Bait and Switch Advertising

All car dealers pay the manufacturers the same prices for their new cars. Large volume dealers will lead you to believe that they pay less, but this is not true. So, when a car dealer advertises a price for a new car, he has no price advantage over his competition. This isn’t the case with most other products. Large volume sellers like Amazon, Walmart, Target, and Costco can negotiate much lower prices from the manufacturers than smaller “mom and pop” stores. Protective car dealer franchise laws lobbied into law in all 50 state legislatures require auto manufacturers to sell their cars to all their dealers at the same price.

Virtually all the prices for new cars you see advertised are so low that it would be impossible for a dealer to remain in business if he sold more than a very few cars at that price. The reason for this is that, if a dealer advertised realistic prices with a reasonable profit built in, another dealer would advertise a lower price. The dealer who advertised a realistic price is helping his competitor sell a car.

Most of the new car prices you see advertised are below the dealers actual cost. He protects himself by selling very few at this price and counting this loss as a cost of advertising. Next to an advertised car you will see some letters and numbers like, #5632A. That is the “stock number” of the car being advertised. This is all that the dealer does to tell you he has just one at this price. The chances are that if you are not the first person in the dealership on the morning of the ad, this car will be gone. Often these cars never existed, but you are told that the vehicle was sold.

Look for these two fine print disclosures at the bottom of the ad: (1) Price good on date of publication only. (2) Price good with copy of this ad only. These are just two more ways the dealer can avoid selling you the car at the advertised price.

If you’re a regular reader of my column, you understand about “dealer fees”. These fees are additional dealer profits ranging from $700 to over $2,000 that are added to the agreed upon price of the car by virtually every car dealer in Florida. They’re generally more than one dealer fee. “Dealer Fee” has become a generic term for phony fees like electronic filing fee, notary fee, doc fee, tag agency fee and many more. Florida law requires that this dealer fee be included in the advertised price. When the salesman tells you the advertised car has been sold but he has another one “exactly like it”, he can legally add back all of his dealer fees.

As you would guess, the salesman’s commission on an advertised car is often either zero or very small. Having no or a very small incentive to sell an advertised car, he will most likely encourage you to buy any other car.

My recommendation to you is to ignore advertised new car prices. If you must respond to an ad car, call the dealership first and ask if the car is still available. If the answer is no, you have saved yourself a lot of time and aggravation. If the answer is yes, ask if they will hold the car for you. If you must, offer to give them your credit card for a deposit to hold the car. If they won’t hold the car, save yourself the wasted trip.

The only way to get the best price on a new car if you’re dealing directly with car dealers is by getting competitive bids from at least 3 car dealers for the exact same year, make, model, and accessorized car with the identical MSRP. You can do this on the Internet, by phone, or in person. The Internet is likely to give you the lowest price. UseConsumer Reports magazine, the Internet www.edmunds.com and www.kbb.com are two excellent free sources of information), or even your local library. There are two other great ways to buy online, www.TrueCar.com and www.CostoAuto.com.