Are car dealerships liable if a surcharge goes beyond the suggested retail price?

Global Legal Law firm received a question about whether a car dealership in California would be held liable if they added a surcharge to the sale of a vehicle, which resulted in the sale amount being higher than the manufacturer’s suggested retail price (MSRP).

What does the law say?

The law that regulates dealers’ behavior in California is California Vehicle Code Section 11713.1. This law means that dealers are expected to sell vehicles at the advertised price. The Donovan v. RRL Corp. case in 2001 confirmed this expectation. This law does not change the rules of contracts, but it does affect how consumers interpret a dealer’s advertisement as an offer.  So, is there a way a car dealership can legally sell the vehicle at a price above the MSRP?  There may be.  Read further to find out more.

Prices that Exceed the MSRP

According to Section 11713.1 of the Vehicle Code, dealers cannot add a supplemental price sticker on a new vehicle with a price that is higher than the MSRP. Nonetheless, dealers who meet specific requirements are exempt from this rule. These are:

1) that the supplemental sticker with additional information shows in large print (excluding the dealer’s name) that the price mentioned on the sticker is what the dealer is asking for and not the manufacturer’s suggested retail price;

(2) that the sticker providing additional information clearly shows the manufacturer’s recommended retail price in a noticeable way; and

(3) the sticker that comes with the product shows any extra items that are not included in the manufacturer’s suggested retail price, along with their additional cost. If the total cost on the sticker is more than the manufacturer’s suggested retail price plus the cost of the added items from the dealer, the difference is called “added mark-up” and will be listed on the sticker.

Can payment processors allow dealers to add a surcharge to cover card processing costs?

If payment processors allow dealers to add an extra charge to cover card processing costs, they might face risks and be held liable if dealers violate Vehicle Code Section 11714.1 by selling above the MSRP. But this is only the case if the dealer fails to comply with the foregoing disclosure requirements. Payment processors can augment its underwriting procedures to ensure that the dealers with which such processors do business comply with California’s disclosure requirements under the Vehicle Code.  Payment processors should consider the following:

Supplemental Sticker:  If payment processors allow dealers to add a surcharge that results in a sales price higher than the MSRP, they should ensure that the dealer includes a clear and conspicuous supplementary sticker. The sticker should explain to the consumer that they will be responsible for paying the surcharge, and the sticker should also state in bold letters that the sticker price is the dealer’s asking price, not the manufacturer’s MSRP.

MSRP Disclosure:  Furthermore, payment processors’ underwriting should have procedures in place to ensure that dealers prominently and clearly display the MSRP on the additional label. This will allow for a comparison between the dealer’s asking price and the MSRP.

Line-Item Disclosure:  Thirdly, it is the responsibility of payment processors to confirm that the additional sticker contains a list of all items that are not part of the MSRP. They must also ensure that the dealer reveals the price for each of these items separately, in case the dealer applies a charge for them. This is known as the “Line-Item Disclosure”.

Added Mark-Up:  Lastly, since payment processors wants to process dealers that add a surcharge, payment processors must confirm that the dealers will comply with the “added mark-up” requirement. This means that the supplemental sticker price needs to explain the reason for why the asking price is greater than the sum of the MSRP and the price of the items listed in the Line-Item Disclosure.

If all the requirements of Vehicle Code § 11713.1(q)(1)-(3) are satisfied, payment processors will likely not face imputed liability from the business activity of its dealers.

Credit Terms Exceeding Cash Price

According to the Vehicle Code, dealers cannot charge more for a vehicle if financing is used compared to buying the same vehicle with cash. This means that if a dealer charges more for financing or leasing than the cash sale price of the vehicle, they would be violating Vehicle Code § 11713.1(k).  The important aspect to consider is the usage of “advertised credit terms.” Payment processors must review how dealers are advertising credit terms to confirm that credit usage does not exceed the transaction amount of a cash sale based on their underwriting policies.


According to the California Vehicle Code, the dealership can legally sell the vehicle at a price above the MSRP as long as they comply with the disclosure requirements as mentioned in this article. Payment processors, too, must ensure that the dealership has disclosed any surcharges and met the requirements outlined in Vehicle Code § 11713.1(k), (q). This will likely protect payment processors from wrongful liability.

At Global Legal Law Firm, our lawyers are familiar with the rapidly changing nature of electronic payments processing processors, and the ever changing regulations involved, with decades of expertise in ISOs, commercial collections, credit card brands, and other forms of electronic payment processing litigation. Let us guide you through this new and volatile environment, rather than attempting to navigate it on your own.

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