- A federal agency has warned 97 car dealer groups that some pricing practices may be illegal.
- The move is a surprise, coming after the Trump administration abandoned a Biden-era crackdown.
The Federal Trade Commission (FTC) began warning car dealers last week that they must advertise final sale prices and honor them.
In letters to 97 dealer groups (companies that operate more than one dealership), the FTC warned: “You may be advertising prices for cars that are lower than what you actually charge consumers.”
The move is a surprise, coming after the Trump administration abandoned a high-profile Biden administration effort to rein in deceptive pricing practices at car dealerships.
The Warning Letters
- In the letters, the FTC warned against requiring dealer financing to obtain discounts, advertising prices not available to everyone, and more.
In the letters, the FTC cautioned dealers against a series of practices, including:
- Advertising a price that does not reflect all required fees
- Advertising a price that reflects rebates or discounts not available to all consumers
- Advertising a price that fails to take into account the amount of an additional required down payment
- Conditioning the advertised price on consumers using dealer financing
- Requiring consumers to buy additional items not reflected in the advertised price
- Advertising unavailable or nonexistent vehicles
The agency made clear that it had not concluded that each dealer that received a warning was engaged in these practices.
Last Year’s Abandoned Junk Fee Ban
- The move partly replicates an abandoned Biden-era effort to rein in “junk fees” in car shopping.
The move comes after the FTC abandoned a similar effort last year.
Under the prior administration, the agency wrote a proposed federal rule that would have made those same practices illegal. It failed a court challenge on technical grounds, with a judge finding that the agency had not provided the public sufficient notice of its plans.
The Trump administration missed a deadline to appeal that decision, which appeared to kill the effort to rein in so-called “junk fees” at car dealerships last year.
The new letters may represent an attempt to resurrect the issue. In a statement, the FTC said it “is committed to preventing auto dealers from misleading consumers with low advertised prices and then adding on mandatory fees at the end of the purchasing process.”
Some Fees are Valid, Some Questionable
- Car pricing is complex, involving some valid fees that can’t be negotiated away and some questionable ones that can.
Car pricing is complex, as Americans aren’t used to negotiating the prices of most goods they buy.
Some fees are a normal and legal part of the purchase process.
Every automaker charges a delivery or destination fee, which helps cover the cost of moving cars from the factory to the dealership. Those fees have been increasing in recent years.
State laws regulate document fees, which cover the cost of additional paperwork dealers must complete to comply with state regulations.
Some other fees are negotiable and, in some cases, provide little to no value to the buyer. In the rules it abandoned last year, the FTC called out nitrogen in tires and warranties that duplicated a manufacturer’s warranty as particularly egregious charges.
Dealers Association: We’re Taking This Seriously
- The largest group representing car dealers said it will work with the agency.
The National Automobile Dealers Association (NADA), in a statement, said, “While the overwhelming majority of America’s 17,000+ dealers service their customers in a consumer-friendly and compliant manner, NADA takes any potential advertising violations in the marketplace very seriously. We will continue to work with the FTC to address areas of concern.”
NADA was a plaintiff in the lawsuit that ended the Biden FTC’s effort to control dealer fees.
