Few experiences are as irksome as the process of purchasing a new or used vehicle, which often entails spending endless hours fending off aggressive sales tactics, until you find yourself sitting in a tiny office being presented with document after document adding one additional charge after another. Sometime later, you finally emerge, dazed and shellshocked, somehow having agreed to spend far more than you originally anticipated. It's a common experience shared by nearly every American who has purchased a car over the last 50 years, and the Federal Trade Commission (FTC) has finally gotten around to doing something about it. The new FTC car dealer rules will be prohibiting a lot of shifty tactics that have been used for decades.
The Combating Auto Retail Scams (CARS) Rule
The FTC recently finalized a new rule to combat a variety of tactics employed by unscrupulous car dealers that result in the lengthy and opaque process of buying a car, which pile on illegal fees and charges to an already expensive purchase.
Vehicles are one of the most expensive items purchased made by American consumers, and for many they are the costliest item they will ever purchase. The final version of the FTC car dealer rules, Combating Auto Retail Scams (CARS) Rule includes the following specific restrictions and requirements for auto dealers:
No Misrepresentations: Any misrepresentations about key information, including the vehicle price and any financing costs, are strictly prohibited.
Offering Price, Total Payment, and Add-Ons Optional: The CARS rule requires dealers to provide the actual price the consumer can pay for the vehicle (called the offering price) and must inform consumers that optional add-ons (like extended warranties) are not required, and to provide information about the total payment when discussing monthly payments.
No Bogus Add-Ons: The rule prohibits dealers from including any additional costs that do not provide a benefit to consumers. Examples of such bogus add-on costs include: 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, or other parts of the deal, and software or audio subscription services on a vehicle that cannot support the software or subscription.
Consent:The rule also requires dealers to obtain a consumers’ express, informed consent for any charges that they pay as part of a vehicle purchase.
These restrictions and requirements came about as the result of tens of thousands of comments submitted by consumers, military personnel, veterans, and auto dealers in the wake of the initial Notice of Proposed Rulemaking issued by the FTC in June of 2022
FTC Car Dealer Rules Provides Special Protections for Service Members
The CARS Rule includes specific protections for members of the military, who often find themselves victimized by unscrupulous car dealers, which is demonstrated by the fact that military personnel have twice as much auto debt as civilians, which poses a serious threat to their financial well-being.
The rule prohibits dealers from lying to service members and other consumers about important cost and financing information, and about whether the dealers are affiliated with the military or any other governmental organization. They also are prohibited from lying about whether a vehicle can be moved out of state or whether it can be repossessed.
According to the FTC, the new rule is expected to save consumers nationwide more than $3.4 billion and an estimated 72 million hours spent each year shopping for vehicles. The CARS Rule will take effect on July 30, 2024, and the FTC will have guidance documents available for both consumers and auto dealers that help them understand their respective rights and obligations under the rule.