8 Advertising Pitfalls Car Dealers Should Avoid
To encourage truthfulness in automotive advertising, the Federal Trade Commission announced Operation Turnaround—a coast-to-coast enforcement effort focused on combating deceptive television, newspaper and online claims about sales, financing and leasing. . If you have clients in the automotive industry, the lessons learned from Moving to Clear Action can help them stay on the right track.
The companies named in the 10 lawsuits include four California dealerships: Casino Auto Sales in La Puente, Rainbow Auto Sales in South Gate, Honda of Hollywood in Los Angeles and Norm Reeves Honda in Cerritos. Also the subject of the enforcement action were Fowlerville Ford of Fowlerville, Miss.; South Atlanta Nissan Motor Co. of Morrow, Ga.; Infiniti of Clarendon Hills, Ill.; and Pie in Hickory, N.C. Ramon KIA. Additionally, the FTC has taken action against Texas-based Southwest Kia companies, including New World Auto Imports of Dallas, New World Auto Imports of Rockwall and Hampton of Mesquite Two car companies. A lawsuit against Courtesy Auto Group in Attleboro, Mass., is headed to an administrative law judge.
You’ll need to review the complaints to see the allegations in each specific case, but busy dealers can supplement their “to do” lists with these “don’ts” related to advertising in one or more of the following Cases challenged by the Federal Trade Commission (FTC) as illegal:
Deceptive pricing. Some dealers advertise vehicles at specific low prices to attract potential buyers. But the actual price is $5,000 higher. (The complaint noted that some of the ads used a mix of English and Spanish.)
Deceptive advance payments. In some cases, dealers will advertise compelling low monthly payments. What they didn’t explain upfront was that these were temporary preview payments that would soon increase. The FTC said the dealer failed to account for the number of payments and how much they would amount to after the first few low monthly payments.
Undisclosed large payments. Another dealer advertised lower monthly payments without explicitly disclosing that the buyer would owe a large final payment. What’s more, the FTC said the dealer didn’t disclose the amount of the balloons — in this case, more than $10,000.
False $0 prepaid lease claim. Some companies advertise that consumers can lease cars without paying anything upfront. The Federal Trade Commission says that’s not the case. In fact, these goose eggs lurk high fees and other upfront amounts.
Undisclosed lease terms. The FTC said some companies advertised low down payments and low monthly payments without clearly explaining that the deal was actually a lease and involved numerous hidden fees.
Hidden rates. In one case, the FTC accused a dealer of claiming to offer 0% interest rate for 60 months. But it turns out that tax rate only applies when people buy a new car for a certain amount, such as $12,000. For example, if a consumer’s dream car costs $18,000, the buyer will have to pay a higher price that is not clearly stated.
False prize promotions. One dealer used the mail to drive people to their door, falsely claiming the consumer had won a raffle prize.
Credit and lease violations. In numerous cases, the FTC has accused companies of violating the Truth in Lending Act (TILA), Regulation Z, the Consumer Lease Act, and Regulation M—long-standing laws that any dealer should be familiar with. One common thread: a failure to disclose key credit or lease-related terms in the ad.
To resolve the FTC lawsuit, the companies signed proposed orders that would change the way they do business going forward. Notable provisions of these legally binding settlements include a prohibition on advertising that misrepresents the cost of purchasing, leasing or financing a vehicle and a prohibition on other deceptive statements regarding pricing, sales, leasing or financing. The order forces the dealer to comply with TILA and the Consumer Leasing Act, as charged in the complaint. Also prohibited: False claims about sweepstakes, prizes, or other incentives.
The FTC will accept comments on the proposed settlement until the February 10, 2014 deadline.
Is it time for compliance adjustments? Bookmark the Business Center’s Automotive page for guidance on avoiding deceptive practices.
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from Tech Empire Solutions https://techempiresolutions.blogspot.com/2024/01/8-advertising-pitfalls-car-dealers.html
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