Proposed New FTC Rule Designed To Help Car Buyers
Almost everyone at some point in their life will wander into a new or used car dealership looking to buy a vehicle. As a whole car dealerships get a bad rap, as the bad ones tend to garner far more discussion than the good ones. Unfortunately though there are bad car dealerships out there who are always looking for creative ways to help customers part with their hard-earned money. Recently the Federal Trade Commission (FTC) announced the Notice of Proposed Rulemaking which targets questionable car sales tactics. Here’s how the FTC is looking to better protect the car buying public.
The FTC has actually been protecting car buyers since the mid 1980s. It was then that the FTC went on the attack against a whole list of deceptive used car sales tactics with the Used Motor Vehicle Trade Regulation Rule. Things like misrepresenting a vehicle’s condition, whether the vehicle had a warranty, and defining what is actually a warranty if there is indeed one. And you can thank the FTC for the now required “buyers guide” sticker you see on every used car window. Over the years the Used Motor Vehicle Trade Regulation Rule has been updated periodically typically to better inform consumers. This new Notice of Proposed Rulemaking would apply to both new and used car dealers.
Notice of Proposed Rulemaking
The Notice of Proposed Rulemaking attempts to approach the car buying process with a little more clarity than what the FTC has observed happening in the marketplace on its own. These are the targets:
- Ban bait-and-switch claims
- Ban fraudulent junk fees
- Ban surprise junk fees
- Require full upfront disclosure of costs and conditions
Most people have probably heard of or even run into a few of these sales tactics over the years.
Bait-and-switch – Ah yes, one of the oldest tricks in the book. A dealer advertises a sweetheart of a car deal guaranteed to make buyers race to the lot. A new car for an unbelievably lower price. Or maybe a ridiculously low loan interest rate or lease payment. But in the case of that unbelievable car deal the salesperson saunters out of the sales office with a defeated look telling you it sold JUST before you got here. But there’s hope because we have one almost exactly like it over here for almost the same price. Next thing you know you are test driving a premium luxury edition while the salesperson talks about monthly payments. Often the original car was never actually available nor was the finance or lease deal.
Fraudulent junk fees – We’ve all seen the rise of junk fees on almost everything. Normally the bane of airline seats and concert tickets, car dealers have created their own kinds of junk fees. These fees are for things that have no real use or benefit other than padding the dealer’s pockets. Those “nitrogen filled tires” may sound fancy until you realize that the air around us is 78 percent nitrogen already.
Surprise junk fees – Surprise parties are fun. Surprise car sale fees are not. These are the fees that seemingly come from out of nowhere while you are sitting in the dealership finance office. Going forward dealers would have to disclose the price of the vehicle itself without any of the optional fees.
Full upfront disclosure of costs and conditions – Sometimes it seems that the most difficult number to pry out of a dealer is the actual cost of a vehicle. Some might grab a sheet of plain paper and start throwing numbers down in corners or squares while talking about trade-in or downpayment amounts. But getting the actual real price (minus taxes and mandatory government fees) can be nigh impossible. The FTC wants to fix that by mandating the real “offering price” for the vehicle be made available to consumers. Any other fees or add-ons that are not a legal requirement to buy the vehicle would have to be disclosed as such. It would also require detailed information about vehicle financing terms.
Those are the main points in the Notice of Proposed Rulemaking, but it also contains detailed requirements around retaining dealership records of advertisements and sales transactions for a specified length of time.
Public Input Requested
Want to let the FTC know what you think of the proposed rules? You can read the entire Notice of Proposed Rulemaking here and also submit comments to the FTC on the same site. The deadline for public input is September 12, 2022.
Car Buying Tips
While the FTC is working to protect consumers, there are a few things you can do to protect yourself when buying your next vehicle:
- Arrange your own financing ahead of time. Contact your bank (or even better a credit union) and get pre-approved for an auto loan. That way you already know your interest rate and your price limit.
- Don’t fall in love with a vehicle. There are plenty of vehicles out there, so know it is okay to walk away if things don’t look right.
- For a used car request a third party inspection. Any reputable car dealer should have no problem with your local NAPA Auto Care Center giving the vehicle a look. If the dealer balks, walk away. Also never use a shop that is recommended by a dealer for an inspection.
- Also for used cars bring your own OBD-II code reader to check the vehicle for any issues. You want to see zero pending faults and all systems reading ready. If anything shows up, walk away.
- It is okay to walk away. Really. Buying a car is a business transaction, not a social interaction. You don’t owe anyone anything until the paperwork is signed. If at any time before that point the process feels “off”, just leave. Trust your instincts.
Buying a car can be a fun and exciting event. With the new proposed FTC rules hopefully it can also be a less stressful event.
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Brian Medford View All
With an automotive writing career spanning over two decades, Brian has a passion for sharing the automotive lifestyle. An avid DIYer he can usually be found working on one of his many project cars. His current collection includes a 1969 Olds Delta 88 convertible and a slant-6 powered 1975 Plymouth Duster.
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