Buying a car? Why you may have to pay more at some dealers if you use cash

How car dealers are pushing to finance purchases A growing preference among car dealerships to finance purchases has led to a new way to advertise vehicles consumers need to watch out for.

It used to be cash was king and that you could get a better deal if you paid for a car in full, but now many dealers want you to finance your purchase so they can make more money.

While in Ontario dealers must use "all-in-price-advertising," meaning the price you see is the price you get, some car dealers aren’t following the rules.

"There is a huge incentive for dealerships to get the consumers to finance the car and if they get paid cash for the car, the dealership could be missing out on a lot of profit,” said Shari Prymak with Car Help Canada, a non-profit group that helps buyers with car purchases.

When you see car ad, some dealers show two prices, a cash price and a finance price. In many cases, the cash price can be $2000 to $3000 higher.

The Used Car Dealers Association of Ontario (UCDA) said selling a car this way is allowed as long as the pricing in the ad is clear and transparent.

"It's not illegal for a dealer to sell a vehicle for a cash price that’s at a different level than a financed price, but as the Ontario Motor Vehicle Industry Council (OMVIC) has indicated, it really comes down to disclosure,” said James Hamilton, executive director of the UCDA.

In a statement OMVIC told CTV News, “As the regulator for motor vehicle sales in Ontario, our role is to ensure registrants strictly adhere to all-in price advertising. Car buyers should be able to walk into a dealership and buy the vehicle for the exact price that is noted in the ad (except HST and licensing). Dealers offering pricing options for finance and cash purchases are required to disclose both prices in their ads, in a clear, comprehensible and prominent manner, not hidden below, on a different page or tab or in fine print."

“Dealers advertising two prices must also disclose the nature of the price (for example 'finance deals only' or 'cash price'). If dealers advertise only one price, this price should be available to all interested buyers. Charging a higher price from the advertised price is non-compliant with the all-in price advertisement regulations set out in the Motor Vehicle Dealers Act.”

But Prymak said many dealers are not following the rules and showed CTV News examples of ads where the advertised price is $26,000, but in fine print in the body of the ad it says "for cash purchases an extra $2,000 is necessary."

Another ad showed a price of $37,400, but later in the ad it says the cash price is $39,000.

Under Ontario rules, Prymak said that's not allowed.

“If you go to the dealership and the dealership tells you, 'Well sorry, to get that price you need to finance it with our dealership,' they are breaking the law,” said Prymak.

Prymak said any dealer pricing cars this way should be reported to OMVIC.

The UCDA said there are over 8,000 car dealers in Ontario and said if consumers aren’t happy with one dealer, they should find another one.

"It really comes down to the consumer’s ability to shop around and get the best deal they can and if they look they will find it,” said Hamilton.

OMVIC added: “Our priority is to protect car buyers. We have increased enforcement against non-compliant activities by expanding our mystery shopping program, dealer audits and investigations to ensure compliance. In 2023, we conducted 2,471 inspections across Ontario and laid nearly 1,600 charges. OMVIC is also taking stronger actions against repeat offenders with higher penalties. We continue to increase our efforts to educate dealers, salespeople and car buyers on all-in price advertisement requirements.”