The price tag causing sticker shock among Washington-area car buyers is no longer the one pasted on new-car windows by the manufacturer.
The newest addition to the auto-price negotiating process is the dealer sticker, usually smaller in size and located to the right of the federally mandated manufacturer's label. The dealer's sticker has various names: "Seller's Reconciliation," "Add-A-Tag," "Dealer's Supplement," "Additional Dealer's Markup."
For area car buyers, the names all mean higher prices -- often $1,000 extra, but in some cases as much as $5,000 above the manufacturer's suggested retail price.
Interviews with Washington-area auto dealers, consumers and consumer advocates -- along with random on-site price surveys by Washington Post reporters -- show that most of the area's estimated 175 auto franchises applied dealer stickers and markups to at least one line of cars at some point during the 1984-model year.
Many of those same dealers also are using the dealer stickers and markups in the 1985-model year, which began Oct. 1.
The appearance of the new price stickers has, in many area dealerships, turned the traditional negotiations for the purchase of a new car upside down.
Ever since the late 1950s, when Congress ordered manufacturers to post suggested-retail-price stickers on new cars, buyers and sellers alike generally have used the sticker price as the starting point for negotiating down the eventual purchase price. Today, with the advent of the dealer markup, the manufacturer's suggested retail price often has been the basis for negotiating up the final price of the car.
Of the 25 dealers visited by reporters during the survey, four did not use dealer stickers or additional dealer markups in their current car inventories. Two of those four dealers sold only domestic cars, and the other two sold high-cost, high-profit luxury imports.
According to the site surveys and interviews, the highest additional dealer markups usually occurred on Japanese models -- including Honda Accord sedans, which are made in Marysville, Ohio, for East Coast sales.
But popular domestic models -- such as the Chevrolet Cavalier, Pontiac Fiero, Ford Thunderbird, AMC/Renault Alliance, and both of Chrysler Corp.'s minivans, the Voyager and Caravan -- also carried markups.
Low-demand cars such as the front-wheel-drive Chevrolet Citation, harmed by bad publicity over alleged rear-brake problems in earlier models, tended to sell at or below the manufacturer's suggested price.
So-called hard-to-sell cars, such as a green Chevrolet Caprice with green vinyl seats being offered by one dealer, also tended to sell at or below the manufacturer's suggested price.
Some dealers noted that customers could even receive price breaks on hard-to-get Japanese cars that are the "wrong" color. A white Toyota Tercel with blue vinyl seats was one example.
Dealers said that the double-sticker phenomenon developed in the Washington area over the past five years. The practice is prevalent on the West and East coasts and in Southwestern cities such as Dallas, where affluence and demand are boosting the selling prices of cars in short supply.
The debate is not over the legality of the markups. Auto dealers are independent business people who have the right to set prices based on their perceptions of market conditions.
The emerging debate is over how those prices are advertised and explained to buyers and whether the charges are out of line with the real value of the products and services offered, combatants on all sides of the issue say.
Those questions are made more complicated by the nature of the new-car retail sales business -- an entrepreneurial realm in which printed prices always have been suggestions and nothing more.
"A car is one of two things in this country that is still subject to haggling in the marketplace. The other is a house," said George Rose, a lawyer who runs the auto complaint section of the Montgomery County Office of Consumer Affairs.
"But most people don't know much about cars and don't like to bargain. If there's somebody who wants to take advantage of you, the car business is the perfect place for him to do it," Rose said.
A good example of how the auto marketplace works is the price variance among dealers for some of the more standard markup items. The cost of rustproofing at the surveyed area dealerships ranged from $225 to $460. Paint sealant ran from $150 to $365, and pin stripes ranged from $89 to $169. Undercoating cost between $95 and $250, and fabric protection was included for $125 to $360.
Most of the area's car dealers "are honest businessmen," Rose said. Indeed, many of the dealers interviewed by The Post took umbrage at suggestions that they may be taking their customers for expensive rides.
"What I don't understand is why people believe that dealers don't have the right to make a profit. Everybody else has the right to make a profit, but not dealers," said Steve Horvath, owner of Tysons Toyota on Route 7 in Fairfax County.
Horvath said he adds an average $1,400 to the price of his high-demand Toyota cars, largely because U.S.-market supplies of those and other Japanese models have been restricted by "voluntary" quotas in place since April 1981.
Another high-demand car in the Washington area is the 1985-model Nissan Sentra Deluxe, a sporty, four-door Japanese sedan.
The people at Bob Rosenthal's Connecticut Avenue Datsun advertise the Sentra for "$99 over invoice" -- which would be a pretty good deal. The invoice charge is about as close as a customer can get to the amount the dealer paid to buy the car from the auto maker.
According to the New Car Cost Guide published by California-based Automobile Invoice Service, the final invoice price of the 1985 Sentra Deluxe was $5,931, which means that the car should have sold for about $6,030 if it really was $99 over invoice.
But the "Add-A-Tag" sticker on the Sentra in the Rosenthal showroom tells another story. It explains the fine print beneath the "$99 over invoice" claim. The fine print says: "Tax, tags and dealer-installed accessories additional. All have some dealer-installed accessories."
Those dealer-installed accessories include $460 for rustproofing; $365 for paint sealant; $169 for pin stripes; $195 for undercoating, and $89 for door edge guards. The guards are easily installed polyurethane plastic strips that fit along the edges of car doors. They are available for $4 for a set of two at some area auto parts stores.
Other dealer-installed accessories included $195 for wheellip moldings (thin metal or plastic shielding, often applied for cosmetic purposes in the arches or wells of the car body that house the wheels -- a set of four moldings should cost the buyer $55, according to Nissan's suggested retail price); $195 for gravel guards (thin metal, plastic or other polymer shielding designed to protect the lower parts of the car's finish from flying rocks and gravel), and $125 for floor mats (available without the Nissan emblem for under $60 for a set of four at some auto parts stores).
On top of those charges, the "Add-A-Tag" asks the buyer to pay Rosenthal a $2,495 "additional dealer's markup" -- automatically applied to all Nissan cars in the showroom.
Before the "$99 over invoice" ad campaign, the Rosenthal dealer sticker carried a bottom-line figure of $12,807. That meant the car originally had a $4,288 markup above Nissan's closing, option-loaded suggested retail price of $8,519 for the Sentra Deluxe.
But in conjunction with the ad campaign, a sign on the showroom wall said: "Forget the Sticker. We're Dealing."
The deal was this: Rosenthal was willing to knock $2,575 off of his original asking price of $12,807. That meant his new asking price was $10,232, which was still $1,713 higher than the closing 1985 suggested retail price and $4,301, or 72 percent, above what AIS said was the closing invoice price of the car.
Why the markup?
"It's very simple. It's because these cars are imported," said Frank Edwards, the Rosenthal Datsun sales manager. Imported cars, particularly Japanese models, are in scarce supply and high demand in the Washington area, Edwards said.
But the markups also are on domestic models, and on economy and luxury cars.
That partly is because of what the trade journal "Automotive News" calls "an old-fashioned boom" in the U.S. auto market.
Buyers who stayed out of showrooms during the last recession have been coming back in droves, mostly to replace cars that they have driven an average 7.2 years. And those buyers are coming at a time when auto-production capacity, here and abroad, has been cut.
Manufacturers seeking to lower break-even lines and to control costs have shuttered old plants and closed others deemed inefficient. New plants, such as the General Motors Corp. facility at Orion Township, Mich., have been built to roll out about 200,000 cars a year. But the modern plants, with their highly automated flexible manufacturing systems, also can operate profitably at lower capacities.
The upshot: in board rooms from Tokyo to Detroit, auto makers are saying that they never again will be caught with excess capacity in a depressed market.
Also, strikes such as those that recently took place in West Germany, France and the United States have dented auto production and the availability of some models.
Added to those developments is a lucrative options lust among buyers.
"People are buying more Cadillac and less Chevette," said auto industry analyst David Healy, of New York-based Drexel Burnham Lambert Inc. "They're going for richer option loads, for more expensive cars."
In that regard, the manufacturers' design and engineering departments are succeeding where their production lines have failed. They are meeting consumer demand.
The designers and engineers are creating cars that go faster on less fuel; cars that have bodies and drive trains that last longer than those of their predecessors; computerized cars that "tell" the driver how far he or she can go on what is left in the fuel tank; cars with anti-skid systems that keep the machines straight in panic stops; cars with stereo systems that rival and, in some cases, surpass the best of what is available in home sets.
"It's a seller's market," said a salesman at Federal Ford of Gaithersburg. "We mark up a straight 10 percent on every car."
Still, even among dealers in the metropolitan Washington area, there are heated arguments over how much is enough profit on unit sales.
"We don't have additional dealer markups, or whatever you call them," said Bob Hughes, sales manager at Moore Cadillac Co. on Route 7 in Fairfax. "Putting on an additional dealer's markup without adding so much as a pin stripe is just taking people's money," Hughes said.
One salesman at an area Chevrolet dealership expressed similar sentiments. "Rustproofing and other such dealer-added options are usually just done to inflate the price of the car. We don't paint, rustproof or add fabric care unless a customer wants it. We don't want to ram these options down their throats," he said.
But Robert C. Daly, spokesman for the McLean-based National Automobile Dealers Association, which represents 19,055 domestic and import franchises, said that add-ons and pricey options often are a necessary part of doing business.
"A dealer's overhead goes on when his car supply doesn't," Daly said. "Some of our new-car dealers have very severe shortages of cars. For example, a dealer who may have built a facility to sell 1,000 cars a year may only get 600. But he still has land costs and personnel costs to pay."
"We have to pay for the lights in the building, the air conditioning, heat, the cost of tables in the showroom and insurance," said Edwards of Rosenthal Datsun.
Rose of the Montgomery County Office of Consumer Affairs agreed that dealers have big operating costs, especially in metropolitan areas such as Washington, where real estate prices are high. But, without naming any specific dealers, he said that nothing justifies "extravagant markups and high-pressure sales tactics" allegedly found in some area dealerships.
One area of consumer complaints is the often inconspicuous placement of additional dealer markups on dealer stickers. For example, at Federal Ford in Gaithersburg, the manufacturer's suggested retail price on a 1985 Ford Escort GL, two-door hatchback was $8,114. But the car was selling for $9,510.40
Prominently listed in the middle of the dealer's sticker were three added options: rustproofing for $295, paint sealant for $195 and undercoating for $95. (Many dealers interviewed said that they could not explain the difference between rustproofing and undercoating, inasmuch as both are anti-corrosive treatments.)
But those charges did not add up to $1,396.40 -- the difference between the suggested retail price and the displayed "final" price of the car.
The missing $811.40 additional markup was found on the top left-hand portion of the dealer's sticker -- sandwiched in between the stock number, the serial number and the model number of the car. The markup, 10 percent of the suggested retail price, escaped the initial notice of four shoppers who visited the dealership at the same time.
Rose, again without commenting on specific dealers, said that his agency requires "clear and conspicuous display" of markups, extra charges and caveats in dealer ads and showroom pricing.
But Robert Hughes, an attorney in the general counsel's office of the Federal Trade Commission, which attempts to regulate advertising practices, says that most automotive ads and pricing have prima facie legality. That includes ads and prices with fine print, Hughes said.
"There is very little on its face that's illegal in those kinds of advertisements," Hughes said, emphasizing that he was expressing a personal view and was not speaking about a particular dealership. "If the ad contains a disclosure or disclaimer that is clear and conspicuous, it's not misleading," Hughes said.
And the markups?
In most cases, they are legal, too, Hughes said.
Under the Monroney Act of 1958, auto dealers must display the manufacturer's suggested retail price on a manufacturer's sticker, Hughes said. "But the Monroney Act has nothing to do with the dealer's particular markup. The dealer is free to add on whatever he wants. There's nothing wrong with that as long as the markup is disclosed," Hughes said.
But dealers "must have some basis for their pricing claims," the FTC attorney said. "That means that they must be able to show that the added markup is something that they add regularly to the sticker price of a particular kind of car.
"If a dealer runs an ad about a vehicle sale, and he had never before sold that particular kind of vehicle at that kind of markup, then he can't very well say he is holding a sale; and there is reason to believe that the ad is misleading," Hughes said.
The problem: "There is no such thing as a regular price in the new-car business," Rose said.
The manufacturer's suggested retail price, traditionally referred to as the "sticker price," is "a guide, a suggestion," said Herb Gordon, owner of Herb Gordon's Auto World (Oldsmobile, Nissan and Mercedes-Benz) in Silver Spring.
"People love you when you sell below the suggested price. But they get angry when market conditions dictate that you should sell above sticker. We are talking about a business that is not a fixed-priced business," Gordon said.
A Rosenthal Datsun salesman put it this way: "Every once in a while you get a customer who will come in and pay the full dealer's [asking] price. So, why shouldn't we ask it? After all, we are a business."