US FTC finalizes car-buying rules to rein in junk fees, bait-and-switch (updated)

Lithia Motors

12/12/2023 20:43

(Adds names of several large auto dealer groups in paragraph 9)
       WASHINGTON, Dec 12 (Reuters) - Auto dealers will be
barred from luring vehicle buyers with promises they do not keep
and will not be able to charge junk fees - like a service
contract for an oil change for an electric vehicle - under a new
rule, the U.S. Federal Trade Commission said on Tuesday.
    The rule could fundamentally change how millions of
Americans buy vehicles annually by requiring up-front pricing in
dealers' advertising and sales discussions, and bars the sale of
any add-on product or service that confers no benefit to
consumers.
    The FTC, in a rule finalized on Tuesday that was first
announced in 2022, said it had been concerned about dealers that
allegedly targeted young men and women in the military. 
    "By the age of 24, around 20 percent of young servicemembers
have at least $20,000 in auto debt," the agency said in a
statement which said that the rule "prohibits dealers from lying
to servicemembers and other consumers about important cost and
financing information." 
    Consumer Reports said the FTC proposal would bar "shady
tactics" by car dealers that can boost the cost of new vehicles.
    Sam Levine, director of the FTC's Bureau of Consumer
Protection, said that consumers often begin car shopping by
comparing prices before going to a dealer.
    "The reality is once you actually get to the dealership, you
find the car, you find the model you like, it's in stock, and
you get closer to the end of the transaction, you realize that
the price that's been advertised is not actually the price that
you can drive away with the car with," he said. 
    The rule, which attracted sharp criticism from the National
Automobile Dealers Association (NADA), takes aim at practices
the FTC says costs consumers $3.4 billion annually and prolongs
the vehicle-shopping process.
    While the FTC did not name any companies in its release,
some of the biggest auto dealers include AutoNation  AN.N ,
Penske  PAG.N , Lithia Motors  LAD.N , CarMax  KMX.N , Group 1
Automotive  GPI.N , Carvana  CVNA.N  and Sonic Automotive
 SAH.N . None of them had an immediate comment on the new rules.
    It would specifically bar misrepresentations about price,
cost and the total cost of the vehicle.  
    Dealers will also be required to obtain consent for any
charges they add to a vehicle's price. They would be barred from
charging for add-ons that are useless to the buyer, such as
selling nitrogen-filled tires that contain no more nitrogen than
normal air.
    NADA previously said the FTC proposal would "upend the sales
process for tens of millions of consumers annually and thousands
of small businesses." The trade group has called the rule
"premature, legally deficient, factually inaccurate, and
exceedingly confusing for consumers and dealers."
    The Alliance for Automotive Innovation, representing General
Motors  GM.N , Toyota Motor  7203.T , Volkswagen  VOWG_p.DE  and
other major automakers, raised concerns about the FTC plan and
warned of "excessive regulation and micromanagement of the sales
experience."

 (Reporting by Diane Bartz and David Shepardson in Washington;
Editing by Matthew Lewis and Mark Porter)
 ((Diane.Bartz@thomsonreuters.com;))