Does Everyone Pay It?
This scam has many different names within the retail car sales industry which include “excessive prep fee scam,” “make ready fee,” and “vehicle prep fee.” So how does a dealer prep fee become a scam? When a dealer attempts to grossly overcharge you for this service.
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When a new car or truck arrives at a dealership from the manufacturer it must be made ready or prepped for sale by the dealer. Most car dealers will charge you a dealer prep fee for this service.
A dealer prep fee is a set amount charged by a car dealership to cover the cost of making a new vehicle ready (prepped) for sale when it arrives on the lot from the manufacturer.
Many dealers have a set amount straight across any car sold. Some dealers have recently started making it a percentage of the factory invoice price of the car.
Dealers normally charge an excessive amount for this service. It can be anywhere from a $500 to a few thousand dollars depending on the dealer. Realizing the profit potential, some dealers have started charging this excessive fee on used cars also.
When a dealer receives a new vehicle from the factory they must remove the protective plastic coating covering the inside and outside of the vehicle, check the fluids, install fuses, road test 3 to 10 miles, wash, wax, vacuum, put on the antenna, and install the license plate holders.
Manufactures normally allot 2 to 3 hours for dealer prep to be performed at a dealership and most dealers are compensated by the manufacturer for the service. However, a dealership with a good prep department can have it done in a little under an hour. The same is true for used cars depending on reconditioning and if any parts to be replaced.
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Not quite sure if everyone would agree that this is a dealer scam. A dealer prep fee is more like an “excessive fee” charged to a customer. It becomes a scam when a dealer excessively marks up the fee well over what it actually costs to perform the service. Some dealers add a pre-delivery or dealer prep fee on every used car they sell.
This is justified by telling the customer the used car must be prepped for sale when it’s purchased from auction or taken in on trade. Although a dealer will spend money to bring a used car up to retail sales quality, these charges were deducted from the vehicle at the time of purchase (or should have been) and then are added again to the cost of the car.
A dealer’s make-ready department must follow a specific process set by the manufacturer to prep a new vehicle when it arrives from the manufacturer. There are specific tests, inspections and steps the manufacturer wants to ensure the dealer performs before making a vehicle ready for sale. The best way to make sure a dealer does this correctly is to pay them for it.
If you inspect the M.S.R.P. sticker on any new car, you’ll find the manufacturer’s statement about the dealer prep fee. It’s normally located under the total suggested retail price or in fine print somewhere near the bottom of the sticker.
The manufacturer’s preparation fee statement will read something like this:
Manufacturer’s Suggested Retail Price Includes Manufacturer’s Recommended Pre-Delivery Service. Does not include dealer installed options and accessories, local taxes or license fees.
The fee is built into the new car’s price from the manufacturer. So if you’re paying for it in the price of the car. Why pay it again to the dealer?
Some dealers have fought to have this statement removed from several manufacturer’s M.S.R.P. stickers. The statement may now be listed on a separate sticker or will be listed on the dealer’s purchase agreement.
A dealer can charge any additional fees they wish. It’s not considered illegal as long as the dealer discloses the fee or any other fee to you on the purchase agreement. It’s up to you if you’re going to pay it or not.
Most car dealerships, including my own, will have the make ready fee pre-printed on the purchase agreements. This gives car buyers the illusion that the fee is mandatory and must be paid if they want the car. You would be surprised how many people don’t even question a dealer prep fee and just skim right past it and sign on the dotted line.
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If the dealer has a $595 vehicle prep fee on every new car they sell and they average 225 new cars a month. They will make $133,875 in prep fees alone and this is on top of any other profit made from the sale of the cars.
225 cars sold x $595.00 dealer prep fee = $133,875.00 additional profit
What if they don’t get everyone to fall for the excessive fee? Let’s say half of the people refused to pay the fee and they only sold 127 new cars with the added charge. The dealer will still make an additional $75,565 for the month.
This is why car dealers attach a make ready fee to every new car they sell, it’s all about the numbers.
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The quick answer is “Yes.” Like most backend additional products such as warranties, insurance products, interior and exterior coatings… dealer prep fees are negotiable.
A dealer may attempt to persuade you that they are not because they add to their bottom line. The fact is, they are not.
Make sure you look at all the fees and charges before signing the contract. When you come to the vehicle preparation fee, ask them to remove it. Tell them that the manufacturer has already compensated them for prepping the vehicle for sale.
I guarantee they’ll look at you like your crazy… Yea, crazy like a fox! If they’re standing their ground, tell them you’re willing to pay a certain amount and not a penny more.
I will tell you there are some dealers out there that will not budge from their “excessive fee” and some have a policy in place to not remove it from the contract. If this is the case and let’s say the dealer fee is $500. Have them leave the fee on the contract and drop the price of the vehicle $500. This way you win and it’s still written on the contract.
When it comes to negotiating a dealer prep fee, it really comes down to how “in demand” the vehicle is your looking to buy and how much you really want to buy the car.
