Don’t buy or lease a car in the U.S. until July.
Fear of being cheated at car dealerships is one of the most fundamental concerns, as it should be.
New and used car salespeople use various tricks to get as much for the car they are selling and pay as little for your trade-in as they can get away with.
There are various ways you can enter the dealership in the right frame of mind and with the right opening negotiating ploy, although you may not think of it that way.
But be assured that the car salesman/woman definitely starts out their day thinking of their strategy. This is how they make a living, and since an average new car sale only gets the salesperson about $350, you can expect them to try and jack up prices.
After explaining the new FTC rules I will provide my guidelines at the end. I used to sell cars.
FTC CARS
The U.S. Federal Trade Commission just set a number of rules that make it illegal for dealerships to make use of some of the worst tricks in the “Combating Auto Retail Scams” (CARS) rule.
Starting this July, some of the most egregious dealership tricks will be illegal in the U.S. The new rules were published/announced on December 12, 2023, and go into effect July, 2024. The rules cover both new car sales and leases.
Of course, CARS only applies to dealerships. On private sales, let the buyer beware is still the rule.
Bait and Switch – CARS Says No
One trick practically everyone has seen is known by the ages-old name BAIT AND SWITCH.
This is also known as the “too good to be true” advertisement, which isn’t limited to car salesmen.
Furniture stores and even grocery stores will place ads listing incredible bargain prices on things in high demand.
So you rush to the store, perhaps clutching the ad in your sweaty, anxious hands, only to be told one of several things.
First, the ad was a mistake, a misprint.
You will often see notes in tiny print at the bottom of ads saying something to the effect that prices are subject to change, so the $2.95 per pound prime rib was actually $29.50 per pound.
Second, this was such a great deal that, even though you were standing first in line as the doors opened, the product has already sold out. Under the new CARS rules, this will be illegal.
Junk Fees – CARS Objects
This one hits after you are worn out negotiating point after point and are presented with a piece of paper, usually four or five pieces of paper, ready to sign.
The extra or “junk” fees are sometimes dealer prep, which you may be told is mandatory, but if mandatory, why was it not included in the original price?
Nitrogen-filled tires are another junk fee.
If that is a benefit, which is highly questionable since you will probably sell the car long before your tires rot due to oxygen in the air filling them.You may be told they will not need to be filed as often.
Being slightly denser than regular air, nitrogen will leak out of tires a bit more slowly.
That is actually true, although as a trained physicist I have to admit that, I also know that my cars come with tire pressure sensors which tell me if the tires are low and also that I haven’t seen even a single pound pressure drop in five years using regular air.
But before you agree to pay an extra $300-500 to have 99% nitrogen in your tires instead of the normal air nitrogen content of 79.99% as found in your lungs, give it some serious thought, especially since the cost of the nitrogen would run about 20 cents and it just involves connecting the tire filler hose to a nitrogen tank after letting most of the air out.
(BTW, if they actually do use nitrogen, you should remember that unless they use a vaccuum pump to get the air out of the tire first, raising the pressure from zero to 30 psi or so would only raise the nitrogen pressure by about 10%.)
Next comes the infamous undercoating scam where the dealer tells you you really need the extra rust protection of the special coating which goes over the tar like factory undercoating.
In the strange movie Fargo, the sleazy car dealer eventually tells the buyer that the coating is applied at the factory and can’t be avoided.
Sometimes an extra, worthless, warranty is tacked on which merely duplicates the warranty the car already comes with, especially true for new cars.
Under CARS starting this July the dealer must get written approval of each individual “extra” charge before presenting the contract to be signed.
The new CARS rules also give the buyer the right to refuse ANY add-on which they do not want.
Saluting the Troops – CARS Objects
This is a really disgusting ploy.
You will especially see this near military bases. This is when (usually) a young man just having the first reliable job in their life and having just been given an assignment is pressured to buy that really hot car they have wanted since high school but could never afford.
Coupled with this sweetheart deal aspect, the bad cop (I have to check with my manager) will be the one who reminds the young man that the military can take a very dim view of people ducking out on debts.
Often that manager will hint that he and or most of his family are also former or current military.
At this point, you might be wondering just what finger the dealership is using in that salute.
CARS makes it illegal to misrepresent the dealership or salespersons as having military ties that do not really exist.
(NOTE: I have actually seen a dealership OWNER pull the “I’ll have to check with my manager” trick to buy time when negotiations seem about to stall.)
Burying True Cost – CARS Objects Again
Also known as burying the consumer, when you get the final contract you may find costs and monthly payments which are hardly recognizable after the original sunny quotes.
CARS will require that the original offering price must include all the necessary fees except for taxes, registration, and insurance which are really not under the control of the dealership and which everyone should already be aware of.
NADA Objects to CARS!
Not surprisingly, NADA (National Automobile Dealer Association) is crying foul.
A Google summary says, “The FTC’s Vehicle Shopping Rule is simply terrible for consumers, adding massive amounts of time, complexity, paperwork and cost to car buying and car shopping for tens of millions of Americans every year. NADA also says that the FTC has not explained why these changes are needed or how they will benefit customers.”
My View of CARS
I feel that the FTC has done a real good deed not just for consumers but also for the thousands of car dealers by forcing dealerships to treat buyers fairly because so many places exist where people can buy a car online with full disclosure.
One way you can see that physical dealerships are running scared is the way so many are now advertising that you can now buy a car entirely online from them! While that is true, I would only point out that just prior to COVID, I purchased a used car entirely online and met up at the local Walmart to inspect the car and sign the paperwork.
Then in 2020 I purchased a car which was a very rare luxury diesel SUV entirely online and it was delivered to my door 200 miles away.
So buying online is nothing new to dealerships which will bend over backwards to make that sale.
If they have to do it without being able to pressure people right in the dealership where they can slip extra fees into the deal while double talking you, then they will do so, giving up that advantage.
After all there is lots of money to be made even after a sale is completed.
A dealership really can sell you a car at only 1% above MSRP so that isn’t outlawed by CARS.
The reason they can do this is because of something called “holdback.” Holdback is a fee paid by the manufacturer at the end of a quarter based on how many cars were sold by the dealership. Holdback these days can run upwards of $1,500 per car because the price of new cars is so high even 3% is a lot.
Although this isn’t covered by CARS, I want to share a word about one Lancaster County, PA dealership I know well.
The local dealer has a giant cross on all of his dealerships but while you may think this is a guarantee of fair dealing, I happen to know that particular dealer divorced his first wife after being caught with his secretary but the family was able to portray him as a mere employee and therefore not able to pay large child support and alimony.
A few years later he married a much younger and, incredibly naive and barely educated girl (she bragged to me that she had never read a book after high school other than The Bible – reading The Bible is fine, but ONLY reading The Bible?) while building a massive mansion on top of a nearby mountain and taking complete ownership of the dealerships on paper.
He is also known for doing his own commercials, at least one of which ridicules the beliefs of Amish neighbors, a fairly common religious sect in this area who, of course, will never buy a car anyway.
You might consider these facts when evaluating just how honorable and Christian the dealerships are in their various practices.
This is right up there with the military scam.
Lest you think this is sour grapes, I have purchased several cars, new and used from those dealerships and always got a fair deal. But I went in knowing that they were a car dealership, not a church.
CARS – the Details
This is directly from the FTC CARS web page.
FTC CARS Rule – fighting auto retail
Tags:
Advertising and Marketing Basics
The primary purpose of the FTC’s CARS Rule is to add truth and transparency to the car buying and leasing process by making it clear that certain deceptive or unfair practices are illegal – for example, bait-and-switch tactics, hidden charges, and other conduct that harms consumers and honest dealers. Why is it called the CARS Rule? Because the Rule is about Combating Auto Retail Scams that cost consumers billions of dollars each year and cause honest dealers to lose business.
The Rule lays out four basic principles to protect people shopping for cars and trucks – practices that are already business-as-usual for honest dealers.
This Dealers Guide introduces industry members to what the CARS Rule means for their dealerships.
An Introduction to the FTC’s CARS Rule
- The CARS Rule prohibits misrepresentations about material information.
- The CARS Rule requires dealers to clearly disclose the offering price – the actual price anyone can pay to get the car.
- The CARS Rule makes it illegal to charge consumers for add-ons that don’t provide a benefit.
- The CARS Rule requires dealers to get consumers’ express, informed consent before charging them for anything.
- Answers to questions dealers may have about the CARS Rule
- Glossary
Read the guide on the FTC website.
My Car Buyer Tips
Some basic tips from a former used car lot owner who was never threatened or sued.
First, NEVER announce that you have a trade-in until well along in the negotiations.
Second, NEVER say how much you like a car you are looking at. If anything talk about a similar car at another dealership you are also considering.
Third, never, NEVER say you are in a hurry or need a car to get to work, or anything which makes it obvious you can’t waste time worrying about every little detail.
Fourth, NEVER begin negotiating by saying your payment can only be so much. That is one rule which you can break if you know what you are doing. In my case I did that with the last luxury car I bought and it not only got $500 off the price (the car was delivered 150 miles at no extra cost), and got me a very low interest rate on a loan.
I used to own a small garage and used car lot in the greater Boston area and someone I went to grade and high school with owned and still owns the local Chrysler dealership and later bought a nearby Chevy dealership.
Actually another classmate owned the local small town G.M. dealership in the same town as the Chrysler dealership but since he was a massive failure who chased his secretary around the office and spent most of his time maintaining his inherited family home I can’t say much useful about his dealership which had been family owned since 1918.
(To be fair, there were two dealerships in a town with a current population of 319, so keeping that second dealership running would have been a struggle for anyone.)
I was not the typical used car dealership owner because I always guaranteed any car I sold.
Two of them broke down soon after I sold them but the owners never asked for their money back which I would have been happy to return if they had told me before junking the cars. So you could say I have an inside track on the tricks used to sell cars.
I mention my background so you can decide how much you should pay attention to my suggestions.
Other scam information that we covered recently.
