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April, 9 2016
In the winter of 2016, secret shoppers from the Automobile Protection Association visited 20 new car dealerships in Greater Vancouver. Using advertising in the daily newspapers and on the dealers' own websites, the APA’s secret shoppers tried to obtain the advertised vehicles. All visits were recorded on W5's hidden cameras. Overall, nine out of 20 dealers visited earned a Pass rating.
Five provinces require all-in price advertising by auto dealers (this includes Quebec, which requires all-in pricing for ALL advertising to consumers). "All-in" means that the price in the ad is the price you're supposed to pay for the vehicle, except for the sales tax and perhaps a fee to register a loan and a small tire levy. In British Columbia, fees must be disclosed clearly in the ad, but they do not have to be in one price.
Miss the show? Bell Media subscribers can watch it online on the CTV W5 website.
Extra charges, like Documentation fees (sometimes abbreviated as D.O.C., for Dealer Overhead Charge), that should have been included as part of the all-in price or listed in the ad, were common. Overall, Vancouver dealers appeared to apply fewer extra charges than the dealers in Calgary visited by the APA in 2014.
Many dealers charge a $100 air conditioner "tax"; this should be included in the all-in price as it has been prepaid by the manufacturer, and the dealer doesn’t remit the money collected to a government authority.
Some dealers charged extra to install wheel locks and fill tires with nitrogen; these mandatory extra charges were of negligible value for the base cars with steel wheels shopped by the APA. The extras were less common and less expensive than observed at the Calgary dealerships visited by the APA with W5 in 2014. When questioned about the charges, a couple of dealers were prepared to remove the wheel locks or waive the charge.
Some dealers misrepresented their extra charges as payable to government or a third party authority. North Vancouver Nissan said the Freight and Pre-delivery Inspection charge of $1,595 is a "government charge." Two dealers applied a $25 “battery levy.” British Columbia dropped that levy in 2010; contact the APA if you purchased a vehicle in B.C. after 2010 and were charged for a battery levy.
Tricks with payments
Small increases in weekly and biweekly payments add up to a significant amount of money over the term of a loan or lease. An 84 month loan, which is a fairly standard term nowadays, has 364 weekly payments, and a 60 month lease has 260 weekly payments.
Honda dealers bumped up advertised weekly payments by seemingly small amounts like $2.34 or $10 a week. These small discrepancies added up to a lot of money, because there are so many payments in a weekly offer. The extra $2.34 weekly a dealer charged over the 260 payments in Honda's advertised lease works out to $608. The $10 a week upsell from the unavailable Fit DX to a Fit LX resulted in a $2,600 jump in the price!
Dealer advertising not always the dealer’s
The APA secret shoppers usually chose ads with a local dealer’s name in them. However upon closer examination, the artwork, price and fine print were almost identical for ads placed by different dealers, even between dealers in different provinces. How is it that Nissan, Honda and Toyota dealers shopped by the APA in Vancouver, Calgary and Montreal ran low-ball ads that were nearly identical for unavailable cars? For an answer to that, you have to look at the long shadow of the automakers. They provide car dealers their advertising templates, and take advantage of loopholes in provincial rules that exempt automakers from oversight by the dealer regulators in British Columbia, Ontario, Alberta, Manitoba & Saskatchewan.
Bait and switch
Many vehicles featured in national advertising and in the dealers' own ads were not available at dealerships. A Honda dealer told the APA shoppers there was a three month wait for a base Fit DX like the one in Honda’s ad!
Results for vehicle brands
Neither Chrysler dealer had the base Grand Caravan with no options advertised for $21,988, but they were able to locate one. Coquitlam Chrysler had the highest extra charges of the survey, adding $800 for a post-delivery inspection (on top of the $1,745 Freight and Delivery charge), and a $290 D.O.C. fee. Neither amount appeared in the Chrysler Canada ad, whose fine print states only that extra fee may be required, but doesn’t say how much. That’s not compliant with B.C. regulations.
Chrysler’s corporate ad was tricky: The bold print promised “No payment for 90 days” but the fine print stated that interest starts to accumulate after 60 days.
The fine print on Ford’s website was the longest the APA has ever seen in a vehicle ad, with an extraordinary 106 separate items! The 2015 Escape S advertised by Richport Ford, and also featured on the Ford Canada website in January and February, was unavailable locally. A 2016 Escape S may have been available, but the dealer required a deposit and signed purchase offer to locate one in British Columbia. Richport Ford applied a $599 documentation fee not listed in their ad. After learning of the survey findings from W5, Richport Ford modified their website to mention the $599 documentation fee.
All three General Motors dealers had their advertised Chevrolet models in stock. This is consistent with previous APA surveys in Calgary, Toronto and Montreal that indicated a lower incidence of bait-and-switch advertising by GM dealers than competitors in those markets. Eagle Ridge Chevrolet in Coquitlam placed an ad for the 2015 Cruze LT that failed to specify it was a used car (the ad didn’t say it was new either!).
Destination Kingsway Honda, at 360 Kingsway in Vancouver, was the only Honda dealer to match the advertised weekly payment on a Honda, in stock with no extra fees.
Honda dealers reported a two or three month wait for the Fit DX advertised for a $44 weekly payment. One salesperson told the APA’s secret shoppers that the dealership's 12 salespeople were sharing a single advertised Fit DX which wasn’t scheduled to arrive for another two months! The result is consistent with APA visits to Honda dealers in Calgary in 2014 that also uncovered bait-and-switch advertising.
The APA shoppers visited just one Hyundai dealership to shop for an advertised Elantra L. The salesman at Jim Pattison Hyundai in the North Surry Auto Mall was knowledgeable and competent. The dealership charges $235 for mud flaps and wheel locks on every car, including those that don’t need them; the salesman was prepared to waive the charge. A $250 additional charge payable to Hyundai Canada was lower than the maximum listed in the fine print of the ad.
The unbelievably low advertised price of $19,988, plus a documentation charge of $549 in tiny fine print for a base Kia Optima at Kia West in Coquitlam turned out to be true. This was an in-house deal, and the dealership had one example of the featured vehicle on their lot. However the dealer misrepresented the manufacturer’s corrosion protection, stating there was “no warranty for rust.”
Nissan's manufacturer advertising was the most misleading shopped by the APA. The ad photo, price, and available discounts are a collage that mixes up two Micra models with different equipment, prices, discounts and financing. The photos showed a loaded Micra SR with an automatic transmission selling for about $15,000 next to the $9998 price of a base Micra S, sometimes in an extra-cost colour (add $135). The discount in the ad of up to $3250 on the SR is not available on the basic Micra S.
To obtain a base Micra at the advertised $9998, you have to take Nissan financing at a relatively high interest rate of about 5%, compared to 2.49% that Nissan charges for its other models. By doing that, a buyer ends up paying almost $1000 in additional interest.
To obtain the Micra S at the advertised price of $9998, the fine print in Nissan's ad explains that the price includes $1150 NCF standard finance cash, $650 non-stack cash (which includes a contribution from the dealer that was not always forthcoming) and $500 bonus cash. How many car buyers can understand this?
Nissan charges extra for paint. Every colour except one or two on the Nissan vehicles shopped by the APA incurred a paint surcharge of $135 or $300, but most Nissan ads don’t tell you that.
Among the Nissan dealers visited, the salesman at Morrey Nissan in Burnaby provided very good advice, including a strategy for dealing with Nissan’s tricky interest-rate bump-up on the Micra S.
The APA visited three Toyota dealers in the B.C. Lower Mainland looking for an advertised 2016 base Corolla CE. Not one had the car in inventory. One dealer said they could get it within three or four days, a second said it was not available, and a third said “maybe.” Of the three, only West Coast Toyota in Vancouver did not charge extra fees on top of the ad price. The result is consistent with APA visits to Toyota dealers in Greater Toronto in 2015 that also uncovered bait and switch advertising.
Most salespeople were not familiar with the details of their dealership’s vehicle promotions. Bring a copy of the dealer or manufacturer ad for the vehicle you are looking for with you.
Read the fine print: in Alberta, British Columbia, Manitoba (as of July 2015), Saskatchewan (as of January 2016) and Quebec, a dealer ad for a new vehicle must include all charges. If you are faced with additional charges above the advertised price, try to obtain a print-out from the dealer and report the incident to the provincial dealer regulator. You should also include a copy of the ad.
Use the list below to pass on or negotiate down the prices of some extras.
The additional products and services sold by new car dealers carry mark-ups as high as 400 percent. Many products are overpriced and several are of little or no value. If they are mandatory, they must be included in the advertised price – that’s the essence of “All-in” pricing.
Green Tire Levies
This refers to a variety of tire-related charges, some of which are worthless, some are marked up excessively, and some were not necessary for the vehicles shopped by the APA.
Nitrogen gas in the tires: regular air is already 80 percent nitrogen. Many tire retailers will fill a tire with pure nitrogen for free or for a small charge of up to $8 a tire.
Road hazard warranty for tires: Sometimes bundled with nitrogen and the provincial tire recycling levy of about $20, this coverage pays part of the cost of replacing a blown tire. The coverage costs the dealer about $60 for all four tires on the small cars the APA shopped, to about $100 for an SUV. The road hazard warranty is more valuable on vehicles with large, expensive-to-replace tires.
Wheel locks: some dealers charged almost as much for the locks as the value of the steel wheels on the base models the APA shopped! The locks cost the dealer $50 to $60 for four and make it harder to steal alloy wheels. Wheel locks are not effective for steel wheels with a design that does not have recessed wheel nuts.
British Columbia: (Understanding Dealer Fees)
The price shown on the vehicle: The price you see on the window sticker, as well as any other advertisement, must be the total price. This is the full amount you have to pay to purchase the vehicle (with the exception of taxes). This number needs to include:
• Dealer fees
• Inspection and pre-delivery fees
• The cost of accessories and optional equipment physically attached to the vehicle
• Any other additional fees and transportation charges.
Dealer fees in advertising
Dealer fees may be displayed in the following ways:
• An ad may prominently display a price of $15,395 plus a $250 doc. fee
• Dealer fees may be shown in the small or fine print of the ad
• If there are no additional fees stated anywhere in an ad or on the vehicle sticker, you have the right to assume that they are already included in the total price.
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