Navigating transactions with automotive FTC dealers often proves to be a perplexing and headache-inducing experience for many consumers. This significant decision-making process is further complicated by dealers engaging in deceptive practices during contract signings or cash/trade-in transactions for new or used vehicles.
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FTC
In an effort to eliminate confusion and streamline the car-buying process, the U.S. Federal Trade Commission (FTC) has introduced new rules under the Combating Auto Retail Scams (CARS) program. Scheduled to take effect nationwide in the summer of 2024, these rules aim to address deceptive advertising and ensure transparency in auto transactions.
Key elements of the CARS rules focus on curbing deceptive advertising related to “material information,” which includes details likely to influence a consumer’s decision. The fundamental principle is that the advertised price should reflect the final cost, minus state and federally mandated taxes and fees, applicable even to leasing transactions. It’s important to note that these rules pertain specifically to “self-propelled vehicles designed for transporting persons or property on public streets, highways, or roads,” excluding certain vehicle types like boats, motorcycles, recreational vehicles, or golf cars.
Clear and consistent communication is emphasized, requiring dealers to disclose the offering price transparently. Advertisements and communications with consumers must align, avoiding contradictions. Electronic communications, such as emails or texts, must feature unavoidable disclosures, preventing dealers from burying essential information in dense text blocks or hidden language. Furthermore, verbal communications must be delivered at a volume, speed, and cadence suitable for easy comprehension by ordinary consumers.
Consumers are entitled to know the total price when financing a vehicle, the availability of rebates or discounts, the availability of vehicles at an advertised price, and the option to retain cash down payments or trade-in vehicles if a transaction doesn’t proceed. The rules also prohibit dealers from coercing consumers into non-factory warranties or dealer-installed parts.
Additionally, the CARS rules safeguard consumers from forced agreements, ensuring that they cannot be compelled to waive their rights. Violating these rules could result in dealers having to refund money to affected consumers, along with civil penalties of up to $50,120 per violation.
However, a legal challenge has temporarily halted the implementation of the CARS rules. The National Automobile Dealers Association (NADA) and the Texas Automobile Dealers Association have petitioned the Fifth Circuit of Appeals, contesting the FTC’s authority to impose the rule. The outcome of this legal battle may impact the timeline for the rules’ enforcement, potentially delaying their implementation by a few months.
