A class-action lawsuit has been filed against General Motors by disgruntled customers who claim the automaker’s destination charges are misleading and deceptive.
The lawsuit, filed in the Southern District of California, involves two plaintiffs who allege they were not aware that GM made a profit off of the destination fees it charges customers. According to Car Complaints, the plaintiffs are California resident Robert Romoff, who recently purchased a new 2021 Chevrolet Equinox with a $1,195 destination charge, and New Jersey resident Joe Siciliano, who purchased a new 2019 Cadillac Escalade with a $995 destination charge.
The suit claims General Motors makes a “significant amount of profit” off of the destination charges that it applies to its new vehicles and “deceives customers into paying far more than the actual cost of vehicle delivery.” The plaintiffs also say that a destination charge has very little to do with how much it costs to ship a vehicle from the assembly plant to a dealership and is instead a way for GM to sneak “hidden markups” into its vehicle transactions.
“Destination fee is generally understood in the automotive industry to reflect the manufacturer’s average cost of delivering one of its vehicles to a dealership,” the filing says, as quoted by Car Complaints. “That destination fee is charged to the dealer and passed on to the purchaser or lessee of that vehicle. Consumers similarly have the expectation that they are covering an automotive manufacturer’s cost for the delivery of the manufacturer’s vehicles when paying the ‘destination fee’ as part of their new-vehicle lease or purchase.”
An article published by Consumer Reports earlier this year attempted to shine a light on rising destination freight charges in the automotive industry. The report indicated that destination fees had risen from an average of $839 in 2011 to $1,244 in 2020 – more than 2.5 times the rate of inflation. David Friedman, CR’s vice president of advocacy, said the auto industry’s “relative silence on the rise of destination charges is a bit deafening,” and called on automakers to be more transparent with regard to delivery costs.
“If they had a valid reason beyond just driving up the price, they would actually be able to point us toward specific examples of costs that have gone up within the shipping process,” Friedman said.
An independent consultant that spoke to CR for its story, Dan Bedore, claimed destination charges are indeed a way for automakers to increase profitability.
“[Destination] ends up being another lever the business can pull to increase revenue,” Bedore explained. “It does not take a mathematician to understand the value of a $100 increase to a company that sells 2 million units a year.”