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Does the CARS Rule Mean the End of Dealer Fees?

Conceptual image of a car dealership focusing on 'dealer fees' with visual elements like a car, price tag, compliance documents, dollar signs, and a calculator, emphasizing transparency and regulatory compliance.

Dealer fees have long been a contentious issue. These fees, often tacked onto the final price of a vehicle, have drawn criticism for their opacity and perceived unfairness. However, recent developments in regulatory compliance, particularly the CARS Rule, are reshaping the landscape of dealer fees and how they are perceived and implemented.



Dealer Fees: A Thing of the Past?

Traditionally, dealer fees have been a method for dealerships to maintain their front-end gross profit, ensuring that salespeople can't offer excessive discounts during negotiations. However, the CARS Rule fundamentally changes this practice. According to industry expert James Ganther, dealer fees, whether labeled as documentation fees, pre-sale preparation fees, or otherwise, are likely to become obsolete unless they are included in the advertised "Offering Price."


The Legitimacy of Dealer Fees

Dealer fees have long been considered legitimate as long as they are reasonable and not exorbitant. These fees can, for example, help cover the costs associated with complying with numerous regulations, including the CARS Rule. Complying with all these regulations requires substantial financial investment, which dealerships can recoup through these fees. However, the CARS Rule mandates that any such fees must be included in the advertised price of the vehicle, which poses a significant challenge.


The End of Separate Dealer Fees?

Under the CARS Rule, separate dealer fees will likely become a thing of the past. Any additional charges, such as documentation fees or pre-sale preparation fees, must be included in the initial advertised price. This change means that dealerships can no longer list these fees separately in the transaction paperwork. Instead, they must be part of the overall "Offering Price," simplifying the pricing structure but potentially impacting profitability.


The Future of Dealer Fees Under the CARS Rule

According to Ganther, if the CARS Rule survives ongoing litigation in its current form, dealer fees, as we know them, will likely disappear. This change will fundamentally alter how dealerships handle pricing and compliance. However, by understanding and adapting to these changes, dealerships can navigate the regulatory landscape effectively and continue to thrive in a competitive market.


Stay Informed

As the legal landscape surrounding the CARS Rule continues to evolve, dealerships must stay informed. Check out James Ganther's full keynote on the CARS Rule:






More About the CARS Rule:

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