Buying a vehicle from a dealership, the financing and sale are usually handled by a salesperson and a financing advisor. There have been several cases going through the Courts recently in BC regarding unauthorized and fraudulent charges.
What have been the issues that are the subject of the litigation?
There are two main issues:
One is, an upsell of unnecessary service items without transparent disclosure as to the cost – for example:
- The brokerage fee.
- Combined DOC – dealership overhead charge – and contract finance charge – this is a cost to prepare the finance paperwork and bill of sale.
- Dealerships pay for freight and pre-delivery inspection that is passed on to the consumer; some added another charge of their own for ‘vehicle preparation’ which is a double charge in this instance.
- Dealerships must pay a go green tire levy of $5 a tire but will upsell this with nitrogen, wheel locks, or road hazard insurance – it costs them $60 to $125 but charges fees 4 – 10 times that to the consumer.
- End of lease mechanical inspection and end of lease charge.
- ADM – additional dealership markup.
- Cashback is a ‘cash front’ that gives you cash in hand at the time of purchase but is added to the price of the vehicle and included in your financing.
- Of course, this means you are also paying a 12% sales tax on the loan to yourself, plus financing charges
- Rustproofing – all new vehicle warranties include anti corrosion so this is an unnecessary upsell
- Green levies are not forwarded to any environmental agency.
The second and more concerning legal issue before the courts at this time is fraudulent charges that were added on to a customer’s financing without their knowledge. This was done with forged signatures after the customer had completed the paperwork but before it was provided to the financing department. Added on were credit protection and replacement insurance – totaling $3200 and financed at 11% interest over 5 years.
Is there any reason that the dealership employees would have done this?
For the employees, there are many reasons why they would benefit from doing this. With the way the sales associates’ compensation is structured, they are paid commission and for every item on a sales sheet, it gets them a percentage. Financing and service advisors that get paid based on a commission pay structure (up to 100%) are incentivized to upsell service, maintenance, and insurance. As for the dealerships, it is a straight-up cash grab for line items like overhead charges, brokerage fees, and additional dealership markups. The actual expenses these fees cover overlap and are therefore double dipping or triple dipping and are very inappropriate.
How can buyers protect themselves?
This is a real buyer beware situation. First, when considering any service items, ensure that all the cost is reasonable for what you are being provided. If it is a service item, be sure to get a quote printout and take it to a mechanic you trust to carefully review. If it is a purchase, get a purchase quote with all the line items listed and take it home to review and ask questions as to what each line item is and what all abbreviations mean, and what it is being paid for.
Secondly, consider if the vehicle even requires any of the service items. Be sure to read the owner manual and your warranty – that will tell you if your warranty requires certain services or if it already covers things like corrosion making the upsell item unnecessarily.
In the case of charges added on without your knowledge, how can you protect yourself?
Get the final, signed paperwork after it has been approved, processed, and signed off by the dealership and the finance company. Be sure to review every line item and signature to be sure you authorized each item that has been purchased. When your payments begin, make sure the amount taken out of your account is the same amount you have recorded in the financing agreement paperwork.
What are a buyer’s options if they come to find out after the fact that they have been charged for things that they have not authorized?
When buying a vehicle you can contact the Vehicle Sales Authority (VSA) if you purchased a vehicle from a licensed dealership. You can take the purchase quote to them too to get them to review the items and have them explain everything to you and advocate on your behalf. They can act as an advocate for the consumer to ensure the dealership meets all of its disclosure standards and the price is fair and reasonable. The people at VSA have seen it all and are there for you and are ready to help you.
VSA also has a Customer compensation fund if you have been taken advantage of and need some help. For any disputes under $5,000 CRT, and Small Claims Court for disputes over $5,000. When doing this you must act quickly. There is a two (2) year limitation on your ability to take the dealership or finance company to the tribunal or court from the day you purchased the vehicle and should have been alerted to the upsell or fraudulent charges, or two years from the first payment made if that is what would have alerted you as to the problem.