The Big Four FTC Rules Car Dealers Fear Most Are One Step Closer to Reality

Inside a Dealership 6 photos
Photo: Kazuo ota on Unsplash
Car DealershipCar DealershipCar DealershipCar DealershipCar Dealership
The Federal Trade Commission (FTC) cleared one big hurdle recently by saying a decisive “no” to a delay request coming from the National Automobile Dealers Association (NADA). Things are shaping up as a victory for the Americans who are looking to buy their next vehicle from a dealership. Here’s what you need to know and how you can still make your voice heard.
The FTC is trying to turn car buying into a hassle-free process. The “Motor Vehicle Dealers Trade Regulation Rule” is comprised of four very important changes. They will transform the way Americans interact with various companies that act as middlemen for manufacturers.

But some things need clearing up first before we can get into specifics.

Firstly, America’s newest automakers gave up on the dealership model of doing business. Companies like Tesla, Lucid, or Rivian discovered that it’s cheaper and more convenient to work directly with the consumer, albeit some states still prohibit car companies from selling directly to buyers. But workarounds have been found.

Legacy manufacturers enjoyed having dealers. Now, not so much. That’s why Ford, for example, is struggling with going on the same route as Rivian. It’s not that easy to give up on business partners that bought almost every product you threw at them.

Before the health crisis and its accompanying issues that have bestowed almost all of us, American car dealers used to act as true middlemen who would buy tens or even hundreds of vehicles from one or more manufacturers. Then, those units became their problem, and they would decide how the selling process was going to happen. They’d have to make sure someone was going to buy from them. In turn, the carmaker would receive a lump sum or generous monthly pays, which guaranteed enough cash flow to keep moving things around for next-generation vehicles or other special projects.

Reality is often dissapointing

Unfortunately, with carmakers unable to enforce strict rules, the last 12 months showed everyone why letting dealerships do their own thing can backfire. Some middlemen introduced obscene price hikes that were disguised as “market adjustments.” Not only that, but consumers also had to face increasing costs when they were already deep in the buying process. Paying the MSRP has become the exception to the rule in 2022.

To summarize everything, it’s very complicated to buy a car in the U.S. right now. Because, on one hand, automakers are struggling with production, and on the other hand, dealers just don’t keep many vehicles in stock anymore. With an ever-growing demand and an insufficient supply, things only looked grimmer and grimmer for the average consumer. This gave enough leeway to dealerships to act exactly as they wanted. But things are about to change.

Enter the FTC and its “Motor Vehicle Dealers Trade Regulation Rule.”

Secondly, the Commission decided it was time to do something about the whole thing. That’s why it introduced a notice of proposed rulemaking that contains four major changes:
  • banning shady and often confusing add-ons such as nitrogen filled tires that contain no more nitrogen than normal air or undercoatings that do not prevent rust;
  • forbbiding deception and unfairness in the motor vehicle marketplace, aka forcing the advertising of the real price of a vehicle on the internet which must include all the fees and add-ons;
  • establishing the fact that customers can and must be allowed to pay for a vehicle as they wish through new non-discriminatory practices, including arranging their own financing;
  • putting an end to "deceptive pricing" when it comes to finance and insurance products, aka establishing a ban on introducing sneaky add-ons (such as costly extended warranties or GAP insurance) by only mentioning them on the fine print, which is not always read by the consumer.

These things should’ve already been the norm, but dealerships reacted when the FTC decided to go ahead with the changes and enter the public consultation phase. They immediately asked for a two-month extension through NADA, whose message was supported by the National Association of Minority Automobile Dealers (NAMAD) and the American International Automobile Dealers Association (AIADA).

Going forward

But in a five to zero vote, the Commission said “no.” It argued that the changes “would protect consumers and honest dealers by making the car-buying process more clear and competitive.” Moreover, the proposed rule was announced in June, and the public consultation phase began on July 13th. It’s scheduled to end in less than two weeks, on September 12th.

NADA replied and said FTC's refusal to extend the public comment period “displays an unnecessary and misguided rush to judgment in this matter.”

The FTC is authorized to address “unfair or deceptive practices that may be common in a given industry,” and that’s what it’s doing with the “Motor Vehicle Dealers Trade Regulation Rule.”

There are less than two weeks left for you to add your input (September 12). Tell the FTC if you support or not these four big changes. It’ll only take a minute of your time now but might save you hours and lots of money in the future.

Ultimately, after all public participation opportunities have been exhausted, the Commission will publish a final rule which must be respected since it will become an integral part of the Code of Federal Regulations.
If you liked the article, please follow us:  Google News icon Google News Youtube Instagram
About the author: Florin Amariei
Florin Amariei profile photo

Car shows on TV and his father's Fiat Tempra may have been Florin's early influences, but nowadays he favors different things, like the power of an F-150 Raptor. He'll never be able to ignore the shape of a Ferrari though, especially a yellow one.
Full profile


Would you like AUTOEVOLUTION to send you notifications?

You will only receive our top stories