New FTC Rules Prevent Car Dealer Scams
Car dealers using shady practices like bait-and-switch tactics or charging exploitative fees will need to fall in line or face punishment from the FTC in 2024.
But Will Predatory Dealers Be a Thing of the Past?
It’s why we hate buying cars: we know so many car dealers use predatory practices that we expect we’re they’re going to try to rip us off. The paperwork is dense, unnecessary costs can be hidden, sales tactics are hard-nosed, and often, dealers don’t actually have the cars or prices they advertise. All of which is now illegal.
The Federal Trade Commission announced a new rule called “CARS,” for Combating Auto Retail Scams. The rule specifically states that car dealers:
- Cannot misrepresent any information about a car for sale, including the price, features, and final cost
- Must clearly state the offering price, total payment, and cost of any add-ons
- Must make clear when add-ons are not required or beneficial, such as duplicate warranties or optional subscriptions
- May not add on items that provide no benefit to the buyer, such as GAP insurance coverage that won’t provide adequate coverage or subscriptions for services the car doesn’t have the software to support
- Must get consumer consent on all charges in a vehicle purchase
Related: Buying a New Car? Here’s the Checklist You Need
Customer Complaints Rise, Sparking the New Rule
The FTC started the discussion on these rules last year when, with surging car prices and high consumer demand, complaints about dealerships increased. The agency logs more than 100,000 complaints about car dealers a year and says that illicit practices cost consumers more than $3 billion annually.
And it’s no surprise that complaints about car dealers make the agency’s top 10 list of complaints each year.
However, it’s not just consumers complaining. Car dealers also complain about other car dealers using shady tactics; they lose both business and reputation to scammy dealer tactics.
One of the most compelling complaints, however, came from the US military community. Military service members are among the youngest car buyers and often carry a lot of car debt. And they are more often the victim of predatory car dealers. The new rules should prevent car dealers from claiming a military affiliation and lying when answering questions about topics such as moving a car out of state or repossession laws.
Related: Yes or No: Car Drives with the Salesperson Present
New Rules Should Help, But Buyers Should Still Beware
“I’m thrilled,” said car buying concierge LeeAnn Shattuck about the new rules. “And it’s about freaking time. Dealers have been using bait-and-switch advertising techniques for decades,” even though it’s illegal in most states.
The new FTC rules should help consumers to be more aware of potential scams and to find recourse when they are taken advantage of. But still, “buyers will need to beware and read all of the fine print before they sign anything,” LeeAnn said. In addition to her buying service, she educates consumers on car buying so they can negotiate their own purchases to get the best deal and avoid being scammed.
Related: The Fed Will Give You Money to Buy a Used Electric Car
Preparation is the Best Strategy
It’s certainly a tough time to buy a car. Prices are still historically high on many cars, and even if that isn’t the case on all models, car dealers can create a sense of scarcity.
But clearly, knowing what you want, what you can afford, and which dealers have that particular model on their lot is the first step. Services like TrueCar can narrow down the choices by model, trim, and features.
Buyers should also have their financing confirmed before going to a dealership; negotiate the purchase separately from the financing and trade-in to ensure you get the right car at the right price.
And then, review and research the car dealer’s offer. Ask about any feature or charge on the contract that isn’t immediately clear, that isn’t on the window sticker, or that you said you didn’t want. Often, dealers will add options without a buyer’s consent, such as VIN etching anti-theft protection; it’s possible to have the charge removed even if the option is still provided.
And if a dealer tries to use predatory or shady practices to add fees to a contract, file a complaint with the FTC. Under the new rules, consumers may have recourse, including getting their money back and punishing shameless dealers with penalties.
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Categorized:Car Buying
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