comply with the rules.
For the record, all of the people employed at an average car dealership must (and do) play by the rules. These same individuals are your friends, relatives and neighbours. Are they all guilty by association?
As a final note, our goal is always to have 100 per cent customer satisfaction with the products and service that we provide. Dealers are proud of the work they do and the role they play in their communities.