The Federal Trade Commission’s (FTC) Combating Auto Retail Scams (CARS) Rule is set to reshape the way cars are bought and sold by prioritizing consumer protection. Originally scheduled to take effect in July 2024, the rule has faced a slight delay due to legal pushback from dealer associations. However, it is still expected to go into effect in 2025, as dealerships prepare for its arrival amid ongoing litigation.
The CARS Rule focuses on eliminating deceptive pricing tactics, such as bait-and-switch strategies and hidden fees, while ensuring buyers receive clear, upfront information. Dealers will be required to provide out-the-door prices, disclosing all fees and charges except for government-mandated costs. The rule also mandates that dealers secure explicit consent from consumers before adding optional products, such as extended warranties or service contracts.
A Push for Transparency and Fairness
The FTC introduced the CARS Rule to protect consumers from misleading practices that have long plagued the industry, according to the Biden administration. Recent FTC reports reveal that hidden fees and deceptive sales practices cost U.S. shoppers an estimated $3.4 billion annually. The rule aims not only to safeguard consumers but also to create a fairer marketplace where honest dealerships are no longer undercut by competitors willing to mislead buyers.
Buyers will benefit from the ability to receive total pricing information immediately, even when inquiring over the phone. This change requires dealerships to be transparent about all costs, eliminating the tactic of revealing key fees only after the customer arrives on the lot.
Industry Pushback and Legal Challenge
The CARS Rule has faced fierce opposition from dealership groups like the National Automobile Dealers Association (NADA). They argue that the new regulations will make transactions slower, introduce unnecessary complexity, and burden smaller dealerships with compliance costs. NADA’s lawsuit challenging the rule caused the FTC to postpone the original July 2024 start date, but the rule remains on track for enforcement in 2025.
The CARS Rule also places new restrictions on how dealerships advertise discounts and promotions targeted at specific groups, such as military members, first responders, and recent college graduates. While these incentives are common marketing tools, the rule prohibits dealers from factoring discounts into advertised prices unless they are available to all buyers.
For instance, if a promotion offers a $500 rebate exclusively to military members, it cannot be included in the vehicle’s advertised base price. This change aims to prevent misleading advertisements and ensure consumers receive clear information about which discounts apply to them. However, it adds complexity for dealerships and classified marketplaces, which must now carefully manage how incentives are communicated and ensure real-time accuracy of both pricing and vehicle availability. Dealers worry that these new requirements may slow the sales process and make it more difficult to manage promotions across multiple platforms, raising concerns about compliance and efficiency.
Dealers Begin Preparing for Compliance
Despite the delay, many dealers are taking proactive steps to ensure compliance. A primary focus has been updating online listings, as the FTC is expected to monitor websites closely for transparency violations. Dealers are also working with third-party vendors to ensure pricing feeds accurately reflect all applicable taxes and fees.
Sales teams will need to adjust as well, learning to quote complete prices quickly and consistently across phone inquiries and in-person visits. With potential fines of up to $50,120 per violation, dealerships cannot afford to be lax in their preparation.
What Lies Ahead
The CARS Rule represents a significant shift for the auto industry, promising to improve the car-buying experience through enhanced transparency. While the legal challenge briefly delayed the rule’s rollout, the industry believe it will proceed with enforcement in 2025. Dealerships that operate with integrity will likely adapt smoothly, while those relying on outdated sales tactics may struggle to keep pace.
As the industry prepares for these changes, consumers can expect greater clarity in pricing and fewer surprises when making purchases. Although some dealers worry about added complexity, the long-term impact of the CARS Rule could foster a more trustworthy marketplace. With 2025 on the horizon, the countdown to compliance has begun.
