New FTC rule targets illegal car dealer tactics

Federal Trade Commission

The agency has responded to years of car buyer complaints

For many consumers, buying a car from a dealer is not always a pleasant experience. The Federal Trade Commission (FTC) is taking steps to ensure that at least buyers don’t face illegal sales tactics.

The agency has finalized a new rule to fight two fairly common types of illegal tactics: bait-and-switch and hidden junk fees. According to FTC estimates, consumers nationwide could save more than $3.4 billion when they purchase cars and trucks. 

The Combating Auto Retail Scams (CARS) Rule also includes specific protections for members of the U.S. armed forces and their families, who are targeted not only with bait-and-switch tactics and junk fees, but also deceptive information about whether dealers are affiliated with the military and other specific issues that affect servicemembers.

‘Unexpected and unnecessary fees’

“When Americans set out to buy a car, they’re routinely hit with unexpected and unnecessary fees that dealers extract just because they can,” said FTC Chair Lina M. Khan. “The CARS Rule will prohibit exploitative junk fees in the car-buying process, saving people time and money and protecting honest dealers.”

As examples of junk fees, the FTC cites warranty programs that duplicate a manufacturer’s warranty, service contracts for oil changes on an electric vehicle, GAP agreements that do not actually cover the car or neighborhood in which it is housed, and software or audio subscription services on a vehicle that cannot support the software or subscription.

As for the bait and switch provision, the rule prohibits dealers from using pitches to lure car buyers to the lot, advertising a low price that doesn’t exist on any of the dealer’s available vehicles.

What car dealers must do

From now on, car dealers must follow these rules:

  • No Misrepresentations: The rule prohibits misrepresentations about key information, like price and cost.

  • Offering Price, Total Payment, and Add-Ons Optional:  Dealers have to provide the offering price—the actual price any consumer can pay for the vehicle; tell consumers that optional add-ons (like extended warranties) are not required; and give information about the total payment when discussing monthly payments.

  • No Bogus Add-Ons: The rule prohibits dealers from charging for any add-on that does not provide a benefit to consumers. 

  • Get Consumers’ Consent: The rule requires dealers to get consumers’ express, informed consent for any charges that they pay as part of a vehicle purchase.

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