Blinded by Chrome: High-Priced Dealer Add-ons
A friend of mine calls it the "rip-off sticker" — the sticker in a new car's window that lists the aftermarket extras installed by the dealer. These dealer add-ons make it harder for the average buyer to get a fair deal on a new car by charging king-size prices for low-value items.
We're not talking about the true window sticker that is generated by the factory and lists the car's MSRP. That sticker provides useful information about the specifications of the engine, the safety equipment and all the factory-installed equipment on a particular vehicle. The dealer's sticker, placed beside the window sticker, lists such items as pin-striping, window tinting, chrome-plated wheels, custom floor mats and alarm systems.
Some buyers want these things and are willing to pay for them. But in many cases, these add-ons have little value and are overpriced — to put it mildly. So, in this article, we'll look at how dealers use this sticker to their advantage and what to do about it.
The topic of dealer add-ons came up recently when a friend of ours found he had been overcharged $5,120 for a new Lexus SC 430. You may be wondering how in the world someone could be overcharged by this amount without noticing it. Understand that our friend had a difficult time even locating one of these sought-after luxury convertibles. When he was moved to the head of the list at a Southern California dealership and was asked if he wanted a car that suddenly became available, he jumped at the chance and made a deal over the phone and fax.
Once he had the car, he examined the contracts and realized he had paid $5,120 over sticker price. He had assumed he would pay sticker price for the car that has a base price of $58,455 and $3,000 in options. Sticker price, particularly on a luxury car like this, already includes a healthy profit for the dealership.
When our friend contacted the Southern California Lexus dealership where he bought the car and demanded an explanation for the overcharge, they said the car was equipped with dealer add-ons. "Such as?" he asked. "We'll get back to you on that," they replied. Time passed, and no explanation was forthcoming. Finally, he found out through another source that the car had "factory chrome-plated wheels." Apparently, the dealer felt this justified the extra charge.
Let's take a closer look at the description of "factory chrome-plated wheels." The SC 430 comes from the factory with alloy wheels. At the dealership, the wheels are removed, chrome-plated and then reinstalled at a cost of $5,120. For fun, I called a local custom wheel shop and told them I had an SC 430 with factory wheels on it that I wanted chrome-plated. How much would that cost? They said it would run $850. Certainly, the dealership would have connections to get the chrome plating done for less than this. But, conservatively, this shows the dealership made a profit of $4,505 on just the wheels.
I know I'm making a big deal about the chrome wheels in this case. But the troubling part isn't that our friend was overcharged for the wheels. It's that the wheels were used as a way to hide an inflated price. I mean, when the dealership was pressed to justify its price, the representative pointed at the wheels and said, "There! Look at those beautiful wheels. That's why we charged you $5,120 over sticker."
Furthermore, when our friend pointed out that he didn't want chrome-plated wheels, the dealership said, "All our cars come that way."
This practice of dealer add-ons is not limited to Lexus by any means. When purchasing cars for our Edmunds.com long-term fleet, we frequently run into dealer add-ons. What makes it tough is that sometimes the car we're eyeballing, which is liberally adorned with add-ons, is the only one of its kind on the lot. We want the car, but we don't want the extra junk that comes with it.
In some cases, the add-ons are rather easy to ignore. We bought a Hyundai Elantra which included a $279 "Appearance Package." This sounds very grand. When we asked exactly what the Appearance Package included, we discovered it was basically pin-striping. It would be difficult to tell customers that pin-striping cost $279. But renamed Appearance Package, the charge might whistle right past some buyers. In our case, we ignored the extra charge and negotiated as if the pin-striping weren't there.
In other cases, however, the add-ons are harder to ignore. Another friend of ours went to a Los Angeles-area dealership to buy his mother a Ford Focus. He was told that the dealership installs a security system on all its cars. His mom didn't want the security system and wanted them to remove it. The dealership refused to budge. She bought the car with the security system, paid $600 for it and never uses it.
We bought a Mazda Tribute ES for our long-term fleet at the same dealership and agreed to pay sticker price since the SUV was selling as soon as it hit car lots. We discovered only when we went to pick up our Tribute that it had a dealer-installed security system. The ES model already comes with a factory-installed alarm that had been disabled to hook up the dealer's alarm. Does this make sense?
A short walk from our offices in Santa Monica is a dealership that sells cars liberally festooned with an assortment of aftermarket equipment (see accompanying photograph). Here, the dealer has taken the $32,125 sticker price for a top-of-the-line import wagon and inflated this price by $2,675 by adding various items. When we looked at the list, which includes a wood package for $695, CD changer for $795, custom matz (sic) for $295, window tint for $395 and paint protect (sic) for $495, only the CD changer seemed to have real value. And even that comes at a high price.
We called a local glass shop and found that it would cost about $145 to tint the back windows of a station wagon. We then phoned a detail shop and told them we wanted a reapplication of the paint protection that the dealer put on our car when we bought it new. "You're talking about wax, basically," they told us. "That's all they do is wax your car." We expressed shock that someone could charge $495 for a wax job. "A lady was in here last week asking about the same thing," our detailer told us. "It's pretty sad that they do that."
So, how do you deal with dealer add-ons? Here are a few recommendations culled from our network of car buying experts:
- Ask ahead of time (even on the phone before you visit the car lot) if dealer add-ons are included on the car you want. Find out specifically what the items are and the related costs. Forewarned is forearmed.
- Avoid dealers who install lots of add-ons unless you really want the extra stuff. You can always have this work done after you buy the car — at a reasonable price.
- Ask the salesman to show you a car without the add-ons. Make it clear you don't want the extra gizmos and don't want to pay for them.
- Tell the salesman you will buy the car if the add-ons are removed. They probably won't do this, but you will have a stronger negotiating position since you've made it clear the item has no value to you.
- If you have to negotiate on a car that's loaded with dealer add-ons, evaluate the bottom-line cost of each item. Don't be afraid to completely ignore pin-striping, paint protection and window tinting. The cost of other items should probably be cut in half, assuming a 50 percent mark-up.
If you're in the market for a new car, and you're looking for a dealership to patronize, let the "rip-off sticker" be a red flag of warning to you. These add-ons complicate the deal and give the dealers extra profit for items you might not even want.
For this, and other buying and leasing strategies, pick up a copy of STRATEGIES FOR SMART CAR BUYERS, by the editors at Edmunds.com.