Price Deception: Have you become a victim?

I hope this post gets shared among your professional or personal networks. It’s applicable for both the business community (you cannot deceive consumers with your pricing strategies) and for consumers (pay attention to the details of your purchase).deception

Like most women, I enjoy shopping … unless it’s for a vehicle. I have never found the process enjoyable, despite our ability to peruse vehicles online. One of our sons has been on the quest for a vehicle and found one he was interested in. We visited the dealership and it appeared to be just what he was looking for. He planned to purchase it and drive it home that evening. Unfortunately, things didn’t go as planned. I won’t disclose the name of this auto group but my favorite search engine revealed they have over ten locations in Illinois and two in the Midwest. Therefore, they have plenty of experience and should not only know the law, but comply with it. The focus of this post is on a term called “deceptive pricing”. If you are not familiar with it, it basically means that you cannot try to influence a consumer’s purchase decision by lying to them or misleading them into thinking they are paying a lower price for something when they are not. Federal law prohibits the use of deceptive pricing (https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/deceptive-pricing). This particular auto group appears to pride themselves on this type of tactic.

Here’s a quick overview of the scenario: Every vehicle has a blue sticker providing a brief description of an automatic “plan” that’s included with the purchase. The price is $995 and supposedly helps protect your vehicle against theft. The salesman proudly claimed that it can reduce your car insurance by $10 per month. After test driving the vehicle, we decided to move forward with the purchase. After all of the additional expected fees (sales tax, license plates, etc.), they added on $995 for that theft protection plan. Realistically, the vehicle in question does not make the top of the list for those reported stolen. And, after all, isn’t that one of the reasons why we insure our cars? I didn’t feel that package was worth the $995 price tag and asked that the device be removed. The car salesman told me they couldn’t remove it. I had no choice in the matter – it was automatically applied to every car they sell. I was shocked to think this was adding almost $1,000 to the cost of the vehicle for our son – and it was something we didn’t want/need. For anyone who knows me well enough, I wasn’t just going to accept that and leave it alone. After all, that was $1,000 being added to the purchase price! If it was $50 or $75, I probably wouldn’t have argued my point. We told the salesman that was a deal breaker and we were leaving. The general manager got involved and proceeded to tell us the exact same story as the salesman. Once again, we said that was a deal breaker. As we were walking away, the general manager came out after us. Guess what? Though he couldn’t eliminate the inflated charge, he could make other “accommodations” that would reduce the price by $1,000. That didn’t change our mind and we left. All along both the salesman and manager were adamant that they have very competitive pricing. What they didn’t want to disclose is what’s really going on here – and that is deceptive pricing. After we got home, we checked other vehicles this particular auto group has online and, sure enough, it appears they use this practice at all of their locations.

I revisited their website and nowhere is this anti-theft package for $995 discussed. Even when I searched their site for the term “theft protection” nothing appears. If this is such a valuable perk, wouldn’t you think it should be part of their marketing efforts or value proposition as to why a consumer should do business with them? Perhaps they could provide customer testimonials of how the device saved their car from being stolen? Maybe that type of benefit would allow them to compete on something other than price. But you and I both know the reason behind that notion. No one would purchase it if it was optional.

Here is what I surmise they are doing. The price of every single car is increased $995 from the advertised price to help cover their operational costs, which positively impacts their bottom line. That way they can say their prices are competitive but that’s not the case. If the real price was revealed, you may take your business elsewhere. The paperwork shows the price you agreed upon and then, boom, your price is automatically increased by almost $1,000. This isn’t fully disclosed until right before finance is involved to complete the transaction. You must pay close attention as it is quickly skimmed over when they are going over the price breakdown. Naturally, this is after you have completed all of the necessary paperwork because they typically have you hooked at that point. Let’s do an easy calculation: if each location happens to sell ten cars per day, that’s $10,000 each store pockets towards their bottom line. Since they have roughly 16 locations that amounts to $160,000 that they could be raking in every single day through deceptive pricing. Multiply that per month and over the course of a year it could bring in several million dollars just through deceptive practices. That certainly adds up to a large amount of money for something that most consumers won’t notice. With the volume levels an organization like this is able to purchase at, I would be shocked if the cost of the installed sensor is more than $100.

Now here’s what you can do. I firmly believe in the power of viral communication. Now that you are aware of this practice, I hope you will start the momentum by alerting people you know. I will be thrilled if I can help prevent one consumer from falling prey to these types of tactics. As they say, consumers beware!

Perhaps the Illinois Attorney General’s office should be notified about this scam or a class action lawsuit should be initiated. I wonder how many thousands of consumers in the northern Illinois area have fallen prey to this fraudulent practice …