In an effort to provide clarity and answer questions related to dealer add-ons and addendum stickers, SCADA has retained Greg Studemeyer, Esq. to research the subject. Please review the legal opinion below.
Provided by Greg Studemeyer, Esq.
This article began as an article on the propriety of using dealer addendum stickers. After reviewing cases from Alabama, Connecticut, Colorado, and Washington, it became clear that rather than the source of a problem, dealer addendum stickers might be a way to address complaints by consumers arising out of the sale of new vehicles with dealer added equipment.
The Dealers Act includes a provision that is challenging to understand. That provision reads as follows:
It shall be deemed a violation of paragraph (a) of Section 56-15-30 for a motor vehicle dealer:
(a) To require a purchaser of a new motor vehicle, as a condition of
sale and delivery thereof, to also purchase special features, appliances,
equipment, parts or accessories not desired or requested by the
purchaser; provided, however, that this prohibition shall not apply as to
special features, appliances, equipment, parts or accessories which are
already installed on the car when received by the dealer; provided,
further, that the motor vehicle dealer prior to the consummation of the
purchase reveals to the purchaser the substance of this paragraph.
Perhaps, an objective reading of this section would suggest that dealers are prohibited from forcing consumers to buy things like lift kits, special wheels and tires, window tint, pinstripes, door edge guards, wheel well enhancements, spoilers, etch products, fabric protection, and the like. One way to address this prohibition is to meet it head on by affixing a dealer addendum sticker to new vehicles that provides:
NOTICE: DEALERS ARE PROHIBITED FROM REQUIRING A PURCHASE OF A NEW VEHICLE, AS A CONDITION OF SALE AND DELIVERY TO ALSO PURCHASE SPECIAL FEATURES, APPLIANCES, EQUIPMENT, PARTS, OR ACCESSORIES NOT DESIRED OR REQUESTED BY THE PURCHASER. THIS VEHICLE HAS THE FOLLOWING SPECIAL FEATURES, APPLIANCES, EQUIPMENT, PARTS, OR ACCESSORIES:
Any such special features, appliances, equipment, parts, or accessories should then be itemized with an accurate description and corresponding price, with a subtotal added to MSRP for final price as equipped.
Perhaps, a Buyer’s Order should likewise contain the above notice followed by the following sentence:
CUSTOMER HAS INSPECTED THE VEHICLE AND IS SATISFIED WITH
THE VEHICLE AS EQUIPPED.
Cases from other parts of the country illustrate the right way and wrong way to address dealer add-ons.
A dealer in Alabama in a 1987 decision defeated a customer’s claim of fraud by demonstrating that charges of $588 for a protective package, i.e., undercoat, fabric protector, and paint sealer, was contained in a dealer sticker, an “add-on” sticker, which was placed on the car window, and such a service was added to the car upon its delivery to the dealer. The Supreme Court of Alabama concluded that, “If, indeed, in the final sales price charged to the plaintiff there was a difference from what he understood it to be, that difference would have been easily discovered by even a casual reference by him to the sales price clearly indicated on the sales document which he signed. (emphasis in original).
About a year later, another Alabama dealer and its salesman were unsuccessful in a similar case. In that case, the salesman itemized a charge of $389 for “AMV” (adjusted market value) and $495 for a “Protection Package” on a worksheet. When the customer asked about the charge for “AMV”, the salesman explained that AMV was a fee similar to taxes, tags, and title. A jury verdict in favor of the customer for compensatory damages of $1,779.00 and punitive damages of $70,000.00 for misrepresentation was affirmed on appeal. The court concluded that whether or not the customer justifiably relied upon the representations of the salesman was a jury question and the jury found in favor of the customer. The court also suggested that had the dealer in this case placed an addendum sticker on the window of the car and had itemized the additional products added by the dealer, the claims against the dealer could have been dismissed.
Two cases from Connecticut, one in 2003 and another in 2004, were brought as class actions. In both cases, the plaintiffs alleged that the dealers had engaged in unfair trade practices by selling new vehicles to consumers at prices higher than MSRP without affixing supplemental stickers to those vehicles advising that an enhanced asking price was being sought. In both cases, the named plaintiffs contended that Monroney Stickers were advertising. In both cases, the court in Connecticut recognized that Monroney Stickers affixed by the manufacturer did not constitute an advertised price by the dealers. Of course, in South Carolina, neither Monroney stickers nor a dealer’s addendum to the sticker are considered an advertisement.
Another class action from Colorado in 2011, involved two separate classes: (1) consumers who were charged for dealer-added products that were never installed; and (2) consumers who were charged for dealer-added products that were installed but not disclosed in writing. The products involved were pinstriping, paint protection, and truck bed liners
Another putative class action from Washington in 2017, involved claims not only against a Honda dealer, but also against American Honda Finance Corporation. In that case, the customer purchased a new vehicle with a dealer addendum sticker on the window that listed three items: “3M”, “Pro Pak”, and “New Car Detail & Dealer Prep”. The sticker listed these add-ons beneath the heading “DEALER-ADDED EQUIPMENT AND SERVICES”. Each add-on had a price associated with it and was included in the car’s total price.
The customer contended that he did not know what the add-ons listed on the dealer’s addendum were, but he thought the add-ons would be included as part of the price of the car because they were listed on the dealer’s addendum. When the customer signed the paperwork, the dealer’s addendum was not included. The customer negotiated with the dealership employees over the final sale price of the car but did not separately negotiate the price of the add-ons.
The customer signed a Retail Installment Sale Contract. Individual prices for the 3M, Pro Pak, and Dealer Prep listed on the dealer addendum were not included in the RISC.
In his complaint, the customer alleged that this particular dealership and other related dealerships failed to disclose the price of, and in some instances fail to furnish, add-ons during the sale and lease of new cars. He alleged that had he known about the add-ons, he could have declined to pay for them or negotiated a lower base price.
The claims against the lender were eventually thrown out. Fortunately, for the lender at least, the RISC contained that familiar language, ie, “This contract contains the entire agreement between you and us related to this contract”. There was no mention made of any add-on products in the RISC itself. Therefore, the customer could not prove that the lender breached any specific provision of the contract.
The dealer was not so lucky. An issue remained as to whether the dealer had adequately disclosed the nature of the add-ons on its addendum sticker, and if the add-ons were actually installed by the dealer. Nonetheless, the facts of this case along with those set forth in the other cases suggest a right way and a wrong way to address add-ons and dealer addendum stickers.
If customers are charged for add-ons:
- The add-on must actually be added to the vehicle;
- Itemize each add-on in clear and conspicuous language on the dealer addendum sticker that an average customer can understand, i.e., don’t use acronyms open to interpretation by sales people;
- List the price of each add-on on an addendum sticker affixed to the window of a vehicle;
- Include a NOTICE like the one set forth above on the addendum sticker;
- Have a customer sign and date a copy of the addendum form to be retained like a BUYERS GUIDE;
- Include language on the buyer’s order to confirm that the customer has inspected the vehicle and is satisfied with it as equipped.
- Itemize add-ons on retail installment contracts.
Like everything else in the car business, dealers must avoid engaging in any conduct that can be construed as unfair, deceptive, arbitrary, in bad faith or unconscionable.