FTC Proposes New Rules to Rein in Shady Car Dealer Practices
The Federal Trade Commission (FTC) is hoping to change this. A new set of proposed rules announced Thursday would prohibit auto dealers from using bait-and-switch advertising practices or tacking on nonsense fees.
The first of the proposed rules would explicitly ban advertising that deceives customers into initiating a purchase, only to learn the real price or terms of the purchase are different from what was marketed. This usually takes the form of advertised low sticker prices, zero percent APR financing, and other hooks that end up being absent from the actual offered deal. After test-driving a vehicle or two, haggling with a salesperson, and undergoing a credit check, these bait-and-switch scenarios can feel confusing and even manipulative.
Another pair of proposed rules would prohibit dealers from implementing surprise or fraudulent “junk fees.” These are the miscellaneous items tacked onto the final price just before signing: “nitrogen-filled” tires, paint protection, UV coatings, and other (often invisible) add-ons that are not-so-conveniently forced upon unwitting buyers. Under the new rules, the FTC would require that dealers provide customers with the price of the car without these add-ons, and only add the extra items once the customer has provided their clear, written consent.
A final rule rounds off the other proposals: dealers would be required to disclose to customers a vehicle’s true “offering price,” excluding only taxes and government fees. The price of any add-ons must be detailed in writing along with a disclosure stating such add-ons are not required to purchase or lease the vehicle.
Automotive consumers generate a significant portion of FTC complaints. Despite previous attempts to engage law enforcement and mitigate deceptive auto dealer practices, complaints regarding vehicle sales and maintenance make up about 10,000 FTC complaints annually. A preliminary regulatory analysis estimates the rules’ net economic benefit would sit around $29 billion over a decade.
As of now, the FTC’s proposed rules are just that; they don’t yet guide auto sales. The FTC is allowing 60 days for comments and questions from the public, which will help guide any revisions and determine whether the rules are implemented at all.
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