FTC’s New CARS Rule Targets Deceptive Car Dealership Practices

The Federal Trade Commission’s recent implementation of the Combating Auto Retail Scams (CARS) Rule marks a significant advancement in safeguarding consumers during the car-buying process. By specifically addressing prevalent tactics such as bait-and-switch advertising and concealed junk fees, the FTC aims to enhance transparency in the auto retail industry. This rule is poised to save consumers over $3.4 billion and approximately 72 million hours each year, fundamentally transforming the automotive purchasing experience and ensuring more equitable transactions.

The CARS Rule is a robust response to the long process for purchasing vehicles.

The CARS Rule is a robust response to the often opaque and lengthy car-buying process that leaves consumers vulnerable to scams by unscrupulous dealers. FTC Chair Lina M. Khan emphasized the importance of the rule, stating, “When Americans set out to buy a car, they’re routinely hit with unexpected and unnecessary fees that dealers extract just because they can.” She further added, “The CARS Rule will prohibit exploitative junk fees in the car-buying process, saving people time and money and protecting honest dealers.”

Under the new rule, dealers are prohibited from using bait-and-switch claims to lure buyers, including false information about the cost of a car, financing terms, availability of discounts or rebates, and the actual availability of advertised vehicles. It also takes aim at hidden junk fees – those charges buried in lengthy contracts that consumers never agreed to pay and often for services or products that provide no benefit.

The CARS Rule also brings clarity and protection for members of the military and their families.

The CARS Rule also brings much-needed clarity and protection for members of the military and their families, who are disproportionately targeted by these deceptive practices. The rule prohibits dealers from lying about cost and financing information, affiliations with the military, and the ability to move vehicles out of state or repossess them.

The creation of the CARS Rule was a meticulous process. The FTC issued a Notice of Proposed Rulemaking in June 2022 and received tens of thousands of comments from various stakeholders. After a thorough review, the FTC made substantial changes to ensure the rule protects consumers and fosters fair competition among auto dealers.

What does the CARS Rule require? No misrepresentations about key information like price and cost. Dealers must provide the offering price—the actual price any consumer can pay for the vehicle. They must inform consumers that optional add-ons are not required and disclose the total payment when discussing monthly payments. Additionally, the rule prohibits charging for any add-on that does not benefit consumers and requires dealers to get consumers’ express, informed consent for any charges.

The impact of the CARS Rule on servicemembers is significant. With an average of twice as much auto debt as civilians and around 20 percent of young servicemembers having at least $20,000 in auto debt by the age of 24, the financial well-being of our military personnel is at stake. The Department of Defense has expressed appreciation for the rule, with Acting DoD Under Secretary of Defense for Personnel and Readiness, Ashish S. Vazirani, stating that the rule will contribute to servicemembers’ economic security and readiness.

The CARS Rule gives consumers and honest dealers a reason to look forward to a more transparent and fair car-buying experience. The FTC has also provided new guidance for consumers and auto dealers to prepare for the rule’s implementation.

The FTC’s CARS Rule represents a significant advancement in addressing deceptive practices within the car-buying process. This regulation aims to create a fairer marketplace for both consumers and reputable dealers by promoting transparency and honesty. As the effective date approaches, stakeholders across the industry and consumers are preparing for a transformative shift toward more equitable car-buying experiences, reinforcing the principles of integrity and fairness in automotive transactions.

Related posts:
FTC Announces CARS Rule to Fight Scams in Vehicle Shopping
FTC reveals new rule targeting auto dealership scams
FTC cracks down on deceptive car sales tactics