Topic: Business people seem to be morons, admin fees prove it.

[johngenx]

I have to have a laugh when people talk about putting our public services in the hands of "business people" as if those same business people are omnipotent beings that are super-human in their ability to maximize productivity and minimize costs.

There are many, many examples of rampant business incompetence.  Morons in the banking industry in the US have practically destroyed the economies of nations.

But, I want to focus on one little example that is plaguing the automobile sales industry: admin fees.  Mike Goetz wrote about them in a Drive column recently, and I think his statement:

"One sure thing about admin fees — buyers hate them."

   --  http://www.metronews.ca/toronto/comment/article/1037520--don-t-let-administration-fees-surprise-you

Yes, people hate them.  It sours the buying experience, especially if they're introduced after a so-called price has been agreed upon.  So, we have something that our customers HATE.  So, let's keep doing it!!  Yay, we have yet another tool to people off.

This is good business practice?  This makes sense how?  Surprising people with "fees" and added charges is never a good way to build customer satisfaction.  Airlines do it, and that industry is famous for abusing customers.

When I owned a retail automotive electronics store, one of the first policies we enacted was "all inclusive pricing."  As an example, a basic remote start system installed was $229 including parts, labour, shop supplies, taxes, etc.  We had a phone sales close that consisted of "you bring 229 loonies down, and you're set."  Options were also priced the same.  Diesel engine kits had a set price, again all inclusive, and so on.  No surprises.

This was a giant sales success for the store.  People loved it.  We revamped all our installation pricing to be all-inclusive.  Now, this is work.  You have to have excellent knowledge of your cost structure and in the installation end, knowing the average cost per install is critical.

In the consulting business, the standard practice was to bill by the hour.  Rates varied depending on the project and the people needed to work on it.  Partners billed at higher rates than associates.  Quotes for projects were always nebulous and estimates that could fall far short of the final bill.  We didn't do that.  As the managing partner, I gave a firm quote that was guaranteed.  We had a "here's the price" structure that our clients loved.  We had fiercely loyal clients thanks to no-surprises pricing.  But, many of our competitors poo-poo'd it as "retail marketing" and somehow beneath them.  Whaaaat?

When you place an ad for a used car for $23,000, I expect that the asking price is $23,000 plus taxes.  Taxes, okay, I'll give that the price is exclusive of taxes.  But, when you start stacking hundreds of dollars of "nothing charges" (I don't get a box of admin to take home) on top of the price, I feel that you lied to me.

If you make customers angry and want to leave, then you're doing something wrong.  This seems so obvious to me, and yet businesses adopt stupid practices that create barriers to buying and reinforce an adversarial relationship with customers.

[2latecrew]

I understand what your saying and don't like and won't pay admin fees. But I understand why they do it. I'd guess that the majority of consumers even though they don't like it are so worn out at the point the admin fees are introduced they figure what the heck its $200 on a 20 K purchase lets just get this over with.

There are likely very few sales lost over admin fees as if they are in danger of losing it they can waive them. Even if only 20% pay them (I think its more than 50%) its still a huge revenue source.

People usually only buy a car every 5 years or so. In 5 years they will have forgotten about the admin fees or they will figure they can get them waived.

Basically it boils down to "if you don't ask you don't get" If the dealer doesn't ask for the admin fee they give up 200 they could have had. If the buyer doesn't ask for them to be waived they end up paying them. It sucks but the revenue more than offsets any sales lost due to people being put off by them

[johngenx]

People do remember.  People remember all the lying and tactics and that is why car sales has such a horrible reputation.  It is why the buying process is seen as adversarial.

[SaskSpecV]

Basically it boils down to "if you don't ask you don't get" If the dealer doesn't ask for the admin fee they give up 200 they could have had. If the buyer doesn't ask for them to be waived they end up paying them. It sucks but the revenue more than offsets any sales lost due to people being put off by them

You're probably right.  But there is a point where customers will say "screw this, I'm leaving".  I may or may not be willing to pay $200 for dealer fees - but when the local Subaru dealership announced their dealer fee of $500 (apparently common practice at Subaru dealerships, so they said) I walked.  Realistically the consumer should be looking at the bottom line price - how much do they have to pay, TOTAL.  The mnfr and dealers can shell-game the costs however they want - lower vehicle price, higher freight & PDI, dealer fees, etc. - but at the end of the day, the customer has to be smart enough to look at the overall price.  If they are willing to pay that price, then it doesn't matter how it is itemized.  If not, well, then they won't buy that vehicle.

This topic gets me started on MY pet peeve about dealerships, which is not the vehicle pricing structure but rather the push towards "lowest monthly payments".  In my recent car buying experience, many salespeople are hesitant, even unwilling, to tell you the actual out-the-door price.  It's much easier to hide it in "only $219 bi-weekly for 72 months..."  And though I like Hyundai and Kia products, their salespeople were the absolute worst for this.  Of course this means that many customers are amortizing their vehicles for excessively long periods, and end up paying a lot more money in the end. (Even if it's 0% interest - they are still paying.  That 0% interest rate comes at the expense of something else in the deal, likely a higher vehicle price). 

But when I think about it, why should I get mad at the dealerships for pushing the car loan, rather than overall price?  It's the consumer's fault for not being numerically savvy enough to realize they are paying more money than they need to.  And if they do realize they are paying extra, but are seemingly OK with it, why should it bother me?

As for the original topic, John, would dealer fees keep you from buying another Subaru?  Will your local dealer "waive" the admin fee?  Or do you think they would just discount the vehicle instead?

[johngenx]

As for the original topic, John, would dealer fees keep you from buying another Subaru?  Will your local dealer "waive" the admin fee?  Or do you think they would just discount the vehicle instead?

Already has.  Many times I've considered a new Forester, or even a late model used one, and left without buying.  Fees on fees and all kinds of lousy, borderline-deceptive sales practices have me leave empty handed.

The Corolla was new, had no admin fees, and a still-high-but-low-for-the-industry $1100 Freight/PDI.  Etching?  No.  I thought maybe we were finally going in the right direction.  Wrong.  The dealer we bought from has no admin fees on new cars, but massive fees on used cars.  We walked on a Highlander thanks to about $800 in surprise fees, plus mandatory etching.  Really?  "It's been done, so you have to pay."  Oh, cripes, I figured that wouldn't ever be heard again, but...

[2latecrew]

People do remember.  People remember all the lying and tactics and that is why car sales has such a horrible reputation.  It is why the buying process is seen as adversarial.

Yet they still by tons of cars. Demand is relatively inelastic. There usually are not more than a few dealers of a brand within a close distance. Cars are different enough from brand to brand that its not just a matter of buying an identical car elsewhere and frankly if the practice of Admin fees is as prevalent as I think then chance of losing a dale is low because if you go to an alternate dealer because of admin fees you'll run into the same fees.

People (including me) hate the dealer process. There isn't any alternative. You either buy your new car from a lying fee charging dealer or you don't buy a new car. People may rember but they still sell a lot of cars and a lot of people pay the fees.

[johngenx]

What we don't know is how many people are like me, and just keep their old car longer, delaying a new purchase.  Most of the time in business, the lost customer is the one you never knew about.  Is the industry really that healthy?  We've had makes on the verge of bankruptcy.  Sales are for the most part heavily dependent on subsidized financing, rebates and other incentives.

[rrocket]

Ah yes, the admin fees.  I questioned admin fees before, and was told (among other things) that it pays for the employee (lackeys no doubt) to run to the Ministry to change over the ownership and whatnot.  I told them "No problem, I'll switch over the ownership myself".  The told me I couldn't...that they HAD to switch it over.  Huh?  What special skills does the shop lackey have over me when it comes to switching an ownership?  I'd wager none...

And yes, I have walked when there was a fee added on to our agreed upon price.  I warned them before I left that when I returned to pick up the car if there was even $1 more than what we agreed on, I'd walk.  And I did.  They ended eating those costs once they knew I'd walk.  I suspect most people wouldn't walk though....

I think if more people walk and tell them to eat it, that the lots would have no choice in the matter...

[Schmengie]

A lot of customers are morons too. I don't feel too sorry for the folks that end up paying admin fees, or 'mandatory' etching/undercoating/whatever fees. Hell, if you could charge a customer for something they don't get a single benefit from and they pay up pretty much every time, why wouldn't you?

When I walk into a dealership, the first thing I say to the salesperson is 'I'm not paying ANY extra fees over and above your best negotiated price, delivery and taxes. Do you want to deal with me or not?' If I get the wrong answer, I leave.

Paying cash or arranging your own financing also helps. That way the dealership can't roll their ridiculous fees into the financing agreement in a way only a CPA could understand. So does reading the bloody agreement in the first place, and questioning anything that you don't understand. Believe me, dealers hate that.

Happily, the last dealership I bought from, the local Nissan outlet, was very open and honest, no BS whatever.

[2latecrew]

What we don't know is how many people are like me, and just keep their old car longer, delaying a new purchase.  Most of the time in business, the lost customer is the one you never knew about.  Is the industry really that healthy?  We've had makes on the verge of bankruptcy.  Sales are for the most part heavily dependent on subsidized financing, rebates and other incentives.

So you delay your new car purchase because of admin fees or the general dealer practices? That doesn't matter because you are DELAYING it..that means eventually you do go and purchase a new car from that same dealer that charges admin fees etc. As I said demand is relatively inelastic. Cars wear out, life changes require it or people just want a new car with new technology eventually you break down and go buy one.

The number of new car sales they lose to private used car sales because people want to avoid admin fees is teeny tiny. Its more than offset by the revenue.

I don't support the current practices at all. I think they are antiquated and very unfriendly. I work in the industry and know a lot of the ins and outs and I shudder at the thought of having to go through the process. But as long as the majority of dealers use these practices its not a differentiating factor. The entire dealer system is an issue. Laws make it impossible to dismatel it.

[johngenx]

Delaying a car purchase means over my lifetime, Ill buy fewer cars.  Fewer car purchases = fewer sales.

We used to buy a new car every 2-3 years, alternating between one for my wife and one for me.  Now, economically it makes more sense to stretch the life of a car, and environmentally, fewer car purchases also make sense.  But, we enjoyed having different and new cars.  One of the reasons we slowed our buying was the unpleasant buying experience.

[Cord]

When you place an ad for a used car for $23,000, I expect that the asking price is $23,000 plus taxes.  Taxes, okay, I'll give that the price is exclusive of taxes.  But, when you start stacking hundreds of dollars of "nothing charges" (I don't get a box of admin to take home) on top of the price, I feel that you lied to me.

John, did you know that in Alberta prices in ads must include absolutely everything other than taxes? The reason that it seems that every ad seems to ignore this requirement is because nobody ever complains. Talking with the head of AMVIC a few years ago, he told me that the only complaints they receive about ads come from other car salespeople. They basically never hear from consumers on this issue. So, guess how much priority they give to enforcing it?

It is also law that payments cannot be more prominent than the total price in car ads.

You want that particular issue to change? Call AMVIC and complain when you see ads that add extra fees in the fine print or when they aren't mentioned in the ad at all but are added at the time of sale.

Personally, I find admin fees to be a big PITA and would love nothing more than if they were mandated out of existence. Of course, everyone should realize that if the average admin fee (say $500) is removed from the dealer's revenue then the average transaction price will likely rise by $500.

[blur911]

Gotta agree, I only ever bought one new car and the dealership experience ensured that I would never buy another new car, and probably not even a used one from a dealer ever again.  That was 21 years ago.  I remember having to get them to drop the admin fees even then.

[airbalancer]

I have no problem with admin fees as I only look at OTR prices, I also include interest cost in to see if I think it is a fair deal

[johngenx]

John, did you know that in Alberta prices in ads must include absolutely everything other than taxes? The reason that it seems that every ad seems to ignore this requirement is because nobody ever complains. Talking with the head of AMVIC a few years ago, he told me that the only complaints they receive about ads come from other car salespeople. They basically never hear from consumers on this issue. So, guess how much priority they give to enforcing it?

I did not know that, and now that I do, you can bet that when I encounter it, I will immediately file a complaint.

[Cord]

John, did you know that in Alberta prices in ads must include absolutely everything other than taxes? The reason that it seems that every ad seems to ignore this requirement is because nobody ever complains. Talking with the head of AMVIC a few years ago, he told me that the only complaints they receive about ads come from other car salespeople. They basically never hear from consumers on this issue. So, guess how much priority they give to enforcing it?

I did not know that, and now that I do, you can bet that when I encounter it, I will immediately file a complaint.

You'll encounter it everyday in either newspaper.

[johngenx]

When I read the advertised price, I am not sure whether fees will be added or not.  Not until I discuss it with the dealer will I know.

A week ago, I called a Calgary dealer about a car they had, and they were very upfront that the price did not include fees, and they had a bloody stack of them.  I'm going to contact them again, and I'm going to file a complaint with AMVIC.

I do notice some ads that feature payments and have NO price.  I'm going to complain about them as well.

Sounds like a project for some of my students...!

[Sir Osis of Liver]

My experience here buying the OB was pretty good. I negotiated the deal and shook hands with the salesguy. Went into the business manager's office, she handed me the paperwork with the agreed to deal and that was it. Absolutely no extra fees of any sort. I was actually pretty surprised.

[Cord]

When I read the advertised price, I am not sure whether fees will be added or not.  Not until I discuss it with the dealer will I know.

By law, advertised prices must include everything except taxes. This basically refers to a newspaper ad, not a sign in the car window or a listing on a web site.

If car A is advertised in the paper but car B is not, the dealer is within their rights to add whatever fees they want to the price of car B but not car A.

See section B in this document:

[initial_D]

A $500 fine, the admin fee should cover that.