The Expert Podcast

…If you are ever involved in an automotive transaction buying a car selling a car or if you're a dealership. The new changes to the section five law or regulation from the FTC. It's going to radically transform the way that vehicles are sold. In the future And if you're a car buyer this benefits you because…the days of having to haggle over price or worry about a dealership, Ms Treating you on. Pricing strategy.

Is over and not all dealerships do this you know a lot of, pundits say that all dealerships are bad and scammers and some are and some aren't. But this section five is going to make a big difference in how that's done Basically they can't rip you off on price anymore and you can defend yourself against it with very serious consequences for the dealer. And this is on their federal trade commission website, few words about section five They get into we're going to look at a couple other documents with the language and the intentions of this law and how it benefits you as a consumer. The overall theme of this is whether or not what a dealership does. Is it unfair method of competition?

And a lot of things that you have been exposed to in the past where the dealership coach you a price and then you go down there and it's a different price Or if you ask them if it's the best price they can offer. And maybe it's not those things are now all subject to review by the FTC federal agency not a state agency. For example, the. Language of the opinions of the FTC say that if you are quoted a price or quoted.

payment or some type of transaction for a vehicle. And it turns out that…the deal isn't what it was supposed to be. You could just leave right And not buy it However, That's not good enough What they're saying is the time that you wasted or the opportunity that you last or. The fact that it might pressure you into buying a vehicle is actually a violation of FTC regulations And the way they phrase it is the conduct goes beyond. the competition of merit So merit might be one dealership is better because maybe they have more inventory or, they have superior business strategies.

That's fair competition. Meritable. Evaluation of that dealer However, if it's just. Something that's made up and not true That's unfair. And here's where they call it PR section forty four sixty three 0.3 prohibited misrepresentations.

The rule would prohibit motor vehicle dealers from making certain misrepresentations. Deceptive practices surrounding motor vehicle transactions basically any misrepresentation. The way this is worded If you ask a dealer point blank is this the best price I can get? And they quote you a price and it's not the best price Maybe they could have gone lower That's a misrepresentation. You could walk away but they even address that…

Prohibited mess representations are material because they affect a consumer's choices such as weather to visit a particular dealership. So it's not even just that you buy a car it's even if you visit the dealership. So if a dealership makes some misrepresentation in their advertising or over the phone or an email just to get you in the door, That is a prohibited conduct. Consumers who select and travel to dealerships based on an advertised offer only to learn late in the process. That the advertise offer does not apply.

Have often spent hours trying to purchase a car. Even if they notice and successfully resist. Later added fees or price changes. Or leave after learning that the discounts do not apply misleading advertisements caused them to waste hours driving to and visiting the dealership. In fact it gets worse than that.

Walking away is not a realistic option for some clients. So you have to restart the hours long process at another dealership. Making additional time off from work. Can't afford. a second car finding other transportation, thus even if they somehow learn they're paying more than what was advertised, consumers might just sign the deal.

Rather than…

starting all over It's kind of like wearing you down as a consumer. And we've all dealt with this. And if you're a legitimate dealer you probably don't do this intentionally, but you probably also try to see what the customer's willing to pay before. You quote a price In fact, this is one of the things that is not stated implicitly but if you're a dealer and you ask a customer, what's your budget or how much can you pay that itself Might be. A misrepresentation because you're not quoting a price based on what you're willing to offer You're quoting a price based on what the customer wants to pay.

And it's very clear…

The rule prohibits misrepresentations concerning the cost or terms of purchasing financing or leasing a vehicle, it would bar deceptive practice surrounding the total costs the price for added features terms of finality availability of discounts So here we go right here. Deceptive practices availability of discounts So if you walk in the door of a dealership and they say you have to pay full list we don't discount the vehicle. If that's not true, that's a prohibited misrepresentation If anybody else got a discount or they're willing to discount it, That might be something that is prohibited. How does this affect you as a car buyer?

Well the law says the. The conduct does not have to cause actual harm. It only has two. Have a tendency to generate negative consequences. For example, limiting choice, lowering quality.

impairing other market participants So if one dealer caught you an unrealistic price or says they have a car in stock to get you to go to them versus somebody else that's impairing other market participants. Reducing the likelihood. Of competition. Right. So.

these are things that are very vague and it kind of takes any misrepresentations or prohibited conduct off the table for a dealer. How do you capitalize that? On…

the sales side on the purchase side if you're a buyer of a vehicle. You want to document all the activities So basically paint the dealer into a corner ask them what's your best price Is this the best price I can get? Are there any add ons Just like lock them into these statements Try to do it by email or text message So documented. And then. See if there's other offerings see if they renege on any of these offerings, because you don't want to just walk away and start the process with another dealer because they might do the same thing.

You want to get the deal you want from. The dealership that is easy to deal with closer to home or…the place that has the one in stock that you need. This federal trade commission section five is very powerful and it's not going to be publicized dealers Won't be telling you about this. and the FTC God bless them Government agency. They may not put a lot of this out in the public either So you need to know about it on your own.

You might be thinking and dealers might be thinking well some of these things might be beneficial to the customer. Well, maybe. You know offering a better deal to one customer because their local might benefit one customer and not another it doesn't matter. You can't do something that. Has a justification just because it helps somebody else or even helps a competitor.

That's not allowed. It says right here, whether the harmed party share in the benefits I…

do not justify it. Not overcome by a countervailing justification. Right So if the customer has helped a little bit because maybe you got them in the door to show them a red vehicle and that's what they wanted. That may not be enough to overcome the prohibited. Conduct And that's also address here.

You can't do false or deceptive advertising or even marketing, which tends to create or maintain market power even if you're not selling, if it hurts the other dealer because they can't sell as much. Look, some dealers will do low ball ads or make offers that they don't even intend to get customers in They just want to. Slow down their competitor and make their competitor have a tougher time especially a weaker competitor. And by definition if that weaker competitor maybe can't get more inventory or they don't get as much service business that. Is something that's prohibited and could be something that's considered harmful.

And they closed This document was saying that the FTC has committed. To discharging its statutory obligations through enforcing and administering. The prohibit prohibition against unfair methods of competition on a standalone basis. Or in conjunction with its other. Authorities.

So they're taking this pretty seriously The last piece of language from one of their documents is,

it would prohibit dealers from first touting low prices or other attractive terms So it doesn't have to be price. It could be saying that they have more inventory saying that they can deliver a faster any attractive term. For specific vehicles, inducing customers to spend time traveling to the dealership and pursuing the offer, but then claiming that the pre the vehicle is no longer available, no longer available at that price. The financing is only for those with high credit scores.

So anything that induces you. Unfairly. To even engage a conversation with that dealer…is considered to be anti-competitive So this section five is a big deal If you're a dealer I'm sure you're hearing about it from your corporate counsel. If you're a consumer. It's going to be something that will benefit you in the long run.

At some point, all dealers are going to conform to this and they'll do it naturally But in the meantime, use this to your advantage in your negotiating and engaging with licensed automotive dealers Remember not all dealers are bad We're not saying that's the case. A lot of dealerships do it the right way, but sometimes old habits. Die hard And you may have to kind of fight your way through the process to get the result you want as an informed consumer.