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Car Dealerships are Rip-offs…

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... but we already knew that right? Or maybe we all didn't.

I'm not writing about buying a new car (that article might be tomorrow), but I'm writing about getting a car repaired. As I mentioned yesterday, my car broke down earlier this week. It's a ten year old Jeep, so it's not of tremendous value and it's been having more breakdowns of late. Since I have a Jeep dealership near the house, I decided to bring it by and get it looked at.

They called back and told me it would be $1000 to fix. I asked what was wrong and they said the cooling fan was broken and it needed new spark plugs. I thanked them and proceeded to hang-up and call my local mechanic. Over the phone they said it would probably be $400, but in person today I think it might even be cheaper than that.

Saving $600 (or more) on a phone call? Eat your heart out Geico.

I shouldn't say that every car dealership is a rip-off when it comes to repair, but that's been my experience and this just cemented that. What's your experience with car dealerships? Let me know in the comments.

(Since this article was so extremely short, I'm going to give you a bonus related article. I'm breaking the blogging rules today.)

To Donate or Not to Donate

Before we got the diagnosis that it was a reasonable fix, my wife was thinking of donating it to Kars 4 Kids. She called them and they said they'd be able to give a tax write-off of whatever they sell it for after their costs for fixing it, but that it would be at least $500. If they were able to sell it for $4000 (below Kelly Blue Book), but used the dealership's $1000 quote to fix it, we'd get a tax write-off of around $3000.

Assuming a 25% tax bracket (just to make things easy) that's a value of around $750 in our pockets. Alternatively, we'll put $400 into fixing it up and try to sell it on our own for $4500 (still under Kelly Blue Book) making a profit of a little over $4000.

I'm all for helping out kids, but that's a huge difference. The $4000 will make a few payments on the new car. Let's hope it works out as planned.

Posted on October 29, 2013.

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19 Responses to “Car Dealerships are Rip-offs…”

  1. Josh says:

    Similar experience…

    The headliner on my car was starting to sag and lose adhesion. When I took my car to the dealership, the rep quoted me $500 just to replace the headliner! I drove out and took my car to a detailing shop that quoted me $150. In conversation, the specialist who fixed up my interior mentioned that a lot of dealerships actually *outsource* to them!

    Ultimately, I attribute my savings to word-of-mouth, as a friend who refurbishes cars for resale referred me to the specialist. You may have to kiss a few frogs otherwise, but if you ask around, you should have no problem finding the same service at a more reasonable price.

  2. Captain Betty says:

    I think dealerships are typically rip offs (or at least more expensive). We started taking our cars to a local mechanic that our friends were raving about and we were floored at how inexpensive he was – almost felt like we’re ripping HIM off. It’s great finding those type of places.

  3. Steve says:

    Car dealerships in my experience charge 2 to 3 times as much for the same services. Ripoff indeed.

    Of course donating your car is a donation, so considering it on dollars and cents is not really the point. It’s less effort than selling it on craigslist yourself and then donating that money to the charity.

  4. Just like with any other service, you need to shop around when it comes to repairs, especially if you are going to be paying out of pocket. There many be some situations where going to the dealership has its benefits, but I have yet to find them.

  5. Dear Debt says:

    Car dealerships are always trying to up-sell and scam you! Finding a trustworthy local is key. I am so glad I don’t drive anymore and just have to worry about my cheapie $50 bike that gets me everywhere :)

  6. I personally feel like car dealerships are rippoffs as well as they over inflate the price of everything and the value markup of most cars are ridiculous.

  7. laura w says:

    I agree with you. I would never have my oil changed at a dealership. They charge way too much. I had a problem with the only new car I have ever purchased, brought it in to the dealership where I purchased it and they tried to rip me off. Good thing I know a thing or two about cars. I now have a reputable mechanic and I go to him when I need something done that I cannot do. As for the donating, I have done that before and it would have been better for me to sell the car and pocket the cash.

  8. Money Beagle says:

    I’ve always figured that the reason that they’re so expensive is because they get reimbursed at a very high rate for warranty work, so they charge the same amount to customers, otherwise there would be no incentive to work with anything but warranty repairs. Knowing this makes it pretty clear that you’re going to pay a lot more.

  9. Nancy Jones says:

    The higher price does not by default equate to “ripoff.” The manufacturer of the dealership sets baselines that the shop has to meet, and that is to be able to service the newer models; training, equipment, and the factory-required parts all play into the prices. I charge higher hourly rates than some of my competitors because I have a professional standing backed by industry certification and verifiable continuing education; that adds value to my service–but only if that matters to the customer. If you have a vehicle that doesn’t need warranty or specialized service, you don’t benefit rom those things, and needn’t pay for them, just as someone who only needs a virus cleanup need not pay for the optimization and additional security services I offer. And if the customer doesn’t feel they need them, I won’t provide those services. But they are never free.

    • Lazy Man says:

      If the dealership isn’t adding value to their service, it doesn’t make since that they’d charge it. I don’t see what value can be added as parts are separately guaranteed and both places guaranteed their labor.

      To put it another way, if Gordon Ramsey is going to make me the same burger that McDonalds does, I’m not suddenly going to pay him $25 for it just because he’s a famous chef. He has to demonstrate clear benefits if he’s going to charge a premium. I don’t see dealerships providing it, it’s the same cooling fan and spark plugs that I got for about 1/3rd the price.

  10. Nancy Jones says:

    That’s a good analogy, and it works and here’s why: Gordon Ramsey doesn’t make a McDonald’s burger, and McDonald’s doesn’t make a Gordon Ramsey burger. If you don’t find value in what Ramsey brings to the burger, then it doesn’t add value–FOR YOU. That doesn’t mean it doesn’t add value at all. If your vehicle was under warranty, having it serviced by an authorized shop would have a lot more value than it does for a relatively older vehicle. And at a non-dealer shop, you often must specify that you want factory parts, and you WILL pay more for them. At a parts store, you will pay much more for brand-new parts than you will for refurbished or remanufactured parts, and your local non-dealer shop may not tell you that. I don’t buy new vehicles, but if there’s any warranty left, and the repair can be covered under warranty, it goes to the dealer. Otherwise, it’s a local non-dealer shop. But when I want a $25 burger experience, I don’t look to McDonald’s to provide it. And when I want a quick meal on the go and I don’t care that it gets wrapped in paper and may not be piping hot and the clerk just wants me out of there, then I don’t sit down in Ramsey’s restaurant. But that doesn’t mean neithr has value. I pay more for what works better in that situation. cheaper is NOT always better, but neither is more expensive always better.

    • Lazy Man says:

      If your car is under warranty, it is an entirely different discussion. If I have an Apple Care plan covers me from a broken iPhone screen, I’m obviously going to use that and go to the official place and not a third party person and pay them money that should be covered by the warranty I have.

      I purposely used the Gordon Ramsey analogy because there is a difference in quality of burgers. In being able to repair a car there is less so… especially in the circumstances presented to the dealership. They had the opportunity to examine it and quote a price, so they know it isn’t covered by warranty. They should know that 3rd party mechanics would do it for a 5th of the price (I was wrong by saying a third, because the 3rd party mechanic replaced a radiator in addition making it 1/3… and the radiator was in need of replacing not an upsell. That’s why I wrote in the article that it would have been cheaper than the $400, the radiator was the bulk of the cost). If you are going to charge $1000 for a $200 job that’s a rip off. I don’t see a way of defending it. After the experience I had, do you think I’d ever give the dealership my business again? Nope. Now if they were upfront and said, “We are going to use some super awesome parts and we had a ton of training and will warranty these things for 5 years, but quite honestly, this car is ten years old, you can get it done fairly well with aftermarket parts for 1/5th (or 1/3rd) at a mechanic. That’s what I’d do if I were you.” That’s an establishment that is going to get my business.

      Now you may argue that it isn’t their job to help the customer find a better value. I’d argue that they are in the customer service business and building relationships should be a top priority to them. At a minimum they should provide two tiers of services, so that they can get my business at a profit to them. Instead they not only lost on that service (one that a mechanic found to be profitable for them) but also a potential customer for life.

      Also from my point of view, I’m here to help people get the most of their money. That includes telling them how they can avoid the pitfall of paying the dealer’s rip off prices. If everyone reading my article saved themselves $700 at some point in their life, I’m succeeding in my goal.

      It’s fair to say that you are willing to pay more in a certain situation, I do too. In this case, it seems like you are willing to pay less in all situations, i.e. covered by warranty or out of warranty and done by a 3rd party.

  11. Vogel says:

    My experiences with out-of-warranty repairs at BMW dealerships has been mixed. The upside is that I get a free loaner car and the repair work is always done competently, but I always feel like I’m getting soaked on the price, and they always try to upsell. On the other hand, I haven’t found a good trustworthy independent mechanic yet, but friends have, and they rave about how much less it costs.

    Two things I don’t like about Kars for Kids. (1) They are one of the big advertisers on the Rush Limbaugh show in my local AM market; (2) they have the most annoying radio jingle I’ve ever heard — it feels like a brain-boring insect every time I hear it, which is rarely because I think Limbaugh is a greedy hate-mongering sociopath; (3) adding further insult to injury, they use “kars” instead of “cars” (which begs the question as to why they stopped short of “karz 4 kidz”).

    Those are all good reasons to boycott the organization, but it also makes me wonder if there’s something sketchy going on with them. At any rate, I would imagine that there are at least a few A-1 charities that take car donations.

  12. Vogel says:

    Apparently I’m not the only one who feels violated by the K4K jingle.

    Warning: this song will try to bore into your brain like a ravenous space weevil.
    http://blogs.chicagotribune.com/news_columnists_ezorn/2009/03/if-the-kars-for-kids-song-gives-you-the-kreeps-youll-want-to-read-this.html

    • Lazy Man says:

      I couldn’t agree more on the BMW and the Kars for Kids advertising (and yes it seems stolen from the Four Wet Pigs thing). I have a friend who has a BMW too and I was shocked at what he pays for repairs at the dealership.

  13. Nancy Jones says:

    To start, I want to say that I enjoy reading your stuff, and I appreciate your efforts to help people get the most for their money. I just think that the phrase “ripoff” is a bit strong. I wouldn’t pay $25 for a Ramsey burger, but that’s not a ripoff. It would be a ripoff if I couldn’t get what was advertised. If the dealer had promised one thing and couldn’t or wouldn’t deliver for that price, that would be a ripoff. But one vendor allowing itself to be undersold is not a ripoff. I get that it has no value to you, and older vehicles’ owners are not their market. Your market isn’t the already-made-their-millions group. My market isn’t the gotta-get-this-repair-done-cheap-so-I-can-hop-back-on-the-adult-site-and-get-infected-all-over-again. I don’t compete with $60 virus cleanups. But I am NOT a ripoff.

    • Lazy Man says:

      So if you saw a gas station selling gas at $20 a gallon, you wouldn’t classify it as a ripoff because it’s delivering gas as it advertises? I can understand if you wouldn’t classify it as a “rip-off”, but I think most people would.

      Maybe it’s a sliding scale. I’m not sure where the scale is, but I bet my father, if he were still alive, would have bought the cooling fan and spark plugs for probably $80 and had it ready to go in about an hour or two… and he wasn’t even a mechanic. It’s clearly not a $1,000 job by any stretch of the imagination.

      If older vehicles are not in their market, they should direct customers to the appropriate market, not exploit them. If they do, not they risk losing customers for life and they have. They also risk someone outing their exploitative nature.

      I’m not writing about business. I don’t know enough about it. Please don’t take what I’m writing about this particular car dealership to reflect whatever service it is you provide.

  14. Nancy Jones says:

    I think we may just be defining “ripoff” differently. Delivering less than what is offered at the agreed-upon price is how I define “ripoff.” There are a lot of goods and services available that cost more than I’m willing to pay, but that isn’t how I define a ripoff. I think the guy selling $20/gallon gas got ripped off in his economics education and is likely to receive one from the market, but if you don’t buy the gas you’re not getting ripped off. And anyone who buys the gas isn’t getting ripped off if they consent to the transaction, even though the guy right next door is selling it for $4/gallon. If he is offering $20/gallon for GAS but is actually delivering something less than GAS, then that is a ripoff. I consider a ripoff to be actual theft of value, but if you haven’t actually exchanged anything other than information, nobody has gotten ripped off. If you had consented to the transaction at the dealership and they said they would provide a level of service and you paid for it and did not receive it, then you would have been ripped off.

    I get what your point was, that for cars not needing service specifically available only at a dealership, other mechanics are likely going to be a better value. There is no doubt in that, and you supported that position well. But your platform reaches a lot of people and you have a responsibility to avoid pejorative terms.

    • Lazy Man says:

      I understand your point. I was using a definition similar to the one you’d find at Wikipedia… “A ripoff (or rip-off) is a bad financial transaction. Usually it refers to an incident in which a person is overcharged for something, or receives goods or services not of the standard expected for the price. A ripoff is usually distinguished from a scam in that a scam involves wrongdoing such as fraud; a ripoff may be considered excessive, but not illegal.”

      http://en.m.wikipedia.org/wiki/Ripoff

      In this scenario, I consider the dealership’s price to be a vast overcharging. I would consider what you’ve described to be closer to fraud or a scam.

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