Can the car dealership really do this?
YesYou are ready to sign the contract for your new car. Then the finance manager tells you that you need to purchase an extended warranty. You want the car, but you’re wondering, “Can a car dealership really do that?”
Yes, they can.
Such conditions imposed by car dealerships – sometimes thousands of dollars of additional products, services and profits added to a buyer’s contract – have become more common now that vehicle inventories are low due to supply chain issues. supply and shortages of microchips. On average, buyers of non-luxury vehicles paid about $900 more than the manufacturer’s suggested retail price, or MSRP, in January 2022, according to analysis of Kelley Blue Book data.
And that’s a far cry from even a year ago, when a buyer could generally expect to pay less than the list price.
Second shock sticker
These days, car buyers are finding that the “suggested” in the manufacturer’s suggested retail price works both ways. And that was a bit of a shock.
Christopher T. Smith, a California lawyer who handles auto-related complaints for Glassey Smith – and a former car dealership himself – says he’s recently received a “huge increase” in complaints about dealerships including additional products and basically saying “take it or leave it.”
Some of these additions will appear on a second sticker right next to the Monroney tag required on every new car: etching the windows, protecting the paintwork, even boldly labeled “market tweaks.” Others won’t emerge until you’re seated in the finance desk and see that the dealer won’t accept cash or ask you to purchase defect insurance or tire protection warranties. and wheels.
Pushing high-yield extras “has always been done and probably always will be done,” says Oren Weintraub, president of Authority Auto, a Los Angeles-area car buying concierge service.
What’s new is that many car dealerships load every deal with whatever they can think of, and many won’t budge from that price. If your goal is to buy at a fair price, your best bet is to wait for that market.
Generally, there is no law preventing car dealerships from charging what the market allows as long as additional fees are stated in the sales contract and the mandatory fees or upsells are not tied to your credit score.
But if an accident, theft or total breakdown of your last car has forced you to shop for a new car – or if there’s a new model you just can’t resist – remember the saying “warned is warned”.
Here’s how the game has changed, some challenges you might encounter, and some strategies to sort it all out.
The game has changed
Features and options that have been installed at the factory cannot be removed if they are on the manufacturer’s sticker. Destination charges on this decal are non-negotiable, as are sales taxes, title and license fees required by your state.
You can haggle the price at the door and end up paying less than MSRP, as most of us have done in the past, but the factory has to be paid and the state has to get its cut. The trading room comes from this S in MSRP.
A second sticker allows many dealers to add items like wheel locks or nitrogen filled tires and charge them high prices. These items could eventually be removed or the cost canceled or reduced. All items on a second sticker are negotiable.
It’s the dealer’s choice whether to stand firm or not. These days, many dealerships sell their vehicles long before they leave the truck. They don’t have to sell you a car any more than they have to force you to buy one.
“The market has become so insane that dealers know the consumer doesn’t have a lot of leverage,” Weintraub says.
Pandemic Market’s Biggest Hits
Everything below is legal, as long as it is disclosed and detailed on your final sales contract. Everything is also negotiable – if the dealer chooses to do so and you are willing to pay.
You will likely see a line labeled “Market Adjustment” or a similar term on most second stickers. The dealer has added nothing of value to the car; he just wants more money for it. A few other extras that might appear on this sticker:
- Anti-theft products such as additional alarms or a vehicle tracking device.
- Fabric protection for padding.
- Aftermarket upgrades such as leather seats or custom wheels.
- Paint protective coating or anti-scratch vinyl film.
- Tinted window.
- Safety extras such as a flashing brake light.
- A second delivery charge
- Delivery preparation costs.
Other items that may appear on the sticker, or later, in the dealership’s finance office, could include:
Often, “these back-end products aren’t even discussed before the finance department,” says Weintraub. Then the buyer is committed to the transaction and the contract is ready to be signed.
You may find that the dealer also sets financing terms. For example, he can only sell you a car if you agree to finance it through the dealer’s partners. It may charge you more if you insist on paying cash.
All of the above is legal. And negotiable. Here’s how to stay on track.
Choose a Dealer Wisely
“The good dealers are always there,” says Weintraub. You can pay more for a vehicle these days, but you’ll find most dealerships aware of the process. “Go with your instincts,” Smith says. “If you feel pressure from the first minute, you’re probably going to feel pressure throughout the case.”
Leave a written record
Print out all emailed offers and keep them with you when you complete the transaction. When you’re negotiating at a dealership, “pull out your phone and take pictures of everything they present to you,” Smith says. Ask for a breakdown of fees and your price at the door.
Keep an eye on the big picture
Rather than fighting over every little item, negotiate based on door price. This allows the dealer to find a place among all the separate parts of the transaction to get you to the correct end number.
Read the contract before signing
In some cases, Smith says these additional items aren’t even disclosed and are simply written into a sales contract — a practice called “payment wrapping.” A careless customer might sign the contract without noticing the extras because they received their agreed-upon monthly payment.
Read the contract after signing
If you’ve been pressured to buy extended warranties or other products you don’t need, you can usually cancel them to get credit on your loan balance. If you took out a loan from the dealership, investigate auto loan refinancing.
More from NerdWallet
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.