Thinking about purchasing a vehicle? It may cost more than you bargain for if you’re considering paying cash. While cash used to be the quick and clean way to make a transaction, it’s not as profitable for dealerships as paying over time. They prefer to finance their vehicles than have customers pay outright with cash. So much so, that they can advertise two separate prices for the same car, legally. Let’s learn more about all-in-price advertising that car dealerships utilize to make the most profit for their inventory.

What is “All-in-Price Advertising”?

In Ontario car dealerships must use “all-in-price advertising,” meaning the price you see is the price you get. However, some car dealers aren’t following the rules. “There is a huge incentive for dealerships to get the consumer to finance the car. And if they get paid cash for the car, the dealership could be missing out on a lot of profit,” said Shari Prymak with Car Help Canada, a non-profit group that helps buyers with car purchases. When you see a car ad, some dealers show two prices, a cash price and a finance price. In many cases, the cash price can be $2,000 to $3,000 higher! The Used Car Dealers Association of Ontario (UCDA) says selling a car this way is legal, as long as the pricing in the ad is clear.

The key to double-standard pricing is transparency

The Ontario Motor Vehicle Industry Council (OMVIC) explains the dealership’s ability to sell a vehicle for two separate sets of pricing this way:

“As the regulator for motor vehicle sales in Ontario, our role is to ensure registrants strictly adhere to all-in-price advertising. Car buyers should be able to walk into a dealership and buy the vehicle for the exact price that is in the ad (except HST and licensing). Dealers may offer pricing options for finance and cash purchases. However, they are to disclose both prices in their ads, in a clear, comprehensible, and prominent manner. Not hidden below, on a different page or tab, or in fine print.”

If dealers advertise only one price, this price should be available to all buyers, regardless of their method of payment. Charging a higher price than the advertisement price is non-compliant with the all-in price advertisement regulations set out in the Motor Vehicle Dealers Act. Other examples of dealership non-compliance include:

  • The advertised price is $28,000, but in fine print in the body of the ad it says “For cash purchases an extra $2,000 is necessary.”
  • Ads show a price of $37,400, but later in the ad, it says the cash price is $39,000.
  • If inquiring at the dealership about the advertised lower price and are told that to get that price, the customer must finance.

The forced financing trap dealerships use

If you do not have cash available to pay for your new vehicle outright, or if you can’t use a line of credit to pay it off, you can fall into the trap of what’s known as “forced financing.” According to Shari Prymak, executive director of the non-profit, Car Help Canada, “Forced financing is sales practices by some dealerships where they don’t give the consumer the option to pay cash for a vehicle, so you have to finance or lease the vehicle if you want to purchase it.” Car Help Canada says it’s a tactic used more frequently over the last several years. “Quite simply, dealerships receive a commission or kickback from either, or both, the manufacturer or the lender when they finance a vehicle,” says Prymak.

In terms of whether the practice is legal, it is a bit of a grey area. But what dealers cannot do is advertise one price, but tell customers that to get that price they must finance it.

All-in-price advertising: Sly sales tactics

Car Help Canada is a non-profit organization whose mandate is to help and protect consumers when dealing with the auto industry. A recent survey finds that many car dealerships across Canada have been price-gouging consumers who purchased a new car over the last two years. The survey finds dealers have been charging markups or forcing consumers to pay for expensive products, which can add thousands of dollars to the regular price of the car. Respondents said not all dealers honour the original price agreed upon and had to pay a higher price.

Here are some highlights of their Canada-wide survey:

  •  36.6% of consumers were forced to pay a markup over the original manufacturer’s suggested retail price (MSRP). 85% of these profit markups ranged from $1,000 to over $10,000.
  •  41.3% of consumers were required to pay for dealer products, such as extended warranty plans, insurance, or protection products.
  •  Over 60% of these products added between $1,000 to over $3,000 to the final price.
  •  54.5% of consumers had to order their new car and wait for it to arrive. Over 40% had to wait longer than originally promised.
  •  The majority of consumers had to wait between one and six months.
  •  The majority of consumers believed they paid the right price and felt the dealer was professional, honest, and transparent.

When it comes to car prices, shop around

The Used Car Dealers Association of Ontario (UCDA) contends there are over 8,000 car dealers in Ontario. Of those, it says if consumers aren’t happy with one dealer, they should find another. Consumers have the right to shop around. If they find a dealership that they are not happy with, they should find another. OMVIC added that they have “…increased enforcement against non-compliant activities by expanding our mystery shopping program, dealer audits, and investigations to ensure compliance.” In 2023, OMVIC conducted 2,471 inspections across Ontario and laid nearly 1,600 charges. They are also taking stronger actions against repeat offenders with higher penalties.

All-in-price advertising: The bottom line

If you are in the market for a new or used vehicle, be sure to do your research. Car dealerships must clearly advertise whether or not they have dual pricing dependent upon the method of payment. If they are not forthcoming with this fact, you have the right to report them to OMVIC or choose to buy from another dealer. While it is an unfair practice to try to make up for revenue lost from not having their vehicles financed, it is not illegal. When looking to buy a new car, be sure to speak with one of our isure representatives to discuss your auto insurance options.

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