Federal Trade Commission Wants to Ban the Shadiest Car Sales Tactics

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Image: David Zalubowski (AP)

The car market and overall car buying has fallen into quite the hellscape for buyers. With dealers short on both new and used inventory, they’ve been pulling out all the stops to take advantage of making as much money as possible. Dealer markups have been the name of this game, but there are other slimier things going on. And the government has taken notice. The Federal Trade Commission (FTC) has proposed a rule that would prohibit dealers from doing things like creating certain fees or false advertising.

Over the past decade, the FTC says it has brought over 50 enforcement actions against dealers, from false advertising to consumer privacy and data handling issues while collecting consumer experiences related to car buying. The FTC’s conclusion was that dealers are shady and something needs to change.

The FTC is proposing four main tactics dealers use to fleece people out of more money:

Bait and Switch: The proposal would essentially ban false advertising. These scenarios encompass when a dealer lures buyers in with lower vehicle prices and then hitting them with a higher price-than-advertised. The bans would also include misrepresentations in vehicle financing. One example the FTC gave is widespread:

“When dealers advertise rebates and discounts, or offer prices that factor in such rebates and discounts, but in fact, those rebates and discounts are not available to the typical consumer, but only a select set of customers, such conduct induces the consumer to select and transact with the dealer under false pretenses.”

For instance, when you visit a dealer website and you see the vehicle’s price, along with various new prices that include rebates for Military or college grad offers. The rule would ban this.

Fraudulent and Surprise Junk Fees: This would nearly target markups disguised as packages. Consider, the local dealer’s $6,800 “protection” packages they try to sell with every new (and used) car on their lot. Although at some dealers, they’ll say it’s non-negotiable. Or another example of this would be bogus doc fees, sometimes costing more than $500. The FTC says these kinds of tactics disproportionally affect minorities, immigrants, and service members.

Requiring dealers have to be clear and upfront about costs and conditions: The proposal would require dealers to be open about and upfront about vehicle costs up to and including the aforementioned fees and why they aren’t required. They’ll also need to disclose information on financing terms.

Dealers will not be happy about these proposed rules to ban their special money-making tactics, but the market, especially now has deemed action beyond necessary. The insanity that has been the car market alone, and how dealers have handled it, speaks more to the nature of the business, and why change in dealer pricing and tactics is needed.

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