Kia Deal
120 grand for a new Kia. How could a dealer do this? That’s what we’re going to find out.
I see a lot of dealer contracts and some of them leave me shaking my head, feeling terrible for the consumer who was sometimes just clearly price gouged by an unethical dealer, but I have never seen someone take in quite as bad and in this particular way as this consumer did on the purchase of a new Kia.
So we’re going to go over the dealer quote and show you how not to get price gouged and taken advantage of, and also show you how to buy a car the right way so that you’re not left in financial ruin.
Quote Breakdown: Kia EV9
we have a quote for a brand new 2024 Kia EV nine, which is the company’s new three row electric SUV.
Now, there are a few really important elements to any dealer price quote, and this is a pretty typical example of what you’ll see.
If you ask for a quote from a dealership.
There’s often a temptation to focus on the payments, but the most important thing that you need to focus on first is the price breakdown for the total vehicle price, including the out the door price.
So that’s where we’re going to begin. So taking a look at the price breakdown, which is for an EV nine land trim.
With the premium package, we can see that there’s an MSRP of 64,995. Below that, we have a metallic paint charge of two 50.
We have our freight or delivery and destination fee, which is 2150.
There is an air conditioning tax of $100, an administration fee for 5 99. And then we have our licensing or registration fees, which here are $59.
Now so far, these are all legitimate fees taken straight from the Kia website, which is more or less what we wanna see. So, far so good.
But if we go further down the price breakdown, we can begin to see our first major problem.
Sneaky Add-ons: Dealer’s Price Tricks
Now just below our registration and licensing fees, we can see that the dealership has added a few add-ons.
We have a Kia protection package, which is listed for $4,488. And below that we have an appearance protection package, which is $1,495.
So the dealership has added a few products to the price of this vehicle.
Now, what’s interesting and very concerning here is that the dealership automatically added these products to the price of the vehicle without the consumer even asking for them.
And when the consumer asked of these products could be removed from the price, the dealership said, absolutely not.
You have to take it or leave it. And here we can see the email from the consumer to one of the dealer sales reps that clearly says that you cannot remove these products, they have To to be included in the price.
Tied Selling: Forced to Pay More
Now this is a major problem.
The dealership is forcing the consumer to pay for $6,000 worth of products that they’re not interested in, even though this is a pre-order for a vehicle that hasn’t even arrived on the dealer’s lot yet, they have pre-sold a few products and automatically included them on the vehicle.
This is a sales tactic, which is known as Tide selling because the dealership is tying the price of the vehicle to the purchase of additional products.
You can’t buy one without also buying the other.
Now, is this legal? Well, the Federal Trade Commission in the United States has tried to crack down on this in the US under its new cars rule, but unfortunately there has been pushback from dealer associations who have attempted to stop these changes and maintain the status quos for dealers in Canada.
Tide selling itself as not strictly illegal under provincial rules.
But Ontario has introduced a proposal which if passed would prohibit dealerships in Ontario from selling this way.
Unfortunately though, until these rules hopefully come to pass, all you can do is if you encounter a dealership that’s using Tide selling is to either negotiate the products out of the price or just shop somewhere else next to Tide selling.
Missing Discounts and Rebates
The next problem with this quote is that this is basically a full price deal.
In fact, an over MSRP deal, there are no discounts that are being negotiated to the price even though this is a relatively readily available vehicle that you could probably negotiate a few thousand dollars off the MSRP and there’s also no rebates whatsoever, even though this consumer is from Ontario and they should be eligible for a $5,000 rebate,
the dealership has not included any rebates in the price breakdown, whether that’s intentional or they just forgot to include them.
Either way, this price should really be a lot lower. Anytime you purchase a new vehicle, you always need to make sure that you’re receiving any rebates or incentives that you are eligible for.
And on top of that, it’s always worth negotiating the price, especially for a vehicle that’s readily available and there’s lots of inventory.
So unfortunately, because this is a full price vehicle with an additional $6,000 worth of products, that’s how we get to a total out the door price of approximately $95,000.
Whoever said that electric vehicles were becoming more and more affordable, I’m really struggling to see it.
Financing Terms: A Costly Mistake
Anyway, let’s move on to the next major problem with this quote, which are the financing terms.
Now, if we move over to the right side of the quote, we can see that the vehicle is being financed on a seven year or 84 month loan, and this is contributing to the wildly inflated price.
If this were a three to four year loan, the amount of interest would
Be significantly lower. But the longer you stretch out a loan, the more you pay an interest, even though longer term loans can definitely lower your monthly payments, they can seriously increase the total amount of money that you spend in interest, especially if you have a very high interest rate.
And that’s just going to add to your total borrowing costs.
This is why I always recommend that when you’re financing never go for a loan that’s longer than 48 months.
If you get a low rate close to 0% interest, then 60 months is okay, but never any longer than that.
A vehicle is a depreciating asset and you wanna make sure that you’re paying it off at the same rate or a faster rate than it’s depreciating.
But unfortunately, because this consumer went with a seven year loan and in this case at 6.99% interest, that’s how we come to a total borrowing cost of around $25,000 in interest, which if we add to the vehicle price, which again was around $95,000, that gives us a total amount of just over $120,000, a ridiculous amount of money to spend.
Danger of Negative Equity
Okay, getting back to the major problems with the price quote, and that brings us to the biggest one of all, which is the severe risk of negative equity.
This consumer has made the unfortunate error of selecting a vehicle that has a high risk of rapid depreciation.
EVs are known to depreciate much faster than regular cars, and this particular vehicle is no exception.
This consumer would’ve paid around $95,000 for a vehicle plus another $25,000 in interest on the loan, again over a seven year period.
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Meanwhile, the vehicle’s value is plummeting. Within the first year, the trade-in value of this vehicle would drop to approximately $50,000 with average mileage, $40,000 by year two, and so on and so on.
Imagine purchasing a new vehicle for nearly a hundred thousand dollars and in less than two years, it’s only worth say around 40 to $50,000, but you still owe around 75 to $80,000 on your loan.
It’s a terrible financial mess that unfortunately many consumers find themselves in when they don’t know how to purchase a vehicle the right way.
And unfortunately, if you find yourself in a position where you have a lot of negative equity on a vehicle that you’re currently paying off, there’s no easy way outta that situation.
Ultimately, you have to pay the money that you owe. And the best ways to avoid negative equity are a few important ways.
How to Avoid Price Gouging
Number one, pick a vehicle that’s not prone to rapid depreciation. Pick something that’s going to hold its value well over time.
And once you’ve chosen that vehicle, make sure that you negotiate the best possible out the door price. Don’t pay for any
Unnecessary add-ons products or dealer fees that you should not be paying for.
Make sure that you’re receiving all the rebates and incentives that you’re eligible for, and also make sure that you negotiate the best possible price with a big discount if possible.
And finally, when it comes to the financing, make sure you do not take out a super long loan, maximum four years to maybe five years, and make sure that you’re receiving the best interest rate that you qualify for.
Following all these steps will really help you out, especially in the long run from avoiding a major financial mess, which fortunately is what I was able to do for this consumer.
The Better Deal: Tesla Model Y
We were able to stop this deal before it happened, and I was able to successfully move them into a much better deal.
Now, this consumer really wanted to have an all electric vehicle, especially a spacious SUV.
So they decided to end up going with a new Tesla Model Y, which ended up costing more than $20,000 less than the Kia E nine.
And not only was it a lot less expensive, but because they decided to go with a three year lease, their payments were far lower, just over $500 per month lower than the payments on the EV nine.
And the best part, because it’s a three year lease, once the lease is up, they can just return the vehicle back to Tesla without any risk of any negative equity.
Share Your Car Buying Story
Now, if you have a similar car buying experience to share, or if you’ve purchased a new vehicle in the last couple years, let me know what it was like. Just leave your story in the comments below.