A new research report by Car Help Canada finds that many car dealerships across Canada have been price gouging consumers who purchased a new car over the past three years. Automobile prices rose sharply over the past few years. A review of published literature and interviews with industry stakeholders confirm that the increases are attributable to price hikes from the manufacturers, higher interest rates for financing and leasing, and automobile dealerships engaging in deceptive sales practices to charge higher prices to consumers. All provincial regulators interviewed acknowledged that dealership sales practices such as tied selling, misleading advertising, and pricing disinformation are significant problems in the marketplace for new vehicles.
Car Help Canada commissioned Decision Point Research to conduct a Canada-wide survey. The survey targeted consumers in order to learn about their vehicle-buying experiences during the pandemic through a questionnaire developed by Car Help Canada. The survey data revealed that:
- 37% of consumers were forced to pay more than the original MSRP. 85% of these profit markups ranged from $1,000 to over $10,000.
- 41% of consumers experienced tied selling and 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.
- 55% 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 1-6 months.
- The majority of consumers believed they paid the right price and felt the dealer was professional, honest and transparent.
Since the completion of the survey, Car Help Canada has received a significant increase in consumer complaints for tied selling, all-in price advertising non-compliance, and disclosure related problems. Car Help Canada recommends that the following actions be taken immediately:
- Prohibit the sales practice of tied selling and include this provision in the provincial legislation for automobile sales.
- Prohibit the use of market adjustment fees and junk fees. Automobile dealers should be prohibited from charging add-ons that do not provide a benefit to the consumer or are grossly overpriced in relation to the benefit provided.
- Expand all-in price advertising legislation to all provinces.
- Expand use of substantial penalties and disciplinary action by provincial authorities for non-compliant dealerships, particularly repeat offenders. The cost of non-compliance needs to be commensurate with profits earned illegally, the size of the business and scope of non-compliance.
Car Help Canada would like to acknowledge that it received funding from Innovation, Science, and Economic Development Canada (ISED) for this research.