California new-car dealers have asked Volvo to cease its Care by Volvo subscription service and allege the program violates the law.
According to a letter from Brian Maas, President of the California New Car Dealers Association, the service may illegally engage in the practice of "payment packing" for consumers. Automotive News (subscription required) reported Tuesday that dealers attest the brand is directly competing with its franchised retail outlets and the company illegally modified its franchise agreements.
Volvo responded to the letter in an official statement and said it plans to produce a formal response to the levied complaints next week.
"Volvo Car USA has always had an open and honest dialogue with its retail partners about Care by Volvo and has recently completed a 12-month anniversary review of the program. An updated version of Care by Volvo (2.0) was recently reviewed with the Volvo Retailer Advisory Board and the feedback was positive and in favor of the changes," the statement read in part.
The company presented the updated version of its subscription service to California dealers last Wednesday where the brand said it received positive responses. It then received the California New Car Dealers Association letter on Friday.
Maas blasted the subscription service and said Volvo provides insurance to high-risk drivers and manipulates payments to ensure a subscriber meets the target payment. Payments range from $650 to $850 and bundle the cost of a two-year subscription to a Volvo vehicle, insurance, and maintenance. In this practice, low-risk drivers pay more for a subscription than a high-risk driver when insurance costs are calculated, the letter purported.
"California law expressly prohibits dealers from 'packing' the cost of insurance into the monthly lease payment. As such, Care by Volvo exposes Volvo dealers to liability under this (and other) consumer protection statutes," the letter said.
The program has been so popular that Volvo installed a 10 percent cap on XC40 crossovers allotted for the program as Care by Volvo began to squeeze supply of the vehicle for dealers.
The dealers asked Volvo to respond no later than Dec. 21.