BUSTING OPEN THE CAR DEALER PLAYBOOK

Few customer experiences can evoke as much anxiety, uncertainty, and frustration as walking into a car dealership. As a consumer, you may find the perfect car online at an advertised price within your budget, only to drive to the dealership to be met with an arsenal of psychological and emotional manipulation tactics – all with the express purpose of driving up the final purchase price without your full knowledge, understanding, or consent. The excitement you may have felt at finding the car of your dreams starts to fade as suddenly, hundreds or even thousands of dollars are somehow being tacked onto your out-the-door price for seemingly no good reason. 

This all-too-common car dealership experience is the result of a strategy called bait-and-switch pricing – and sadly, it’s the reality for 71% of used car buyers in the U.S. In total, bait-and-switch pricing amounts to a $11.8 billion problem annually in the U.S. Even worse, there’s no federal regulation in place to stop dealers from purposefully obscuring important purchase details and egregiously overcharging consumers on what’s already one of the most expensive purchases they will make in their lifetimes.

It’s important to be clear, however, about what and who are causing the problem of bait-and-switch pricing. While the stereotype of the shady used car salesman is well-known, the real issue lies with the dealer business model, rather than individual rogue salespeople. Because cars are the only major purchase where consumers need to haggle on a final purchase price, car dealerships have a significant incentive to bring customers into the dealership without committing to a bottom-line price. Once the customer is in the dealership, dealers have the clear upper hand, and are able to drive up the price of a car in real time through a range of manipulative tactics. 

Over the past year, at CoPilot, we have spoken with car shoppers around the country and analyzed used car transactions across the U.S. Our data, for the first time ever, quantifies how much consumers were charged in hidden fees on their used car purchases and brings actionable insights and data to this problem. And we’re only just getting started pulling back the curtain on the scope of the problem of bait-and-switch pricing, which dealers are the worst offenders, and how much it’s costing consumers. Our ultimate goal? End bait-and-switch pricing, for once and for all.

Hidden fees are a common tactic in bait-and-switch pricing, especially for used car transactions. These fees are rarely advertised upfront and often added to a car purchase during the negotiation or purchasing process, without clear justification or purpose. They make the car buying process time-consuming, frustrating, and ultimately more expensive for shoppers.

Defining Hidden Fees 

Hidden fees fall into three categories: legitimate; excessive; and illegitimate.

• Legitimate: Legitimate fees at car dealerships are reasonable charges that cover actual costs or services provided during the vehicle purchase process. 
• Excessive: Excessive fees typically refer to charges that are unreasonably high or unnecessary for vehicle add-ons and features.
• Illegitimate: Illegitimate fees are charges that violate laws, regulations, or constitute deceptive practices. These fees also include charges for services that were not clearly communicated to the consumer or added onto the final purchase price without their consent.

By The Numbers: Key Takeaways

Excessive Fees Analysis

1. License Fee: $292.64

   • The amount in license fees that dealers are allowed to charge is capped by the state and should not exceed a certain amount. This number is the average amount by which license fees exceeded the state limit in the used car purchases analyzed by CoPilot.

2. Plate Fee: $275.99

   • Similarly, plate fees are regulated on a state-by-state basis and cannot exceed a certain amount.

3. Transportation fee: $212.33

   • Transportation fees refer to the cost of shipping the car from another location, like another dealership. These fees can often be marked up or contain illegitimate add-ons. 

4. Title fee: $205.92

   • In some states, title fees – the cost of transferring ownership from the buyer to the seller, including processing documents – are capped at a certain amount. Even in the absence of statewide regulation, these fees can be considered excessive if the dealer charges extra for processing documents beyond the title transfer.

5. Doc fee: $204.32

   • In some states, doc fees are regulated and capped at a certain amount. Some states, like Florida, that don’t have statewide regulation tend to see excessively high doc fees.

1. Title fee: $205.92
2. Doc fee: average $204.32

3. Registration: average $258.55 

   • This represents the average amount that dealer registration fees exceeded the amount charged by the state’s DMV.

4. License fee: average $292.64 

5. Electronic filing fe: - average $220.57

Illegitimate Fees Analysis

Note: The illegitimate fees below fall into a few categories. They can include charges for added features that were pre-installed on the vehicle, but not included in the final purchase price to the consumer. They can also refer to extra features that the dealer added to the car during the purchase process, without asking the consumer. 

The common thread here is that while these fees describe actual add-ons or services, what makes them illegitimate is that they were added to the final purchase price of the car without the consumer’s knowledge or consent.

1. Etching, wheels and lock: $1,795.00

   • This includes the vin etching, the wheel locks, and recovery system to protect against theft.

2. Reconditioning: $1,581.83

   • On paper, this fee covers the dealership’s costs to get the vehicle ready to sell (including inspecting, repair, and detail).

3. Exterior paint protection: $1,366.17

   • This fee refers to a brand name for a series of products designed to protect the exterior and interior of the vehicle against environmental damage (exterior) and spills/stains (interior).

4. Anti-theft / lo-jack: $1,227.25

   • This refers to a theft protection or deterrent system.

5. Door edge: $1,067.71

   • This refers to a product designed to protect the edges of vehicle doors from nicks, chips, and scratches that can occur from contact with other objects, like walls and other cars, or even when opening the door too forcefully.

1. Exterior paint protection: $1,238.23 
2. Reconditioning: $1,366.17 
3. Dealer accessories: $1,581.83 

4. Warranty: $1,593.97 

   • An add-on package for extended warranties, service plans, or other dealer-specific benefits these services are totally discretionary to the consumer and they should be able to push back on the fee if they are not interested in these services.

5. Anti-theft: $1,227.25

Brand Type Breakdown 

Domestic Brands - i.e., Ford, GM, Chevrolet

• 71% of purchases had hidden fees

  • The total amount of hidden fees was $885.19
  • illegitimate fees - average amount: $855.13
  • excessive fees - average amount: $30.07

Foreign Brands - i.e., Honda, Toyota, Kia

• 64% of purchases had hidden fees

  • The total amount of hidden fees was $851.97
  • illegitimate fees - average amount: $729.41
  • excessive fees - average amount: $134.92

Luxury Brands - i.e., Mercedes-Benz, Audi, Lincoln

• 39% of purchases had hidden fees

  • The total amount of hidden fees was $425.99
  • illegitimate fees - average amount: $361.25
  • excessive fees - average amount: $64.74

New car prices skyrocketed during the COVID-19 pandemic, due to a range of factors, including supply chain constraints and the semiconductor shortage causing new car inventory to plummet. At the same time, consumer demand for cars heightened. This created a perfect storm of supply-and-demand issues in the car market, one that still impacts car shoppers today when they step onto the dealer lot. 

The price increases in the new car market then trickled into the used car market, causing these prices to soar as well.  

• Currently, new car prices are now $49,667, up 29% since the start of the pandemic.
• Used car prices are now $26,715, up 18% since March 2020. This created an incredibly profitable environment for car dealers during 2021 and 2022 in particular. 

New car supply finally started to rebound in mid-2023, as automakers were finally able to produce more cars. However, car prices have yet to come down significantly from their peaks (New car prices, for instance, fell by just 1% in 2024). Meanwhile, dealers, who became accustomed to record profits during the COVID years, are unwilling to give those up. 

Today, more than ever, the dealer business model is incentivized to engage in non-transparent and at times deceptive pricing practices, resulting in hundreds and sometimes thousands of dollars extra added onto car purchases each year.

Unfortunately – with the overturn of the FTC Cars Rule in 2024, which had mandated that dealers transparently communicate vehicle piercing and limited add-ons and hidden fees – there is no regulatory solution to this problem. Without strong consumer protections in the car buying process, it’s now incumbent on car shoppers to be able to identify hidden fees and push back on the dealer when they try to add these onto a purchase.

To that end, there are a few steps that CoPilot recommends that consumers take to be prepared when they encounter bait-and-switch pricing at the car dealership:

• While it may seem like an obvious step, contact the dealer in advance and get the out-the-door price in writing. This holds them accountable to a number and diminishes the dealer’s ability to use bait-and-switch pricing.
• Identify any fees that look higher than average or seem unnecessary. Follow up with the dealer if there are any fees you need more clarification on and try to negotiate any fees down that you feel uncomfortable about. 
• Research average fees for your state so you can easily identify if what the dealer is charging you is in line with what other dealers are charging. 

Ultimately, however, bait-and-switch pricing is not a problem that can be solved on an individual level. We need to put the onus on dealers to end these deceptive pricing tactics and commit to fair and transparent pricing. In the coming months, CoPilot will continue to pull back the curtain on this problem:

• We’ll expose which metro areas and dealers across the country most often charge egregious hidden fees.
• We’re building tools and resources to help customers advocate for themselves when they encounter bait-and-switch pricing at the dealer.
• We’ll continue to connect with consumers who can share their knowledge and experience with bait-and-switch pricing, and use it to help others

Our goal is simple: End bait-and-switch pricing at car dealerships, period. We can’t wait to meet you on this journey.

ABOUT COPILOT

For journalists and publishers, CoPilot’s data has the best real-time view on prices, sales, and inventory in the new and used car market. By monitoring the online inventory of virtually every dealer in the country, every day, CoPilot:

• Provides fresh, comprehensive, and daily data
• Offers insight on the new and used market, broken down by segment, brand, model, and fuel type
• Looks at current retail prices, which (unlike wholesale prices) are a much more accurate reflection of how much consumers are currently paying for cars

For consumers, CoPilot offers the first-ever AI-assisted car shopping app, which:

• Searches virtually every dealer and analyzes millions of vehicles to find the best car for your needs, at the right price
• Helps you avoid add-ons and hidden fees, and negotiate the best price
• Does not take money from dealers, providing customers with truly unbiased recommendations

Media Contact:

Kerry Close Guaragno

kclose@groupgordon.com

732-609-2644