FTC Announces Effort to Save Car Consumers $3.4B

New federal regulations would fight common auto-buying scams

A key federal regulator has announced a new policy designed to fight common scams in the car-buying marketplace.

The Federal Trade Commission (FTC) announced the new Combating Auto Retail Scams (CARS) rule that they say will help stop bait-and-switch tactics and junk fees commonly associated with car purchasing.

The FTC estimates enforcement of the rule will save auto buyers as much as $3.4 billion a year.

“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. “The CARS Rule will prohibit exploitative junk fees in the car-buying process, saving people time and money and protecting honest dealers.”

The elements of the new rule include clear, upfront pricing and disclosure of add-ons and optional fees. The FTC says:

"Dealers have to provide the offering price—the actual price any consumer can pay for the vehicle; tell consumers that optional add-ons (like extended warranties) are not required; and give information about the total payment when discussing monthly payments."

Consumer advocates were quick to applaud the effort to protect consumers in the car buying space.

“The time is long overdue for the FTC to level the playing field for car buyers and honest dealers,” said Erin Witte, Director of Consumer Protection at Consumer Federation of America. “The CARS Rule will bring some improvements to the auto market, and we look forward to working with the FTC to ensure that all consumers, especially those in vulnerable populations, are prioritized throughout the process.”

Noting that car sales are among the top consumer complaints each year, one advocacy group says the new rule should provide an improved climate for purchasing a vehicle.

“The FTC has taken the courageous step of addressing the top consumer complaint in the country: auto sales,” said Rosemary Shahan, President of Consumers for Auto Reliability and Safety. “This rule should benefit both consumers and honest car dealers, who wrote in support of the proposed rule and complained about being at a competitive disadvantage because of unscrupulous car dealers who lure car buyers with false promises of low prices, then jack them up using sneaky tactics.”

The new rule will take effect on July 30th, 2024.

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