Can Car Dealers Charge a Higher Price if the Customer Pays in Cash and Doesn't Finance?

To sum up TIADA's understanding of the issue, NO. A vehicle may only have one price. There should be no cash price, credit price, internet price, etc…just one price. Dealers should stop thinking of inventory in terms of “cash cars” and “finance cars” on the lot. You simply have vehicles on your lot, and you accept various methods of payment for those vehicles, which may include cash, 3rd party financing or in-house financing.  A customer may negotiate to strike the best bargain; as long as the negotiated price is not contingent upon the payment method, there is no prohibition on price negotiation.
When featuring a sales price of a new or used motor vehicle in an advertisement, the dealer must be willing to sell the motor vehicle for that featured sales price to any retail buyer. The featured sales price shall be the price before the addition or subtraction of any other negotiated items. Destination and dealer preparation charges must be included in the featured sales price.
No person may advertise a savings claim or discount offer on a used motor vehicle….those can only be made on new motor vehicles / franchise dealers. Advertising an "internet price," "e-price," or using similar terms that indicate or create the impression that there is a different or unique sales price for an online or internet consumer or transaction is prohibited.  See Texas Administrative Code 43 TAC 255.250 (d-e).
Demanding a higher price if consumer wants to pay cash could be a “hidden finance charge” outlawed by Regulation Z.  It may also be a “Deceptive Act or Practice” under state and federal law - A three-part test is used to determine whether a representation, omission, or practice is deceptive. First, the representation, omission, or practice must mislead or be likely to mislead the consumer. Second, the consumer's interpretation of the representation, omission, or practice must be reasonable under the circumstances. Third, the misleading representation, omission, or practice must be material. [FTC policy Statement on Deceptive Acts and Practices].  So, under federal law you could have purchased the vehicle and sued the dealer for the overcharge as an unfair practice and a Regulation Z violation.
The communication of the price by you is an advertisement under federal law. Under federal law, the terms “advertising” or “advertisement” includes any message to the public, however communicated, which promotes a product or service. (Note - there are some exclusions to this definition for Reg. M and Reg Z.) So if your customer saw an advertisement and went to the dealership based upon the advertised price, the dealer may have a “bait and switch” claim. Under this scenario, the customer could sue the dealer for specific performance – asking a judge to order dealer to honor the advertised price.
Some dealers have interpreted the Herbie's enforcement action to mean that prices cannot be negotiated at all. And in fact, many dealers choose not to negotiate price on any deal, period, which is certainly their right; that practice reduces the risk of a regulatory action. However, as stated above, there is currently no federal or state law that explicitly prohibits price negotiation on the sale of a vehicle, as long as substantially similar negotiation takes place in both cash and credit sales.
So, do the policies above make you impervious to a consumer lawsuit or regulatory action? Nope. No such bullet-proof policy exists. These are simply best practices to minimize your risk. Will they be enough to protect your dealership? …maybe.



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