What You Need to Know TODAY about FTC CARS Rules (2024) (2024)

What Every Car Dealer Needs to Know About the FTC CARS Rule Today!

FIRST, breathe a sigh of relief because these new rules are under judicial review and so no effective date has been set. It was scheduled for July 30 2024.

BUT, as a car dealer, staying compliant with the FTC’s regulations is crucial for your dealership’s success, reputation (and wallet!). Here are the immediate steps to ensure you’re on the right track should these CARS Rules take effect:

What is the CARS Rules?

The FTC CARS Rule stands for the “Combating Auto Retail Scams” Rule, introduced by the Federal Trade Commission (FTC). It’s designed to enhance transparency and fairness in the auto market by setting clear standards for advertising, disclosing prices, and selling practices at car dealerships. This rule aims to protect consumers from deceptive practices and ensures that they have all the necessary information to make informed decisions when buying or leasing a car.

Breaking Down the FTC CARS Rule for Car Dealerships

Understanding the Federal Trade Commission’s CARS Rule is crucial for car dealerships aiming to ensure transparency and fairness. Here’s a deeper dive into what the rule entails with practical examples:

Clearly Disclosing All Costs and Terms Up Front

To foster trust, dealers must list the total car price, “Offering Price” (but can exclude government charges – tax and tag fees).

For instance, if you want to sell a vehicle for $8,999 and have a $200 Doc Fee your advertised price on your website and other marketing sites needs to be $9,199.
The FTC CARS Rule also mandates that dealers must clearly disclose the total payment amount for a financed or leased vehicle. This includes the sum of all monthly payments plus any upfront costs the consumer needs to pay, like a down payment or trade-in value. It ensures buyers are fully informed about the total cost before making a decision, preventing unexpected increases in payment amounts after the deal is made.

Avoiding Misleading Claims in Promotions

Dealerships should steer clear of advertising vehicles at prices that are not universally available to all customers or promoting non-existent rebates.

Example: Avoiding advertising a car model as available at a low price when in fact it’s a trim level with many add-ons.

Requiring Explicit Consent for Any Added Charges

Before adding any services or insurance products like GAP, express consent from the buyer is necessary. For example, if a dealership wants to include a service contract, the customer must understand the cost and agree to it explicitly before it’s added to the contract.

How the CARS Rule Affects Servicemembers

For members of the military, the issues addressed by the CARS Rule are compounded by dealers who prey especially on young servicemembers, for whom having a vehicle is often vital when stationed on sprawling military bases.

Servicemembers have an average of twice as much auto debt as civilians. By the age of 24, around 20 percent of young servicemembers have at least $20,000 in auto debt, which creates a substantial challenge to servicemembers’ financial well-being.

The CARS Rule prohibits dealers from lying to servicemembers and other consumers about important cost and financing information, and about whether the dealers are affiliated with the military or any other governmental organization. They also are prohibited from lying about whether a vehicle can be moved out of state (which affects servicemembers and their families, who must frequently move to new duty stations) and whether a vehicle can be repossessed (there are laws that protect many servicemembers from having their vehicle repossessed).

Additional Resources and FAQs

FREQUENTLY ASKED QUESTIONS:

What should I do to prepare should the CARS Rule take affect?
- Ensure all advertisem*nts and promotional materials accurately reflect vehicle prices and terms. Train your staff to disclose all costs upfront and obtain explicit consent for any additional charges.
How will the CARS Rule impact my dealership’s marketing practices?
- You will need to avoid any bait-and-switch tactics and ensure that all advertised prices are available to every customer without hidden fees or conditions.
What protections does the CARS Rule provide for servicemembers?
- The rule prevents dealers from providing false information about cost and financing, military affiliation, vehicle mobility, and repossession laws, protecting servicemembers from predatory practices.