*Note that as of January 2024 the CARS rule is indefinitely on hold.

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In December 2023, the Federal Trade Commission (FTC) finalized the new Combating Auto Retail Scams (CARS) Rule. The FTC CARS rule aims to fight scams customers face while shopping for vehicles. The rule explicitly targets two illegal tactics common with auto sellers: hidden junk fees and bait-and-switch sales tactics. 

This new rule affects not only car shoppers, but also auto dealers. As a dealer, you may have to make some adjustments to ensure compliance with the FTC CARS rule, which goes into effect on July 30, 2024¹. Here’s what you need to know about the FTC CARS rule before then. 

What Does the FTC CARS Rule Require?

There are four main requirements that the FTC CARS rule imposes on car dealerships². Note that the rule applies to all Covered Motor Vehicle Dealers, as defined by the FTC, and any covered motor vehicles they sell or lease. These vehicles do not include motorcycles, marine vehicles, or recreational vehicles. 

1. Dealers must not misrepresent material information relevant to customers’ buying or leasing decisions. 

Making deceptive claims about material information like financing options, vehicle pricing, or add-ons is prohibited under the CARS rule. According to the FTC, material information in this context refers to any information “likely to affect a person’s choice of, or conduct regarding, goods or services.” ²

Misrepresenting this information through implication or express statements violates the CARS rule. Expressly, dealers cannot misrepresent any of the following information:

• The cost of buying or leasing a vehicle
• The terms for financing a vehicle
• The availability of a car at a given price
• Details about a consumer’s financing application
• The availability of discounts and rebates
• Whether a customer has been preapproved for any product or service

2. Dealers must disclose the offering “drive-off-the-lot” price. 

When advertising vehicle prices, dealers must clearly publish the total price consumers can pay to purchase the vehicle. This price is what the FTC calls the “offering price.” If there are optional add-ons for the car, the dealer must inform consumers that they are not required to purchase these add-ons. In discussions about monthly payments, the total cost for the vehicle must also be clear. 

The only costs dealers can exclude from the published offering price are government charges. These charges may include applicable taxes, certification, or license and registration fees. 

3. Dealers cannot charge for add-on products or services that do not benefit the customer. 

If any add-ons do not benefit consumers, dealers cannot charge them for those add-ons under the CARS rule. Examples of these add-ons include coverage that’s redundant with the car’s warranty coverage and “nitrogen-filled tires” that contain no more nitrogen than standard tires. 

4. Dealers must obtain customers’ express, informed consent for all charges. 

Before charging anything, dealers must ensure customers have provided clear, informed consent on their purchase and how much it costs. Dealers cannot include any surprise or hidden charges to which the customers have not consented. 

Dealers who violate these requirements are subject to action by the FTC. The FTC can seek equitable and injunctive relief from dealerships violating the CARS rule³. Violating the CARS rule may also expose dealers to state legal action and private litigation. 

Reaction to the CARS Rule

According to the FTC, these requirements protect consumers and eliminate shady dealers. FTC Chair Lina M. Khan said, “The CARS Rule will prohibit exploitative junk fees in the car-buying process, saving people time and money and protecting honest dealers.”

Upstanding dealers will ultimately benefit from the FTC CARS rule as disreputable dealers are exposed and punished for violating the requirements. The main goal is more truth and transparency in vehicle sales. 

While the rule has not gone into effect yet, there are high expectations for its impact. The rule is expected to save consumers across the country over $3.4 billion and millions of hours of vehicle shopping¹. 

However, the reaction to the CARS rule hasn’t been entirely positive. The National Automobile Dealers Association criticized the rule for further complicating vehicle transactions, claiming it would lengthen the car sales process⁴. Time will tell whether the new FTC car dealerships rule yields the intended results for both consumers and dealers.

Transparency Starts Here

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Sources:

1. FTC Announces CARS Rule to Fight Scams in Vehicle Shopping. Federal Trade Commission. Retrieved January 12, 2024, from https://www.ftc.gov/news-events/news/press-releases/2023/12/ftc-announces-cars-rule-fight-scams-vehicle-shopping 
2. FTC CARS Rule: Combating Auto Retail Scams – A Dealers Guide. Federal Trade Commission. Retrieved January 12, 2024, from https://www.ftc.gov/business-guidance/resources/ftc-cars-rule-combating-auto-retail-scams-dealers-guide 
3. Turetsky, B. and Culhane, Jr., J. (20 December 2023). FTC issues final CARS Rule setting new requirements on vehicle sales. Consumer Financial Services Group at Ballard Spahr LLP. Retrieved January 12, 2024, from https://www.consumerfinancemonitor.com/2023/12/20/ftc-issues-final-cars-rule-setting-new-requirements-on-vehicle-sales/ 
4. Lin-Fisher, B. (13 December 2023). Buying a car? FTC reveals new CARS Rule to protect consumers from illegal dealership scams. USA Today. Retrieved January 12, 2024, from https://www.usatoday.com/story/money/cars/2023/12/13/ftc-cars-rule-car-auto-dealership-scams/71905547007/