November 10, 2022

FTC’s New Car Sales Rule

The proposed [FTC] rules target dealer control over the flow and timing of Information which enables them to add charges or change contract terms late in the purchase or lease process.
JD Supra

In June 2022, the Federal Trade Commission (FTC) shared their proposal for a revised set of rules regarding new car dealerships and promoting transparency with end-users. The updated rules tackle several concerning automotive industry practices that have come to light in recent times. 

A proposed change in regulations such as the one proposed by the FTC can help buyers make better-informed decisions while buying a vehicle. On the flipside, while this rule sets out to protect buyers, it can impact car dealerships’ business. The rules don’t benefit auto dealers, who want the FTC to amend these proposed regulations, because they stand to lose some of their profits.  

What Is The Proposed FTC New Car Dealer Rule? 

Changes to car dealership regulations will protect buyer interests, but not those of car dealerships. 

According to PR Newswire, proposed changes to the new car deal rules will include:

  • dealers needing to disclose the full purchase price upfront
  • no hidden, or surprise, add-ons such as equipment or warranties
  • no more valueless, fraudulent “junk fees”
  • a ban on the use of bait-and-switch advertising practices

Proposed Rules Cater To Consumers

The FTC received more than 100,000 complaints about car dealerships over the last three years. They note that the top 10 most common complaints they receive are related to new and used motor vehicle sales, financing, service, warranties, rentals, leasing, and complaints about motor vehicle transactions. 

The organization’s proposed regulations directly target many of the practices that a consumer might see as “sneaky”. As written, new guidelines would offer more transparency for buyers and limit what dealers can sell to them and how they can sell those products and services.

Dealerships Say New Rule Is Unfair

Following the proposed FTC new dealership rule, several issues are beginning to cement the FTC’s case. In a JD Supra article, the FTC pushed for a settlement involving unfair dealership practices. JD Supra states that this case “comes at a time when the FTC appears poised to adopt a rule for new car dealers that will impose significant limits on how dealers advertise to bring customers into dealerships and also impose requirements for disclosures that dealers must provide up-front at the outset of negotiations with customers”.

Dealership groups want to know if the FTC’s regulation of new car dealers is really necessary. Groups such as these state that practices like the above-mentioned will persist in the industry. To this end, comprehensive rules are needed, instead of ones that only tackle a few and pointed issues at a time. 

Is There A Middle Ground? 

The FTC prides itself on its works to “promote competition and protect and educate consumers”. While protecting buyers’ interests, dealerships want the FTC to secure their interests as well, so as not to hurt their businesses which are already struggling with supply-chain woes and post-pandemic repercussions.

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