How the FTC Is Working to Eliminate ‘Hidden Fees’ at Dealerships

The number of car dealerships increased notably between 2020 and 2022, leading to higher competition. As some retailers try to stay ahead of the competition, they might use questionable means to lure buyers. One common practice is attracting people into car buying with lucrative offers. Dealerships then add some fees during the transaction to compensate.

The Federal Trade Commission (FTC) has proposed a new bill to protect consumers. The suggested rule could eliminate hidden fees by banning bait-and-switch pricing. Here is more information on this matter and tips to save you from fraud when shopping for your next car. 

What is bait-and-switch?

Bait-and-switch is a common form of fraud in retail sales. It involves advertising goods as an excellent bargain and then luring the customer to buy at a higher price. Buy-and-switch is another common culprit and might also include promoting cheaper items that are out of stock. After that, the sales team will pitch another pricey model and convince you to purchase it.

Other bait-and-switch tactics used by car dealerships are:

  • Unclear financing terms
  • Lying about the availability of discounts and rebates
  • Failing to disclose that some financing terms are only applicable to leased cars

Car dealerships often lure potential customers by deceiving them about costs. For example, a company might use a lower price in an advert and then cite it as a mistake. Likewise, it might fail to reveal the cost of add-on services and products. This issue then leads you to believe that a vehicle is cheaper.

How the FTC is working to eliminate hidden fees

A car dealership with cars, balloons, and flag streamers that could have hidden fees.
Car dealership | Getty Images

The FTC exists to protect consumers from deception and unfair business practices. In a bid to enhance protection, the commission proposed a new rule. 

According to Business News, the policy’s goal is to ban bait-and-switch and other deceptive marketing tactics. The proposal would also prohibit fraudulent junk fees. This implies that dealerships may face the law for including add-on products and services that aren’t beneficial to consumers.

Another matter covered by FTC in their proposed rule is the upfront disclosure of costs and conditions. The commission suggests that dealers disclose an actual offering price that excludes taxes and government fees. 

The proposal also includes a ban on surprise junk fees. Dealers would have to inform customers about such charges and get written consent. FTC is also trying to ensure sellers reveal that add-on fees are optional.

FTC’s proposed rule could save consumers from unwanted fees and allow them to compare prices based on ads. Eliminating hidden fees at car dealerships will also make car buying more straightforward. Consumers will get competitive offers and avoid frustration. This policy may also benefit honest dealerships by allowing them to enjoy fair competition.

Measures to protect yourself from hidden fees at dealerships

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As the FTC works on improving consumer protection, there are measures to protect yourself when buying a car. Consumer Reports recommends you understand the payment terms beforehand. This way, you’ll compare financing options and avoid high fees.

More precautions to take when buying a car are:

  • Contest the delivery and preparation fees
  • Don’t pay an advertising fee
  • Buy from reputable dealerships
  • Negotiate unavoidable fees

Another way to protect yourself when buying a car is to inquire about all costs. When you contact or visit a dealership, ask their staff to list any additional fee you may incur if you purchase a vehicle. Moreover, research each charge to determine if it’s mandatory or for an add-on service. You could also ask for a cost breakdown quote categorizing all expenses.

Being cautious when car shopping can ensure you don’t spend beyond your budget and avoid hidden fees at dealerships. You could also enjoy car incentives and favorable payment terms.