DRIVERS are becoming victims of bait-and-switch pricing tactics by dealerships resulting in costly hidden fees, a study has found.
Used car buyers have been tricked into forking out significant amounts in recent times – averaging at least $640 per transaction.
This equates to around $11.8 billion in added costs each year.
According to a CoPilot study, dealerships have been accused of using tactics to lure drivers into the showroom.
Some are accused of manipulating prices often catching drivers off guard.
First, dealerships would list a car at a lower price to attract them into the showroom.
But then they use manipulative tactics to hike the price, such as adding illegitimate or excessive fees and charges for add-ons that haven’t been asked for.
One major factor that’s been driving this problem is the Covid pandemic, which caused car shortages that not only drove up prices, but also dealer profits.
New car prices rose by 29%, while used car prices increased by 18% during the pandemic, creating an environment where dealers became used to record profits.
As such, dealers are now incentivized to maintain these profits, even as supply chain issues start to get rectified.
Coupled with a lack of strong consumer protections, these practices are ultimately allowed to persist.
Illegitimate fees, such as charges for added features or services not disclosed during the purchase process, are added to hike prices.
Costs such as transportation, title and doc fees are also often added.
On average, hidden fees add up to $640 per transaction, with $453 attributed to illegitimate fees and $184 to excessive fees.
These specifics can be as innocuous as etching, wheels and locks, which can add up to $1,795 to a car’s price.
Reconditioning fees, which are charges for inspecting, repairing and detailing the car before sale, can come to $1,581.83 on average.
Costs include those for products to protect the car’s exterior and interior, anti-theft systems and even door edge guards.
Add-ons that aren’t requested can also bump up costs.
This includes items such as LoJack systems, window tinting or VIN etching that were not part of the advertised price.
Extended warranties, oil changes and vehicle maintenance plans can also be bundled into the price.
The CoPilot study found that 71% of used car buyers in the US encounter bait-and-switch pricing, while average hidden fees vary by brand type – with domestic brands being the most affected.
For instance, hidden fees for domestic brands average $885.19, compared to $851.97 for foreign brands and $425.99 for luxury vehicles.
The overturning of the Federal Trade Commission’s Combatting Auto Retail Scams Rule in 2024 has also left consumers with fewer protections, making it even more critical for buyers to be vigilant.
The Federal Trade Commission is cracking down on dealerships that charge buyers unfairly.
However, as many transactions aren’t spotted due to electronically signed documents, many added-on fees aren’t spotted. Here’s how the agency says you can spot them.
Source: FTC
This rule had mandated transparent pricing and limited hidden fees – with its removal directly contributing to the persistence of deceptive practices.
Law firms have shared a series of clues to ensure unsuspecting drivers don’t fall victims to such bait and switch tactics.
Drivers should be skeptical if they think the deal is too good to be true.
They should also look out for the mannerisms of the staffers in the showroom.
If the salesperson is being particularly aggressive or rushing to conclude a deal, then the buyer should take a step back.
First-time buyers are often more vulnerable to falling victim to bait-and-switch tactics.
This is because they might not have the same level of experience in a dealership compared to a more seasoned driver.
