The Federal Trade Commission (FTC) has introduced significant changes to the advertising and sales practices in the automotive industry, set to take effect soon. Known as the FTC CARS Rule, these changes are designed to enhance transparency and protect consumers from misleading advertising.
Here’s a breakdown of the key points and what it means for dealerships…
Understanding the FTC CARS Rule
The FTC CARS Rule is aimed at making car buying more transparent and less deceptive for consumers. It mandates specific disclosures in advertising, ensures transparency in pricing, and imposes stricter recordkeeping requirements. This rule is a response to long-standing consumer complaints about hidden fees, unclear financing terms, and misleading price advertisements.
Key Changes in Advertising
One of the most significant changes involves how prices and financing terms are advertised. Here’s what dealers need to know…
- Accurate Monthly Payments: If you're advertising an APR offer, you must list the actual monthly payment, not just a generic cost per thousand dollars financed. This change requires precise calculations and clear communication to consumers.
- Prohibited Practices: Terms like "click here for price" or "call for price" are no longer acceptable. The exact offering price must be disclosed upfront in all inventory pages and advertisements.
- Conditional Offers: Conditional offers, which have limited eligibility and do not apply to all consumers, can be mentioned in ads but should not be factored into the displayed price. Advertisers must clearly disclose the specific eligibility criteria for these offers to avoid misleading consumers.
Impacts on Digital and Video Advertising
The new rule impacts digital advertising on platforms such as Facebook, Instagram, and Google, requiring dealers to ensure that the prices listed in feeds and inventory ads are accurate and regularly updated to maintain compliance.
For video ads, as well, disclaimers must now be both displayed on screen and spoken aloud. While this change ensures that all necessary disclosures, including those related to conditional offers, are clearly communicated to consumers, it also presents a challenge in maintaining engaging and concise ads.
Recordkeeping Requirements
Dealers must retain records of all advertisements and communications for at least two years. This includes documenting any price changes and maintaining copies of all ads to provide evidence of compliance if audited by the FTC.
Preparing for the Changes
Dealerships should start preparing now to ensure compliance by the July 30th deadline. Here are actionable steps to take…
- Audit Your Current Practices: Review all current advertising and sales processes. Ensure that all advertised prices are accurate and all necessary disclosures are included.
- Train Your Staff: Make sure your sales and marketing teams understand the new requirements. Regular training sessions can help prevent unintentional non-compliance.
- Leverage Technology: Use digital tools and platforms that automatically calculate and update prices, ensuring consistent and compliant advertising across all channels.
- Engage with Your Agency: If you work with an advertising agency, communicate these new requirements and collaborate on strategies to incorporate the changes effectively.
- Enhance Transparency: Shift the focus of your advertising to highlight transparency and trust. Showcase your inventory, provide clear pricing, and emphasize the customer experience.
Embracing the Change
While the new FTC CARS Rule might seem daunting, it presents an opportunity for dealers to build stronger relationships with their customers. By fostering a transparent and trustworthy sales environment, dealers can differentiate themselves and enhance customer satisfaction.
The FTC CARS Rule is set to revolutionize the automotive advertising landscape. Dealers who proactively adapt to these changes and prioritize transparency will not only comply with the new regulations but also gain a competitive edge in the automotive market. Start preparing today to ensure a smooth transition and continued success in this new era of automotive sales.