Toyota bans below-invoice ads

After 2 violations, dealerships could forfeit factory marketing incentives

After 2 violations, dealerships could forfeit factory marketing incentives

Toyota Motor Sales U.S.A. told its retailers last week they would no longer be permitted to advertise vehicle prices below invoice and explained how it will discipline dealers who break the rules.

The new advertising rules were laid down at Toyota’s national dealer meeting in Las Vegas.

Toyota is implementing the prohibition beginning Jan. 1 and will start enforcing the new ad covenants on April 1. Toyota confirmed the ad rules in a statement to Automotive News after the meeting.

Toyota dealers who violate the rules will be issued a warning for a first offense, according to a dealer who attended a session at the meeting where the ad covenants were detailed.

For a second offense, the store could forfeit factory marketing incentives of up to $450 per vehicle for the month during which the offense occurred, said the dealer who asked not to be named.

In an email, a Toyota spokesman said all violations would be investigated by Toyota. To help dealers avoid violations, Toyota is setting up an ad pre-approval and consulting process that dealers can access ahead of running their ads, he said.

Last month, several Toyota dealers interviewed about the impending ad covenants said they favored the approach to help hold prices and improve margins on new-vehicle sales.

Some opponents said the ad covenants bordered on price fixing and would be particularly injurious to one-price dealerships that won’t haggle on price online or at the store.

As Automotive News reported last month, Toyota is following in the footsteps of Honda with its below-invoice advertising ban, designed to help hold retail prices and prevent bait-and-switch tactics.

Those entail enticing customers with extremely low prices, then claiming that the particular vehicle is unavailable when the customer comes to the store or the low price was based on a laundry list of undisclosed incentives for which the customer doesn’t qualify. Honda has banned below-invoice pricing for years.

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