A vehicle is often one of the most expensive purchases many people make in their lives, and often these purchases are marred by a lengthy car-buying process and hidden fees. Now, the Federal Trade Commission has a plan in place to help mitigate some of the stress and cost of the process – the CARS Rule. The new rule will go into effect on July 30, 2024.
What Is the CARS Rule?
CARS stands for Combating Auto Retail Scams, and this rule is aimed at stopping two of the most common problems people have when car shopping, bait-and-switch tactics, and hidden junk fees. These tactics are often part of unscrupulous dealers' repertoires but these practices are illegal.
Practices such as bait-and-switch are harmful to customers, because they waste time and money, often by luring in customers with certain advertised vehicles at low prices, then telling the customer the vehicle is no longer available or available at a higher price. Unscrupulous dealers then often use aggressive tactics which leave buyers feeling pressured into taking a different, often much more expensive deal.
Junk fees often happen on the other end of the deal, when you're working with a finance manager to seal the deal. These fees include things that are optional and often unnecessary, but many customers feel pressured into taking the whole package, or often aren't given the time to read through the contract, so they don't realize they're signing for things like fabric protection, or insurance products that may be unnecessary to the customer.
What Does CARS Do?
The CARS Rule is designed to help consumers, especially military members and their families, combat these harmful car sales practices. The new CARS Rule includes requirements of dealers including:
- No misrepresentation – rules prohibit the misrepresentation of key info such as price and cost.
- Offering price, total payment, and add-on options – Dealers must provide the actual price a consumer can pay for the vehicle, tell the buyers that they're not obligated to accept optional add-ons, and give consumers info about the total price when discussing monthly payments.
- No bogus add-ons – The CARS Rule also prohibits dealers from charging for add-ons that do not benefit the consumer, like oil changes for EVs, or GAP agreements which don't actually cover the consumer.
- Get consumer consent – Dealers must get a consumer's express written consent for any charges they pay as part of the vehicle buying process
CARS Rule to Help Servicemembers
The CARS Rule is especially helpful to members of the military, who are often preyed upon as young servicemembers when they need a vehicle as a vital part of their daily life on sprawling military bases. According to their report, the FTC states that servicemembers have twice as much auto debt as regular civilians, with about 20% of them having at least $20,000 in auto-related debt by the age of 24.
The CARS Rule prohibits dealers from lying to servicemembers about important cost and financing information, and about whether the dealer is affiliated with the military or any government organization.
Making the CARS Rule
The CARS Rule came about after the FTC issued a Notice of Proposed Rulemaking related to shopping for a vehicle in June of 2022. After a months-long comment period, the agency received tens of thousands of comments from consumers, servicemembers, veterans, and car dealers about the proposed rule to help inform the decision-making process.
What Will Happen If Dealers Don't Follow the Rule?
It's not clear as of yet what the punishment will be for going against the CARS Rule, but the FTC's aim is to make the car-buying process more transparent. To gather the most information you can about this new rule, you can visit the FTC website at consumer.ftc.gov. Here you can see FAQs, and find out more about how this new rule could impact your next vehicle financing journey.
