Dealer Add-ons Explained
Understanding the Legality of Dealer Add-ons in Texas
In many instances, car dealerships – both new car dealerships and used car dealerships – will list additional services that they provide to their customers as part of the sale. These services are often referred to as "dealer add-ons." Dealer Add-ons can include some pacement of warranties for vehicles, and/or some amount of money added at the end of a transaction for items such as window tinting or custom stereo systems.
An example of a dealer add-on may be a 3 year/36,000 miles vehicle service contract. This contract could be written by the dealership directly, by a widely known third party, or from a third party with whom the dealership has a working relationship. In this example , the consumer would owe nothing more than the negotiating price of the vehicle plus taxes, registration fees, and any added dealer add-ons, if desired.
In most consumer protection transactions, the contracting parties do not realize their rights and obligations until after the sale and purchase are made. This is due in part to the vast inequality of experience and the extent of industry specific knowledge of the parties. However, consumers need not fear asking questions about dealer add-ons and the legality of the dealer add-ons. If the dealer add-ons are not fully disclosed, they should not be added to the purchase price of the vehicle, and consumers are entitled to a refund by the dealer for any services which were misrepresented to the consumer.
Dealership Laws in Texas
Texas state laws concerning dealer add-ons are confusing and often contradictory on their face. The core Texas laws and regulations that dealers must follow when selling add-ons are:
• TX Bus. & Com. Code Ann. § 349.001 et seq. – In Texas, dealers cannot force customers to purchase add-ons, and all add-ons must be properly and fairly disclosed to customers.
• 16b Tex. Admin. Code § 91.18 – Another rule obligating dealers to disclose the existence of all add-ons and their costs in writing to customers
• 43 Tex. Admin. Code § 215.147 – This rule prohibits dealers from charging customers for some add-ons, including window etching and paint sealants.
• TX Admin. Code § 215.48(b) – This provision gives the State Agency contracting authority to reject contracts containing improper add-ons.
• 43 Tex. Admin. Code § 215.152 – This provision imposes several prohibitions and requirements concerning Motor Vehicle Sales Integrity.
Texas Consumer Rights
Texas law offers several protections for consumers who use dealer add-ons when purchasing a vehicle. The Texas Deceptive Trade Practices Act (TDTPA) may help protect you from add-on fees that are not disclosed to you, for example. Although it is not primarily an anti-consumer statute, the TDTPA can be utilized to enforce consumer protection against felons and others related to dealer add-ons.
The TDTPA codifies consumer protections for fraudulent conduct during or resulting from the "transaction" in an automobile deal, including advertising, representations made by repair and service personnel, and the general ability to obtain damages against an automobile dealer who engages in fraud or deception.
Several TDTPA protections are particularly relevant to dealer add-ons, such as:
Advertising the sale of goods at a prescribed price that the seller does not offer them for sale at that price constitutes false, misleading, or deceptive acts or practices. This addresses situations where an advertised interest rate may have excluded the addition of an extended service contract (either with the dealership itself or an outside company) to the base loan amount.
Importantly, and unlike many other consumer protection laws, the TDTPA can be used to enforce violations committed by convicted felons.
Common Procedures and Issues
Dealerships often employ coercive practices in their attempt to sell costly extras, including "loss of income" insurance, GAP, service contracts and Paintless Dent Removal. These practices include:
- Stating that the add-on is necessary for purchasing a vehicle when it is not
- Making statements that the product has a requirement to cover a loan balance when it does not
- Making statements that the product is a requirement of the manufacturer or lender when it is not
- Adding fees and charges onto the car loan that are not authorized by the buyer
- Adding fees for the add-on products to the loan which the buyer did not authorize
6 . Charging excessive amounts for add-ons including unnecessarily marking up the price of the add-on
7. Failure to provide proper disclosures about the add-ons
8. Presenting the appearance that the buyer may lose the negotiated price on the vehicle if an add-on is not purchased.
A dealer’s claims regarding financing can also be problematic. Common consumer complaints involve dealers who make a claim that, once the financing is in place, the buyer has no right to terminate the contract. They also complain of dealers’ actions hinting at the idea that additional payments will be due if they attempt to rescind the deal. Some dealers have also been said to present the idea that the buyer will not get the car if the financing is rejected.
Navigating Dealer Add-ons
To protect yourself from dealer add-ons, it’s important to put your car purchase over any "add-ons" so you can see your total contract price, as well as your total cost per month for the purchase. Listing all of these fees at the very beginning of the contract gives you a chance to make sure that these charges are fair and allow for negotiation where necessary. Make sure you have all contracts in writing, and take time to read them. Something that looks straightforward can end up costing more than you initially planned. Don’t be afraid to say, "No." If you don’t want a warranty, gap coverage, or other add-ons, say so; do not let a dealer talk you into something you don’t really need. If you can’t afford a vehicle with the extras it is offering, consider waiting until you can save up for the car you want, since trying to pay for add-ons or warranties can be burdensome and become part of what you end up paying for the rest of your life, even after the car is gone.
Resolving Concerns with Dealers
If you ever find yourself in the unfortunate situation of having purchased a vehicle that has dealer add-ons that are possibly illegal or at least unfair, there are some options available to you. Should you have a concern about the legality of your dealer add-on charges, you can submit a complaint through the TXDMV dealer portal. A TXDMV inspector will review the matter and contact the dealer if there is a basis for a violation. In cases where the dealer fails to respond satisfactorily to the complaint, TXDMV may issue a fine . Complaints may also be lodged with the Federal Trade Commission (FTC), to the Texas Office of the Attorney General either directly or through the Do Not Call Registry if the dealer failed to discontinue marketing calls after your original purchase. I recommend contacting an attorney should you have a dispute over dealer add-ons. An attorney can review your contract, evaluate your claim, and determine whether litigation is available in your situation.