FTC’s new AUTO rule could save car buyers $3.4 billion each year

  • You’ve heard the stories (or experienced them yourself): car dealers racking up junk fees, luring and switching buyers, and selling the elderly on unnecessary add-ons. All of these tactics will be illegal under the new FTC CARS rule.
  • Combating Auto Retail Scam (CARS) prohibits dealers from misrepresenting their prices. The rule specifically caters to military personnel, who are often targeted by dealers.
  • The FTC began talking about this new rule in 2022, but it won’t go into effect until late summer 2024.

The Federal Trade Commission (FTC) has announced new rules designed to prevent salespeople from deceiving car buyers. The new CARS rule, which stands for Combating Auto Retail Fraud, addresses two items that car buyers have long complained about: bait-and-switch tactics and junk fees. Anyone who has ever been angered by a surprise $500 “protection” add-on knows how maddening it can be.

Specifically, the CAR Rule is based on four main prongs: (1) Dealers cannot misrepresent the price of a car; (2) Dealers must “clearly disclose” the actual price someone might pay for the car; (3) Dealers may not charge consumers for add-ons that provide no benefit; and (4) Dealers must obtain the buyer’s “express, informed consent” before charging them for anything.

Federal Trade Commission

The FTC originally proposed what became the CAR Rule in June 2022. In July 2023, a group of 17 Democratic U.S. lawmakers issued a statement asking the FTC to finalize those rules. Although the new AUTO rule has already been confirmed, it won’t go into effect until late next summer: July 30, 2024. When the rule finally arrives, the FTC said it should save U.S. car buyers more than 3 .4 billion dollars each year , along with an estimated 72 million hours spent vehicle shopping.

The Federal Trade Commission has created a website for car dealers who want to follow the new rules exactly. The commission said nothing should change for “honest traders” but listed some categories of actions that will be illegal under the CAR Rule, which we imagine many of our readers have come across while surfing. Dealers will not be able to misrepresent “the availability of vehicles at an advertised price”, for example, or “any costs, limitations, benefits or any other aspect of an additional product or service”. The CARS rule also makes it illegal to “charge consumers for supplements that provide no benefit.”

Protection of military personnel and the elderly

All kinds of people can fall prey to unscrupulous car dealers offering such scams. For example, the Los Angeles County District Attorney’s Office says older people are often targeted by unethical car dealers. The CARS rule specifically focuses on preventing scams targeting service members, which fraudsters target, the FTC said, with “deceptive information about whether dealers are affiliated with the military and other specific issues that affect service members.” The Federal Trade Commission said about 20 percent of service members have at least $20,000 in car debt by the time they turn 24. This is twice as much as in the general population.

“The Department of Defense is evaluating the Federal Trade Commission’s CARS rule,” Ashish S. Vazirani, the Department of Defense’s acting undersecretary of defense for personnel and readiness, said in a statement. “For our service members and their families, a car is an essential purchase, and this CARS rule will help combat predatory practices targeting our men and women in uniform.”

Main photo by Sebastian Blanco

Contributing Editor

Sebastian Blanco has been writing about electric vehicles, hybrids and hydrogen cars since 2006. His articles and car reviews appear in New York Times, Automotive News, Reuters, SAE, Autoblog, InsideEVs, Trucks.com, Car Talk and other outlets. His first green car media event was the launch of the Tesla Roadster, and since then he has been following the transition from gasoline vehicles and discovering the importance of new technology not only for the automotive industry, but for the world at large. Add in the recent move to autonomous vehicles and there are more interesting changes happening now than most people can imagine. You can find him on Twitter or, on good days, behind the wheel of a new EV.

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