Predatory Pricing: Online ads don’t match price paid at some dealerships

InvestigateTV - Buying a new vehicle is one of the biggest purchases many people will ever make.

“It is a really important purchase, often the second most expensive after a house,” said Sally Greenberg, Executive Director of the National Consumers League.

Car prices are skyrocketing, too. According to CARFAX, the median list price for a used car jumped 40% from January 2021 to January 2022. The biggest jump came in sedans with the average cost rising from $15,995 to $22,900 over the past year.

In the midst of this climb, our national investigative team uncovered consumer complaints from across the country accusing dealers of advertising one price, but when it came time to sign, charging a cash price thousands more.

Daniel Blinn is a Connecticut attorney with the Consumer Law Group. We spoke with three clients he’s representing in lawsuits concerning this issue. All three told similar stories of prices taking unexpected jumps.

• Karen Hubball purchased a 2015 Volkswagon Jetta Sedan for $15,000. The advertisement showed the car would cost $10,980. “I was very upset,” Hubball said.
• “I was mad,” said Gerardo Velazquez. “It was way too much money.” The price in his ad for a 2018 Nissan Rogue was $21,000, but when he went to sign his paperwork it listed at $24,045.
• Michele Gagnon bought a 2019 Kia Soul for $16,218 that was advertised for $15,499. “It made me feel very angry. I had literally depleted my savings account to put the money down on this vehicle to buy my 17-year-old a reliable car,” Gagnon said.

Blinn provided other examples of vehicle overcharging. In one advertisement, a Ford Fiesta was priced at $11,599, but the cash price was $17,200 - an almost 50% increase. Another showed a Nissan Altima posted online for $15,750; however, the cash price on paper was $20,681.

Blinn said his clients bought vehicles under false pretenses, and he said these cases are on the rise.

“Once it becomes less profitable to rip people off, that’s when they’ll stop doing it,” Blinn said.

After reviewing motor vehicle complaints reported to attorneys general offices from several states over the past couple of years, InvestigateTV found this practice wasn’t just happening in the Northeast.

• In Arkansas, one customer said: “they quoted me one price significantly higher than their online price. I pointed out the price discrepancy, and they informed me that the national company required them to post a specific lower price on their website.”
• One buyer in Texas said: “the truck was advertised for $30,000. When requested for an out the door price the salesman refused and stated that the sale price was $38,000.”
• And a South Carolina customer reported: “false advertising, went to purchase the truck and the price was higher than advertised. Cease bait and switch.”

InvestigateTV reached out multiple times to the car dealership industry for comment. The National Automobile Dealers Association had no response. The National Association of Dealer Counsel responded through email stating: “The NADC does not do interviews on these matters.” Auto Nation did not respond to our request for comment.

In Section 5: Unfair or Deceptive Acts or Practices of the Federal Trade Commission Act, the law prohibits any service providers such as dealerships from misleading consumers. While some states are enforcing federal regulation through fines and penalties, others aren’t.

“There are market conditions right now that have impacted the price of cars, but the laws in most states provide that if a car dealership advertises a car for a certain price – they have to sell it for that price,” Blinn said.

Greenberg, from the National Consumers League, said consumers should pump the brakes before buying. She suggested doing comparison shopping, checking online dealer reviews and reading the fine print.

“Any vehicle purchase requires a healthy amount of skepticism about the trustworthiness of the dealership, no matter how nice they are. No matter how beautiful the showroom is,” Greenberg said.

Looking back, Karen Hubball said she has regrets and now wants to make sure no one else falls for the same “Predatory Pricing”. “People need to know what’s going on,” Hubball said.

If you think you’re being overcharged for a vehicle, our experts said the laws in most states allow you to take legal action against car dealerships to recover damages. They said you could also file a complaint with your state attorney general or consumer protection agency.

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