FTC Finalizes New Rule to Combat Auto Retail Scams, Aims to Save Consumers $3.4 Billion Annually

The Federal Trade Commission (FTC) has recently finalized a new rule aimed at combating two widespread illegal tactics consumers face when purchasing a vehicle: bait-and-switch tactics and hidden junk fees. The enforcement of the Combating Auto Retail Scams (CARS) Rule is expected to save consumers nationwide an estimated $3.4 billion and 72 million hours each year spent on vehicle shopping.

The CARS Rule also provides clear protections for members of the military and their families, who are often targeted with bait-and-switch tactics, junk fees, and deceptive information about whether dealers are affiliated with the military.

FTC Chair Lina M. Khan commented on the new 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. The CARS Rule will prohibit exploitative junk fees in the car-buying process, saving people time and money and protecting honest dealers.”

The new rule prohibits dealers from using bait-and-switch claims to entice vehicle buyers, including misrepresentations about the cost of a car, the terms of financing, the availability of discounts or rebates, and the actual availability of the vehicles being advertised. It also addresses hidden junk fees, which are charges buried in lengthy contracts that consumers never agreed to pay and, in some cases, provide no benefit to consumers.

Vehicles are often the most significant purchase American consumers make. The CARS Rule aims to target illegal practices that capitalize on the challenging nature of buying a vehicle, particularly the often lengthy and opaque process that leaves consumers vulnerable to scams by dishonest car dealers.

The CARS Rule requires:

1. No Misrepresentations: Dealers are prohibited from making misrepresentations about key information, like price and cost.
2. Offering Price, Total Payment, and Add-Ons Optional: Dealers must provide the offering price—the actual price any consumer can pay for the vehicle; inform consumers that optional add-ons (like extended warranties) are not required; and provide information about the total payment when discussing monthly payments.
3. No Bogus Add-Ons: The rule prohibits dealers from charging for any add-on that does not provide a benefit to consumers. Examples include warranty programs that duplicate a manufacturer’s warranty and service contracts for oil changes on an electric vehicle.
4. Get Consumers’ Consent: Dealers are required to obtain consumers’ express, informed consent for any charges they pay as part of a vehicle purchase.

This new rule aims to protect consumers from exploitative practices in the auto retail industry and ensure a more transparent and fair car-buying process.

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