Two Westchester County car dealerships will provide more than $1 million in refunds after a state investigation found they used misleading fees and optional add-ons to overcharge customers.
The settlement covers DARCARS Lexus and DARCARS BMW in Mount Kisco and also requires $700,000 in penalties, according to Attorney General Letitia James' office.
Refunds cover commissions and add-on packages
DARCARS Lexus will pay $892,671.26 to customers charged a two-percent “sales commission” between Oct. 23, 2021, and May 30, 2022. The attorney general's office said the fee was optional, provided no benefit to buyers and was not paid directly to sales employees despite its name.
Both dealerships will provide another $281,847.72 in reimbursements. That includes $116,849 for customers who complained about being charged for a bundled add-on called DARCARS Assurance and $164,998.72 for consumers who told the state about the commission fee.
Customers charged after May 2022 may also qualify through a claims process. The dealerships must mail claims forms and pay restitution on valid submissions, potentially pushing the total into the millions of dollars.
James said buyers should receive clear pricing without fees for products they did not knowingly choose. Her office opened the investigation in February 2022 after a customer reported that DARCARS Lexus added a commission charge of more than $700 without disclosure.
Investigation found inconsistent explanations
The state said DARCARS Lexus began imposing the fee in October 2021 and DARCARS BMW followed in August 2022. The fee appeared as a preprinted line in sales and lease agreements and was described as not required by law, but employees did not clearly tell customers it was voluntary.
According to the investigation, customers who questioned the charge received inconsistent explanations. Some were told it was a standard dealer fee or directly compensated their salesperson, while others were told it offset employee costs and commissions.
The dealerships also advertised prices online without the fee, making their offers appear more competitive. Applying the charge to nearly every transaction generated millions of dollars in additional revenue, the attorney general's office said.
Investigators also examined DARCARS Assurance, a collection of aftermarket products that included collision and stolen-vehicle credits. A collision benefit advertised as covering up to $2,500 of an insurance deductible applied only if the customer bought or leased another vehicle from the same dealership within 60 days of an insurance settlement.
The state said customers were not clearly told that the package was optional, creating the impression that it was required for a sale or lease.
Dealership practices must change
Under the settlement, DARCARS has stopped charging the commission and must clearly disclose future fees and optional products. It may no longer sell DARCARS Assurance or a similar bundled package at any New York dealership.
Sales, finance, advertising and marketing workers must receive annual training on fair business practices. The claims process will cover additional customers who can document qualifying charges.
Consumers who believe they were affected by deceptive vehicle sales or lease-buyout practices may submit a complaint through the attorney general's consumer complaint system.
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