#34 - Monday Minute - Deceptive Pricing Practices

Alright guys, Luke's Rand here this morning. So my good buddy Stuart out in Arizona posted something this past week on the independent forum that talked about how dealers are trying to gain the online pricing model. And unfortunately this has been going on for a while and I didn't understand to the extent until I kind of read through this article. Last couple days I've been down in Florida, Florida buying cars and a lot of the cars I was looking at trying to buy were new car store trade ins and they left the window stickers in the car. So I just said you know what, I'm gonna go check this out. Yesterday Jeff, I saw a 2012 Limited Town and country van, really nice van that was coming through I wanted to bid on. So I walk up to it and on the side of the window it had MSRP 12, 7 or whatever. Then it had our price 10 6. Well on to the side of that they had the new car addendum sticker and there was another fifteen hundred dollar add backs. So, so this is going on everywhere. I don't know what to say about it other than this is how bad dealers do business.

So Luke, help me understand that real quick. Those of us that don't get the game, that aren't from the used car world, or maybe we just live in small sheltered bubbles like I do, you're saying that these dealers are basically power booking or overbooking their cars through whatever booking software they have the ability to do. So that that car is saying hey you know it's really not a ten thousand dollars Kelly retail. It's actually an eleven hundred dollar Kelly retail. But we've only got it priced at 10.

No, no, no, what they're doing is this, they're saying MSRP is, is 12 8. That's what, that's power booking. Everything's in there, right? But they said because, because we like you customer, we're gonna sell it to you for 10 5. And that's what they're advertising across every online platform. Okay, car gurus, whatever. Yeah, that's what they're advertising. Well what's happening at that point is if you've ever been new car shopping, they'll have a little addendum to the window sticker and that may include etching, it may include undercoating, it may include LoJack, it may include delivery cost, this, that and other which I'm pretty sure is allowed on new cars but I've never seen it on used cars until the other day.

This dealer, they're saying that it books at a higher Dollar amount because of all this ridiculous add on stuff.

They don't care about the booking. What they care about is what the customer is going to pay. But they're advertising for. Advertising it for a good bit less than what the actual price is, is what they're doing.

Hmm.

Okay, so if you go on any third party site, not any, but most nowadays is gonna sort by a good, better, best deal, right?

Yeah, yeah.

So what it's allowing them to do is you stick all their cars at best deal and then when you get into the store, they're hitting you back for 12 to 17 hundred dollars worth of add ons, which is just ridiculous. In South Carolina it is illegal. And in most states probably it is illegal to advertise a price on the Internet that does not include your document fee, it does not have to include your state sales tax and tax, but it has to be the real price of that car.

Okay, so I think I got my head wrapped around this. So you're saying that the Kelley Blue Book doesn't matter because. Well, I rephrase that. Kelley Blue Book or nada matters because when they're pricing their car at or below nada, it's showing up as a good deal, quote unquote on Cargurus at 10 grand. But then when you go up at the dealership, they're saying, oh yeah, our sales price is ten grand. But we've done undercoating and etching and VIN sketching and clear bra and tire package. So our, our sales price is actually 12,5.

Right. They don't give the customer the option. Yeah, they're not giving the customer the option to buy those things.

They're saying, oh yeah, it's all been done to the car.

There you go.

But that price wasn't online because that's not the sales price, that's the addendum. Add on products that have been thrown on the car and now you have to pay for those if you want that car.

Right. You know, just in that article that that steward put out there, they had a preparation fee of $1295, you know. Yeah, exactly. Plus a DOC fee of $600. Well, they're essentially taking the, the recon cost and added it as a prep fee. So, you know. Yeah, can we, can I go to the auction and buy whatever car I want to and advertise it at that price then purchase price? Yeah. Then when you get in the store, I go, oh yeah, but there's a recon fee involved and that's $1,500, which is ridiculous.

And then I got a fifteen hundred dollar gross profit fee because I got to feed my family. And then I got $500 sales commission fee. I got attack on top of that, these guys are doing this and the salesman and the customers. How I still don't get either way. Whether it's add on or addendums that, that these guys want to tack onto their car when the customer shows up or whether you're having this low advertised price quote, unquote, and then when the customer shows up you say, oh well, that's only if you finance through Spartan or that's only if you finance through this finance company. How are these salesmen and how are these guys? I mean, it just seems like an instant your customer's pissed. They just drove here based off this price you had online. And now you're trying to bait and switch them. I mean this.

Exactly. It's exactly what it is. It's bait and switch. It's illegal. And unfortunately there are people who aren't enforcing it. I don't, I'm with you. If I, if I walked in somewhere and I was going to buy a boat like you did not, not long ago try to do not long ago, and I walk in and I'd already discussed the price and I get there, next thing you know there's, you know, $1500 d difference in the price I was quoted in the price here. I would flip out. I would flip out.

And it's definitely one thing. I mean, there are some expectations. I get it. I gotta pay tax on top of this. I get it. I'm gonna stomach a doc fee of a reasonable amount because that's the standard, I guess. And we can argue the doc fee another day. But if I pay for additional products like insurances or VIN etching or clear bra, that that's my choice to pay additional for those after we've negotiated the best sales price. So yeah, this, I mean, geez Louise, man, it's ridiculous.

The one thing I want to tell other dealers out there and listen to this really well, there's two points. Number one, don't do this. In most states, this is 100% illegal. And I would dare to say all states, this is 100% illegal. But I don't know laws in every state. Number two, if you see another dealer doing this, turn them in to your department of consumer affairs. This is illegal. They have people there wanting to shut these dealers down, wanting to find these dealers, man, just do it. Turn them in today.