April 29, 2002
Undercover probe of new car dealerships finds extensive overcharging and deceptive practices
Montreal, Quebec – In its annual undercover probe of Canadian car dealerships, the Automobile Protection Association has found a high incidence of deceptive practices, overcharging, and misleading advertising. APA researchers posing as ordinary buyers visited 42 dealerships in four Canadian cities to shop for new cars and minivans. According to APA president George Iny, 45% of the dealerships visited earned a failing grade.
Dealerships in Edmonton and Vancouver were the worst, according to the report. The APA says that deceptive practices often began even before the APA shoppers made it to the dealerships. In Vancouver and Edmonton, dealer ads left out important information, or the cars in the ads were not available, or they were selling at higher prices. Dealership charges for paperwork and vehicle preparation in three of the four cities visited were frequently excessive. Chrysler dealerships in Vancouver and Toronto charged the highest extra fees, with observed charges for administration and paperwork of $299 to $632. In some cases, the dealers appear to be double billing. In Toronto, West End Chrysler and Islington Chrysler’s pre-delivery charges of $343 and $89 respectively are levied on top of Chrysler’s $955 transport and preparation charge, which already includes a pre-delivery allowance. Dealerships in Montreal rightly included these charges in the price of the vehicle, or charged a small premium for it.
Edmonton
Edmonton is the city with the worst results in the APA survey. Among the more outlandish results, Capital Jeep Chrysler failed to indicate that a new Neon was in fact a leftover 2001 demonstrator. “Furthermore,” said George Iny, “the dealership’s ad actually showed a 2002 car in the photo!” Northstar Hyundai tried to convince the APA shoppers that Royal Bank financing at 7.8% was cheaper than Hyundai’s factory financing or leasing at rates below 4%! Some sales managers and salespeople ruefully observed to the APA shoppers that the Edmonton market was out of control, and there was little they could do about it. The APA says that AMVIC, the Alberta Motor Vehicle Industry Council,
Vancouver
At Vancouver Chrysler, the advertised promotion failed to indicate the vehicle was a leftover 2001 model, and Chrysler’s rebate of over $2,000 mysteriously disappeared when the APA shoppers requested a calculation of payments with bank financing. Deer Lake Chrysler had the highest charge for extra fees in Vancouver, including a fictitious $375 lease administration fee payable to Chrysler. Midway Mazda had an unexpected surprise waiting at the dealership, in the form of a $2,200 down payment not disclosed in their ad for a Mazda Protegé. A missing balloon payment boosted the price of a Windstar
Toronto
Advertising in Toronto was clearly superior to Edmonton and Vancouver, but dealers are using loopholes to jack up selling prices. Toronto is the capital of extra fees with charges for paperwork and cleaning up the car of $324, $432 and $632 at the three Chrysler dealerships visited. Some dealers made errors on the provincial fuel consumption tax, including Mazda of Brampton that levied a charge of $75 on a minivan (there is none for minivans). Mazda dealers had to scramble to provide explanations regarding Mazda’s confusing promotion that required the dealer to kick in some of the
Montreal
With a small sample of only six dealerships, Montreal set the standard for the investigation. Salespeople provided a realistic assessment of the strengths and weaknesses of leasing and financing. There was no pressure to close the deal right away. Even Cité Nissan, whose dodgy advertising was the poorest observed in Montreal, was saved by the salesperson who immediately
Results for Each City
is a toothless tiger. “Right now,” says Iny, ” honest car dealers in Edmonton are penalized by the selling practices at over half the dealerships visited, and AMVIC seems to be looking the other way.” The two Toyota dealerships passed easily, but their polished performances came at a price: the selling price of a new Camry sedan was a scant $196 off full retail, compared to selling prices that were $400 to $700 lower in Vancouver.
minivan at Key West Ford by an incredible $9,150. Overall, the Toyota and General Motors dealerships shopped by the APA in Vancouver performed better than their competition. The General Motors dealers were running a carmaker promotion for the Cavalier and Sunfire that was refreshingly free of extra
charges payable upon delivery, and they had an adequate supply of vehicles at the advertised price in inventory.
advertised savings and an undisclosed extra charge by Mazda of $105 for every colour except Blue Mica.
disclosed the extra fees and charges. Sylvain Bossé of Coiteux Hyundai provided a detailed breakdown of all the extra charges for a base Accent – no small feat given all the extra charges for a base Accent, and detailed and knowledgeable disclosure of financing and leasing terms. All three Toyota
dealerships provided complete and polished sales presentations, but their non-negotiable fixed prices were a mere $85 off full list on a Toyota Echo. Toyota prices became non-negotiable in January 2002 with the introduction of the Access Toyota selling system. The APA says Access Toyota has resulted in higher prices virtually across-the-board in Montreal, by several hundred dollars in many cases.
Chrysler and Ford dealerships performed the worst overall. Toyota and General Motors performed best, and Mazda and Hyundai were mediocre. Mazda and Hyundai charge extra for items the other carmakers include, which means surprises are more likely at the dealership. The Nissan ad for a Sentra XE was
When it comes to financing, the APA says the worst deals do not come from the carmakers. The lender most preferred by car dealerships that place deceptive financing ads is the Royal Bank, says the APA, particularly in Western Canada.
The APA says that government cutbacks mean you can’t rely on the regulators to keep the industry honest, and industry self regulation in Alberta is not delivering the goods either. In spite of efforts by automakers like Toyota and General Motors to improve standards for retailing, there is
Detailed ratings on each dealership can be found at the APA web-site, www.apa.ca.
Overall findings
a model of clarity, with no extra fees and the down payment and monthly payment indicated in the large print. The consistently best sales experience among the brands shopped was Toyota, says the APA. “With or without Access pricing” Iny says, “the APA found Toyota dealers demonstrated a superior level of product knowledge and covered all the bases more consistently and applied the least pressure to make a sale.” However, Toyota dealers in the regions with fixed selling prices appeared to charge substantially more.
still a long way to go. The APA says that an eventual clean-up of auto retailing will likely require much more active involvement by the car makers, as they did with auto leasing. Based on its hidden camera shopping with CTV’s W-FIVE, the APA suggests taking a copy of a car ad to a competing dealer selling the same brand and asking them to match the offer. Chances are, they’ve already lost a few sales due to the ad, and will work a little harder to match the deal; if not, they’re almost certain to reveal the tricks in the competitor’s promotion to earn your business.
