Car dealerships are price gouging customers: survey

Are Ont. car dealers 'price gouging' customers? A car buyers survery suggests car dealers are 'price gouging' customers by forcing them to buy expensive add-ons and options.

When you buy a car, you'll be pitched warranties, rust protection and other add-ons you can usually accept or decline.

However, a new survey by Car Help Canada, a non-profit group that provides assistance to customers buying cars, finds that some car dealers are forcing customers to buy adds-ons, and if they don't, the dealer will refuse to sell them the car.

"Many dealerships are price gouging consumers charging them excessive fees and forcing them to pay for add-on products they don't necessarily want or need,” said Shari Prymak, executive director of Car Help Canada.

The Canadian Car Buyers Survey asked 1,500 adult Canadians who purchased a car within the past two years about their car buying process.

Thirty-seven per cent of new car buyers said they were forced to pay a mark-up over the Manufactured Suggested Retail Price (MSRP) and 85 per cent of those profit mark-ups ranged from $1,000 to over $10,000.

Some of the options customers were forced to buy included extended warranties, paint protection, tinted windows, key fob insurance, rust protection, tire and rim protection and VIN etching.

According to the survey, some dealers told customers they had to pay for the add-ons or they couldn't buy the car.

"The dealership hides these charges until the last moment, until the contract is put in front of the consumer, and only then are they presented with it," said Prymak, adding that most dealerships now give you a price and say “take it or leave it.”

During the pandemic, many dealers had a shortage of vehicles due to factory shutdowns, supply chain issues and chip shortages which drove up demand and prices for both new and used vehicles.

While many in the industry thought wait times would be better by now, the survey found that most new car buyers had to wait one to six months to have their new car delivered to them.

This time last year, CTV News Toronto spoke with Erez Van Ham who was told if he wanted a new car he'd have to pay thousands of dollars extra for options he didn't want.

"I feel it's price gouging at it's worst, you used to be able to go into a dealership and negotiate a price down, not up" said Van Ham.

The practice is known as “tied selling” and while it's not illegal, Car Help Canada said it could be considered unethical.

A spokesperson for the Ontario Industry Vehicle Council (OMVIC) which oversees Ontario car dealers told CTV News Toronto: “The practice of requiring car buyers to buy additional products alongside a vehicle purchase has become prevalent due to widespread supply chain issues leading to significant vehicle shortages in North America. This is often presented as mandatory, putting pressure on car buyers to comply, or face outright refusal from the dealer.”

“This has prompted numerous complaints to OMVIC from car buyers who feel compelled to pay for unwanted products. It’s important to note this practice also exposes dealers or salespersons to the risk of violating the Code of Ethics through unprofessional, dishonest, or improper conduct, potentially resulting in enforcement measures.”

“In terms of dealers charging a higher price for a vehicle upon delivery, under the Consumer Protection Act (CPA), if a dealer raises the price after a contract is signed, the car buyer may cancel without penalty and get their deposit back.”

Car Help Canada recommends shopping around to find a dealer who won't force you to purchase options you don't want and while it's currently harder to negotiate, you can still try.

The online survey was conducted by Decision Point Research Inc. between Sept. 26 and Oct. 18.

A total of 1,500 people were surveyed. Participation was limited to Canadians who purchased a new car within the past two years. No margin of error was provided.