Buying A New Car? Proposed Rules Might Make It Easier To Not Get Ripped Off
New Federal Trade Commission rules could hold car dealerships to stringent standards if they end up becoming policy.
It’s rare to drive away from a car dealership feeling that you’ve gotten the best deal possible — or even a good deal, really. Between all the complicated math, the add-ons, the industry jargon, and the intimidatingly large numbers being tossed around, many consumers are unsure if all the things they’re paying for are necessary, and by the end of the lengthy process, usually just want to get the hell out of the dealership.
We’ve come to accept it as part of the process. Still, there are some unscrupulous dealerships out there that take advantage of this fact and artificially inflate pricing or use other underhanded tactics to pad their commissions. The Federal Trade Commission (FTC) is finally taking steps to address these unsavory players and the tens of thousands of complaints they generate each year.
New rules have been proposed to address common sales tactics like bait-and-switch pricing, forced extended warranties, nitrogen-filled tires, and not disclosing the vehicle's actual price until the end of negotiations.
The FTC says they receive around 100,000 complaints each year about car dealerships, more than they do about almost any other industry sector. Officials hope the new rules will discourage sketchy salespeople from taking advantage of consumers in the market for a new vehicle — especially now, as vehicle prices have increased almost 14% from May 2021.
“As auto prices surge, the Commission is taking comprehensive action to prohibit junk fees, bait-and-switch advertising, and other practices that hit consumers’ pocketbooks,” Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, said in a statement. “Our proposed rule would save consumers time and money and help ensure a level playing field for honest dealers.”
The National Auto Dealers Association said the proposed rules were “unwarranted, redundant, and ineffectual.”
So what are these new FTC rules, and how will they impact the car-buying experience? Here’s what you need to know.
Banning Bait-and-Switch Sales Tactics
This rule would prohibit dealers from using fake or dishonest pricing or false claims to get consumers into the dealership.
These tactics include pricing, finance terms, availability of specific vehicles, add-ons and upgrades, and many other deceptions. When the consumer arrives at the dealership, they may find out that what they were told the price of their vehicle would be isn’t necessarily the truth and then are a captive audience to a high-pressure sales pitch.
Banning Junk Fees
Junk fees are additional charges tacked on to the end of the sale for items that provide no benefit to the consumer — items like nitrogen-filled tires that only contain air levels of nitrogen, extended warranties for cars that aren’t eligible for extended warranties, leased car gap insurance, and any surprise add-ons that aren’t disclosed until the end of the sale process.
Dealers would no longer be allowed to require junk add-ons for the purchase of a vehicle.
Disclosure of Price and Fees Upfront
Dealers would be required to disclose the total “offering price” of the vehicle to the consumer, which would be the total amount the consumer would pay for the vehicle, taxes, and registration.
The dealer would also be required to disclose information about any add-ons in writing to the customer, including the price of the add-on and the fact that it’s not a requirement for the purchase of the vehicle.
The new proposals were published on July 12th and have a 60-day public comment period. The Commissioners will review all public comments before issuing a final decision on adoption of the new ruleset.