GM Faces Class Action Lawsuit Over High Freight Destination Charges

Many people might be unfamiliar with destination fees or charges. Destination charges arise when a vehicle manufacturer ships a vehicle to a dealership; the dealership is then charged a certain amount of money, generally agreed to cover “shipping” of the vehicle. According to Consumer Reports, the average destination fee rose from $839 in 2011 to $1,244 in 2020, more than 2.5 times the rate of inflation during this period, potentially indicating that the manufacturers are grossly overcharging for delivery of the vehicle to the dealership. The destination charge is then passed along from the dealership to the vehicle purchaser when it is bought, although many car buyers remain unaware of this charge.

Plaintiffs claim that General Motors makes a profit off destination charges over and above the cost of delivery.

California resident Robert Romoff and New Jersey resident Joe Siciliano are the named plaintiffs in a new class action lawsuit dealing with the legitimacy of freight destination charges. Both plaintiffs recently purchased vehicles from General Motors (GM) without being aware of the destination charge or the profit that GM makes off those charges. According to the lawsuit, Romoff paid a $1,195 destination charge for his larger vehicle, a 2021 Chevrolet Equinox, and Siciliano paid a $995 destination charge for his smaller vehicle, a 2019 Cadillac Escalade.

These fees, also referred to as freight destination fees, are non-negotiable and generally do not vary based on the dealership’s proximity to the manufacturer; this means that someone who purchases a vehicle delivered from a manufacturer 10 miles away may have to pay the same delivery charge as one delivered from a manufacturer hundreds of miles away.

One of the biggest contentions regarding delivery fees is the lack of transparency surrounding their calculation.

When car buyers make a purchase, they typically expect to pay a lot of money and know their purchase may be subject to a variety of fees. However, the freight destination charge typically represents a lot of money to spend with very little explanation. The lawsuit’s primary allegation revolves around the idea that GM intentionally misled customers about the nature of the freight charge, explaining it generally as a delivery fee when in fact the fee is much higher than the actual cost of delivery. Plaintiffs allege that these high freight charges are merely a way for the vehicle manufacturer to sneak in price markups largely unnoticed and to the detriment of the consumer.

This is not the first lawsuit of its kind regarding allegedly overinflated freight destination charges.

In May of 2021, Chrysler was hit with a similar class action lawsuit making many of the same allegations. The lawsuit applied to all New Jersey and New York consumers who paid a destination charge with the purchase of their vehicle within a particular period of time. In this lawsuit, the plaintiffs claimed they would not have purchased the vehicles or would have only agreed to purchase the vehicles for a significantly lower cost if they had known that Chrysler made a profit off the delivery charge.

The results of both the Chrysler and GM lawsuit regarding allegedly deceptive destination charges remains to be seen, but they could result in vehicle purchasers receiving compensation for the overcharge if successful.