When an individual steps foot inside of a car dealership, it’s often equated to walking inside of a lion's den. For years, consumers looking to buy a car have had to armor themselves up against deceptive negotiation tactics often used by dealers, but that soon may become a thing of the past.
The Federal Trade Commission recently finalized a new rule called Combating Auto Retail Scams, which fights illegal tactics such as hidden fees and bait-and-switch tactics that consumers often battle when trying to purchase a new vehicle. It is set to take effect on July 30, 2024.
“When Americans set out to buy a car, they’re routinely hit with unexpected and unnecessary fees that dealers extract just because they can,” said FTC Chair Lina M. Khan in a press release. “The CARS Rule will prohibit exploitative junk fees in the car-buying process, saving people time and money and protecting honest dealers.”
A bait-and-switch tactic is a form of false advertising. For example, a car dealer can bait a customer by advertising a vehicle at a low price. Once the customer is hooked on the vehicle, the dealer then switches and tells the customer that the car is unavailable and will aggressively try to sell them a more expensive vehicle.
The press release reveals that consumers and even car dealers, who have lost business to other dealers who bait-and-switch, have sent complaints to the FTC about this form of deception.
The CARS Rule bans dealers from using that tactic when it relates to “the cost of a car or the terms of financing, the availability of any discounts or rebates, and the actual availability of the vehicles being advertised,” according to the press release.
The new rule will also give car shoppers some relief from excessive and unnecessary add-ons that result in additional fees embedded into their auto purchasing agreements.
These include “warranty programs that duplicate a manufacturer’s warranty, service contracts for oil changes on an electric vehicle, GAP agreements that do not actually cover the car or neighborhood in which it is housed, or other parts of the deal, and software or audio subscription services on a vehicle that cannot support the software or subscription.”
Overall, the CARS Rule is expected to save consumers $3.4 billion annually, as well as 72 million hours that are spent each year on car buying.
The move from the FTC comes after it vowed to crack down on junk fees across different industries after consumers have complained about encountering such fees when it comes to purchasing concert tickets online, renting an apartment, paying utility bills, etc.
“Americans are fed up with the junk fees that are creeping across the economy,” said Consumer Financial Protection Bureau Director Rohit Chopra in an October press release.