Bart Grzybowski learned the dealer offer for a 2022 Soul EV Limited at Leggat Kia in Burlington, Ont. was about $11,000 more than the MSRP.NICK IWANYSHYN/The Globe and Mail
When Bart Grzybowski strolled over to his Kia Soul EV one evening last July, he was shocked to find its front end pulverized into a mess of twisted metal, the hood crumpled and the bumper sheared off.
“Luckily, no one was in the car,” recalls Grzybowski, who is an engineer. “But it was destroyed.” The 2018 electric vehicle had been hit by a driver who was eventually charged with impaired driving. The car was written off by his insurance company, and Grzybowski started looking for a new one.
Because he had opted to have the Kia Soul EV insured for full replacement value, Grzybowski needed to find the same model, with the same trim level.
After hearing about new vehicle inventory shortages, especially for electric vehicles, Grzybowski was relieved to find a 2022 Kia Soul EV Limited sitting in the lot at Leggat Kia in Burlington, Ont., about 15 minutes from his home. But that relief was short-lived.
Grzybowski had checked the Kia Canada website, where the manufacturer’s suggested retail price (MSRP) on the Soul EV Limited was $54,000. However, Leggat Kia Burlington told him the retail price for their 2022 Soul EV Limited was $64,995, about $11,000 more than he expected. Grzybowski protested, pointing to the MSRP on Kia Canada’s website, but Leggat Kia insisted that this was the market price. After some negotiation, his insurer agreed to pay the difference.
“I was desperate and had no choice,” Grzybowski says. “[The dealer] knew I had no car, that I was getting some sort of insurance payout, and that I needed that model.” He says the salesperson told him he could either pay the full asking price of $64,995 or try his luck elsewhere.
“I hated the whole ordeal,” Grzybowski says. “It was such a frustrating experience.”
He says he called Kia Canada to complain, but did not hear back. Joseph Capriotti, the general sales manager at Leggat Kia Burlington, did not respond to requests from The Globe and Mail on Feb. 23 for comment about their vehicle pricing practices or when asked about Grzybowski’s case.
Grzybowski’s story came as no surprise to Shari Prymak, a consultant at consumer advocacy group Car Help Canada. “There’s very little supply of cars, especially hybrids and EVs,” he says. “Whenever a dealer has one, they’re charging an enormous markup for it.” And the manufacturers are hands-off. “They’ll use the reasoning that dealerships are independent franchises; they have the right to run their business however they choose.”
He says he thinks some dealers are being greedy. “Some will tell you this is what we have to do to survive,” Prymak says. “They say they’re selling fewer units per month, so they have to make more margin per unit, and this is the way to do it.” Although he has no hard numbers, Prymak says that given the significant increase in complaints he’s been fielding lately, he estimates that the vast majority of dealers are charging more than the MSRP.
It’s not the first time Leggat Kia Burlington has been in the news. In November, the dealer came under fire for charging a buyer $5,000 more than the MSRP for a Kia Seltos.
Leggat Kia is part of the Leggat Auto Group, a family-owned business with about a dozen dealerships in Ontario.
Dealers are regulated by the Ontario Motor Vehicle Industry Council (OMVIC), which has a 12-member board that includes nine dealer representatives. A December 2021 report from the Auditor-General of Ontario found the agency was falling short in its role to “protect the public in their transactions with motor vehicle dealers and salespersons.” Of the complaints against dealers that it handled, OMVIC had been unable to mediate a resolution in about half the cases, the audit concluded. When drivers buy or lease a car, there is an extra $10 fee that dealers pay to OMVIC.
Maureen Harquail, OMVIC’s chief executive officer, acknowledged there can be a gap between what manufacturers advertise and dealers charge.
“Market adjustment fees are being charged by some dealers to reflect an increase in a vehicle price over MSRP and/or as a result of limited supply,” Harquail said in an email.
Furthermore, she said, OMVIC does not regulate vehicle manufacturers (with the exception of Tesla, which is registered as a dealer in Ontario), so carmaker ads – such as build-and-price features on their websites – do not have to comply with the all-in pricing requirement that dealers must adhere to.
Under the Ontario Motor Vehicle Dealers Act, dealers must disclose all fees and charges when they themselves advertise vehicles, and are only allowed to add licensing fees and HST.
OMVIC’s mandate is to maintain “a fair and informed marketplace by protecting the rights of consumers,” but according to George Iny, director of the Automobile Protection Association (APA), a consumer advocacy group, that doesn’t always happen.
“To APA’s knowledge, a ‘market adjustment’ is not prohibited by law so long as the extra charge is included in the [dealer’s] advertised price for the vehicle.” While this practice does not specifically violate the Motor Vehicle Dealers Act, Iny said it would seem to breach the Code of Ethics – in particular, the section about professionalism. This clearly states that a “registrant” (car salesperson registered with OMVIC) “shall act with honesty, integrity and fairness.”
“Ontario’s Motor Vehicle Dealers Act contains the right wording and is an impressive document,” says Iny. “But it’s rarely applied.”
There are instances where OMVIC does take action against dealers, such as failing to disclose accident damage history or other contraventions of the MVDA. Consumers who are being forced to pay extra for a new or used vehicle can complain to consumer advocacy groups like Car Help Canada and the Automobile Protection Association, which may be able to successfully intervene on their behalf.
“OMVIC can never force a dealer to provide a specific remedy to a complaint. But we can attempt to negotiate issues where we feel the dealer has failed to adhere to the MVDA or other consumer protection legislation,” Harquail said.
Padding vehicle prices isn’t limited to so-called market adjustment fees. When Zack Brendan from Keswick, Ont., picked up his 2023 Subaru BRZ at New Roads Subaru in Newmarket, Ont., last September, he found a surprise on his bill. A Tri-Hazard Protect, Level 2 warranty, costing $1,295, had been added to the total, even though he had not ordered it.
“The sales rep told me every car comes with this package, and that it’s not optional,” says Brendan, who works in software quality assurance. After he researched the warranty, he saw that the contract for the warranty allows for a 30-day cancellation.
“I went back to New Roads Subaru with the contract in my hand and showed them what it said, and asked to have the warranty cancelled,” he says. “They just said no and told me if I wasn’t happy with the car, they would gladly take it back.”
Brendan says New Roads Subaru also told him that all their vehicle buyers are informed about this mandatory warranty up front. Brendan vehemently denies this. “I didn’t hear about this until I picked up the car.”
Mark Beevor, a sales manager at New Roads Subaru in Newmarket, didn’t respond to emails asking about sales practices and Brendan’s case.
That’s the current “normal,” says APA’s Iny.
“Other mandatory extras include tire warranties and vehicle [identification number] etching,” he says. “The real problem is a scandalous drop in retailing standards and uptick in deceptive practices, many of which already existed before pandemic shortages.”
He says that dealer regulators across Canada were unprepared for the big shift in supply and demand brought by the pandemic, and now, nearly three years in, have not mounted a convincing response. “The fines are puny, and retaining your licence to sell vehicles appears to be a right, not a privilege.”
While OMVIC can and does discipline dealers, the average fine is about $2,000 to $4,000, Iny says. “If you sell 1,000 cars at a $500 markup, that’s about $250,000.” A dealer’s licence is rarely taken away, and only in extreme cases.
At the beginning of the pandemic, Iny recalls that dealers vigilantly complied with health regulations, providing signage and sanitizer and wearing masks. A violation of public health rules would have shut down the dealership and resulted in a costly interruption of business. But it was public health officials who enforced those rules, not the dealer regulators. “It shows that dealers can be compliant.”
Neither Grzybowski nor Brendan contacted OMVIC to complain.
From Brendan’s perspective, any new car buyer would be wise to have a complete order sheet with all the costs laid out before they put down a deposit. “You just can’t trust car dealers,” he says. “Frankly, [adding mandatory, unwanted extras] seems illegal. At the very least, unethical.”