The FTC’s CARS Rule

Abstract

In December 2023, the Federal Trade Commission (FTC) introduced the Combating Auto Retail Scams (CARS) Rule, a sweeping regulatory effort aimed at curbing deceptive practices in vehicle sales. Designed to address bait-and-switch tactics, hidden fees, and misleading financing offers, the Rule imposes new disclosure and recordkeeping requirements on dealerships. This article explores the legal foundations of the CARS Rule, the industry’s response, and its implications for consumer protection and dealership compliance. It argues that while the Rule introduces necessary safeguards, its implementation must balance transparency with operational feasibility.

I. Introduction

Buying a car is one of the most significant financial decisions consumers make—yet the process is often riddled with confusion, hidden costs, and aggressive sales tactics. The FTC’s CARS Rule seeks to change that by mandating clear disclosures and prohibiting misleading practices. This article examines the Rule’s legal structure, the challenges it presents for dealerships, and its potential to reshape automotive retail norms.

II. Legal Foundations of the CARS Rule

A. Scope and Applicability

The Rule applies to covered motor vehicle dealers selling or financing vehicles to consumers. It excludes off-road vehicles, motorcycles, and RVs, but covers most passenger vehicles sold through traditional dealerships.

B. Key Provisions

  • Offering Price Disclosure: Dealers must clearly state the full cash price of a vehicle, excluding only government-mandated charges.
  • Finance and Lease Transparency: Advertised monthly payments must include the total cost over the term of the lease or loan.
  • Rebate Clarity: Dealers cannot advertise discounts or rebates unless they are available to all consumers.
  • Add-On Product Restrictions: Products with no actual benefit to the consumer may not be offered or sold.

III. Industry Response and Legal Challenges

A. Dealer Associations Push Back

The National Automobile Dealers Association (NADA) and the Texas Automobile Dealers Association (TADA) filed a Petition for Review, challenging the Rule’s scope, clarity, and burden on small businesses. The FTC postponed the Rule’s effective date pending judicial review.

B. Compliance Concerns

Dealers argue that the Rule’s recordkeeping and disclosure requirements are onerous, especially for smaller operations. There is also concern about the ambiguity in defining “actual benefit” for add-on products.

IV. Consumer Protection and Equity

A. Addressing Deceptive Practices

The Rule targets long-standing issues in automotive sales, including hidden fees and misleading financing terms. By mandating upfront disclosures, it empowers consumers to make informed decisions.

B. Equity Implications

Low-income and first-time buyers are disproportionately affected by deceptive practices. The Rule’s emphasis on transparency may help reduce predatory lending and discriminatory pricing.

V. Recommendations for Implementation

To ensure the Rule achieves its goals without overburdening dealerships, regulators and industry stakeholders should:

  • Provide Clear Guidance. Develop detailed compliance manuals and training resources.
  • Phase Implementation. Allow for gradual adoption with grace periods and pilot programs.
  • Support Small Dealers. Offer technical assistance and digital tools to streamline compliance.
  • Monitor Impact. Collect data on consumer outcomes and dealer practices to refine enforcement.

VI. Conclusion

The FTC’s CARS Rule represents a bold step toward fairness and transparency in automotive retail. While legal challenges may delay its rollout, the Rule signals a shift in how vehicle sales are regulated and perceived. By centering consumer protection and ethical business practices, it lays the groundwork for a more equitable marketplace—one where trust is not a luxury, but a standard.