Automakers’ Added Subscription Fees Raise Legal Questions

The steering wheel and dashboard of a car. — (Image credit: Getty Images)

“In 2022, executives at BMW came upon a brilliant, if perverted, idea to extract more money from their customers,” Michigan attorney Steve Lehto told me in an interview. He has practiced in the fields of lemon law and consumer protection for over 30 years and hosts Lehto’s Law, a highly educational YouTube program. “They wanted to start charging customers $18 a month for subscription-based access to heated seats and, later, for using the remote-start feature — many of the things their cars already came with.”

Due to enormous pushback, BMW dropped the heated-seats fee in September. (Lehto notes that these fees are not the same as the ones people pay for SiriusXM satellite radio service, which is similar to your cable TV bill.)

“But there could be no end to this,” he says, “so why not include a fee for using safety features, such as blind-spot and pedestrian warnings, emergency stop, automatic high beams, power windows and other, often-standard features or options that have been on cars for years — that’s the fear. Following that logic, automakers could turn every component into a subscription and continue to get money out of you after you’ve already paid for your vehicle.”

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The practice is infuriating vehicle owners and car dealers, who ask, “I have paid for these features and can turn them on myself, so what are you doing for me by charging a fee to use what I already have?”

Serious legal/contractual issues

In law school, and in one of the most useful college courses you can take, Business Law, we learn that for a contract to be enforceable, there must be legally sufficient consideration on both sides of a transaction — each side must get something of value.

So the important legal question boils down to: How can an auto manufacturer justify a subscription fee for something that a vehicle buyer already owns and that works by pushing a button?

“Let’s say I buy the car with cash,” Lehto says. “I own it outright. What right do they have to turn things on or off on a car that I have just purchased? They are not adding any value, and in contract law, their demand for money to allow you to use what you already paid for is not supported by legally sufficient consideration, and their payment demand should fail.”

Lehto believes automakers will try something to make it seem like they are adding some value. “You can probably drive fine with your navigation system or infotainment center shut off. I can imagine them saying, ‘If you don’t want to pay us for using your GPS navigation system, we will just shut it off, and by the way, not only does it show you what road you are on, but it shows you the nearest McDonald’s.’ They will likely claim that provides enough of a service to support their subscription fee.”

It has already begun

For some Toyota vehicles, using the remote-start option — already wired into the vehicle and previously free to use — will cost you $8 a month after a free trial. Other automakers — Audi, Cadillac, Porsche, Tesla and Volvo — are instituting a subscription model for certain options where a customer would pay a monthly or annual fee for such features as active driving assistance or voice recognition, even though they are already built into the car and, in some cases, have been free to use for years.

Do added fees like these seem fair or contractually legal?

I emailed media relations at some of the major automakers who have these subscription plans in place and asked about “the legal justification for charging to use features the buyer has already paid for — heated seats or safety items that never were subject to a subscription charge to use them in the past, such as driver safety and comfort options.”

Not one of them addressed the contractual issue, which is huge. One replied, “Unfortunately, some things that were reported and written online regarding this topic were not correct and continue to create confusion.” A press release was attached to that response that only added to my confusion.

Lehto points out another worry: “What if the infotainment center needs expensive repairs? Will the dealer fix it or require you to pay? Or they could say, ‘Cancel your service and leave it broken in your car.’ There are so many unknowns right now.”

Pending New Jersey legislation

Lawmakers could step in to protect consumers from automakers’ added subscriptions and fees. In New Jersey, pending bill A4519, sponsored by Assemblymen Paul Moriarty (D), Joe Danielsen (D) and Kevin Rooney (R), "prohibits a motor vehicle manufacturer or dealer from requiring subscriptions for certain motor vehicle features and from charging certain fees." Third-party services, such as infotainment features, satellite radio or in-vehicle Wi-Fi, are not included.

According to NJ CAR (the New Jersey Coalition of Automotive Retailers), “The legislation is intended to ensure consumers aren’t blindsided when purchasing vehicles with features already installed only to find out those features are subscription-based and not included in the sale price of the vehicle.”

Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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After attending Loyola University School of Law, H. Dennis Beaver joined California's Kern County District Attorney's Office, where he established a Consumer Fraud section. He is in the general practice of law and writes a syndicated newspaper column, You and the Law. Through his column, he offers readers in need of down-to-earth advice his help free of charge. "I know it sounds corny, but I just love to be able to use my education and experience to help, simply to help. When a reader contacts me, it is a gift."