Are Dealer Markups Legal or Illegal?
You might think the answer to this is a resounding “yes,” but hold your horses. The short answer is no—dealer markups aren’t illegal, but it’s a little nuanced. Dealer markups are as american as apple pie, they are simply a symptom of a free capitalist economy and the retail dealership model uses markups over MSRP to counterbalance the supply to the demand.
Problem is, while dealer markups aren’t illegal, many car dealerships use old school scummy sales tactics. Here’s a deeper look at whether dealer markups are legal.
Examples of dealer markups legalities
It is a legal requirement for car dealers to display the Monroney label/window sticker on new cars, accurately disclosing the equipment and pricing information, such as:
- MSRP (manufacturer suggested retail price)
- Standard (manufacturer supplied) equipment and warranties
- Optional (manufacturer supplied) equipment and their pricing
Dealers don’t often supply the markups or addons up front or online where shoppers need it listed the most. These markups and mandatory addons are crucial information that buyers want and need upfront before contacting a dealer or driving to a dealers location.
Some dealers are even more sinister. They advertise vehicles as “retail price” or “no dealer fees,” yet charge excessively overpriced added accessories and documentation fees. Some even use confusing or deceitful words such as “market price” or “Brooklyn MSRP.”
The issue is that dealers advertise cars online at MSRP and then force customers to pay much more once they’re in the dealership after they’ve tired and worn down a buyer. We call this the “bait and switch” and its definitely an old school scummy sales tactic.
That’s where the Dodd-Frank Act comes in, providing common-sense protection for consumers. States such as New Jersey, Wisconsin, California, Oklahoma, New York, Texas, and Pennsylvania also have laws prohibiting car dealers providing false advertising. Of course they can be circumvented simply by stating “plus added fees” or similar jargon to innacurately posted prices online.
No wonder states like Arizona punished two car dealerships that advertised vehicles at a low price but refused to sell the cars unless customers paid for added-on accessories. They had to pay $480,000 for false advertising.
In Maryland, a judge ruled that a KIA car dealer must refund shipping charges and other fees it charged customers beyond the advertised price. The state estimates the settlement could be as much as $1 million.
New York also got in on the action after discovering that car dealers committed more than 7,000 violations, including unfair markups and dealer add-ons. The New York Department of Consumer and Worker Protection (DCWP) forced them to pay more than $800,000 in civil penalties and restitution.
In rare cases, car manufacturers may make some markups illegal. For instance, VW Credit and Audi Financial Services limited lease rates to 1%.
Steps taken to protect consumers
On its part, the Federal Trade Commission intends to protect consumers from unfair and deceptive acts through accurate pricing disclosures and requiring car dealers to obtain customer consent for charges.
In the New York case, the court outlined requirements for compliance with NYC laws on advertising, such as not selling a car for more than the advertised price.
What you can do to avoid legal Dealer Markups
While dealer markups and forced addons are legal, saavy consumers are turning the tide on these archaic sales practices. After all, the manufacturer came up with the MSRP after factoring in the car dealers’ expenses.
The best way to go about it is by visiting our site Markups.org. We are a site dedicated to crowdsourcing and aggregating retailer-consumer data all over the USA, so you can avoid dealerships charging the highest markups.
Check out the dealerships and stealerships near you: https://bit.ly/Markups-ViewListings
And make sure to share your experience by posting new markups listings: https://bit.ly/Markups-AddNewListing
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