If you've shopped for a vehicle online recently, you've probably seen these labels:
"Great Deal."
"Good Deal."
"Fair Deal."
"Hot Car."
"Price Drop."
These little badges appear next to vehicle listings on third-party automotive websites and are designed to help shoppers quickly identify which vehicles represent the best values.
For years, consumers have trusted them. I'm not sure they should. This will shock some you of-not everything on the Internet is true.
Before I go any further, let me be clear: I'm not talking about the websites themselves. Sites like Cars.com, Kelley Blue Book, CarGurus, AutoTrader, Carfax, and others provide valuable information and have become important tools for vehicle shoppers. I bring you research from them here on a regular basis.
What I am questioning is whether consumers should blindly trust pricing badges that suggest a vehicle is a "great deal" when nobody outside the dealership truly knows what the final transaction will look like.
That's becoming an increasingly important question.
Recently, AutoTrader quietly eliminated its "Good Price" and "Great Price" designations, while vAuto temporarily suspended its Fair Market Range pricing tools. As reported by CBT News, according to Cox Automotive, the changes were tied to increasing industry focus on pricing transparency and recent Federal Trade Commission enforcement efforts involving vehicle advertising.
That should get your attention.
The FTC has made it very clear that consumers deserve transparent pricing. Earlier this year, the agency warned dozens of dealership groups about advertising practices that could mislead shoppers regarding the actual price of a vehicle. I saw the list of dealerships that got the strongly worded warning letter, and the ones I suspected would be there, were in fact there. No surprises in the list for me, but I watch this stuff closely.
And that's where I think the conversation gets interesting.
If regulators are scrutinizing dealership advertising because the advertised price may not reflect what consumers ultimately pay, how can a third-party website confidently tell me a vehicle is a "Great Deal"?
Think about it.
Does the website know whether the dealer has mandatory add-on products? Does it know if there's a required protection package? Does it know about dealer-installed accessories? Does it know whether the advertised price requires financing through a specific lender? Does it know whether there are reconditioning fees, administrative fees, theft protection products, nitrogen tire packages, paint protection packages, wheel protection plans, or any number of other items that might affect the final transaction?
In many, and likely all cases, the answer is no. Remember, these websites are paid by the dealers. Can they pay extra to get a “great deal” badge on the listing of a car they need to sell? I am not sure, but it is a very good question.
What these websites generally know is the advertised price, vehicle history information, market data, comparable inventory, and pricing trends. That's useful information, but it isn't necessarily the same thing as knowing the actual out-the-door price.
As someone who spent years owning dealerships, I can tell you that the cheapest advertised vehicle wasn't always the cheapest vehicle.
Not even close.
I've seen vehicles advertised thousands of dollars below market value simply to generate phone calls and internet leads. Once the customer arrived, the story changed. Maybe there were mandatory add-ons. Maybe there were fees that weren't obvious. Maybe the advertised price included incentives that very few shoppers actually qualified for. Or in the case of used vehicles, maybe they never actually existed at all. Yes, I have seen that, too.
The point isn't that every dealer does this. Most don't.
The point is that a pricing label on a website that charges dealerships a LOT of money cannot possibly tell the entire story, nor do they want to.
And here's another question consumers should be asking: How are these ratings calculated?
The algorithms are proprietary. Every website uses its own methodology. One site may call a vehicle a Great Deal while another site may classify the exact same vehicle differently. That's because each company uses different formulas, different data sources, and different assumptions.
Yet consumers often treat those ratings as if they're objective facts.
They're not.
They're opinions generated by algorithms, not a breathing human being who is looking at all the facts.
But it does raise an important question.
Should consumers place more trust in a colored badge generated by a website than in their own research and common sense?
I don't think so.
In fact, I think shoppers should spend less time looking at deal ratings and more time looking at transparency and ask these questions:
Those questions tell you far more about whether you're getting a good deal than a green badge next to a vehicle listing.
I also think the industry may be entering a period of change.
If regulators continue focusing on pricing transparency, third-party websites may eventually face pressure to explain how pricing ratings are calculated or reconsider whether those ratings should exist at all, AND THEY SHOULD. AutoTrader's recent decision may be an early indication of where things are headed.
We'll see.
Until then, here's my advice.
Use third-party websites. They're excellent research tools. Compare vehicles. Read my reviews. Check vehicle history reports. Study market pricing.
But don't buy a vehicle simply because a website tells you it's a "Great Deal."
A computer algorithm doesn't know the whole story.
The dealer does.
And the dealer willing to be completely transparent about pricing, fees, add-ons, and terms is probably worth more to you than any badge you'll ever find on a website.
Here's the bottom line.
For years, consumers have been trained to shop for green badges, stars, rankings, and deal ratings. Maybe it's time we started shopping for something else.
Transparency.
Because in my experience, that's usually where the real great deals are found.