Commonwealth _ Tammy Hussey discovered an unusual restriction when accompanying her 84-year-old father on a car shopping trip this summer. After test-driving a 2021 Jeep Compass at a Toronto dealership, John Hussey, who had the funds in his bank account to purchase the car outright, was informed that he could only drive it home if he financed the purchase. To facilitate a cash purchase for her father, Tammy Hussey engaged in a 30-minute discussion with the salesperson at the dealership. Despite her persistent attempts to convince them to accept her father’s savings as payment, they were met with an abrupt request to leave. The dealership, North York Chrysler, did not provide any responses to interview requests regarding this incident. However, their website shed light on the stringent restrictions imposed on cash sales. These limitations extend exclusively to local customers residing within an eight-kilometer radius of the dealership. The primary objective behind this policy is to prevent transactions that are not directly retail-related or that might involve exports of the purchased vehicles.
Such restrictions not only affected John Hussey’s ability to make a cash purchase but also showcased the dealership’s adherence to a specific geographic criterion for cash transactions. This policy, designed to regulate sales within a localized area, inadvertently created hurdles for customers like John Hussey, residing beyond the designated boundary, seeking to make straightforward cash acquisitions. Forced financing” refers to the practice where car dealerships impose conditions that push customers towards taking out a loan instead of making a cash purchase. In John Hussey’s case, despite having the funds to buy the car outright, the dealership restricted the sale to financed purchases, effectively excluding him due to his residence location. Consumer advocate Shari Prymak highlighted this tactic, revealing that dealerships often earn commissions from lenders when facilitating loans for vehicle purchases. These commissions, which are absent in cash transactions, incentivize dealers to steer customers towards financing deals. This approach allows dealerships to generate additional profits per sale through these commission-based arrangements.
This practice has raised concerns about consumer choice and fairness, as it limits the options available to buyers, compelling them to engage in financing even if they have the means to make a cash purchase. It’s part of a strategy employed by some dealerships to maximize their earnings on each sale, impacting customers’ purchasing experiences and potentially restricting their freedom to choose their preferred payment method. Cost of Living attempted to gather information from major Canadian lenders about the commissions they provide to dealerships, but their responses were either non-existent or declined. Kenton Maitland, a general sales manager in the automotive industry, offered insights into the commission structure prevalent in dealerships. He outlined that commissions for vehicle sales typically vary, ranging between $500 to $2,000 per vehicle. These commissions are contingent upon factors such as the financing amount opted for by the customer and the interest rates associated with the loan.
Highlighting the financial significance of financing deals for dealerships, Maitland underscored how such arrangements serve as a substantial revenue source. The commissions earned through financing agreements constitute a considerable portion of a dealership’s profits per sale, incentivizing a focus on encouraging customers toward financing options. However, amidst this financial incentive, Maitland stressed a commitment to providing flexibility to customers who prefer making cash payments. He emphasized the importance of maintaining positive and enduring relationships with clients and safeguarding the dealership’s reputation. Despite the profitability associated with financing, Maitland emphasized a dedication to accommodating and serving the preferences of customers who opt for cash transactions. This approach is intended to prioritize customer satisfaction and foster long-term trust and goodwill within the community.
