Under an agreement with the state, Maryland automobile dealers yesterday promised to itemize the vague "dealer prep" charges that routinely add $150 or more to new car prices. Sometimes, the customer gets only a wash and wax for the money.
The agreement makes Maryland the only state where these charges will be uniformly itemized on the car's sticker, consumer advocates said yesterday as they praised the agreement between the state Automobile Dealers Association and the Maryland Consumer Credit Commissioner.
The Automobile Trade Association's president, Baltimore Cadillac dealer Matthew Fenton, said he thought state consumers will pay less for a new car because of the agreement.
"The customer may get the car for less because he will know exactly what he is getting or not getting," said Fenton. "Of course, we have a legal hold on our dealers, but I think they'll follow the agreement."
"This will end a disturbing practice of overcharging on new automobile purchases," said Maryland Attorney General Francis B. Burch.
For five years, consumer groups have been sounding warnings across the country about the growth of "dealer prep" charges, which they perceived as a potential "rip-off."
Originally, these charges were included in the price negotiated between a purchaser and a salesman. Then dealers started adding it on - and varying it - after the price had been negotiated. In this way, a dealer could make up for any losses sustained in the negotiation.
"The whole thing got out of control," said Clarence IDtlow, director of the Center for Automobile Safety in Washington.
The agreement actually was a bargain reached after Burch decreed last October that all settlement cost for new automobile purchase were illegal. Since the "dealer preparatory charges" are added on after a customer agrees on a price, the association began discussions with the consumer commission about the application of Burch's ruling.
Credit Commission Alan T. Fell called the agreement a victory for consumers, an impediment to dealers who might hide their profits under the label "prep charges."
In it April edition this year, the Consumer Report advised its 2.25 million subscribers to be sure to ask if dealer prep is a separate charge and be wary of the answer. Dealer prep is sometimes used as a "pack" - an unwarranted charge made to add to profits."
Individual Maryland dealers generally were reluctant yesterday to discuss the charges made for "dealer prep." The sales manager at Lowe Chevrolet in Upper Marlboro, however, said his firm usually charges $105. "That's to get the tires ready, a road test of four to eight miles, for gas, to wax it, undercoat it," explained J.I. Goosen, Lowe manager.
At Chris hamburger Ford in College Park, the prep charge averages some where around $50, according to manager Dick Murphy. "This (itemization) shouldn't make any difference to us," Murphy said. "We've never tried to conceal anything."
Besides the car's base price and the cost for such options as whitewalls and a stereo radio, the shopper will find the itemized "prep charges" like rustproofing and be able to refuse to accept the additional service.
John Powell, executive vice president of the Automobile Trade Association, said he was "pleased with the agreement."
"It was vey refreshing, Commissioner Fell tok the attitude of cooperating with industry. We are going to do everything to comply," Powell said.
Although consumer groups oppose prep charges altogether, they agree that a reasonable price for the normal services is between $50 and $75. These include rustproofing, car wash and wax possibly a road test.
"This is absolutely a national problem. We receive anywhere from 12,000 and 15,000 complian a year and a good number are on the items charged for dealer prep," said Ditlow.
"It's a way for some salespersons to make a better commissionon a higher profit on a nonitemized item. It's kind of like purchasing something for $10 plus tax, plus a license fee and then this extra unexplained charge. It's back to the old unwary consumer thing."