Navigating the complexities of automotive regulations can be confusing and leave dealers wondering how it impacts their business and what changes, if any, need to be made to remain compliant. The FTC’s CARS Rule is the latest example of how highly relevant and changing legislation can turn the industry on its head. We’re here to help simplify things. Let’s review what the CARS Rule is, what it seeks to achieve, what it means for auto dealers and how to comply with it.
What is the FTC CARS Rule?
The FTC Combating Auto Retail Scams Rule is a regulatory measure that lays out four basic principles to protect car buyers from unfair, illegal or deceptive practices. It underscores the importance of truthful advertising and fair dealings with customers – a mainstream practice for most dealers.
The rule's primary aim is to ensure transparency and honesty to foster consumer trust and confidence, which can ultimately enhance customer relationships and dealership reputation. Initially slated to go into effect in mid-2024, the Rule has been paused pending further legal review. As the Rule evolves and changes, JM&A Group’s teams are staying close to the conversation to best understand the implications to dealerships in advance of the effective date.
Why is Auto Dealership Compliance Important?
The Rule and other key regulations for automotive dealerships are more than a box to check for compliance – they are an opportunity for dealerships to demonstrate their commitment to honest business conduct. More than ever, customers value transparency from companies they buy from. Earning their trust through honesty, clear pricing and reputable business practices is key.
On the flip side, non-compliance with these rules can trigger severe repercussions, including legal consequences and hefty fines, not to mention a significant hit to your reputation and public perception. The stakes are high, for both gains and losses.
In short, understanding the regulations and laws that apply to auto dealers, including the CARS Rule, and integrating their requirements into your dealership operations isn't just necessary, it can help fortify your dealership’s market standing and protect it from potential pitfalls. While compliance requires an investment of time and resources, the return – in terms of consumer trust, dealership reputation and risk mitigation – is well worth it.
Impact of the FTC CARS Rule on Automotive Dealerships
The effect of the FTC CARS Rule is substantial and widespread, but it doesn’t have to be complicated. The rule as it is currently written mandates the complete, accurate and honest disclosure of vehicle information, specifically:
Prohibits misrepresentation of information that could affect a person’s choices related to their purchase, such as finance terms, costs and benefits to add-ons like F&I products, rebates and discounts
Requires dealers to clearly disclose the actual price anyone can pay to purchase the vehicle, including specifying that add-ons are optional, the total of all finance or lease payments and any payment comparisons
Makes it illegal for dealers to charge customers for add-ons that don’t provide a benefit, such as coverage that is duplicative to the car’s warranty or a contract a customer would not financially benefit from, which is already business as usual for most dealers operating honestly 
Requires dealers to clearly disclose the actual price anyone can pay to purchase the vehicle, including specifying that add-ons are optional, the total of all finance or lease payments and any payment comparisons
It’s worth repeating that honing these practices and training your team to consistently deliver on them is simply good business. As laws take effect and change, ensure your staff has ample opportunity to stay ahead of regulations, ask questions and learn how compliance plays a role in their day-to-day, and the impact it has.
While most dealership teams are driven by sales performance metrics, the customer experience must always take priority. Pushing products or unnecessary upsells are not just out-of-date practices, they are bad business that will ultimately tarnish your reputation with buyers. By focusing on creating a holistic, helpful dealership experience where customers feel heard and taken care of, you will naturally build trust and fuel long-term loyalty, strengthening your dealership's standing in your market.
Automotive Dealership Compliance Best Practices
Compliance doesn't just happen. It is the result of planning, consistent execution and continuous monitoring.
Once you have an understanding of the rules and regulations that impact your business and their implications for your dealership, ensure you are working with a partner who can provide comprehensive training to your staff so they are well-versed in how their role helps achieve compliance.
Ongoing training, paired with effective, consistent processes can help ensure transparency in the sales and finance departments, two key areas impacted by the CARS Rule. Regular monitoring and periodic audits can also help identify and correct any potential issues before they become bad habits.
Compliance doesn’t need to be challenging. Partnering with experts in the field can make it considerably easier and support you in managing compliance at your dealership.
Managing Compliance at your Dealership Includes:
- Dealership process enhancements
- Dealership policy templates
- Compliance training and certification
- Deal reviews
- Website and ad reviews
- Expert guidance and recommendations
Leveraging Compliance as a Competitive Advantage
In the highly competitive auto retail market, dealerships must find innovative ways to stand out, and it’s in this way that you can use the FTC CARS Rule to your advantage. Practicing and promoting a transparent, customer-centric sales approach bolstered by honesty and integrity can be a way to distinguish yourself from competitors, as long as you back your words up with actions. Establishing and maintaining a culture of trust and respect can go a long way in driving success for your dealership.
While achieving compliance requires dedicated effort on the part of leaders and staff, the return you’ll see in terms of customer trust and business reputation is substantial.
With the right guidance and strategic approach, you can successfully uphold compliance and cultivate a competitive advantage.
Auto Dealership Compliance Solutions
At JM&A Group, we harness our industry-leading expertise in dealership success to offer strategic advice and comprehensive solutions.
Our aim is to help you not just understand and implement the FTC CARS Rule but to turn it into a catalyst for business growth.
Having a partner to provide guidance and act as another member of your leadership team can help put your mind at ease. With our support, you can equip your team to remain in compliance with applicable laws and regulations as well as effectively manage risk.
Our dedicated experts also review your operations, offer side-by-side training and deliver a complete solution that our dealer partners count on to help them protect their reputation while delivering stellar customer experiences.
Having a partner to provide guidance and act as another member of your leadership team can help put your mind at ease. With our support, you can equip your team to remain in compliance with applicable laws and regulations as well as effectively manage risk. Our dedicated experts also review your operations, offer side-by-side training and deliver a complete solution that our dealer partners count on to help them protect their reputation while delivering stellar customer experiences.
Conclusion
Understanding the shifting regulatory landscape doesn’t have to be a struggle. By establishing consistent processes and taking the necessary steps to safeguard your business, customers and data, you can improve your dealership’s profitability while also boosting customer confidence.
With personalized learning paths for all areas of the dealership, customized support from our automotive experts and support from your local legal counsel, you can create and maintain a team that’s accountable for your success.
There’s no need to navigate dealership compliance or the FTC CARS Rule alone. Our actionable insights, practical strategies and hands-on guidance can help your dealership achieve compliance while delivering best-in-class automotive solutions to your customers. As your partner, we’re committed to elevating your dealership’s potential and finding avenues for continued growth in an ever-changing industry.
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