FTC Bars Car Sellers From Making Deals With Unmet Promises & Useless Ad-Ons

Under a new rule the U.S. Federal Trade Commission finalized yesterday, auto dealers will be prohibited from enticing car buyers with empty promises and useless add-on products and services such as a contract for an oil change for an electric vehicle, reports Reuters.

This new rule could help millions of Americans who purchase vehicles every year from falling into unknown traps. Dealers will now be required to provide and incorporate transparent, up-front pricing in their advertising and sales communications, and they will no longer be able to integrate extra products or services that are of no benefit to customers.

The FTC expressed its concerns about dealers who allegedly targeted young men and women in the military. The U.S. agency said in a statement, “By the age of 24, around 20% of young servicemembers have at least $20,000 in auto debt.” With the mission to fix this ongoing problem, they said this new rule “prohibits dealers from lying to servicemembers and other consumers about important cost and financing information.”

“Shady tactics” by auto dealers that amplify the total cost of a new car will now be barred in line with the FTC proposal, according to Consumer Reports.

Sam Levine, director of the FTC’s Bureau of Consumer Protection, stated that consumers often start car shopping by scoping out different cars and comparing prices before approaching a dealer. “The reality is once you actually get to the dealership, you find the car, you find the model you like, it’s in stock, and you get closer to the end of the transaction, you realize that the price that’s been advertised is not actually the price that you can drive away with the car with,” Levine said.

To no surprise, the rule was criticized heavily by the National Automobile Dealers Association (NADA). President of the association and CEO Mike Stanton said it was “heavy-handed bureaucratic overreach and redundancy at its worst, that will needlessly lengthen the car sales process by forcing new layers of disclosures and complexity into the transaction.” In an email, Stanton stated, “We are exploring all options on how to keep this ill-conceived rule from taking effect.”

Carvana’s Chief Brand Officer Ryan Keeton said the company has been an advocate for transparency. In an email comment, he said, “We support efforts to introduce more transparency across the industry to help consumers make informed decisions on their own terms.”

While the FTC didn’t expose any companies in its release, some of the auto dealers in question include Lithia Motors, Penske, AutoNation, Sonic Automotive, CarMax, and Group 1 Automotive.

The rule would specifically bar distorted pricing linked to the total cost of the car. Dealers will also now need to get consent from buyers for any charges they add to a vehicle’s price. They would not be able to charge for extras that are of no use, such as selling nitrogen-filled tires that have nothing beneficial to add to the functioning of the car.

The Alliance for Automotive Innovation, representing General Motors, Toyota Motor, Volkswagen, and other large automakers, also shared its concerns about the FTC plan and warned of “excessive regulation and micromanagement of the sales experience.”