Can the Car Dealership Really Do That?

You’re ready to sign the contract for your new car. Then, the finance manager tells you that you have to buy an extended warranty. You want the car but find yourself wondering, “Can a car dealership really do that?”

Yes, they can.

Such conditions by car dealers — sometimes thousands of dollars of extra products, services and outright profit added to a buyer’s contract — have become more common now that vehicle inventories are low due to supply-chain issues and microchip shortages. On average, buyers of non-luxury vehicles paid about $900 more than the Manufacturer's Suggested Retail Price, or MSRP, in January 2022, according to data analysis from Kelley Blue Book.

And it’s a far cry from even a year ago, when a buyer could usually expect to pay less than sticker price.

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Second sticker shock

These days, car buyers are finding out that the “suggested” in manufacturer’s suggested retail price works both ways. And it’s been a bit of a shock.

Christopher T. Smith, a California attorney who handles auto-related complaints for the firm of Glassey Smith — and a former car dealer himself — says he has received a “huge uptick” of complaints recently about dealers including extra products and basically saying "‘take it or leave it’.”

Some of these add-ons will appear on a second sticker right next to the Monroney label required on every new car: window etching, paint protection, even boldly labeled “market adjustments.” Others won’t emerge until you’re seated in the finance office and find the dealer won’t accept cash or requires you to buy gap insurance or tire and wheel protection warranties.

Pushing high-profit extras “has always been done and probably always will be done,” says Oren Weintraub, president of Authority Auto, a concierge car-buying service in the Los Angeles area.

What’s new is that many car dealers are loading up every deal with anything they can think of, and many won’t budge from that price. If your aim is to buy at a fair price, your best bet is to wait out this market.

In general, no law prevents car dealers from charging what the market will allow ​​as long as extra charges are listed in the sales contract and the mandatory charges or upsells aren't linked to your credit score.

But if an accident, theft or total breakdown of your last car has forced you into shopping for a new ride — or there’s a new model you simply can’t resist — remember the proverb “forewarned is forearmed.”

Here’s how the game has changed, some challenges you might encounter and some strategies for sorting it all out.

The game has changed

Features and options that were installed at the factory can’t be removed if they are on the manufacturer's sticker. The destination charge on that sticker is nonnegotiable, as are the sales taxes, title and license fees required by your state.

You can haggle over the out-the-door price and wind up paying less than the MSRP, as most of us have done in the past, but the factory has to be paid and the state must get its cut. The negotiating room comes from that S in MSRP.

A second sticker allows many dealers to add things like wheel locks or nitrogen-filled tires and charge high prices for them. Such items could possibly be removed or the cost waived or reduced. All the items on a second sticker are negotiable.

It is the dealer’s choice whether to stand firm or not. These days, many dealers sell their vehicles long before they are backed off the truck. They don't have to sell you a car any more than you can be forced to buy one.

“The market has become so insane, dealers know the consumer doesn’t have much leverage,” says Weintraub.