How NOT to Sell Above MSRP
In a previous article, we discussed how to sell a vehicle for more than the manufacturer’s suggested retail price. It is legal to do so, provided you don’t do it in a deceptive manner. The big no-no was not selling above MSRP, but selling above the advertised price.
So I thought the subject was closed… but I was wrong. This week I heard from an agent whose dealership client intended to charge an undisclosed $1,000 to any customer that did not finance the vehicle through the dealership.
I told the agent about the prohibition on selling above advertised prices, and he forwarded that nugget on to his client. The next day the agent called me back to inform the dealer said that wouldn’t be a problem, as he never mentions a price in his advertisements!
To which I replied. “So he doesn’t post Monroney labels on his cars? That’s illegal, too.” In fact, the dealer did have Monroney labels on the units he sold – the OEM places those on the vehicles at the factory.
Eventually, the dealer added an addendum sticker bumping the price of every vehicle by $1,000 and advertising an instant $1,000 discount if the deal is financed through the dealership. A bit convoluted, I grant you, but probably legal – at least it’s not illegal on its face, which is certainly an improvement.
Deceptive Pricing Guidelines
The dealer’s problem was twofold. First, he thought that the price on the vehicle itself was not an advertisement. But as the Federal Trade Commission itself states in its Deceptive Pricing Guidelines:
“There are many methods by which manufacturers' suggested retail or list prices are advertised… The mechanics used are not of the essence. This part is concerned with any means employed for placing such prices before the consuming public.”
In other words, the sticker price is an advertised price, and you can’t sell above that. If you use an addendum sticker to bump the price, that becomes the new “advertised price” – and you can’t exceed that, either.
Disclose Clearly, Conspicuously, and Early
The dealer’s second problem was more fundamental: he wanted to play hide-the-ball with a big gotcha! at the end. Increasing a price by an undisclosed $1,000 in the F&I box is a deceptive practice, full stop. Your pricing practices are generally up to you, provided you disclose them clearly, conspicuously, and early.
For example, you often see gas stations advertising one price for cash sales and another, higher price for credit sales. That’s because gas stations lose a portion of their sale price when the transaction involves a credit card. No one objects, because the pricing differential is advertised clearly, conspicuously, and early. Dealers could take a lesson from the gas station operators.