Car buyers beware on websites that provide dealer pricing

Dealers pay for the privilege of knowing you are looking for a particular car

Published on CBC News Online, April 8, 2014, With files from Aaron Saltzman

Knowing the invoice price, or what the dealer paid for a car, is supposed to give a buyer a fighting chance when negotiating at the car dealership.

However, car buyers are warned to be wary of websites that will provide the dealer invoice price, either for free or for a small fee, as that figure may not be accurate.

'We've all been told that if you're going to buy a car, you've got to do your homework. But nobody has ever taught us what that homework is supposed to be'- student Aileen Pinkerton

"The vast majority of them are actually lead generators for dealerships," says Viraf Baliwalla, who teaches a car-buying course at Humber College in Toronto and Conestoga College in Kitchener, Ont.

"Things like 'dealer invoice price reports' as they call them....that is a fake number," he told CBC News.

"Twenty years ago people believed that the dealer would show me my invoice price report to show me how little they actually were making on this deal. Well, we knew back then that's really not their invoice price. There's two levels, right, one that we will never see and one that they're actually going to show us," he added.

When you buy a price report online, your information is forwarded to a dealer, who then knows not only that you are interested in one of their vehicles, but that you're willing to pay for some research on that vehicle.

"That information is extremely valuable to these dealerships. So they're actually buying that information," said Baliwalla, who also runs Auto Mall Network, an auto buying consultancy for consumers and other clients.

Ben Spatafora says sites such as Car Cost Canada are meant to provide a service for consumers.(CBC).

Ben Spatafora, who runs dealer price site Car Cost Canada, freely admits the site is sponsored by dealers.

"They do pay to advertise on our website and [for] the privilege to be our dealer partners so that they can get access to our membership," he told CBC News.

But he said the site is meant to be a service to inform consumers and "improve the buying experience."

"You can call it a lead generator. We also like to call it a referral or an introduction," Spatafora said.

Dealers pay for access

Baliwalla says the fact that dealers are paying for access to these websites and to your name and email should make consumers suspicious of any dealer auto price they see posted.

Be even more suspicious if you are asked to pay for a referral to a dealership, he said.

Baliwalla's three-hour course guides consumers through the car-buying process - urging them to get 70 to 80 per cent of the information they need about the car before they approach any dealership.

Most people are leery of the car-buying process, he said.

"So you know, the whole comparison shopping, playing the games, etc., it creates a very negative experience because you can walk in today and buy that car - your neighbour walks in to the same dealership, same day later on, talks to a different sales rep or even the same sales rep and they end up getting a completely different price based on their skill," he said.

Intimidating process

One of his students, Aileen Pinkerton, agreed she was intimidated by the idea of car-shopping.

"We've all been told that if you're going to buy a car, you've got to do your homework," she said. "But nobody has ever taught us what that homework is supposed to be."

Baliwalla offers some of his own tips:

• Compare buying a new vehicle with a used vehicle, looking at warranty and cost.
• Compare financing options, considering leasing as well as buying. Know how the monthly financing option works out in overall price over a period of years.
• Try to determine how much the vehicle will cost to run and to insure.
• Watch for extras thrown into the contract, such as rust-proofing, which can be lucrative for dealers.
• Never take anyone's word that a car is in good shape - always take it to an independent mechanic for an inspection.