A recent article in Automotive News highlighted the efforts of Earl Stewart, a West Palm Beach, Fla., car dealer who is not only shining the light on an unscrupulous practice, but is walking the talk as well.

We’ve all heard about those “dealer preparation and document fees” that are tacked on to the price of a new car. Stewart has been vocal that those fees, which can amount to as much as $1,000, are a consumer rip-off. In fact, he stopped charging those fees in 2005, and has tried to shame his fellow car dealers into doing the same. They haven’t budged, but consumers have used the most powerful weapon at their disposal - their pocketbooks - to support Stewart’s stance. According to the Automotive News article, Stewart doubled the number of cars he sold once he dropped the fees.

In the meantime, Stewart is advocating on behalf of Florida legislation that would outlaw dealer fees. In his blog, he makes valid points about why a compromise bill that would mandate disclosure still wouldn’t give consumers a fair shake:

Think about it. (1) Car dealers admit that the dealer fee is pure profit [they also refer to it as recapture of costs but that is synonymous with profit]. (2) All the rest of the dealers’ profit is included in the price he quotes you on the car. (3) Common sense and “Accounting 101″ says that businesses should include all of their costs/profits in the price of their product or service. (4) What reason can there be for a car dealer electing to remove a portion of his profit from the price he quotes you on a car, renaming it “dealer fee” [or one of at least 22 other nebulous names according to the Florida Senate Investigation of the Dealer Fee] and then adding that profit back in when you sign your paperwork upon the delivery of your car? I submit that there can be only one answer to that question. That answer is that the car dealer wants you to think that the price he quoted you includes all of his profit and is the complete out-the-door price of the car.

We agree with Stewart. Tacking on dealer prep fees amounts to unfair lending practices, and should be stopped. There’s an interesting class action lawsuit brewing in Missouri about just this issue, which we’ll discuss in a future post.